Friday, September 7, 2007

Weekly inventory update

9/7 - Westside inventory is up for the week in all three areas.

For some very sobering context be sure to see Dr. Housing Bubble's History repeating in Florida and Lessons from the Roaring 20s. and Charles Hugh Smith's The Big One Just Hit.

(I'm starting a new format of these, with new short weekly posts rather than updating the long one each week. See notes and the last monthly update.)

       LA County  Santa Monica  Pacific Palisades  Mar Vista
<$3M New Tot DOM<$2M New Tot DOM Tot New DOM

_________ _______________ _______________ ___________


1/30/06 27,732
2/28/06 29,420
3/31/06 31,819
4/21/06 33,054 35
5/ 1/06 34,032 38 33
6/ 2/06 37,847 56 36 38
6/30/06 42,317 66 40 49
8/ 4/06 45,315 70 34 50
9/ 1/06 46,781 71 27 59
10/ 6/06 47,369 83 25 98 71
11/ 3/06 45,780 80 20 91 77
12/ 1/06 43,103 65 18 72 96 39 20
1/ 5/07 35,646 54 4 60 117 33 6 71 66
2/ 2/07 36,715 38 15 45 124 29 16 61 71
3/ 2/07 41,251 42 14 51 114 26 10 68 79 53 25 76
4/ 6/07 42,857 41 23 49 107 18 8 73 103 52 52 50
5/ 4/07 45,918 46 28 54 92 19 6 82 79 68 37 52
6/ 1/07 52,198 50 25 61 78 17 15 87 78 77 39 53
6/30/07 52,769 42 18 56 81 17 11 92 77 74 33 61
8/ 3/07 54,166 53 28 68 86 23 12 78 76 84 39 68
8/31/07 57,432 57 21 72 98 18 7 69 75 90 40 79
9/ 7/07 61 9 75 90 20 2 74 88 91 3 85
9/14/07

Ancient Palisades

Heading up the coast, how about this 3 bed / 2 bath Pacific Palisades house at 17833 Porto Marina Way, asking $1,795K, first place at 329 days in the Under $2M Division of the Ancient Listings of Pacific Palisades. Originally listed for $1,895K, it was reduced in June, and has fallen out of escrow twice, in June and August.

"With its broad sunset vistas across the Santa Monica Bay, and whitewater view of Will Rogers State Beach directly below, it is easy to understand why the artists in residence lived their lives here. No grand pretense, but rather a daily relationship with nature and the invigorating ocean climate. And who but artists would purchase an adjacent lot just to keep a garden? The lot is a separately deeded parcel, & is included in the price. The entire package is a great value for ocean view property...."

Apparently the "daily relationship with nature" includes going outside up the stairs to the master bedroom. Too arty for current Palisades buyers? Nice view though; I took this photo from a little farther up Porto Marina.

Wednesday, September 5, 2007

Lowest-priced SM

Back to houses. I've noted that well-priced listings still sell fast, even as others sit and sit. This new 2 bed / 1 bath listing is at 2937 Delaware Ave. (red arrow above; tree-lined Delaware is between the freeway and Verizon). It's asking $720K, the lowest-priced house in a single-family Santa Monica neighborhood, and well-priced compared with its comps:

2961 Delaware, 2/1, sold 6/14/07 for $660K
3208 Urban, 2/1, in escrow 7/07, asked $700K
1912 Warwick, 3/1, sold 6/16/06 for $765K
3008 Delaware, 2/1, sold 4/7/06 for $769K
3345 Virginia, 3/1, sold 7/18/07 for $799K
3344 Virginia, 2/2.5, sold 3/30/07 for $825K
1817 Warwick, 3/1, off-market 6/07, asked $865K
3011 Virginia, 3/1.75, in escrow 8/6, asked $949K

"Charming traditional 2 bedroom, 1 bath on a quiet tree-lined street. Hardwood floors, updated kitchen with gas cooktop & electric oven. Newer roof, copper plumbing, ceiling fans, central heat. Avocado, apricot, plum, fig, persimmon, peach, lemon, and two orange trees. McKinely Elementary School & Lincoln Middle School; Buyers to verify with school district. Fireplace in living room is decorative only. No showings before September 11 caravan...."

Tuesday, September 4, 2007

Modelling prices and income

I've been thinking about this since my 8/21 post, "Return to historic costs/income", attempting to better measure the idea of house prices returning to their historic relationship with income.

The blue line above is the S&P/Case-Shiller price index for Los Angeles, from 1987 through the first half of 2007. I extended it back to 1975 with the similar OFHEO data for Los Angeles. For income I used the BEA per-capita personal income for Los Angeles (magenta line, numbers in 1,000s). Its linear trend continues into the future.

If the blue line falls at the same rate as it's fallen so far, it would fall over 40% before converging on the income line. Considering its huge rise, that doesn't seem unreasonably more than its 26% fall in the 1990s.But income alone doesn't cover buyers' ability to pay. Next step was to add average mortgage interest rates, above, from the Federal Housing Finance Board. It shows the spike above 15% in the early 1980s. But it doesn't appear to show the teaser rates used to qualify buyers the last few years. I've presumed rates will return to a longer-term 7.9% average, the average of 1975-2007, but omitting the 1979-86 period over 10%.Above I plotted a new income line (orange) adjusted by percent above or below the 7.9% average, to see how it tracked price increases. It's better, but could fit the 1980s better and doesn't fully reflect the last few years' teaser rates.Finally, I tried to add a "wealth effect", to represent the value of building or falling equity, lagged a year (yellow line above).

This is an experiment and work in process, that deserves a bunch of disclaimers and requests for feedback! You may have noted that the price index (left axis) is arbitrarily matched to income (right axis). There may be better data to use for income and interest rates. I presumed future interest rates will not remain below past averages. And will prices fall faster or slower? But the general pattern seems reasonable.

"Bailout? No way"

Excellent op-ed "Bailout? No way"in the LA Times today by LA Land blogger Peter Viles!

Here's what you do with it to make a difference: Send a copy with your comments to your senators (e.g. Dianne Feinstein and Barbara Boxer), congressmember, President Bush, presidential candidates like Hillary Clinton, Barack Obama, John Edwards, Bill Richardson, and Chris Dodd, and other prominent senators on this issue (see "Mortage mess echoes in Congress" in today's LA Times) like Charles Schumer. Hey, how about your favorite talk-radio host while you're at it? Show them a lot of people care. Get noticed!

Here are some highlights of Pete's op-ed (emphasis added):

President Bush announced his intention last week to reach out a hand to the "many Americans" who "may have been misled" in the sub-prime mortgage market. Two days earlier, presidential hopeful Barack Obama called for fining "predatory lenders" to bail out "hoodwinked" families. ... The news media report on families losing homes, disabled owners facing foreclosure and newlyweds being tossed into the street. ...

[But] According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout.

"It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times. "Usually," added "Brian," "when the facts are examined closely, we find people who ... took a chance that house prices would keep rising, that they could remodel the kitchen, buy the truck and the motorcycle, put it on the credit card and pile that debt into the next refinance..." ...

And yet now, just as the market is starting to cool and possibly provide buying opportunities, many of these folks -- especially those patiently waiting out the bubble -- find themselves crashing a pity party for the very buyers who priced them out of the market. They are furious that the government appears interested in supporting overextended borrowers and high prices, and they cite data to support their position. ... No wonder LA Land commenter "jbunniii" writes: "No bailout is needed -- most of the borrowers in trouble didn't put any money down in the first place, so they will lose nothing by walking away." ...

Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels. This makes little sense in Los Angeles, which ranks among the least affordable markets in America when housing prices are matched against income levels. Why should government favor today's owners over tomorrow's buyers?

"I make nearly 100K and cannot afford a home in California," "JK" wrote on LA Land. "Using my tax dollars to help irresponsible people keep homes they can't afford, while at the same time keeping me out of the market, will be enough to send me over the edge." ...

Sunday, September 2, 2007

1996 north-of-Montana prices

I ran across a list of prices of sold houses north of Montana in the second half of 1996, about the bottom of the last cycle (shown on the Los Angeles S&P/Case-Shiller graph, above, from Paper Economy).

"Lot value" for a typical 50x150 lot was a little over $600K. Jump into the time machine, here they are:

2222 San Vicente, $550K, 11/96, fixer traditional
241 Adelaide, $585K, 8/96, lot value ocean and canyon views
525 11th, $605K, 12/96, 3 bed 1750 SF, orig. cond. fixer
333 12th, $610K, 9/96, 3 bed 1500 SF orig. cond. traditional
440 17th, $638K, 10/96, 3 bed 1550 SF orig. cond. Spanish
404 12th, $640K, 10/96, 2 bed 1450 SF traditional
344 Euclid, $650K, 9/96, 3 bed 1873 SF remodelled Spanish
239 25th, $650K, 10/96, trad. fixer
558 10th, $655K, 8/96, 2 bed 1879 SF orig. cond. traditional
707 16th, $675K, 11/96, 3 bed 2500 SF traditional
1428 San Vicente, $679K, 8/96, 3 bed remodelled Spanish
513 Euclid, $697K, 11/96, 3 bed 1800 SF Tudor
514 25th, $700K, 8/96, 3 bed 2300 SF remodelled traditional
528 25th, $712K, 9/96, 4 bed 2300 SF traditional
326 9th, $715K, 11/96, 3 bed 1656 SF Spanish, rem. kitchen
214 15th, $740K, 12/96, 3 bed 2000 SF orig. cond. Spanish
418 24th, $822K, 10/96, 2 bed 1992 SF remodelled Spanish
334 14th, $850K, 10/96, 4 bed 2260 SF 2-story Tudor
514 Alta, $855K, 10/96, 3 bed 1800 SF 2-story trad. 60x175 lot
715 17th, $890K, 11/96, 3 bed 2155 SF remodelled Spanish
1030 San Vicente, $926K, 8/96, 5 bed 5380 SF 2-story Medit.
528 10th, $950K, 10/96, 4 bed 3000 SF new architectural
326 25th, $975K, 10/96, 8 bed 2-story remodelled Spanish
1021 Georgina, $1,010K, 11/96, renovated 2-story 60x173 lot
318 24th, $1,050K, 9/96, 4 bed 2884 SF 2-story remodelled trad.
477 21st Pl., $1,058K, 11/96, 4 bed 4200 SF remodelled Spanish
709 17th, $1,138K, 9/96, 3 bed remodelled 2-story Spanish
322 19th, $1,185K, 4 bed 4000 SF 2-story restored Spanish
2201 Alta, $1,195K, 8/96, 5 bed 2-story updated Cape Cod
409 Lincoln, $1,215K, 11/96, 5 bed 3600 SF 2-story architectural
1525 Georgina, $1,250K, 8/96, 5 bed 2-story traditional
422 22nd, $1,275K, 9/96, 5 bed 4682 SF new 2-story architectural
1321 Brentwood Terr., $1,295K, 9/96, 4 bed recent 2-story Medit.
1133 Georgina, $1,325K, 9/96, 14,620 SF lot fixer 2-story Spanish
244 16th, $1,395K, 10/96, 3 bed 2-story restored Spanish
217 20th, $1,450K, 12/96, 4 bed 4268 2-story Mediterranean
704 Palisades Bch. Rd., $1,450K, 9/96, 5 bed 3400 SF updated
201 Marguerita, $1,485K, 8/96, 4 bed 4665 SF 2-story '80s trad.
502 12th, $1,505K, 8/96, 5 bed new Spanish (Ramirez' first)
2159 La Mesa, $2,263K, 10/96, 4 bed 5107 SF house, 29,600 SF lot overlooking Riviera golf course
707 Palisades Bch. Rd., $3,000K, 9/96, 6 bed 8177 SF John Byers on beach

Saturday, September 1, 2007

Bush details

The LA Times' "For some, a chance to refinance despite default" by Kathy M. Kristof today gives useful detail and supports the idea that Bush's proposal wouldn't have much effect after all the qualifications, especially here in California.

Who qualifies for these loans? ...

* Even if you're in default today, you must have had a history of on-time payments until your so-called teaser rate expired and the interest on your adjustable-rate mortgage reset.

* The interest rate must have been scheduled to reset between June 2005 and December 2009.

* You must have 3% cash or equity in your home.

* You have to show a history of sustained employment.

* You have to prove you will have sufficient income to make the FHA Secure loan payment.

What's the maximum loan amount under the program?

FHA limits vary by county. In most major California cities, the maximum FHA loan for a single-family home is $362,790.

What if my mortgage is more than that?

An FHA proposal would hike the loan limit to $417,000. The proposal had been stalled in Congress but appears to be gaining steam and may be at the top of the priority list when lawmakers return from recess.

What about the interest rate?

An FHA loan is only modestly more costly than an ordinary loan, said Jeff Lazerson, a Laguna Niguel mortgage broker. Current rates for a traditional, so-called conforming loan averaged 6.09% on Friday, according to BankRate.com.

If you have a small down payment, lenders charge more -- closer to 6.5%.

The FHA also charges a 1.5% upfront insurance premium, plus 0.5% a year, which could bring the total annual loan rate to 7% or higher. On a $350,000 loan, that would mean a $2,329 monthly payment.

That's not cheap, to be sure, but many sub-prime borrowers are paying 10% or more, Lazerson said. At 10%, the monthly payment on a $350,000 mortgage would be $3,071.

"Big bailout might be inevitable" by Tom Petruno is more disturbing.