Sunday, April 29, 2007
March Sales
The numbers are in and compared to last year:
SFH sales are down 32%
Median price for SFH 4BR+ is down 8%.
Number of listings is up 60%
Oouch!
Stay tuned. This is just starting.
March sales of Conejo Valley single-family homes totaled 106. This compares to 93 sold in February and 156 a year ago, according to Allen Reznick President, Conejo Valley Association of REALTORS.
Median sales price for single- family homes in March 2007 was $814,285; in 2006 it was $842,105. The median price is the point where half of the units sold for more and half for less.
Median prices for single- family homes in March were as follows: $625,000 for 1 two bedroom homes, 664,473 for 25 three-bedroom homes; and $883,333 for 80 four or more bedroom homes. This compares to sales in March 2006 of $583,222 for 4 homes up to two bedrooms; $671,874 for 44 three-bedroom homes; and $959,677 for 108 four or more bedroom homes.
Condominium sales totaled 66 in March compared to 36 in February 2007 and 74 for March 2006.
Total Sales for all real estate transactions in March were $147,223,550 for March 2006 the total was $220,418,498.
New residential listings totaled 480 in March 2007 compared to 303 in March 2006 and 129 in February 2007.
Monday, April 23, 2007
Real Estate Crash a Post Mortem for the Stock Market
The real estate market is crashing faster than anyone had anticipated. Housing prices have fallen in 17 of 20 of the nation's largest cities and the trend lines indicate that the worst is yet to come. March sales of new homes plummeted by a record 23.5% (year over year) removing all hope for a quick rebound. Problems in the subprime and Alt-A loans are mushrooming in previously “hot markets” resulting in an unprecedented number of foreclosures.
The defaults have slowed demand for new homes and increased the glut of houses already on the market. This is putting additional downward pressure on prices and profits. More and more builders are struggling just to keep their heads above water. This isn't your typical 1980s-type “correction”; it's a full-blown real estate cyclone smashing everything in its path.
Tremors from the real estate earthquake won't be limited to housing—they will rumble through all areas of the economy including the stock market, financial sector and currency trading. There is simply no way to minimize the effects of a bursting $4.5 trillion equity bubble.
The next shoe to drop will be the stock market which is still flying-high from increases in the money supply. The Federal Reserve has printed up enough fiat-cash to keep overpriced equities jumping for joy for a few months longer. But it won't last. Wall Street's credit bubble is even bigger than the housing bubble — a monstrous, lumbering dirigible that's headed for a crash-landing. The Dow is like a drunk atop a 13,000 ft cliff; inebriated on the Fed's cheap “low-interest” liquor. One wrong step and he'll plunge headlong into the ether.
The stock market cheerleaders are ooooing and ahhing the Dow's climb to 13,000, but it's all a sham. Wall Street is just enjoying the last wisps of Greenspan's low interest helium swirling into the largest credit bubble in history. But there are big changes on the way. In fact, the storm clouds have already formed over the housing market. The subprime albatross has lashed itself to everything in the economy — dragging down consumer confidence, GDP and (eventually) the stock market, too. The real damage is just beginning to materialize.
So why the stock market keep hitting new highs?
Is it because foreign investors believe that American equities will continue to do well even though the housing market is slumping and GDP has shriveled to the size of a California raisin? Or is it because stockholders haven't noticed that the greenback is getting clobbered every day in the currency markets? Or, maybe, investors are just expressing their confidence in the way the U.S. is managing the global economic system?
Is that it - they admire the wisdom of borrowing $2.5 billion per day from foreign lenders just to keep the ship of state from taking on water?
No, that's not it. The reason the stock market is flying-high is because the Federal Reserve has been ginning up the money supply to avoid a Chernobyl-type meltdown. All that new funny-money has to go somewhere, so a lot of it winds up in the stock market. Evergreen Bank's Chuck Butler explains the process in Thursday's Daily Pfennig:
“The Fed may have quit publishing the M3 data, but they continue to publish all the data that goes into the calculation and our friends over at Shadow Government Statistics have a chart which demonstrates why the Fed decided to keep M3 under wraps. A look at the chart shows the Fed is pumping up broad money supply at an astounding rate of 11.8% per year! All of this rapid money supply growth is reflected in an increase in equity prices. The stock market needs to rise just to keep pace with all of this newly-created money. As long as the Fed doesn't rock the boat with another rate hike or by turning off the spigot of money flowing into the markets, the equity markets will continue to run.”
Ah-ha! So the Fed gooses the money supply, stocks shoot up, and everyone's happy — right?
Wrong. Growth in the money supply should (closely) parallel growth in the overall economy. So if GDP is shrinking (which it is) and the money supply is increasing then—Viola!—inflation. (“11.8%” to be precise)
Of course inflation doesn't affect the investor class or their fellow-scoundrels at the Fed — the more money floating around the markets the better for them. It's just the opposite for the pensioner on a fixed income or the salaried wage-slave who gets a 15-cent pay raise every millennia. They end up getting ripped off with every newly-minted greenback.
But then that's the plan — to shift zillions from one class to another through massive equity bubbles. All it takes is artificially-low interest rates and a can of WD-40 to keep the printing presses rolling. It's so simple we won't dignify it by calling it a “conspiracy”. It's just a swindle, pure and simple. But it never fails.
Every time the Fed prints up another batch of crisp $100 bills; they're confiscating the hard-earned savings of working class people and retirees. And, since the dollar has dropped roughly 40% since Bush took office in 2000; the government has absconded with 40% our life savings.
That's the truth about inflation; it is taxation without representation, but you won't find that in the government's statistics. In fact, the Consumer Price Index (CPI) deliberately factors out food and energy so the working guy can't see how the Fed is robbing him blind. The only way he can gauge his losses is by going to the grocery store or gas station. That's when he can see for himself that the money he works so hard to earn is steadily losing its purchasing power.
The big question now is how long will it take before foreign creditors wise up and see the maxed-out American consumer is running out of steam. As soon consumer spending slows in the US; foreign investment will dry up and stocks will tumble. China and Japan have already slowed or stopped their purchases of US Treasuries and China has stated that they plan to diversify their $1 trillion in US dollars in the future. This has lowered demand for the dollar and decreased its value in relation to other currencies. (The dollar hit a new low just last week at $1.36 vs. the euro)
A slowdown in consumer spending is the death-knell for the dollar. That's when there'll be a stampede for the exits like we've never seen before—with each of the world's central banks tossing their worthless greenbacks into the jet-stream like New Years' confetti. According to Monday's Washington Post that moment may have already arrived. As the Post's Martin Crutsinger says, “Consumer spending rose at the slowest rate in five months in March while construction activity managed only a tiny gain, weighed down by further weakness in housing”.
The connection between housing and consumer spending is critical. Housing has been the main engine for growth in the US in the last 5 years accounting for 2 out of every 5 new jobs and hundreds of billions in additional spending through home-equity extractions. A downturn in consumer spending means that foreign investors will have to look for more promising markets abroad, which will trigger a steep reduction in the amount of cheap credit coming into the country via the $800 billion trade deficit. This will slow growth in the US while further weakening the dollar.
Can you say stagflation?
The present currency and economic crises were brought on by Bush's unfunded tax cuts, unsustainable trade deficits, and the Fed's hyperinflationary monetary policy. These policies were executed simultaneously for maximum effect. They were entirely premeditated. Many people now believe that the Bush administration and the Federal Reserve are intentionally creating an “Argentina-type meltdown” so they can privatize state owned assets and usher in the North American Union--the future “one state” alliance of Canada, Mexico and US--along with the new regional currency, the Amero.
Stay tuned.
Nevertheless, monetary policy is not the only reason the stock market is headed for a fall. There's also the jumble of scams and swindles which have been legalized under the rubric of “deregulation”. New rules allow Wall Street to take personal liabilities and corporate debt and repackage them as precious gemstones for public auction. It's the biggest racket ever.
Consider the average hedge fund for example. The fund may have originated with $10 billion of its own cash and swelled to $50 billion through (easily acquired) credit. The fund manager then creates an investment portfolio that features CDOs (collateralized debt obligations) and Mortgage Backed Securities (MBS) to the tune of $160 billion. The majority of these “assets” are nothing more than shaky subprime loans from struggling homeowners who have no chance of meeting their payments. In other words, another man's debt is magically transformed into a Wall Street staple. (Imagine if you, dear reader, could sell your $35,000 credit card debt to your drunken brother-in-law as if it was a bar of gold or a vintage Ferrari. That, believe it or not, is the scam on which bond traders thrive)
So, the fund is leveraged, the assets are leveraged and (guess what) the investors are leveraged too — either buying on margin or borrowing oodles of cheap, low interest credit from Japan to maximize their profit potential.
Get the picture; debt x debt x debt = maximum profit and skyrocketing stock prices. That's why the face value of the market's equities far exceeds the world's aggregate GDP. It's all one, big debt-Zeppelin and it's rapidly tumbling towards planet earth.
KABOOM!
Deregulation works like a charm for the gangsters who run the system. After all, why would they want rules? They're not thinking about capital investment, productivity or infrastructure. They're not building an economy that serves the basic needs of society. They're looking for the next big mega-merger where two monolithic, maxed-out corporations join in conjugal bliss and create a mountain of new credit. That's where the real money is.
Wall Street generates boatloads of cyber-cash with every merger. This pushes stock prices up, up and away. Deregulation has turned Wall Street into the biggest credit-generating Cash-Cow of all time—spawning zillions through seemingly limitless debt-expansion. These virtual dollars were never authorized by the Federal Reserve or the US Treasury—they emerge from the black whole of over-leveraged uber-transactions and the magical world of derivatives trading. They are a vital part of Wall Street's house of mirrors where every dollar is increased by a factor of 50 to 1 as soon as it enters the system. Assets are inflated, debt is converted to wealth, and fiscal reality is vaporized into the toxic gas of human greed.
Doug Noland at Prudent Bear.com explains it like this: “We've entered a euphoric phase of financial arbitrage capitalism with extreme Ponzi overtones, a pyramid scheme of revolving credit rackets and percentage spread plays completely abstracted from any reality of fruitful activity. The reason we don't even call "money" by its former name anymore is precisely because we realize at some semi-conscious level that "liquidity" is not really money. Liquidity is a flow of hallucinated surplus wealth. As long as it flows in one direction, into financial markets, valve-keepers along the pipeline, like Goldman Sachs, Citibank, or the hedge funds, can siphon off billions of buckets of liquidity. The trouble will come when the flow stops -- or reverses! That will be the point where we will rediscover that liquidity really is different from money, and if we are really unlucky we'll discover that our money (the US dollar) is actually different from real wealth”.
Noland is right. The market is “a pyramid scheme of revolving credit rackets and percentage spread plays” and no one really knows what to expect the flow of liquidity slows down or “reverses”.
Will the stock market crash?
It depends on the aftereffects of the subprime meltdown. The defaults on existing mortgages are only part of the problem. The real issue is how the “credit dependent” stock market will respond to the tightening of lending standards. As liquidity dries up in the real estate market; all areas of the economy will suffer. (We've already seen a downturn in consumer spending) Wall Street is addicted to cheap credit and it has invented myriad abstruse debt-instruments to get its fix. But what happens when investment simply withers away?
According to WorldNetDaily.com Jerome Corsi that question was partially answered in a letter from the Carlyle Group's managing director William Conway Jr. Conway confirms that the rise in the stock market is related to “the availability of enormous amounts of cheap debt”. He adds that:
“This cheap debt has been available for almost all maturities, most industries, infrastructure, real estate and at all levels of the capital structure.” (But) “This liquidity environment cannot go on forever. The longer it lasts, the worse it will be when it ends…….Of course when ends, the buying opportunity will be once in a lifetime."
Ah, yes; another wonderful “buying opportunity”!?!
You can almost feel the breeze from the great birds flapping overhead as they focus their gaze on the carrion below. Once the stock market collapses and the greenback flattens out on the desert floor; they'll be plenty of smiley faces preparing for the feast.
Conway is right; the stock market IS floating on a cloud of cheap credit created by a humongous trade deficit, artificially low interest rates, and a 10% yearly expansion of the money supply. Like he says, “It cannot go on forever.”
And, we don't expect that it will.
By Mike Whitney
Email: fergiewhitney@msn.com
The defaults have slowed demand for new homes and increased the glut of houses already on the market. This is putting additional downward pressure on prices and profits. More and more builders are struggling just to keep their heads above water. This isn't your typical 1980s-type “correction”; it's a full-blown real estate cyclone smashing everything in its path.
Tremors from the real estate earthquake won't be limited to housing—they will rumble through all areas of the economy including the stock market, financial sector and currency trading. There is simply no way to minimize the effects of a bursting $4.5 trillion equity bubble.
The next shoe to drop will be the stock market which is still flying-high from increases in the money supply. The Federal Reserve has printed up enough fiat-cash to keep overpriced equities jumping for joy for a few months longer. But it won't last. Wall Street's credit bubble is even bigger than the housing bubble — a monstrous, lumbering dirigible that's headed for a crash-landing. The Dow is like a drunk atop a 13,000 ft cliff; inebriated on the Fed's cheap “low-interest” liquor. One wrong step and he'll plunge headlong into the ether.
The stock market cheerleaders are ooooing and ahhing the Dow's climb to 13,000, but it's all a sham. Wall Street is just enjoying the last wisps of Greenspan's low interest helium swirling into the largest credit bubble in history. But there are big changes on the way. In fact, the storm clouds have already formed over the housing market. The subprime albatross has lashed itself to everything in the economy — dragging down consumer confidence, GDP and (eventually) the stock market, too. The real damage is just beginning to materialize.
So why the stock market keep hitting new highs?
Is it because foreign investors believe that American equities will continue to do well even though the housing market is slumping and GDP has shriveled to the size of a California raisin? Or is it because stockholders haven't noticed that the greenback is getting clobbered every day in the currency markets? Or, maybe, investors are just expressing their confidence in the way the U.S. is managing the global economic system?
Is that it - they admire the wisdom of borrowing $2.5 billion per day from foreign lenders just to keep the ship of state from taking on water?
No, that's not it. The reason the stock market is flying-high is because the Federal Reserve has been ginning up the money supply to avoid a Chernobyl-type meltdown. All that new funny-money has to go somewhere, so a lot of it winds up in the stock market. Evergreen Bank's Chuck Butler explains the process in Thursday's Daily Pfennig:
“The Fed may have quit publishing the M3 data, but they continue to publish all the data that goes into the calculation and our friends over at Shadow Government Statistics have a chart which demonstrates why the Fed decided to keep M3 under wraps. A look at the chart shows the Fed is pumping up broad money supply at an astounding rate of 11.8% per year! All of this rapid money supply growth is reflected in an increase in equity prices. The stock market needs to rise just to keep pace with all of this newly-created money. As long as the Fed doesn't rock the boat with another rate hike or by turning off the spigot of money flowing into the markets, the equity markets will continue to run.”
Ah-ha! So the Fed gooses the money supply, stocks shoot up, and everyone's happy — right?
Wrong. Growth in the money supply should (closely) parallel growth in the overall economy. So if GDP is shrinking (which it is) and the money supply is increasing then—Viola!—inflation. (“11.8%” to be precise)
Of course inflation doesn't affect the investor class or their fellow-scoundrels at the Fed — the more money floating around the markets the better for them. It's just the opposite for the pensioner on a fixed income or the salaried wage-slave who gets a 15-cent pay raise every millennia. They end up getting ripped off with every newly-minted greenback.
But then that's the plan — to shift zillions from one class to another through massive equity bubbles. All it takes is artificially-low interest rates and a can of WD-40 to keep the printing presses rolling. It's so simple we won't dignify it by calling it a “conspiracy”. It's just a swindle, pure and simple. But it never fails.
Every time the Fed prints up another batch of crisp $100 bills; they're confiscating the hard-earned savings of working class people and retirees. And, since the dollar has dropped roughly 40% since Bush took office in 2000; the government has absconded with 40% our life savings.
That's the truth about inflation; it is taxation without representation, but you won't find that in the government's statistics. In fact, the Consumer Price Index (CPI) deliberately factors out food and energy so the working guy can't see how the Fed is robbing him blind. The only way he can gauge his losses is by going to the grocery store or gas station. That's when he can see for himself that the money he works so hard to earn is steadily losing its purchasing power.
The big question now is how long will it take before foreign creditors wise up and see the maxed-out American consumer is running out of steam. As soon consumer spending slows in the US; foreign investment will dry up and stocks will tumble. China and Japan have already slowed or stopped their purchases of US Treasuries and China has stated that they plan to diversify their $1 trillion in US dollars in the future. This has lowered demand for the dollar and decreased its value in relation to other currencies. (The dollar hit a new low just last week at $1.36 vs. the euro)
A slowdown in consumer spending is the death-knell for the dollar. That's when there'll be a stampede for the exits like we've never seen before—with each of the world's central banks tossing their worthless greenbacks into the jet-stream like New Years' confetti. According to Monday's Washington Post that moment may have already arrived. As the Post's Martin Crutsinger says, “Consumer spending rose at the slowest rate in five months in March while construction activity managed only a tiny gain, weighed down by further weakness in housing”.
The connection between housing and consumer spending is critical. Housing has been the main engine for growth in the US in the last 5 years accounting for 2 out of every 5 new jobs and hundreds of billions in additional spending through home-equity extractions. A downturn in consumer spending means that foreign investors will have to look for more promising markets abroad, which will trigger a steep reduction in the amount of cheap credit coming into the country via the $800 billion trade deficit. This will slow growth in the US while further weakening the dollar.
Can you say stagflation?
The present currency and economic crises were brought on by Bush's unfunded tax cuts, unsustainable trade deficits, and the Fed's hyperinflationary monetary policy. These policies were executed simultaneously for maximum effect. They were entirely premeditated. Many people now believe that the Bush administration and the Federal Reserve are intentionally creating an “Argentina-type meltdown” so they can privatize state owned assets and usher in the North American Union--the future “one state” alliance of Canada, Mexico and US--along with the new regional currency, the Amero.
Stay tuned.
Nevertheless, monetary policy is not the only reason the stock market is headed for a fall. There's also the jumble of scams and swindles which have been legalized under the rubric of “deregulation”. New rules allow Wall Street to take personal liabilities and corporate debt and repackage them as precious gemstones for public auction. It's the biggest racket ever.
Consider the average hedge fund for example. The fund may have originated with $10 billion of its own cash and swelled to $50 billion through (easily acquired) credit. The fund manager then creates an investment portfolio that features CDOs (collateralized debt obligations) and Mortgage Backed Securities (MBS) to the tune of $160 billion. The majority of these “assets” are nothing more than shaky subprime loans from struggling homeowners who have no chance of meeting their payments. In other words, another man's debt is magically transformed into a Wall Street staple. (Imagine if you, dear reader, could sell your $35,000 credit card debt to your drunken brother-in-law as if it was a bar of gold or a vintage Ferrari. That, believe it or not, is the scam on which bond traders thrive)
So, the fund is leveraged, the assets are leveraged and (guess what) the investors are leveraged too — either buying on margin or borrowing oodles of cheap, low interest credit from Japan to maximize their profit potential.
Get the picture; debt x debt x debt = maximum profit and skyrocketing stock prices. That's why the face value of the market's equities far exceeds the world's aggregate GDP. It's all one, big debt-Zeppelin and it's rapidly tumbling towards planet earth.
KABOOM!
Deregulation works like a charm for the gangsters who run the system. After all, why would they want rules? They're not thinking about capital investment, productivity or infrastructure. They're not building an economy that serves the basic needs of society. They're looking for the next big mega-merger where two monolithic, maxed-out corporations join in conjugal bliss and create a mountain of new credit. That's where the real money is.
Wall Street generates boatloads of cyber-cash with every merger. This pushes stock prices up, up and away. Deregulation has turned Wall Street into the biggest credit-generating Cash-Cow of all time—spawning zillions through seemingly limitless debt-expansion. These virtual dollars were never authorized by the Federal Reserve or the US Treasury—they emerge from the black whole of over-leveraged uber-transactions and the magical world of derivatives trading. They are a vital part of Wall Street's house of mirrors where every dollar is increased by a factor of 50 to 1 as soon as it enters the system. Assets are inflated, debt is converted to wealth, and fiscal reality is vaporized into the toxic gas of human greed.
Doug Noland at Prudent Bear.com explains it like this: “We've entered a euphoric phase of financial arbitrage capitalism with extreme Ponzi overtones, a pyramid scheme of revolving credit rackets and percentage spread plays completely abstracted from any reality of fruitful activity. The reason we don't even call "money" by its former name anymore is precisely because we realize at some semi-conscious level that "liquidity" is not really money. Liquidity is a flow of hallucinated surplus wealth. As long as it flows in one direction, into financial markets, valve-keepers along the pipeline, like Goldman Sachs, Citibank, or the hedge funds, can siphon off billions of buckets of liquidity. The trouble will come when the flow stops -- or reverses! That will be the point where we will rediscover that liquidity really is different from money, and if we are really unlucky we'll discover that our money (the US dollar) is actually different from real wealth”.
Noland is right. The market is “a pyramid scheme of revolving credit rackets and percentage spread plays” and no one really knows what to expect the flow of liquidity slows down or “reverses”.
Will the stock market crash?
It depends on the aftereffects of the subprime meltdown. The defaults on existing mortgages are only part of the problem. The real issue is how the “credit dependent” stock market will respond to the tightening of lending standards. As liquidity dries up in the real estate market; all areas of the economy will suffer. (We've already seen a downturn in consumer spending) Wall Street is addicted to cheap credit and it has invented myriad abstruse debt-instruments to get its fix. But what happens when investment simply withers away?
According to WorldNetDaily.com Jerome Corsi that question was partially answered in a letter from the Carlyle Group's managing director William Conway Jr. Conway confirms that the rise in the stock market is related to “the availability of enormous amounts of cheap debt”. He adds that:
“This cheap debt has been available for almost all maturities, most industries, infrastructure, real estate and at all levels of the capital structure.” (But) “This liquidity environment cannot go on forever. The longer it lasts, the worse it will be when it ends…….Of course when ends, the buying opportunity will be once in a lifetime."
Ah, yes; another wonderful “buying opportunity”!?!
You can almost feel the breeze from the great birds flapping overhead as they focus their gaze on the carrion below. Once the stock market collapses and the greenback flattens out on the desert floor; they'll be plenty of smiley faces preparing for the feast.
Conway is right; the stock market IS floating on a cloud of cheap credit created by a humongous trade deficit, artificially low interest rates, and a 10% yearly expansion of the money supply. Like he says, “It cannot go on forever.”
And, we don't expect that it will.
By Mike Whitney
Email: fergiewhitney@msn.com
Saturday, April 21, 2007
Appraisers Pressured to Inflate Values
Daily Real Estate News April 20, 2007
The four biggest trade groups representing appraisers say inflated property valuations have been one of the main driving factors behind the surge in foreclosures by financially strapped borrowers.
Led by the Appraisal Institute, the organizations also argue that inflated appraisals are at the center of many mortgage fraud schemes, and they’ve called on federal regulators to come down harder on lenders that pressure appraisers to boost valuations in order to permit overpriced deals to proceed. In many instances, such lenders failed to require "firewalls" separating loan officers working on commission from appraisers tasked with assigning a value to the property being financed.
In a 2006 poll conducted by October Research Corp., 90 percent of the appraisers reported having been the victims of such forms of coercion as nonpayment of fees and outright threats and many reported having lost business when they opted not to go along with the plan.
Source: Baltimore Sun (04/20/07)
© Copyright 2007 Information Inc.
The four biggest trade groups representing appraisers say inflated property valuations have been one of the main driving factors behind the surge in foreclosures by financially strapped borrowers.
Led by the Appraisal Institute, the organizations also argue that inflated appraisals are at the center of many mortgage fraud schemes, and they’ve called on federal regulators to come down harder on lenders that pressure appraisers to boost valuations in order to permit overpriced deals to proceed. In many instances, such lenders failed to require "firewalls" separating loan officers working on commission from appraisers tasked with assigning a value to the property being financed.
In a 2006 poll conducted by October Research Corp., 90 percent of the appraisers reported having been the victims of such forms of coercion as nonpayment of fees and outright threats and many reported having lost business when they opted not to go along with the plan.
Source: Baltimore Sun (04/20/07)
© Copyright 2007 Information Inc.
Deep Impact: Foreclosure Surge in California
Daily Real Estate News April 17, 2007
A surge of foreclosures in California has some economists concerned that the fallout will be long lasting and potentially wound the whole economy.
The 11,033 foreclosures in the first three months of the year represent an 800 percent increase over the same period a year earlier.
"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," says analyst Christopher Thornberg of Beacon Economics.
He predicts foreclosures will top out at four or five times the current level — enough, he says, to induce a recession or at least bring the economy to the precipice.
Others are less pessimistic. "The housing sector is in trouble for a considerable period," says Edward Leamer, director of the UCLA Anderson Forecast. "But the rest of the economy will muddle through."
Source: Los Angeles Times, David Streitfeld (04/17/07)
Realtor Magazine Online
http://www.realtor.org/RMODaily.nsf/pages/News2007041706?OpenDocument
A surge of foreclosures in California has some economists concerned that the fallout will be long lasting and potentially wound the whole economy.
The 11,033 foreclosures in the first three months of the year represent an 800 percent increase over the same period a year earlier.
"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," says analyst Christopher Thornberg of Beacon Economics.
He predicts foreclosures will top out at four or five times the current level — enough, he says, to induce a recession or at least bring the economy to the precipice.
Others are less pessimistic. "The housing sector is in trouble for a considerable period," says Edward Leamer, director of the UCLA Anderson Forecast. "But the rest of the economy will muddle through."
Source: Los Angeles Times, David Streitfeld (04/17/07)
Realtor Magazine Online
http://www.realtor.org/RMODaily.nsf/pages/News2007041706?OpenDocument
FEBRUARY 2007 MARKET REPORT
FEBRUARY 2007 MARKET REPORT
February sales of Conejo Valley single-family homes totaled 93. This compares to 102 sold in January and 109 a year ago, according to Allen Reznick President, Conejo Valley Association of REALTORS.
Median sales price for single-family homes in February 2007 was $809,375; in 2006 it was $814,394. The median price is the point where half of the units sold for more and half for less.
Median prices for single-family homes in February were as follows: $500,000 for 2 two bedroom homes, 690,475 for 29 three-bedroom homes; and $867,424 for 62 four or more bedroom homes. This compares to sales in February 2006 of $625,000 for 3 homes up to two bedrooms; $684,792 for 38 three-bedroom homes; and $928,571 for 68 four or more bedroom homes.
Condominium sales totaled 36 in February compared to 51 in January 2007 and 44 for February 2006
Total Sales for all real estate transactions in February were $122,942,304 for February 2006 the total was $130,361,675.
New residential listings totaled 129 in February 2007 compared to 211 in February 2006 and 180 in January 2007.
February sales of Conejo Valley single-family homes totaled 93. This compares to 102 sold in January and 109 a year ago, according to Allen Reznick President, Conejo Valley Association of REALTORS.
Median sales price for single-family homes in February 2007 was $809,375; in 2006 it was $814,394. The median price is the point where half of the units sold for more and half for less.
Median prices for single-family homes in February were as follows: $500,000 for 2 two bedroom homes, 690,475 for 29 three-bedroom homes; and $867,424 for 62 four or more bedroom homes. This compares to sales in February 2006 of $625,000 for 3 homes up to two bedrooms; $684,792 for 38 three-bedroom homes; and $928,571 for 68 four or more bedroom homes.
Condominium sales totaled 36 in February compared to 51 in January 2007 and 44 for February 2006
Total Sales for all real estate transactions in February were $122,942,304 for February 2006 the total was $130,361,675.
New residential listings totaled 129 in February 2007 compared to 211 in February 2006 and 180 in January 2007.
Friday, April 20, 2007
MarketWatch: California home prices to weaken further: Goldman
Investment bank Goldman Sachs is increasingly concerned about the health of California's real estate market ...
Mortgage delinquencies jumped 46% in California last year, vs. a 5% increase nationally, Goldman said in a note to clients late Thursday.
Delinquencies on prime and subprime adjustable-rate mortgages in California soared by 78% and 60% respectively, vs. 33% and 24% across the U.S., the bank added, citing recent data from the Mortgage Bankers Association.
Median California home prices are still creeping up, and the state's strong employment trends should support the real estate market. But Goldman is worried that surging prices in the state in recent years weren't driven by traditional factors such as strong employment and income growth. Instead, the bank reckons an increase in ARM mortgages offered to borrowers who were already stretching to buy high-priced homes fueled the boom.
Now that lenders are cutting back some of these types of loans and regulators are beginning to crack down, California home prices could begin falling later this year, especially in high-price cities and towns, Goldman said.
Investment bank Goldman Sachs is increasingly concerned about the health of California's real estate market ...
Mortgage delinquencies jumped 46% in California last year, vs. a 5% increase nationally, Goldman said in a note to clients late Thursday.
Delinquencies on prime and subprime adjustable-rate mortgages in California soared by 78% and 60% respectively, vs. 33% and 24% across the U.S., the bank added, citing recent data from the Mortgage Bankers Association.
Median California home prices are still creeping up, and the state's strong employment trends should support the real estate market. But Goldman is worried that surging prices in the state in recent years weren't driven by traditional factors such as strong employment and income growth. Instead, the bank reckons an increase in ARM mortgages offered to borrowers who were already stretching to buy high-priced homes fueled the boom.
Now that lenders are cutting back some of these types of loans and regulators are beginning to crack down, California home prices could begin falling later this year, especially in high-price cities and towns, Goldman said.
Thursday, April 19, 2007
Foreclosure pace nears decade high
The state's increase could soon pull down home prices and even bring a recession, some economists say.
Nearly 900 Californians a week are losing their homes because they can't afford to pay the mortgage — up from about 100 a week a year ago — providing fresh evidence that the housing market's troubles are nowhere near over.
The surge is raising concerns that home prices will soon suffer as a result. The 11,033 foreclosures in the first three months of the year represent an 800% increase over the same period a year earlier.
In addition, 46,760 homeowners were sent default notices in the first quarter, DataQuick Information Systems reported Monday. A default notice is a warning from a lender to catch up on payments immediately or face eviction.
Foreclosures and default warnings are at their highest points in nearly a decade, the La Jolla-based real estate data tracker said.
So far, the effect on home values has been muted. But as the number of move-outs, evictions and forced sales continue to increase, some economists say they will soon start to push prices down.
First to fall will be the low-income communities where marginal loans proliferated, they say. The trend will spread like a virus to more affluent neighborhoods.
The most pessimistic think a housing bust will wound the economy.
"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," said analyst Christopher Thornberg of Beacon Economics.
He predicts foreclosures will top out at four or five times the current level — enough, he says, to either induce a recession or at least bring the economy to the precipice.
Other experts aren't exactly optimistic but believe that the situation is more ambiguous. They say the state's low unemployment rate of 4.8% and generally healthy economy will absorb trouble, up to a point.
"My gut is the correction we are seeing is regional and very spotty," said Patrick Veling, president of Real Data Strategies in Brea.
Generally, the places with the cheapest housing in the state — including the Inland Empire and Central Valley — are faring the worst.
In Riverside and San Bernardino counties, the combined volume of foreclosures rose to 2,369 in the first quarter from 255 in the same period last year. The Central Valley, which includes Sacramento County, jumped to 3,039 from 286.
Another problem spot is San Diego County, where the 1,183 foreclosures is the highest since DataQuick began tracking this information in 1988. The county's market peaked earlier than the rest of the state.
Los Angeles County, the largest housing market in the state, is surprisingly strong. The default rate is almost 60% below the first-quarter 1996 peak, DataQuick said.
Most of the loans going into default now were made at the peak of the housing boom in 2005, when some thought the good times would continue forever and lending standards were lax. Nearly 80% of loans made in the state in May 2005 for the purpose of purchasing houses had adjustable rates, a record high.
Many of these mortgages required the borrowers to put little or no money down, and lenders took their word for whatever income they said they made.
For a moment, everything was fine. Then housing prices stopped going up — meaning that many of these borrowers did not have enough equity or income to refinance to a new loan. Others in foreclosure may be able to afford the payments, but have chosen not to make them because their homes are worth less than they paid.
Foreclosures peaked at 15,418 in the third quarter of 1996, at the tail end of the last big slowdown in the state. They bottomed out at 637 in the second quarter of 2005, as the most recent boom was cresting.
The peak for default warnings was in the first quarter of 1996, with 61,541. The 46,760 warnings reported for the first three months of this year is up 148% from the same period last year.
Compared with the mid-1990s, however, the state's population and housing stock have grown modestly.
The sharp rise in foreclosures has become a political issue, with Congress debating methods of aiding those underwater.
There's little precedent for the current wave of foreclosures. Traditionally, people lose their jobs, and then they lose their houses. In the early '90s, the aerospace industry's collapsetriggered a broad recession.
This time, the foreclosures are happening first — and fast.
"It surprises me, the speed at which all this is evolving," said Edward Leamer, director of the UCLA Anderson Forecast.
He sees plenty to worry about. For instance, the recent tightening of loan standards is, for better or worse, eliminating a lot of the fuel that powered the bottom of the market. Entry-level buyers are priced out, which means existing owners have a harder time selling their homes to move up. Eventually, everyone is vulnerable.
"The housing sector is in trouble for a considerable period," Leamer concluded, "but the rest of the economy will muddle through."
In its March housing report last week, DataQuick reported that the median price for homes sold in Southern California was up 4.6% from March 2006 despite a sharp drop in sales.
Because the houses that aren't selling tend to be the cheaper ones, that automatically pushes up the median. Housing bears say a rising median can mask a sinking market.
Even taking this into account, however, the market appears healthier than one might expect.
Sales in the three lowest segments of the market plunged by about 50% in March from March 2006, according to new DataQuick statistics. Yet the median prices in those categories were, on average, unchanged from a year earlier.
"Prices are going sideways," said Veling of Real Data Strategies.
He wondered whether the mood was worse than the reality, adding that the boom went on so long that people's memories are distorted.
"It's been so long since we've seen a normal market that we've forgotten what it looks like," he said.
http://www.latimes.com/business/la-fi-foreclose17apr17,0,3729854.story?page=2&track=mostemailedlink
Free Home Buying School
Workshop offers information to home buyers
The Area Housing Authority is sponsoring a free Home Buying School workshop, "Why it still makes sense to buy vs. rent," from 6:30 to 7:30 p.m. at the Grant Brimhall/Thousand Oaks Library, 1401 E. Janss Road.
The session will include tax benefits, FICO scores and loan options for first-time buyers available through the state of California.
Many new homebuyers are unaware of state and local programs that help with down payments, closing costs and lowerinterest loans.
http://www.toacorn.com/news/2007/0419/Family/061.html
For information or reservations, call (800) 549-0337, ext. 167.
March sales slower than normal
Housing market continues to slide across Southland
Closed sales were off too, down 24.7 percent to 999, according to La Jolla-based DataQuick Information Systems, which tracks real estate activity across a six-county Southland region.
By contrast, the Southern California median where half the prices are higher and half lower rose 4.6 percent to a record $505,000, but sales were down 32.4 percent to 21,856.
Ventura County's median-price decline was 2 percent worse than San Diego County's 4.9 percent drop, according to DataQuick. The local median home price typically tracks a little behind Orange County, which reported a 0.6 percent increase in March to $629,000.
An economist said March's bleak numbers reflect his prediction last fall that 2007 Ventura County real estate prices will either decline slightly or be no better than flat.
Some real estate brokers said they believe ongoing media coverage of troubles in the subprime lending market is causing would-be buyers to hesitate in hopes prices will fall further. Others said it's still a little early for spring buying activity to kick in.
"This could just be one month. I wouldn't base the trend, this particular thing, on one month," said Mark Schniepp, director of the California Economic Forecast Project in Santa Barbara. "It's down a little bit steeper, but that could have been the mix. Maybe there were more condos sold and that tended to drag the median price down ... Call me next month when the numbers come out and we'll see if we have a trend."
View of the Southland
Southern California's real estate market is sending mixed messages with last month's sales hitting a 10-year low for March while the six-county median topped $500,000 for the first time, DataQuick reported. And the Southland's median price increase was attributed to a downturn in sales of entry-level homes.
March sales were slower than normal in the Conejo Valley, but offers and listing activity turned brisk as April began, said Glen Scalise of Century 21 Rolling Oaks Realty in Thousand Oaks. Media coverage of increasing foreclosures and subprime borrowers who are having trouble making mortgage payments, he said, are causing some buyers to wait in hopes that many more properties will flood the market and force prices to plunge.
"Our inventory has started to climb a little bit just like I suspected, and our pending sales are up just a hair," he said. "I think they would be up proportionately had we not had all this bad news."
Tony Deleo, broker at Main Street Realty in Ventura, said he thinks DataQuick's estimate of a 24.7 percent sales volume decline is too conservative. "My estimate would be 40 percent," Deleo said, "and I believe the median price is off way more than 6.9 percent."
Ventura had 506 active listings Thursday, including 118 that were in escrow, he said, while Oxnard had 1,056 properties listed with only 160 in escrow.
"That's almost a seven-month supply," Deleo said. "I think this will be the year that the market will clearly bear out my prediction that it will retrench itself."
Homes priced at $525,000 or less are selling fairly well, he said, because entry-level buyers are still active locally. But the market for homes priced from about $550,000 to about $1 million is soft. High-end properties are still selling.
"The affluent people who have money, they're going to buy under any circumstances," Deleo said.
Another Realtor said he had no explanation for why Ventura County prices fell more than those in other Southern California counties, but he does not believe the March downturn indicates a trend.
"My perception has been that there is a little bit of a slowness maybe caused by the tax season and maybe the spring buying season hasn't started yet," said Joe Virnig, president of the Ventura County Coastal Association of Realtors.
"The numbers could show a slowdown that was significant 11 months ago. It's just now all being added into it, not really reflective of just last month's activity ... Not that much has happened over the last month for there to be a decline in one month like that."
Monthly mortgages are up
DataQuick reported that 21,856 new and existing homes and condominiums were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 23.6 percent from 17,680 in February, and down 32.4 percent from 32,320 in March 2006.
Last month's sales were the lowest for any March since 1997, when 20,024 homes were sold.
"Both lenders and buyers are being more cautious, the dicey mortgage financing has all but disappeared," Marshall Prentice, DataQuick's president, said in a prepared statement. "It's becoming apparent that a lot of the 2004-05 buying activity was drawing from the future, and that future is now. A lot of demand was pre-met, otherwise these low sales counts would have put more downward pressure on prices by now."
The typical monthly mortgage payment that Southland buyers committed to last month was $2,326, up from $2,303 the previous month and up from $2,297 a year ago, DataQuick said. Adjusted for inflation, current payments are 8.9 percent more than typical payments in the spring of 1989, the peak of the prior real estate cycle.
Conejo Valley Association of Realtors President Allen Reznick said he had not yet seen the Thousand Oaks area's March prices, but the market looks normal to him. If prices were down last month, he said, it probably indicates more condominiums were sold than normal. Entry-level buyers would purchase most of those, and they are not used to the market.
"People have a lot of choices right now," said Reznick, a broker at Aviara Real Estate. "We've had several years of a really brisk market with limited inventory. I'm not so sure that people totally understand how to react to this type of market. It's a transition. It's going to take a little bit of time for people to be able to make those choices that they now have."
Indicators of market distress are moving in different directions, DataQuick said. Financing with adjustable rate mortgages is declining significantly. Foreclosure activity is rising but is still within the normal range. Down payment sizes are stable and flipping rates and non-owner occupied buying activity is down.
http://www.venturacountystar.com/news/2007/apr/13/housing-market-continues-to-slide-across/
Wednesday, April 18, 2007
In the beginning...
Homeowner default notices jump 123%
County foreclosures surge, information service says
California's slow housing market turned down a bleak path during the first quarter as thousands of homeowners fell months behind in their mortgage payments, leading to a surge of default notices.
Lending institutions filed 46,760 defaults, the most in almost 10 years. The news was coupled by a wave of foreclosures statewide.
In Ventura County, notices of default on houses and condominiums jumped to 965 in the first quarter, up 123 percent from 433 in the same period last year, DataQuick Information Systems reported Monday.
The La Jolla-based real estate information service blamed the increase on flat appreciation, slow sales and the terms of teaser-rate mortgages being reset at a higher interest rate.
The number of default notices sent to California homeowners last quarter increased to 46,760 for the January-to-March period, up 148 percent from 18,856 last year. The notices serve as the first step in a lengthy process toward foreclosure.
In recent years while the market was hot, Ventura County homeowners were largely able to avoid foreclosure by selling their homes, paying off their mortgages and still making a profit. That no longer seems to be the case for some people.
There were 203 foreclosures in Ventura County during the first quarter, up from 17 filed over the same period last year, which was considered a "rock bottom level," said DataQuick spokesman Andrew LePage. The year-over-year leap was a drastic 1,094 percent.
'A perfect storm is brewing'
Since 1988, Ventura County's quarterly average has been 124 foreclosures. Foreclosures peaked at 330 during the third quarter of 1996, and hit an all-time low of six in the third quarter of 2004, LePage said.
Statewide, the loss of homes to foreclosure totaled 11,033 during the first quarter, up 81.5 percent from 6,078 for the previous quarter and 802.1 percent from 1,223 for the first quarter last year.
DataQuick reported that many of the loans that went into default last quarter were originated between April 2005 and May 2006, with a median age of 15 months. Adjustable-rate mortgage use for primary purchase home loans peaked at 77.8 percent in May 2005 but has dropped since.
On primary mortgages, homeowners were a median five months behind on their payments when the lenders started the default processes. The borrowers owed a median $10,784 on a median $331,200 mortgage.
Mortgage broker Mike Anderson is seeing a noticeable increase in foreclosures and is forecasting a major jump soon.
"A perfect storm is brewing, and most people don't even know it," said Anderson, a partner of Ventura County Home Loans in Ventura. "A lot of people are on the cusp of looking at foreclosure."
Some borrowers might not be fully informed or aware of their types of loans, one of which could be an adjustable rate mortgage that is about to increase.
A very different climate
What's driving the increase of foreclosures? Some experts say they don't know. Anderson says the changing of subprime guidelines and the terms of many adjustable rate mortgages increasing are some of the factors.
"More than likely, a large portion of these are going to be foreclosed on. That's when there's going to be blood on the streets, hypothetically," Anderson said. "As early as six months ago, you could do 100 percent financing for the stated borrower with a 600 credit (FICO) score."
It's a different story today. With subprime banks defaulting on these payments and sometimes filing bankruptcy, lenders are cautiously requiring a minimum credit score of 670, and a down payment on the property. This makes it nearly impossible to refinance for a homeowner whose property lost value, and now has more to pay the bank than what was originally owed.
"The market is having a long overdue correction in terms of saying yes to loans," Anderson said.
Many worry the current housing cycle will replicate the housing market's crash in the 1990s, but it's a very different climate, said Bill Watkins, director of the UC Santa Barbara Economic Forecast Project.
"Right now, the economy is doing rather well," Watkins said. "The people who are losing their homes are not typically people who have lost their jobs, but because they've had to deal with the structure of the loan" and don't have enough equity to sell or refinance.
For some, the best option could be to sell, but if the homeowner does not have any equity or savings, the most rational and easy choice could be to simply walk away, and let the house go to the bank, Watkins said.
Buyers hoping to get a good deal on foreclosed homes will likely be disappointed. Home values have not yet been effected by rising defaults, Watkins said.
'Still a lot of demand'
Mark Asai, a real estate foreclosure consultant at Century 21 Rolling Oaks in Thousand Oaks, said a buyer might save from 3 percent to 5 percent off a foreclosed home, but that's it.
"The quantity of foreclosures are very small, and we're in a more affluent area where there's still a lot of demand and not much housing relative to people who want to buy a home," Asai said.
In response to the rising default notices in Ventura County, this month Troop Real Estate Inc. formed Troop Solutions, a subsidiary corporation to assist homeowners who are approaching or are in preforeclosure. Preforeclosure is the period of time before a property goes to public sale.
"What we try to do is identify the rights and obligations of the homeowners and develop strategies and solutions that help them keep their property," said Paul E. Stansen, real estate broker and attorney leading the efforts at Troop Solutions. "In a nutshell, we work to protect homeowners' equity and credit."
He has a large and growing list of potential clients. Receiving counseling isn't cheap. Stansen charges $250 an hour while he sifts through loan documents with a client and tries to find a possible solution, such as a mortgage modification, which might mean extending the term of the loan.
It typically takes from two to three hours to get through the conversation and analyze a 200- to 300-page loan document.
"What we're trying to find out is what's unique about their loan, if there's a prepayment penalty, if there's a rate adjustment, and what they can do to rectify that," Stansen said.
http://www.venturacountystar.com/news/2007/apr/17/homeowner-default-notices-jump-123/
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