Archive for August, 2008

Positive signs are seen in housing

Tuesday, August 19th, 2008

Prices, sales point to healing sector, economist reports
By Jenni Mintz (Contact)
Tuesday, August 19, 2008  

As ugly as the housing market looks, there are encouraging signs that the sector is healing, an economist said Monday.

Prices don’t appear to be falling as rapidly as they were, sales are rising, and default notices appear to be leveling off, said Mark Schniepp, executive director of the California Economic Forecast Project in Goleta.

For the first time since November 2005, monthly sales in Ventura County increased over the previous year, MDA DataQuick reported Monday. A total of 870 properties sold last month, up 11 percent from 784 in June 2007.

While that appeared promising, the median price paid for new and existing homes and condominiums remained flat at $420,000 in July, unchanged from the previous month but down 27.9 percent from $582,500 a year ago, according to the San Diego-based real estate information service, previously known as DataQuick Information Systems.

The median is the midpoint, where half the homes sell for more and half for less.

Just 21 percent of the mortgages were financed with jumbo loans last month, compared with 50.7 percent a year ago. That is partly because jumbo loans are harder to obtain and are more expensive relative to conforming loans, said Andrew LePage, DataQuick analyst.

In July, Southern California home sales rose to the highest level in more than a year, as more buyers swooped in to purchase distressed properties, according to DataQuick.

Rising year-over-year sales are the first sign that the market is healing, Schniepp said.

There were 20,329 properties sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July, up 16.7 percent from the previous month and 13.8 percent from the same month a year ago.

Last month’s sales total was the first since September 2005 to rise above the year-ago level, DataQuick reported.

The uptick in sales was mostly driven by inland markets that posted the biggest depreciation and are now having the greatest sales appreciation, LePage said.

For example, July sales rose 48.6 percent in Riverside County from a year ago, while the median price dropped 34.8 percent, from $399,000 to $260,000.

“It’s not like there’s this real broad sales recovery from the Inland Valley to the beach,” LePage said. He added that the closer you get to coastal regions, the weaker sales are.

‘A fire sale of properties’

The median price paid for a Southern California home was $348,000 last month, down 2 percent from $355,000 in June and 36 percent from $505,000 a year ago.

Foreclosed properties accounted for 43.6 percent of the existing homes sold in the six-county region last month.

“What we’re looking at is a fire sale of properties in newer, affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages,” John Walsh, MDA DataQuick president, said in a news release. “What we’re still not seeing is this level of distress spreading to more expensive or established neighborhoods.”

Laurie Rutledge, a Realtor with Coldwell Banker Residential Brokerage in Ventura, says she’s seen an increase in activity, but mostly in the lower-end market — the $350,000 to $500,000 range.

“That price range is very hot right now,” she said.

While values are expected to remain flat for some time, Rutledge believes it’s a great time to buy.

“For one thing, there’s a lot of inventory, and interest rates are still low, and that situation may not exist when the market begins turning,” Rutledge said.

Distressed sales a factor

If notices of default fall now, then foreclosures will peak and then start to decline in December, Schniepp said. Though he does not believe prices will drop much more, he predicts more year-over-year price declines for as long as foreclosures continue to rise.

“Much of the declines we’re seeing right now is influenced heavily by distressed sales,” he said. “Those are the things that are beating down prices.”

About 36 percent of the county’s existing homes and condominiums sold in July had been foreclosed on at some point in the past year, compared to 7.7 percent a year ago.

Once inventory of distressed property has been cleared, prices will stabilize, which will lead to a sharp increase in sales by the second quarter of 2009, Schniepp said.

“Then the real estate market will become a lot healthier,” he said. “We are in the initial stages of recovery.”

Still, Schniepp cautioned that the market is still far from normal. He projects 2009 will have a solid increase in transactions and “will feel much better.” However, “we are likely not to see a normal market until 2010.”


Potential for West Nile virus has county on the offensive

Thursday, August 14th, 2008


By Roger Showley

August 14, 2008
From a sheriff’s helicopter, every San Diego neighborhood sparkles with patches of light-blue backyard pools and spas, symbols of the good life in the Sun Belt.
Only these days, an increasing number of pools are turning slimy green from the algae that grow once owners turn off the filters to save cash or lose their properties through foreclosure. On weekly flyovers, county environmental health officers have spotted nearly 900 of these “green” pools since May.

In this case, green is not good. The algae attract mosquitoes that lay their eggs on the surface, and in a few days adult insects emerge, bothering residents and potentially spreading the deadly West Nile virus.

“If people don’t tell us they have a green pool, they are at risk to get West Nile virus,” said Chris Wickham, one of 40 county staff members combating the virus and other diseases borne by mosquitoes, rats and other sources or “vectors.”

Last year, the county’s vector-control program received 2,149 mosquito-related complaints or service requests. To get a handle on all potential mosquito breeding grounds, the county has stepped up its aerial surveillance and visits to properties with green pools.

So far this year, the number of green pools sighted by helicopter has sometimes reached 80 to 100 in a two-or three-hour flight compared with 20 a year ago, Wickham said. Many are found in Chula Vista, Escondido and Oceanside, where foreclosures have been high.

“It sure seems like there are more green pools out there than last year,” Wickham said.

The problem is not restricted to San Diego County, officials said. Urban counties throughout the state are reporting more problem pools. And in Clark County, Nev., home of Las Vegas, the total so far this year is 2,000.

Bill Reisen, a research entomologist whose lab at the University of California Davis is testing 1,000 groups of mosquitoes weekly for West Nile virus, said swimming pools may be a growing source of virus-carrying mosquitoes. Dry conditions should have eliminated the normal breeding grounds found in wetlands, riverbeds and other such habitats.

“The end of the issue will be to have someone buy these houses and take care of the pools properly,” Reisen said.

Such was the case of a property on Tait Street in Linda Vista seen by Wickham last week. The telltale green tinge was spotted from the air, so he went out Saturday to investigate and found a for-sale sign outside the property, which was tented for termite control.

As allowed by law, Wickham entered the backyard, deposited about a half-dozen “mosquito fish” to feed on mosquito larvae and left a notice that reads, “Mosquito Fish at Work – Do Not Add Chemicals,” and asks the residents to contact the vector-control program for more details.

“Right now, our charge is to protect the public health,” Wickham said. “Our cause is to kill every mosquito we can – no mercy, take no prisoners.”

Coincidentally, the 1,850-square-foot property closed escrow yesterday, and the new owner plans to empty the pool and cover it, said the listing agent, Ellen Wang of Re/Max Associates.

Next door, Wickham also found a green pool in the backyard of a home that is occupied but where the owner did not respond to his knocks at the door. He threw a handful of mosquito fish over the fence in the hope that any breeding problem would be controlled.

“As far as I’m concerned, that’s now a pond, not a swimming pool anymore,” Wickham said.

Jean Listar, a neighbor, said the owner’s wife had died recently and that he had stopped maintaining his landscaping and pool. Listar said she had not seen any mosquitoes – “not yet, anyway.”

The county has been fighting mosquitoes for more than 30 years, and since 1989 has charged a mosquito-, vector-and disease-control assessment on property tax bills to cover the costs. This year the charge is $7.92 per house – or $1 more for coastal properties – and an equivalent amount for other property types.

The current budget of $893,609 supports a staff of 28 full-time and 12 seasonal workers who do surveillance, visit homeowners and conduct educational campaigns to alert the public to the danger of West Nile virus and other diseases. The budget includes $25,000 for flyovers in sheriff’s helicopters at the rate of $700 per hour.

The virus, first detected locally in 2003, infected 15 humans in the county last year and three so far this year. Symptoms resemble the flu but can become severe, resulting in polio-like disability and sometimes death. There have been no deaths so far in San Diego County.


Information: The county Department of Environmental Health operates the region’s vector-control program with the goal of eradicating mosquitoes carrying the West Nile virus and other diseases. Information is available at (888) 551-INFO and The California West Nile virus Web site is

Free fish: Free mosquito-eating fish are available from the vector-control program’s office at 9325 Hazard Way, Kearny Mesa; (858) 695-2888.

Personal protection: Officials recommend that residents protect themselves by using insect repellent containing the active ingredient DEET, wearing long-sleeve shirts and long pants, repairing window and door screens to keep mosquitoes outside, and dumping containers of stagnant water. Mosquitoes generally are active from dusk to dawn.


How to buy a foreclosed home

Friday, August 8th, 2008

Sure, there are bargains to be had, but there are also plenty of pitfalls awaiting anyone brave enough to wade into real estate’s maelstrom. Here’s what to consider.
By Les Christie, staff writer
Last Updated: August 8, 2008: 11:17 AM EDT

NEW YORK ( — Hoping to score a house on the cheap by buying a foreclosed property? There are good deals out there, but the process is complicated and risky. Here’s what you need to know.

There are certainly plenty of Foreclosed Homes on the market. In California, 40% of existing homes sold in the second quarter were foreclosures, according to DataQuick, a provider of real estate information, compared with 5.4% a year earlier.

Indeed, Fannie Mae CEO Daniel Mudd said Friday that the company is pushing hard to sell more foreclosed properties, to get them off the books. “I don’t think this is a time to be holding onto REOs and hoping for a better day,” he said.

Steve Dexter, author of “Prospering in the Rising Wave of Foreclosures,” has bought dozens of foreclosed homes and thinks now is a good time to dive in. “It’s the best way to buy, and it’s time to buy again,” said

There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.

A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off.

Buyers can find pre-foreclosures by poring over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.

Armed with prospects, buyers should go scouting. If they see homes they like, they should contact the owners to see if they want to sell.

“You call them or knock on their doors and say, ‘I know you’re having a problem and I think I can help you,’ ” said Alexis McGee, co-founder of

McGee only buys when she figures she can make a profit of 30% or more; marketing and other expenses wipe out about half that by the time she resells. But people buying a house to live in might be happy with a 20% discount from market value.

Cold calling and making low-ball offers on people’s homes can be difficult: Some owners are emotional, even angry. Many are trying to hold onto their houses and don’t appreciate what they consider scavengers sniffing around.

“But you’re not taking advantage of these homeowners,” said Duane LeGate, president of, which puts together buyers and sellers of distressed properties. “All many of them want is financial relief from bad mortgages, and you’re offering it.”

Indeed, some owners are open to doing what’s called a short sale, which is when a buyer pays less for a house than the mortgage that is owed on it. Lenders must agree to a short sale, and will then forgive the rest of the debt.

Often, banks are reluctant to do such deals, since it requires them to take a loss. It can take months and a lot of badgering before a deal goes through, and not every buyer is up for that kind of hassle.

But as the housing market deteriorates, lenders are warming up to short sales, according to founder Brad Geisen. “It makes a lot more financial sense for them to liquidate early rather than go through the foreclosure process,” he said, which can cost lenders about $50,000.

Gabe Cera recently bought one through an associate of LeGate, Raul Pineyro, owner of Cacophony Group Real Estate Services in Dade County, Fla. Cera purchased a four-bed, three-bath in Miami for about $60,000 less than what the owner’s mortgage was worth.

“I’m very satisfied,” Cera said. “The transaction was very smooth and quick and I think I saved a lot of money.”

In buying any pre-foreclosure, LeGate advises buyers to not be turned off by dirty carpets or ugly paint jobs. That’s where the best deals are.

“Anybody can go the Home Depot (HD, Fortune 500) and buy some paint and a new rug,” he said.

Sheriffs’ sales
In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.

 Bidders can’t inspect the property, so there’s no telling how much work it needs. And there is also no telling what kind of liens there are against the home, due to unpaid taxes and so forth, which can also jack up the cost of these homes. Finally, Buyers need to come with cash, ready to put 10%-20% down on the spot, and able to pony up the rest in a matter of days.

“If you want to buy on the courthouse steps,” said LeGate, “you’d better be a pro.”

Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.

LeGate himself has bought several homes at auction, with mixed results.

“The first time, I bought, renovated and sold the house all within 29 days and made a killing,” he said. “I thought I was a mini-Donald Trump. The second time, the previous owner poured cement into the pipes before he left and when I turned on the water, it clogged everything. I lost more on the second house than I made on the first.”

After a lender takes back a house, the property goes back on the market as what’s called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.

Author Steve Dexter advises house hunters to go to the Web sites of all the major lenders and look for REOs in their communities. Alternatively, “Get a young, hungry real estate agent who’s screening REOs all the time and put them to work for you,” he said. Foreclosures for sale may also be found on the sites of Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), as well as eBay (EBAY, Fortune 500).

Dexter prefers to buy REOs because the process is so clean; the title is clear and the property is delivered vacant, even if the prices aren’t as good. He says one bank manager told him he usually sells REOs for 95% of listing prices, on average.

“You might not think that’s too great for buyers,” said Dexter, “but the listing prices are lower [than market value],” usually by 10% or more. The total discounts often exceed 15%.

Another way to buy an REO is through an REO auction. As bank portfolios of these properties have swollen, they’ve started to unload them en masse. Pam McKissick, chief operating officer of Williams & Williams, an auction company based in Tulsa, said her company buys big portfolios of post-foreclosure properties from lenders and then auctions them to individual buyers.

The REOs that Williams & Williams pick up are usually sold within 30 days; successful bids can be quite low. “It’s a very rapid process,” said McKissick, ” You want to put a family back into a home quickly and bring the neighborhood back. This does that.”

First Published: August 8, 2008: 11:06 AM EDT

Freddie Mac posts $821M loss

Thursday, August 7th, 2008

In yet another sign that the nation’s housing market continues to slump, Freddie Mac posted a loss of $821 million for the second quarter, slashed its quarterly dividend 80 percent and promised investors that it would raise at least $5.5 billion in new capital, the financial institution announced Wednesday.
It’s the fourth quarterly loss in a row for the company, a government-sponsored entity that buys mortgages on the secondary market from lenders.

The magnitude of the loss, five times worse than what Freddie reported for the first quarter of 2008, stems primarily from the implosion of the real estate market in Florida and the Southwest during the past two years.

Like its sister organization, Fannie Mae, Freddie is bleeding from the massive number of low-quality subprime mortgages underwritten during the real estate bubble, a large number of which are no longer performing.

Freddie also lost money on its investments in securities backed by subprime mortgages. In the larger world of finance, the collapse of subprime-backed securities has already forced some of the biggest U.S. and European banks to write off more than $200 billion the past year.

In a conference call with investors, CEO Richard Syron warned that the country’s real estate woes were far from finished.

“Today’s challenging economic environment suggests that the housing market is far from stabilizing,” he said. “We are halfway through the overall peak-to-trough decline.”

But critics say Syron has to move faster. Freddie’s stock dropped $1.55, or 19 percent, to $6.49 Wednesday, eroding its capital base. Syron says he doesn’t want to raise more capital now, which would dilute the holdings of current shareholders. “That value’s already gone,” says Paul Miller of FBR Capital Markets. “They need capital, and they need it fast.”

Freddie shares traded at nearly $75 at their peak at the end of 2004 and have tumbled 90 percent from a 52-week high of $67.20 last August.

Freddie’s losses aren’t just a problem for shareholders. Like Fannie, Freddie makes money buying mortgage loans from underwriting banks. In today’s tighter credit market, the current mortgage loans are profitable, but Freddie’s losses are preventing it from investing more capital in the area.

In a conference call Wednesday, Freddie executives said they would hold steady or cut back on the company’s existing loan portfolio, which could make mortgages even more expensive for aspiring homeowners.

The Bush administration and Congress have expressed concern about the health of Fannie and Freddie this summer, noting that problems sustained by those institutions could worsen the economic problems currently facing the nation.

“These guys can’t be turned around until the housing market bottoms out,” says Dan Seiver, finance professor at San Diego State University. “There’s no sign of that happening. If the economy weakens, more homeowners are going to have trouble making payments.”

Greg Farrell • USA TODAY • August 7, 2008