Explaining Southern California's economy

California is going through another 'wave' in foreclosures

Foreclosures Spike As Banks Accelerate Loan Default Notices

Kevork Djansezian/Getty Images

A for sale sign is posted in front of house in Glendale. California saw foreclosure starts pick up in June, suggesting that a new wave of defaults is underway.

For the first six months of 2012, foreclosures in California declined from the same period a year earlier. But RealtyTrac, an Irvine-based company that specializes in tracking foreclosures, reports that the state still has the fourth highest foreclosure rate in the nation. In fact, in June, default notices sent to homeowners increased from May. And year-over-year, California's rate of foreclosure starts increased 18 percent, making it the top state for the month, the first time that California has held that slot since 2005.

I talked to RealtyTrac vice-president Daren Blomquist. He said that states with the worst foreclosure rates have remained consistent during the housing crisis. The top five haven't moved around a lot: it's Nevada, Arizona, Georgia, California, and Florida. He noted that the only surprise was that Georgia has moved into the top four and that Florida has slipped.

Read More...

April Case-Shiller Index: Price slide could be slowing in L.A.

April 2012 Case-Shiller

S&P

L.A. home prices are down from last April, but they've been trending up modestly for the first part of 2012.

The April Case-Shiller Index came out yesterday and contained good news for most of the 20 cities that the index covers and some indications of a decent trend for L.A. in the first quarter of 2012. Home prices were still down in L.A. compared with this time last year — down 3.6 percent in fact — but over the past few months, prices have been edging up.

Not as much as in Phoenix, which rose by 8.6 percent from April 2011. But the decline wasn't as severe as in Atlanta, which dropped by 17 percent.

In L.A., February-March saw a tiny 0.1-percent increase after a January-February month-on-month decline. But the March-April uptick was better: 1.5 percent. This could mean that prices are gaining a footing and could start to build on their gains. Sales, after all, have been improving in L.A. But prices haven't yet caught up. This could change as foreclosures and short sales (when the lender agrees to accept a sale for less than is owed on the mortgage) move through the system.

Read More...

Can the Federal Reserve end the foreclosure crisis?

Mercer 11751

AP Photo / J. Scott Applewhite

The Federal Reserve Building in Washington, DC.

The economist Peter Morici, who has been extremely critical of the Obama adminstration's economic policies of late, has taken a look at the housing crisis and doesn't see much hope. He does see one way out, however. But it's an exceptionally unlikely way out:

Currently, the rate on five-year adjustable rate mortgages is about 3.2 percent. If the Fed could get the investors who buy Fannie and Freddie bonds to accept interest rates of minus 3 percent, then young folks could be offered mortgages with appropriately negative interest rates. To accomplish that feat, the Fed would have to buy all those bonds itself-that's right the Fed would finance all federally guaranteed mortgages and write off 3 percent a year. I can just hear Ron Paul now.

Morici makes this argument in the context of discussing why it makes little sense for young people to buy houses right now (unfortunately, I can't link to his piece, as it isn't on his website yet). He refers to Ron Paul, a Texas congressman and noted libertarian, because Paul is no fan of the Fed

Read More...

No room for optimism about SoCal housing market

KPCC's business commentator and LABiz blogger Mark Lacter takes a look at the SoCal housing markets, checking in with the DataQuick numbers. What we notice is that August sales volume was up from August of last year, but sales prices are down. Here's DataQuick's analysis:

The region’s overall median sale price is suppressed somewhat by abnormally low sales of newly built homes, which typically sell for more than resale homes. Southland builders sold 1,184 new houses and condos last month, down 14.3 percent from a year earlier and the lowest new-home tally for an August in DataQuick’s records back to 1988.

But despite that, what's worrying is that price deflation still seems to be a major factor in the regional housing market. These numbers jumped out at me:

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,101 last month, down 4.6 percent from $1,154 in July and down 4.9 percent from $1,158 in August 2010. Adjusted for inflation, current payments are 52.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.1 percent below the current cycle’s peak in July 2007.

Read More...