The Q3 Foreclosure Report Is In

I was checking my inbox recently and found the latest info on foreclosures from Property Shark. Last time I wrote about foreclosures back in September, I noted that parts of the San Fernando Valley topped the charts for number of foreclosures in the Southern California area. Here is a brief list, so you can see which areas have the most foreclosed homes for the third quarter of 2008:

Taking the #3 spot for the second time in a row is Sylmar with 301 trustee sales.

Pacoima keeps the #4 spot with 290 trustee sales.

Reseda is new to the list, taking the  #11 spot with 225 trustee sales.

If you’re interested in the chart, click on it to enlarge.

I also combed the report for other areas I thought some of our readers might be interested in. These are all Q3 foreclosure numbers.

Encino (91316): 68

Encino (91436): 15

Sherman Oaks (91403): 33

Sherman Oaks (91423): 33

Woodland Hills (91367): 63

Woodland Hills (91364): 57

West Hills (91307): 45

West Hills (91304): 110

Back in September, a reader asked if I thought the stats indicated a firming market in West Hills (91307). Given this latest foreclosure report, the fact that the number of houses for sale is only declining slightly (perhaps due to seasonal influences), and the fact that the charts still show the sold price per square foot to decline, I would have to say we’re not at the bottom yet. (Some of you might be saying, “duh!”)

What are your thoughts?  Are any of you actually finding bargains in the foreclosure market? Please share.

Dead in Eagle Rock

The Los Angeles Times has an interesting piece today about an abandoned loft project in Eagle Rock on Colorado boulevard that local residents say is an eyesore and danger, and that the article’s author is using as an icon of the recent real estate bust. The 17-loft project was started on a triangle of land that had previously seemed impervious to development…big columns went up, but then heavy rains came down and things seemed to crumble:

Today, a half-built, block-long still life of concrete and rebar has supplanted the grass and ivy. Cinder-block walls are tagged with graffiti. Trash — a crumpled milk jug, a condom wrapper — is caught in the weeds. All of it is framed by 40 towering pillars. The developer says the project is effectively dead. It’s unclear whether anyone — the developer, the lender, the city — has the wherewithal or the inclination to do anything about it. Neighbors fear the site could stay this way for years; seeking some sort of progress, they are planning to sprinkle the site with morning glory seeds.

Next to downtown, Eagle Rock is one of the neighborhoods where I consistently have seen the most price drops and homes lingering on the market. The article describes the area as a “village” and an alternative to Los Feliz, Silver Lake, or even Glendale and Pasadena.

Eagle Rock stumbled into a terrible decline in the 1970s. In the ’90s, it began to ascend, fueled by millions of dollars in public and private investments — and a wave of artists and bohemians priced out of the beach and unimpressed with the hip scenes of Los Feliz, Silver Lake and Echo Park. Along with counterculture types who’d never left, they sought to create a different sort of community on what might be called an urban seam — not quite city, not quite suburb; edgier and funkier than nearby Glendale and Pasadena, but more forgiving and artsy than the metropolitan center to the south.

I think all that is true, but when it comes down to it, real estate really is location, location, location. Eagle Rock’s alternative vibe – the very thing that drew many there in the first place – also makes it a “not for everyone” kind of place, and I think that’s really hurting real estate values right now. Here’s a few places for sale near this lot:

• A 2/1 for $339,900 – its a 2/1 with 995 square feet.
• This cute bungalow is a 2/2 for $449,000 and 1,144 square feet.
• This is a short sale north of Colorado Blvd. It’s listed at $475,000 for a 2/2.
• And here’s a cute traditional for $499,000, making it a very low $293 per square foot.

Even John McCain Doesn’t Blame the Media for the Economic Mess

Republican presidential candidate John McCain is known to have a somewhat caustic relationship with the media.  But, to his credit, he doesn’t hold journalists responsible for the uproar in the financial markets.

From the Washington Post’s political blog:  At a town hall meeting in Denver on Thursday, a questioner who identified herself as a small-business owner who had been struggling for two years because of economic conditions asked McCain what could be done about the media, whom she blamed for “killing” the car and real estate businesses.

She received a huge ovation, and the audience tittered as McCain seemed to smile and hesitate before answering the question.

“I do believe there are many occasions where the nature of the media is to exaggerate things and perhaps not be as accurate as we would like them to be,” McCain said to laughter. “But let me say, very seriously, I think one of the biggest causes of this problem was not so much the media. In fact, I don’t think that the media was responsible for what happened at Freddie Mac and Fannie Mae.”

He went on to blame the beginnings of the crisis on “such a corrupt system in Washington that Fannie Mae and Freddie Mac basically got completely out of control, their executives got exorbitant, huge amounts of pay packages,” while encouraging “all this risky behavior in the real estate market.”

Meanwhile, he added, lawmakers and lobbyists, and greed on Wall Street, accelerated the problem.”In all due candor, I can’t blame that on the media,” McCain added — though he hastened to add: “I will blame them for a lot of other things.”

I realize it’s comforting to assign blame when things go wrong, but how are the media responsible for all the things that are wrong with our economy?

Last month, National Association of Realtors economist Lawrence Yun blamed the media for creating “unfounded concern” among consumers about the health of the real estate market.  (Hmm…I didn’t hear anyone complaining when newspapers were writing story after story about record prices and sales.)

The media’s job is to tell people what’s going on.  Are stories about falling housing prices making people skittish about buying houses?  Undoubtedly yes, but it’s the data and the statistics that are the problem here, not the media. 

Anyone whose livelihood is being hurt by the economic downturn, like real estate agents and auto salespeople, probably wishes the news were better.  But facts are facts.  To say that the media is the reason people are not buying houses is insulting to the intelligence of the American people, who are smart enough to know figure out what’s really going on.

Personally, I wish journalists had investigated the underpinnings of the housing boom before it went bust.  But I can’t blame them for not figuring it out; no one else did either.  And if they had questioned the situation while everyone was happily making and spending money, they probably would have been accused of being killjoys.

Journalists aren’t perfect, and they don’t always get it right.  But a free press is essential to our democracy. We may not like everything we hear on the news, but the alternative — allowing the government or special-interest groups  to influence or control what’s reported — is infinitely worse.

Recent Redfin posts:
Debt, the Engine of Prosperity, is Out of Fuel
Third Quarter Foreclosure Stats By ZIP Code: Glendale and Pasadena
An Explanation of the Financial Crisis That Even I Understand

Third Quarter Foreclosure Stats by Zip Code: Glendale and Pasadena

Countrywide takes the lead as beneficiary for the most foreclosed homes in Los Angeles County, followed by Washington Mutual, according to Property Shark’s 2008 3rd quarter report. My own investigation on Property Shark last week found Countrywide on 6 and Washington Mutual on 5 of the 25 current Glendale notices of default.

Foreclosures in the county are up an overwhelming 196% compared to the 3rd quarter of 2007.

A related data file charts the number of foreclosure sales by area. Here is where Glendale and Pasadena zip codes stand with respect to others in LA County:

Of 272 county zip codes, Pasadena 91103, at number 99, has the highest number: 55 trustee sales, with an average loan amount of $491,559. Pasadena 91101, with a concentration of Old Town luxury lofts and condominiums near the Gold Line, at number 238, has the least: 9 sales, with an average loan amount of $383,400. Glendale’s highest ranking zip code is 91206, number 148 on the list, with an average loan amount of $424,516; the lowest ranked is 91204, a mixed commercial/industrial/residential neighborhood with fewer homes, and an average loan amount of $428,257.

The zip code breakdown:

Debt, the Engine of Prosperity, is Out of Fuel

If we break out the strategic reserves, $700 billion may keep the engine running…but for how long? Where will the fuel for debt come from after that?

I understand that businesses rely on banks from time to time for short-term funds to keep operations going and people employed. But why are American consumers (with “consumer” a synonym for “citizen”) constantly encouraged to go into debt?

Whether it is a new pickup truck, a home entertainment system, or a major appliance, your retailer has a financing plan for it. The product of this strategy is debt. The engine of our economy is debt.

The strategy is a failure and the engine is sputtering as home equity plummets and and easy credit dries up.

Why, if people are losing overpriced homes to foreclosure, should the government try to game the system? Shouldn’t home prices fall to affordable levels, allowing buyers to assume less debt? Why is our government’s solution a plan to rescue debt holders and provide more debt? I’m guessing there are reasons we would be frightened to know.

As Ken Blackwell’s editorial lamented today:

We have become a culture addicted to debt. It starts with 18-year-olds, where everyone getting a job is offered a credit card and everyone going to college is offered several, with the expectation of profits from interest accruing on balances.

The economic expansion of the past fifteen years has been built on a mountain of debt. Millions spend today with no thought of how they can pay tomorrow. Whereas you used to save and invest and wait for big purchases such as a new car, now you get it today and pay massive sums in interest as you finance it.

Our representatives in Washington haven’t admitted that leadership at all levels of our society has not just allowed, but encouraged banks, manufacturers, retailers, marketers, and salespeople to push debt on customers. Debt that is threatening to bankrupt our country.

Irvine Renter observes, “you can’t take it with you” is a rational argument for abusing home equity lines of credit. Why not just pull out as much cash as possible to finance the lifestyle our 24/7 marketing culture is selling? How’s this for an answer: Its unpatriotic!

There’s my rant. Thanks to Mene Tekel, who titled this post’s photo “Get in Debt, Get Fat, Die.”

For those who have been patriotically saving up for the bubble to burst, these attractive properties in north central Pasadena are already nicely renovated, whether paid for by home equity line of credit or other means:

1508 Sinaloa Avenue
$755,000 (originally $899,000)
3 bed/3 bath
2,196 sq.ft.
$344 per sq.ft.
On Redfin 199 days
This is a lender-approved short sale reduced three times. It last sold in July 2006 for $840,000.

745 E. Rio Grande Street
$749,000
3 bed/2.75 bath
1,550 sq.ft.
$483 per sq.ft.
On Redfin 142 days
A City of Pasadena Landmark Property, this looks charming. It last sold July 2005 for $685,000

965 E. Howard Street
$998,000
3 bed/2 bath
2,120 sq.ft.
$471 per sq.ft.
On Redfin 29 days
This 1909 Craftsman looks completely restored and sits on a large 13,000+ sq.ft. lot. It last sold in June 2004 for $811,000.

An Explanation of the Financial Crisis That Even I Understand

For the past two days, I’ve read more economic news than I’ve ever read in my life. Mostly I’m trying to get a better handle on what is going on with our financial system, so I can decide whether I’m for or against the big government bailout. Of course, in the end it really doesn’t matter what I think; Congress is going to do whatever it does, and I’m guessing the rescue bill is going to pass, because the consensus is that although only a handful of reckless folks caused this mess, everyone will be hurt by it.

Anyway, I came across this New York Times article that references an episode of a Chicago Public Radio show called This American Life that aired back in May. The episode, entitled “A Giant Pool of Money,” is still on the Web, and yesterday I listened to the entire thing. The hosts — Ira Glass, Alex Blumberg and Adam Davidson — present the most comprehensible explanation of the evolution of the housing bubble that I have heard. If, like me, charts and graphs make your eyes water and you really aren’t sure what a mortgage-backed security is, spend an hour and listen to this show. It’s fascinating, forthright, and entertaining, and you’ll come away reasonably learned about how we got into this mess. Here’s my takeaway:

1. There is a “giant pool of money” out in the world at any given time — from pension funds, insurance companies, 401(k)s, etc. — that money managers must a) safeguard and b) make grow (i.e., invest).
2. In the early 2000s, interest rates were so low that it was impossible for money managers to make any real money on “safe” investments like bonds or CDs.
3. Around that time, someone got the bright idea to create “mortgage-backed securities,” created by buying home loans in bulk from lenders and selling them as investment vehicles. The reasoning was that the mortgage-holders, who were paying around 6% interest, would provide a dependable rate of return that was considerably higher than that of bonds or CDs.
4. This idea really caught on; the demand for mortgage-backed securities went through the roof. The problem was, by 2003 everyone who could get a mortgage pretty much already had one. How would the demand be met? You guessed it: by lowering lending standards.
5. Lending standards kept devolving as demand for mortgage-backed securities continued unabated. As one lender lowered standards, others followed suit to compete. The bottom was the advent of the so-called “NINA” loan — no income, no assets.
6. Things started to tank when people stopped making their mortgage payments — in some instances, new homeowners would go immediately into default, not making a single payment. As delinquencies snowballed, lenders finally started to get spooked, and things started to tighten up.

And here we are.

At the end of the episode, which aired nearly five months ago, Blumberg and Davidson conclude that the fallout from this bubble will be “more like the 1970s than the 1930s,” with the economy simply shifting into neutral for awhile. So even though these two men were in front of the curve in seeing that the housing boom was a house of cards, they still underestimated its impact, just like practically everyone else — including our leaders.

When you listen to this report, it seems so patently obvious that the the situation was a disaster in waiting. Yet none of our leaders and money managers saw it coming — or, if they did, they decided to ignore it. I don’t know which is worse.

But if Congress and the Fed didn’t foresee this, how do we know they’re capable of doing the right thing going forward?

Recent Redfin posts:
Ed McMahon, You Need a Kick in the Can!
How to Go Green and Save Some Green
Are Short Sales an Illusion?
WaMu Owns 25% of Current Glendale Defaults

Ed McMahon, You Need a Kick in the Can!

Unless you’ve been in a cave for the last few months, you’ve heard the story of Ed McMahon and the impending foreclosure of his Beverly Hills home. Apparently McMahon, who is 85, somehow found himself virtually bankrupt, despite at one time proclaiming a net worth of $200 million. At the time, his spokesperson noted that a recent neck injury had prevented McMahon from getting a job and bringing home a paycheck, just like any other octogenarian.

Thankfully, McMahon did manage to land a new gig: He’s going to star in two viral videos for FreeCreditReport.com — the site whose commercials feature a trio of jingle-singing twentysomething slackers who don’t have a clue about their finances. According to this Associated Press story:

In the first video, McMahon — who once pitched the American Family Publishing sweepstakes — and a bodyguard are cruising through a neighborhood looking for sweepstakes winners to ask for some money back, but McMahon doesn’t actually go through with it. In the second spot, McMahon dons a new suit after undergoing a financial and emotional makeover.

“When I retired, I was famous,” McMahon raps in the video. “I had money and glory/I bought a house for 6 mill/I thought nothing could touch me/Until my credit went south, and debt started to crunch me/Next thing I know, instead of playing gin rummy, I was scrambling just to make ends meet/It wasn’t funny.”

After being joined by two scantily clad women, McMahon continues: “Got a bump from the media chumps, but that was temporary/Wife with bad credit was scary, so I got wise/I may have fallen, but I got back up/Now I’m back on the attack, like a ninja swinging nunchucks/I told the haters, ‘Go on, take a hike’/It’s my show now, and I can do what I like.”

McMahon’s compensation was not disclosed, but presumably it’s enough offset the indignity of capitalizing on one’s financial ineptitude. He told The AP that he hoped that his participation in the campaign would help others. Right.

Meanwhile, another source of income may be in the offing:

Last week, a Los Angeles Superior Court judge ruled that McMahon’s lawsuit against Cedars-Sinai Medical Center and two physicians he claims failed to properly diagnose and repair his broken neck laid out adequate legal ground to pursue claims that include negligence, elder abuse, battery, fraud and intentional infliction of emotional distress.

The latest word on McMahon’s home is that it might be saved before its Oct. 2 auction date. The CEO of a company called Foreclosure Trackers claims it has worked out a loan-purchase plan with McMahon that it hopes its lender, Countrywide, will accept. In other words, a short sale. Good luck with that!