A Memo To Californians From Everyone Else In The World
The La Jolla Light reports from California. “A Hollywood celebrity just plunked down more than $17 million for an oceanfront La Jolla home, marking one of the largest sales in years, said Ross Clark of Willis Allen, who represented the sellers. The buyer…paid $17,350,613 for the seven-bedroom, 11-bath home. Before selling last week, the Lower Hermosa home was originally listed at $29.5 million and later dropped to $24,750,000. Clark said the sale is a good sign for the high-end housing market since ‘absolutely zero homes above $10 million’ have sold this year.”
“Currently, there are 14 homes priced at more than $10 million on the market in La Jolla and 12 in Del Mar. ‘Hopefully this will jump-start things,’ he said. ‘This is the one everyone’s been waiting for.’”
The Glendale News Press. “Massive condominium developments in Glendale and Burbank, faced with the pressures of the sputtering economy, have slashed their prices by up to 40%, attracting a spike in interest from first-time home buyers, agents reported. The projects — the Excelsior at the Americana at Brand and the Burbank Collection — have sat largely vacant for months.”
“When projects like the Americana at Brand and the Burbank Collection are completed, the developers’ obligations to pay off banks or investors can grow exponentially if sales are slow, said Paul Habibi, professor of real estate at the UCLA Anderson School of Management. In that case, developers have only two options, he said. ‘They can either unload [units] into the for-sale market, albeit at a discount, or they can unload them into a rental market,’ he said.”
“Some recent area developments have already abandoned the condo market in favor of leasing apartments. Glendale’s 416 converted all of its 115 residential units to rentals in January. And Verdugo Village took the same route with its 126 newly constructed units last month.”
“The shift in condo prices was a logical step for developers, said Jack Kyser, founding economist at the Los Angeles Economic Development Corporation. It has, in turn, made the market ripe for buyers, he said. ‘If you’re in the market for a single-family home or a condo, if you can get a mortgage, now is a good time to jump in the market because you’re going to find very, very motivated sellers,’ Kyser said.”
The LA Downtown News. “The Brockman Building stands as one of Downtown’s most anticipated residential conversions, as area boosters hope it will inject pedestrian life onto recovering Seventh Street. Yet although the upgrade was completed last year, the property has yet to see a single resident and is mired in financial troubles.”
“Last month, Brockman Building Lofts LLC filed for Chapter 7 bankruptcy protection, the first step on the road to liquidation, after parent company the West Millennium Group defaulted on its $35 million construction loan and Countrywide Bank (now owned by Bank of America) initiated foreclosure proceedings. On May 8, West Millennium itself filed Chapter 7. The Brockman now stands in limbo.”
“Amy Goldman, an attorney with Lewis Brisbois Bisgaard & Smith LLP, became the property’s court-appointed trustee, charged with overseeing the liquidation process, after it went into Chapter 7. Goldman last week said there is nothing for her to administer because the Brockman’s debt outweighs its value.”
“‘Trustees don’t usually administer buildings when there’s no equity,’ Goldman said. In a later email, referring to the $45 million debt, she added, ‘I do not believe that it would sell near that in this market.’”
The San Gabriel Valley News. “MDA DataQuick reported that the median price of a home in the six-county region of Southern California was $247,000 - down 1.2 percent from $250,000 in March and down 35.8 percent from $385,000 a year ago. The median last month was the lowest since 2002, and was 51.1 percent below the peak of $505,000, which was hit in spring and summer of 2007.”
“The dip in median prices ran counter to recent reported buying frenzies that has had economists, analysts and Realtors saying the market was recovering. What could be skewing the median down is the lack of high-end coastal sales, which means higher sale prices are missing from the data, DataQuick officials said.”
“Last month’s Southland sales were the highest for that month since April 2006, when 27,114 homes sold, but were 18.2 percent below the average April sales total since 1988, when DataQuick’s statistics begin. Foreclosure resales made up a lot of those sales. In April, they accounted for 53.6 percent of all Southland resales last month. It was the seventh consecutive month in which post-foreclosure properties made up more than half of all resales.”
“John Walsh, MDA DataQuick president offered a word of caution for the market. Foreclosures could keep coming. The effect of mounting job losses could trigger more defaults, and a new wave of foreclosures on ‘option ARM’ loans and ’stated income’ loans used in mid- to high-end markets could also come, Walsh said.”
“‘If job cuts remain deep and foreclosures spike, then the past few months might later be viewed as nothing more than a brief calm before the next foreclosure storm,’ Walsh said.”
The LA Times. “Southern California’s median home price slipped slightly in April, new figures show, but the volume of home sales tells a tale of two housing markets. In distressed areas such as the Inland Empire, homes are selling at a quickening pace, as buyers snap up foreclosed properties at cut-rate prices. But in more expensive areas such as Pacific Palisades and Corona del Mar, activity is still largely frozen. Many well-heeled homeowners who aren’t under financial pressure to sell are keeping their properties off the market or holding out for prices that buyers are either unable or unwilling to pay.”
“Manhattan Beach real estate agent Ed Kaminsky said he was beginning to see some signs of a thaw. This month, he sold a four-bedroom house in that coastal community for $2.6 million — $400,000 less than the seller paid for it in 2006. The owner had listed the house for sale at $3.45 million in 2007, but pulled it from the market at that price when he got no takers. Until recently, sellers in upscale communities swore they were immune to the housing market downturn, Kaminsky said.”
“‘When it first started, they said it’s just the low end. Everyone said, ‘We’re different.’ We’re not,’ Kaminsky said.”
The Daily Breeze. “The Palos Verdes Art Center’s seventh annual ‘Win Your Dream House Raffle’ turned out a bit different this year: There was no house. It’s probably no surprise that in such a down economy the art center failed to get a minimum of 22,000 ticket buyers - for the first time since the attention-grabbing raffle debuted.”
“That meant a four-bedroom, ocean-view contemporary Mediterranean was taken off the prize list. Instead, the art center’s board decided to give the winner a $1 million cash payout - though it had the option of splitting the about $1.8 million proceeds with the winner. The board decided to give her a cool million, making about $800,000 for the art center off the raffle.”
“‘They’re very generous people,’ said Kathy Shinkle, the center’s spokeswoman, of the board.”
The Ventura County Star. “The median price of homes sold in Ventura County was $340,000 in April, down 23.6 percent from a year ago. But even with lower sales, there were buyers in the market taking advantage of low rates and prices. Kim Tallman hadn’t even been looking when she decided to buy a townhome in Oxnard’s RiverPark.”
“‘I wasn’t even in the market,’ she said. ‘I didn’t think I could afford it or it could happen.’”
“She had been helping a friend look at homes for about a year. Mostly, it had been a discouraging process for Tallman, who said most of the homes in her price range needed a lot of work and would have needed modifications to meet her needs. But while on a visit to RiverPark with her friend, she found a four bedroom, three and a half bath townhome that included a granny flat with a separate entrance for her mother, who is disabled. It cost about $412,000.”
‘With low interest rates, it made sense to buy. Everything fell into place perfectly, she said. The mortgage is more than her rent was each month, but she gets the tax savings.’
“‘I’m stretching a little bit more than I did, but at least it’s going toward something,’ she said.”
The Redlands Daily Facts. “Redlands economist John Husing spoke at the Inland Empire Economic Forecast Conference at the University of Redlands, where he and other local experts predicted the region still has more than a year before the economy begins to turn around. Husing and others said the reason why the Inland Empire economy has been suffering recently is because its three main strengths - construction, manufacturing and logistics - have taken a hit.”
“Husing said Detroit is the only major U.S. population area with a higher unemployment rate than the Inland Empire. That, and local governments are suffering from less revenue from property taxes and sales tax. Husing said although the Inland Empire still has ‘dirt’ and a lot of blue-collar workers, ‘the question is, will we find a new sector to lead us out (of the recession)?’”
“‘We need to rely on our strengths,’ he said. ‘Until we can get back into residential construction, that hole remains until we find something else to fill it.’”
“Positively, he said supply and demand is rising to about where it was in 2003. ‘Affordability is phenomenal,’ he said. He said one sign housing prices are getting better is Tino, a hotel employee he knows, is finally looking to buy a house. But, he said, ‘we need to burn through a ton of foreclosures’ and government fees must go down.”
The Press Enterprise. “In Riverside County there were 4,469 home sales last month, up more than 40 percent from April 2008, and in San Bernardino County there were 3,130 sales, almost 88 percent more than for the same month a year earlier. Sales reached record highs for April in a number of Inland communities, including Moreno Valley, Perris, Indio, San Jacinto, Lake Elsinore and Victorville.”
“The median price of homes sold last month in Riverside County was $180,000, down 39 percent in a year, while the median priced house in San Bernardino County was $138,500, almost 48 percent less than in April, 2008.”
“Several variables can still affect a housing recovery, DataQuick President John Walsh said in a statement. ‘The problem is that we still face big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on option ARM and stated income loans used in mid to high-end markets. Also of concern are reports of lenders holding back for many months before making a public foreclosure filing,’ he said.”
The Petaluma Argus Courier. “So, you’re thinking about buying a home. You’ve crunched the numbers, figured out how much you can spend and settled on a price range for your search. Your conclusion? It’s going to be a challenge. That shouldn’t come as a surprise of course, but what may shock you is just how much you can save on your purchase and just how quickly your home can start paying you back.’
“You won’t need to wait until years from now when you sell your home to see a return on your investment. There are several ways your house can start working for you almost immediately and, in this economy, you’ll likely want to take advantage of them.”
“First-time homebuyers, or those who haven’t owned a home in at least three years, who purchase this year are eligible to receive up to an $8,000 tax credit. This is like the government’s big ‘thank you’ for buying. There are a couple of catches.”
“Boy, will you hit the jackpot come April 15! On a new home purchase, nearly all of the payment at first goes to interest, so most of your mortgage will be deductible.”
“There are so many benefits to buying a home and the expense shouldn’t be a burden on you and your family. It may take some time, but do your research and take advantage of as many opportunities available to you as possible. Purchasing a home is one of the best investments you can make and when pay day comes, you’ll be thankful you did.”
The Sacramento Bee. “Memo to Californians from everyone else in the world: You folks out there in sunshine land caused this historic global recession, and it’s time for you to mend your ways. Farfetched? Not really.”
“A very good case can be made that California’s developers, mortgage lenders and house-hungry, but income-deficient, residents, with state and local officials as enablers, created an unsustainable housing bubble. And when that bubble burst, leaving holders of mortgage bundles — many of them overseas banks — with little more than toilet paper, it created a banking crisis that spread to virtually every other segment of the global economy.”
“Nine of the 10 top issuers of subprime and no-documentation mortgages were headquartered in California, and the state has been ground zero for the collapse of those mortgages as adjustable interest rates ‘reset’ upward, having recorded more than 500,000 foreclosures.”
“Currently, another 400,000 home loans in the state are delinquent because the economic crisis that was spawned by the banking crisis means hundreds of thousands of California families have lost their incomes, folks who were reasonably good credit risks originally and cannot make their mortgage payments.”
“There are a few signs that the national recession could be coming to a close, but that doesn’t mean California will return to prosperity soon. The state has been hit especially hard. It’s entirely possible that it will lose another 250,000 or more jobs before the recession hits bottom here, and that unemployment, now over 11%, will rise a couple of more points. That’s the economic reality.”
