Other items of note

Paper Economy's S&P/Case Shiller tool shows Los Angeles continued down in June, dropping .4% from May. See my July post for more. Unfortunately this is looking two months in the rear-view mirror; expect more drama over the next three months!

Diana Olick's (CNBC today) "White House Has It all WRONG On Subprime" (be sure to watch the video).

Mr. Mortgage's (today) "FHA Plan: Bring a water gun to fight a fire". I wonder how much is political posturing, to appear to be doing something?

Tom Whipple's (Energy Bulletin / Falls Church News-Press 8/30/07) "The peak oil crisis: the quiet time".

... The oil market has been so fixated by the hurricane and credit crisis in recent weeks that little notice has been taken of a looming supply crunch. Last week’s market U.S. stockpile report had imports and crude stocks up a bit, but gasoline stocks dropping by a whopping 5 million barrels. ...

The likelihood of an imminent credit-crunch-induced recession seems far higher to OPEC officials at the minute than to Wall Street brokers. For OPEC, the credit crunch may be just an excuse to cover their inability to increase production....

Michael Kinsley's (Time magazine 8/23/07) "Your House Is Worth Less? Good".

... Since most families own their homes, the country is happier when real estate prices are going up. But it is healthier when prices are going down. Look at it this way: in the housing market, people fall into three categories. Some, mostly young folks, are trying to buy their first home. Some, at various stages of midlife, own a home but will trade up someday, or at least think about it. And some, mostly older, are trying to sell and downsize. Who is served by soaring house prices? Not the first group: rising prices make it hard for those people to get into the game. Not the second group: what it will have to pay for a bigger house is probably increasing faster than what it can get for the current one. ...

Mariel Garza's (LA Daily News 8/25/07) "Let mortgage fires burn on".

... I'm not sorry that real-estate prices are creeping down by the glut of desperate "for sale" signs all over Southern California. ...

Weekly Inventory Update

8/31 - Inventory is slightly down for the week, up for the month, and the listings are getting older (DOM increasing). More price reductions. Let's see how listings and sales do when the fall season begins after Labor Day.

8/24 - These stats have needed a graph; here is one, showing my Santa Monica (under $3M) and Palms-Mar Vista inventory on the right axis and OC Renter's LA County inventory on the left. LA is up over last year; SM is down.

Big jump in listings, 10%+/- for the week! SM is up 6 from 9 new listings; PP up 1; and MV up 11 from 13 new listings.

8/17 - Santa Monica and Palisades are pretty flat; Mar Vista is down despite new listings.

8/10 - Santa Monica is down 2, Palisades down 5, Mar Vista up 5.

See Calculated Risk for explanation of what the Federal Reserve did the last three days to add liquidity. Essentially the Fed loaned a lot of money to banks short term, with Mortage-Backed Securities as collateral. The Fed did not buy those securities.

8/3 - Westside inventory is up 2.6% from the end of July. I also seem to be seeing more price reductions and failed escrows (financing failed?) in Santa Monica, Palisades, and Mar Vista.

       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
 8/10/07  54,802  51   8  67  90  18   3  74  87  88  13  69
 8/17/07          52  11  67  97  18   5  77  78  81  21  73
 8/24/07  56,118  58  20  72  94  19   7  77  69  92  34  73
 8/31/07  57,432  57  21  72  98  18   7  69  75  90  39  79
 9/ 7/07   

All Westside (updated 1st Fri. of mo.)

                   2/9  3/1  4/6  5/4  6/1 6/30 8/03 8/31
Bel Air-Holmby Hls. 86   86   92  100  103   99   86   99
Beverly Center-M.M. 64   57   48   53   54   65   64   67
Beverly Hills       67   70   56   46   53   49   59   61
B.H. Post Office    94   91   92   88   93   95   92   94
Beverlywood Vic.    35   36   31   39   38   41   42   46
Brentwood           67   71   73   75   72   68   86   77
Cheviot H.-R.Pk.'8' 22   20   19   22   23   22   26   20
Culver City         35   25   20   28   33   36   41   48
Malibu             178  181  192  199  206  220  224  216
Malibu Beach        42   44   51   52   56   58   54   45
Marina Del Rey      20   20   20   27   29   28   26   27
Pacific Palisades   64   68   73   82   87   92   78   69
Palms-Mar Vista     62   53   52   68   77   73   84   90
Playa Del Rey        7    8   17   20   21   20   21   24
Playa Vista          3    2    3    1    3    5    4    9
Santa Monica        50   50   49   53   61   57   68   72
Sunset Stp.-Hwd.H. 155  178  159  166  180  168  187  184
Topanga             39   41   36   43   45   54   49   54
Venice              64   64   57   68   70   72   69   68
West Hollywood Vic. 23   32   25   36   42   41   40   36
West L.A.           19   21   25   24   25   34   31   36
Westchester         53   46   47   45   53   52   62   72
Westwood-Cent.City  33   44   37   42   33   34   29   37
                  ____ ____ ____ ____ ____ ____ ____ ____
Total             1282 1308 1274 1377 1457 1483 1522 1551
Month-month incr.        2%  -3%   8%   6%   2%   3%   2%

Notes

LA County inventory via OC Renter. Santa Monica Days on Market (DOM) is for <$3M, and omits Santa Monica Canyon (in City of Los Angeles but S.M. Post Office). Pacific Palisades DOM is for <$2M and count omits mobile homes. "New" is for previous month, or month-to-date for current partial month.

Cheap north of Montana

This new 2 bed / 2 bath listing at 420 7th St. for $1.4M is interesting for being north of Montana for well under $2M. Not a tiny lot, presumed a tear-down, but on very-busy 7th St., the main road into Santa Monica Canyon. I've outlined its lot above. A recent comp is 633 7th, 3 bed / 2 bath, sold 12/6/06 for $1.41M. You could drop by the brokers open today (wonder who the "committee" is?):

"Original 1950's charmer close to Montana Avenue & the beach. Single-story with 2BD, 2BA, living room, dining & 2 garages (one attached & one detached). Bring your architect to add-on or build your dream home. Tons of opportunity! Offers subject to review of committee. Open for the first time Tuesday Aug 28, 11-2 PM"

USA Today lead

USA Today's lead article was striking (no link because I can't find it on their website; emphasis added):

The news Monday from the National Association of Realtors was bad enough: Sales of existing homes fell in July to their slowest pace in five years. The glut of homes for sale is at a 16-year high. The median price is down for a record 12th month in a row.

What's really grim, though, is this: None of the figures reflect this month's turmoil in the mortgage market. Which is why the numbers will likely be even worse in coming months. And why the NAR doesn't expect the housing market to recover until early next year. ...

Can you believe that!?! We're falling off a cliff ... until everything is wonderful again in maybe six months. Add another to NAR spin vs. reality history.

Nothing sold

Nothing sold over the weekend in Santa Monica. I always expect something to go into escrow between Friday evening and Monday evening. Nothing did in Santa Monica.

Remember 2614 2nd (above), 3 bed / 1.75 bath, at the corner of Ocean Park Blvd? It's been on the market about a year. Originally listed at $1,495K, its price has been $1,375K since March and now was finally cut to $1,250K. How many other prices of long-languishing properties will start breaking soon?

Bailouts?

Mr.Mortgage asked, "In the spirirt of democracy and a good Saturday round table discussion, what is your view on the proposed bailout plans that the presidential candidates have been discussing?"

This is important and timely, with recent posts by Mish, OC Renter, Calculated Risk, Housing Doom, and Marinite. The LA Times editorialized against it, linked on the LA Land blog. I also posted back in March on Marinite's wiki and an LA Times article on earlier bailout proposals.

My main points include: (1) How can buyers who just can't afford their mortgages be successfully bailed out? (2) How would that not also bail out undeserving speculators and irresponsible lenders? (3) Bailouts would delay the necessary fall in house prices before the market can recover at affordable price levels.

I see two levels operating: First, politicians want to appear to be doing something. The probably good news is that whatever modest amount of money committed would be little more than symbolic, with no big effect, good or bad.

But the bigger question is, I can imagine the Fed and major banks searching in uncharted territory for something to avoid major defaults. We've seen initial actions with lowering the discount rate and getting big banks to borrow there. Presuming that doesn't solve the problem, what happens next?

"Reasons Housing Will Retrace to 1997"

Great timing: on the heels of Tuesday's "Return to historic costs/income", Charles Hugh Smith wrote yesterday on "Two Irresistible Reasons Housing Will Retrace to 1997 Prices". His graph above shows what that decline looked like in Japan. He begins:

Two historically irresistible patterns suggest speculative-bubble housing values will eventually retrace back to their 1995-1997 levels:

• the symmetry of speculative rises and retraces
  
• the unbreakable links between income and housing values.

I encourage you to read his whole essay (and follow his blog, which was an inspiration to starting mine).