Housing Prices and Unemployment in Los Angeles

Fascinating piece of research by Calculated Risk -- housing prices charted against the unemployment rate in California and Los Angeles. Click on the graph to enlarge, and actually read it. Note what happened in the last cycle: housing prices continued to fall for four years after unemployment peaked in 1992. In the current cycle, there is no clear evidence that unemployment has peaked.

This doesn't necessarily mean we're in for another four-plus years of declining housing prices. But it makes a strong point: rising unemployment makes a housing market rebound unlikely.

If Houses Could Talk: 12707 Marco Place

If houses could talk ... this one might say: "I used to be a millionaire. I was on fire. I was en fuego."

The details, as chronicled on this Redfin listing:

12707 Marco Place, Mar Vista, 90066

Three bedrooms, two baths, a 1,424-square foot bungalow-style home, built in 1950.

Sold in July 2004 for a tidy $768,000.

Sold on June 14, 2007 for an even tidier $1.055 million.

Listed for sale in January 2009 for $799,000.

That's a nice little round trip.

Redfin indicates the listing is a short sale, still active, 148 days and counting. 

The listing begins, "Gorgeous single-story in popular Mar Vista. Seller extremely motivated... "

Analysis: If that 2007 sale price is accurate, that has to be very near the tippy-top of the market. I'm a little curious as to why this house hasn't sold. I've seen similar new listings for $899,000 within a few blocks. I'm not saying the house is work $900K, or even $800K, but there do seem to be buyers at $800K for homes like this in this neighborhood.  I know a tear-down that sold in this neighborhood for over $800K this year. And this isn't a teardown, it's a nice little house.

Of course, short sales are messy and take forever, with good reason. In order for a short sale to take place, you've got to find a human being at the company servicing the mortgage who has the authority to make two potentially expensive decisions. Then, you've got to convince said person to agree with you that, one, you really can't afford to keep paying the mortgage. And two, that the property is worth a lot less than the outstanding loan, and this is the best price you can get for it.

Tracking Mar Vista, One House At A Time

This week I had an idea to try to recreate the bubble by tracking all the home sales in a Los Angeles neighborhood over the past 20 years or so. Why go back so far? I figure you have to go back to the previous boom cycle so that you can chart two separate housing cycles, to see if the most recent bubble really is off the charts, or just a garden variety Southern California housing boom.

In any event, I started researching individual home sales using Zillow, and began logging them. You can find the log here, at a separate blog called Mar Vista Bubble Monitor.

I chose a portion of 90066, Mar Vista, bounded by Santa Monica on the north, Venice Boulevard on the south, Bundy/Centinella and the east, and Walgrove on the west. Yes, there are neighborhoods within this "neighborhood," but I think the housing stock is fairly consistent throughout this area. The basic unit is the 1,100-1,200 SF, one-story home.

I'd be very curious to hear your thoughts on this little exercise. I'm hoping to find ways to map the bubble over time, but that will involve learning some new mapping/software/design tricks, and I am a slow learner. Give me time. And check out Mar Vista Bubble Monitor.

Pictured: New construction on Stanwood in Mar Vista.

On Montana in Santa Monica, 30 Vacant Storefronts

News item: The LATimes reports that "more than 30" storefronts are now vacant along Santa Monica's Montana Avenue, which serves as a kind of overpriced Main Street for North-of-Montana residents. The Times' Martha Groves:

"Along Montana, where home-grown businesses have lent the street an aura of charm and uniqueness, more than 30 storefronts sit vacant. Among the departed are fixtures such as KidsBizz, rug merchant Effandi and Ames Apparel. Babystyle closed after a quick liquidation. Shabby Chic, a once unstoppable force in home furnishings, also went under. Women's clothier Darylle B reduced its space, and Subtle Tones is seeking smaller quarters for its clothing and home items."

Worth noting: Shabby Chic filed for Chapter 11 bankruptcy back in February. Here's how the company founder, Rachel Ashwell, broke the news on her blog:

"This is a blog I never in my wildest nightmares thought I would have to write. Last Thursday evening Shabby Chic filed Chapter 11 bankruptcy protection. Business has been hard for a while, but the notion that my beloved company would become as broken as it has was never a consideration for me. I thought there would be other solutions. But with great sadness, in the end, it was the best choice of some very not nice choices."

The bloviation part: Even during the boom years, Montana wasn't exactly a thriving retail district. Rents are high and there was a lot of turnover, as merchants came and went, trying to match the neighborhood's pricey but fickle tastes. Now rents are high and there is still turnover, but the merchants are just going.

Still, vacancies on Montana are a pretty strong indication that the recession has come to upper-crust L.A. Lower home prices will likely follow. For those of you who think you saw signs of a bottom in housing stats this week, I implore you to get your housing stats, and analysis, from Calculated Risk, which wrote today: "In previous housing busts, foreclosures continued to rise until prices finally bottomed. And prices will fall - and foreclosures rise - for some time. There is no end in sight."

Prices will fall ... for some time. So says CR.

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The photo above is sunset at Santa Monica beach. It doesn't have anything to do with Montana Avenue, but I like the picture.

Foreclosure on San Bernardino County's "Dream Street"

Fascinating Sunday Reading: This op-ed piece in the Sunday L.A. Times telling the story of "Dream Street," a real street in a 2007-era development in San Bernardino County.

The writer, and photographer is Douglas McCulloh. At a charity auction back in the bubble days, he won the right to name a street in a new development. He chose "Dream Street." He also chose to document the building of Dream Street, and what happened next.

You know the story: new homes for $1,600 down in the Inland Empire in 2007, a subdivision located in the flight path of Ontario Airport. You know the drill: subprime loans, delinquencies, defaults, foreclosures, brown grass.

But McCulloh sees more, and that's what makes the story worthwhile. He tracks an evicted family's path: Owed $437,000 on their Dream Street home, which is now worth about $225,000. Fell behind on the $4,000/month mortgage. So they walked away. Default, foreclosure. Then what?

McCulloh: "But there is more. The neighbors also told me that just two months after departing Dream Street, the couple and their children already had another house. They pooled their money with that of other family members, reconfigured who should apply for the loan, bottom-fished the housing crash and bought an older home less than a mile away. It has five bedrooms on a big lot, and the kids can walk to school. Total cost: $110,000 and change. They even have some newly planted tropical palm trees -- the very ones they yanked from the lawn of their Dream Street house."

So who really lost on Dream Street? Wall Street lost. Big: "The evicted family apparently lands on its feet. The banking giant (a now shuttered division of Lehman Brothers) whirls into oblivion."

McCulloh has turned the story of "Dream Street" into a book, available for $17.55 on Amazon. I'm going to buy it -- then at least I'll own a piece of the housing bubble.

Barnes: Higher Rates Make Housing Bottom Impossible

The week just ended brought a confusing jumble of housing statistics. I won't weed through them all except to observe: Yes, there are a few signs the decline in home prices is slowing. But no, there is no sign of a bottom.

The biggest story of the week in housing was not the Case-Shiller numbers (bad but not getting worse), and not rising delinquencies for prime borrowers (bad and getting worse). No, the big story was the spasm in the bond markets this week. Bond investors are worried about runaway federal spending and borrowing. So they sold bonds, driving up interest rates and mortgage rates.

This is a problem. A big problem. From Lou Barnes' weekly column (must-reading, IMHO):

"Sales of existing and new homes stayed flat in April, at record lows. 'A' quality loan delinquencies rose to 8.9%; all indicators for foreclosures are rising; modification programs are still small-number, and of those, re-defaults run 25%-60%. Low-priced homes in every market get auction-style attention; however, foreclosures at 50% of resales tells you everything you need to know about the non-foreclosure fraction. Unstable, not bottom, not bottoming. Higher rates make bottom impossible. Even before this week’s rate-wreck there was still no up-tick in purchase-loan applications."

I'll repeat the takeaway: "Unstable, not bottom, not bottoming. Higher rates make bottom impossible."

The Wall Street Journal hammers the same point: "Home-mortgage rates have surged to their highest level in more than three months, threatening prospects for quick rebounds in the housing market and consumer spending."

More from the Journal: "Meanwhile, rising unemployment is fueling a continuing steady increase in mortgage delinquencies and defaults. About 12.1% of first-lien home mortgages in the U.S. were overdue or in the foreclosure process at the end of March, the Mortgage Bankers Association reported. That's the highest ever recorded in the MBA survey and up from 8.1% a year earlier and 11.9% at the end of 2008."

There are some signs price declines are slowing. But there is also clear evidence of a new wave of foreclosures, which will put additional downward pressure on prices. The New York Times this week: "More homeowners than ever before are falling behind on mortgage payments and sliding into foreclosure, according to figures released Thursday, a sign that the housing crisis is spreading through the ranks of previously stable borrowers."

The Last Working Crane in Downtown L.A.?

Take a good look at the grainy iphone photo above. Why? Because this crane is almost done with its job at the new Ritz-Carlton condo building downtown, and when it's done, the big cranes will be just about gone from the L.A. skyline. There's been quite a construction boom downtown, and it's about to be over.

For what it's worth, I like the looks of the new Ritz tower, which is just around the corner from the Staples Center, and pretty darn close to the 110 freeway. It's not a straight up-and-down tower, it's a bit top-heavy, so there are some interesting angles. I like the blue-on-blue color scheme too. I have no idea who's going to buy luxury condos downtown, however.