Sweet Orange

Up today is Irvine’s 92606 ZIP housing numbers. This ZIP includes the Westpark and Walnut neighborhoods. The photos are of 59 Del Cambrea, a three-bedroom, single-family home in Westpark, and 39 Royal Victoria, a four-bedroom condo in Walnut. Both have HOA fees and Mello Roos taxes, and both are priced near the overall median for homes in this ZIP. However, the price per square foot is considerably cheaper for the Royal Victoria home ($309/SF) than for the Del Cambrea home ($441/SF).

92606 Median Selling Price:

• 

  39 Royal Victoria, Irvine (Walnut)

  July 2010: $584,000 (up 9.5% y-o-y)

• June 2010: $457,000 (down 25.4% y-o-y)
• May 2010: $408,000 (down 16.7% y-o-y)
  For comparison: Redfn’s May median numbers are $457,000 (down 30% y-o-y) or $347/SF (up 1.5% y-o-y)
• April 2010: $498,000 (down 20.3% y-o-y)
• March 2010: $613,000 (up 12.07% y-o-y)

92606 Number of Sales:

• 

  59 Del Cambrea, Irvine (Westpark)

  July 2010: 14 (down 22.2% y-o-y)

• June 2010: 17 (up 6.3% y-o-y)
• May 2010: 21 (up 40.0% y-o-y)
• April 2010: 12 (up 33.3% y-o-y)
• March 2010: 15 (up 25.00% y-o-y)

Source unless otherwise noted: DQNews

Photo: South Coast Repertory, located in the cultural district of Costa Mesa’s South Coast Metro

Following is a history of the number of sales for homes in Costa Mesa by ZIP.

92626: South Coast Metro, Mesa Verde, part of Central Costa Mesa

• June 2010: 37 (down 2.6% from June 2009)
• May 2010: 26 (down 1.5% from May 2009)
• April 2010: 28 (down 6.7% from March 2009)
• March 2010:  32 (down 22.0% from March 2009)

92627: Eastside, Southwest, part of Central Costa Mesa

• June 2010: 43 (no change from June 2009)
• May 2010: 46 (up 4.5% from May 2009)
• April 2010: 30 (down 9.1% from April 2009)
• March 2010: 36 (up 24.1% from March 2009)

Source unless otherwise noted: DataQuick/OC Register

Here are some quotes from a post in a recent John Burns Consulting newsletter. They provide some food for thought when deciding if housing prices are going up, down, or sideways:

When forced to answer the question, we [John Burns Consulting] say that most home prices are reverting to 2003 prices - some areas have overcorrected and some have not fully corrected. While that covers our butt nationally, we know the truth is much different depending on what submarket or pool of homes you are talking about.

…

If you read the newspapers, you would think prices are appreciating, whether it is the Case Shiller price index or median resale prices - the two price measures that used to be the most reliable measures…

According to CS, prices are up 6% in LA (includes Orange Co.) and 11% in San Diego since March of 2009. According to the median price, prices are up 12% in LA, 17% in Orange County, 12% in Riverside and 18% in San Diego since April of 2009. Neither is correct if you are talking about most homes in those markets.

…

According to a [Realtor Survey of Existing Home Prices] survey, prices only recently started appreciating in Orange County, and they are still trending down very slightly in the rest of Southern California.

…

To understand home prices (and all else housing-related for that matter), you need to look at everything. If you are making a decision based on headline data or a regression to the mean, you are taking a lot of risk.

Click on the link to see the rest of this John Burns Consulting newsletter.

Downs [of the Brookings Institute] expects big changes because of the recession, such as homes being built smaller and being less affordable. He also expects a switch from the more conservative spending and fewer government restrictions of the Reagan and Bush eras to the more liberal government spending and tighter government regulations that the Obama administration has already started to enforce.–”Brookings fellow: Recession is not over yet,” Jacksonville Business Journal

We are about to have new legislation that is aimed at preventing the housing and financial market crashes that we recently experienced from occurring again. Opinions differ on where or not this new legislation adequately addresses these problems while at the same time not unnecessarily stifling financial institutions ability to lend.

Back in February at an Urban Land Institute event, Anthony Downs of the Brookings Institute identified the following as issues that the new financial legislation should address but probably would not due to “political backlash.” When reviewing this new legislation, keeping this points in mind can help you decide how successful lawmakers were in their attempt at reform.

Here are the points that Downs thought were necessary for successful reform of the financial institutions:

• Break up the largest U.S. banks that control much of the nation’s money
• Require that financial institutions have adequate reserves
• Reorganizing securities
• Require that mortgage bankers conform to stricter rules
• Ensure international cooperation on financial regulations

What do you think? Does the new legislation go too far or not far enough in addressing the problems that lead to our current financial difficulties?

Note: For one analysis with some pros and cons, see “The Dodd-Frank Financial Reform Bill is a Valuable Step Forward” Douglas J. Elliott, Brookings Institute.

Photo Courtesy Brookings Institute

Do you think that you know how to solve the California budget crisis? Do you think that you know what programs to cut or taxes to raise? If so (or even if not), you can put your assumptions to the test by taking the California Budget Challenge from the nonpartisan NextTen group.

Since its debut in 2005, more than 175,000 people have used the “California Budget Challenge,” the online simulation that lets users try their hand at managing the Golden State’s finances by creating a budget reflecting their values.

The new June 2010 California Budget Challenge includes the most up-to-date figures from Governor Schwarzenegger’s May Revise. You’ll be confronted with many of the current proposals under consideration by the legislature. In addition to choices about education spending and income tax, you now have the opportunity to weigh in on topical proposals such as further cuts to human service programs, imposing an oil severance or marijuana tax, or increasing the current cigarette tax.

South Coast Repertory in Costa Mesa

Here are the some recent housing numbers for Costa Mesa by ZIP. The 92626 ZIP includes South Coast Metro, Mesa Verde, and part of Central Costa Mesa. The 92627 ZIP includes Eastside, Southwest and part of Central Costa Mesa.

Median Selling Price

92626

• April 2010: $512,250 (up 6.4% from April 2009)
• March 2010: $515,000 (up 12% from March 2009)

92627

• April 2010: $435,000 (down 5.6% from April 2009)
• March 2010: $467,500 (up 24.7% from March 2009)

Number of Sales

92626

• April 2010: 28 (down 6.7% from March 2009)
• Marach 2010:  32 (down 22.0% from March 2009)

92627

• April 2010: 30 (down 9.1% from April 2009)
• March 2010: 36 (up 24.1% from March 2009)

Source: DataQuick

Photo Courtesy South Coast Repertory

“The rate [of home ownership] only began to climb above 64 percent in the 1990s and the first decade of the current century when Administrations of both parties adopted national policies designed to encourage home ownership; the result was to drive both home prices and the home ownership rates to unsustainable levels”.–”Housing in America: The Next Decade,” Urban Land Institute

The percentage of those in the U.S. that are homeowners has fluctuated throughout U.S. history. As mentioned in the quote, the home ownership rate peaked in 2004 at 69%.

Here is the U.S. homeownership breakdown as provided by the Urban Land Institute (ULI):

• 1900-1930: 45% to 48%
• 1940: 43% (The reduced amount was due to the Depression and World War II.)
• 1945-1960: 62% (This was the period of “the great suburbanization of the U.S.” The factors leading to this suburbanization was “a booming economy, rising real incomes, favorable tax laws, a rejuvenated home building industry, and easier financing.“)
• 1960-1990: 62% to 64%
• 2004: 69%
• First quarter 2009: 67.2%
• Likely near-term stabilization rate: 62% to 64%

ULI provides the following analysis on the effects that a change in the number of homeowners will have in the U.S.:

“Government policies are in the process of being rebalanced today. A homeownership rate of 62 to 64 percent will have only a modest impact on local communities….

There have been many studies which extol the virtues of homeownership for community stability and educational and health benefits for children. These are being questioned by new studies, however, and new evidence suggests that housing stability is more important than whether a home is owned or rented in producing positive outcomes.

If, on the other hand, a confluence of circumstances conspires to produce a rate in the 50s, this will be a “game changer.” The most likely cause for such a low homeownership rate would be a prolonged or double dip recession, with a slow recovery”.–Urban Land Institute

To see a ULI video presentation of the report, click here. To read the ULI report, click here. To read a related report from ULI, see “2010 Emerging Trends in Real Estate“

According to Pulitzer Prize-winning columnist Thomas Friedman, one of the main problems facing the U.S. is an “I’ll-Be-Gone, You’ll-Be-Gone” attitude about our economy–and the environment. For example, he states that we have been using the same unsustainable accounting practices for both: We have been underpricing risk, privatizing gains and socializing losses, and this is why Bear Stearns and the polar bear are becoming extinct at the same time.

As Friedman sees it, the root of this problem isn’t solely with current government policies:

We don’t just need better government, we need better citizens….We need to make leaders understand you can ask me to something hard.

Friedman see much of the anger at our current predicament as “unfocused” and an unwillingness to make a shift away from the familiar but unsustainable practices that have lead to the current difficulties. Friedman says we are following situational values instead of sustainable values.

Goldman has been the poster boy for banks behaving by “situational values” - exploiting whatever the situation, or rules that it helped to write, allowed.–NY Times News Service

Now brace yourself, because here is an example of the type of immediate change that he thinks we should be willing to make for the long-term benefit: A dollar gas tax.

Forty cents would go to deficit reduction, 40 cents to health care (which would also help to reduce the deficit), 10 cents to subsidize those who can’t afford health care, and 10 cents to those who have to drive long distances.

As Friedman sees it, these measures would help to reduce the deficit, improve the health of the dollar because we won’t be sending $250 billion overseas, and correct an energy policy that is currently empowering some of the most corrupt leaders in the world.

OK, I know that a gas tax is a third rail in politics, and I imagine some of you are muttering some unpleasant words just at the mention of a gas tax. But as Friedman sees it, we cannot continue with an economy based on the expectation of continuous withdrawals without deposits.

Here are some other solutions that Friedman thinks will help our economy:

• Health care reform will allow us to compete globally.
• Investment in energy technology will allow us to compete in the predominant job markets of the not-to-distance future.
• Education in energy technology will allow us to build a better economy.

Sources:

• http://www.nytimes.com/2009/11/22/opinion/22friedman.html?_r=1&em
• http://www.charlierose.com/ (under Web Exclusives)

Notice of Defaults up, and trustee sales down. That is what the most recent numbers from DQNews are telling us about the foreclosure process in Orange County.

Here are the numbers from DQNews:

Notice of Defaults (This is the first step in the foreclosure process; however, this does not necessarily end in the home being taken back by the lender.)

• 2008Q3—5,692
• 2009Q3–7,436
• This is a 30.60% increase.

Trustee Sales Recorded (This is the last step in the foreclosure process. The home is taken back by the lender in this stage of foreclosure.)

• 2008Q3–3,997
• 2009Q3–2,238
• This is a 44.00% decrease.

Here is what John Walsh, DataQuick president, makes of these numbers:

It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it’s not out of the goodness of their hearts. It’s because they’ve concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest. Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses.

He goes on to say:

There’s a batch of truly nasty loans that were made in mid 2006. There’s another batch made in late 2006. These are worse than the mortgages before and after, and it’s taking a long time to process them.

The 2009 fourth quarter number from DataQuick should be out soon. We will see if the Q3 and Q4 numbers tell the same story. I expect that they will.

Update: New numbers from DataQuick have just been released. sw 1-30-10

Recently, I wrote a post about the Fed’s mortgage-backed securities buy-back program. In that post, mortgage exec Randy Johnson and vice president of HSH Associates (a mortgage-education company) Keith Gumbinger predicted that mortgage rates will go up after March 31, 2010. March 31st is the date the  buy-back of mortgage-backed securities by the Federal Reserve is scheduled to end. An article from Matt Padilla provides more information, and a different perspective, on the mortgage back securities (MBS) buy-back program.

Here is a quote from the Padilla’s article that states this different perspective:

Mortgage strategists at Credit Suisse say the slowdown in Fed purchases will not affect MBS spreads to any large degree. “The Fed’s exit from the MBS purchase program will likely be well absorbed by the market,” according to a weekly Credit Suisse “Market Watch” publication. After March 31, the “Fed will likely assume a backstop role for the MBS market to prevent a double dip in housing,” Credit Suisse strategists say.–Matt Padilla, “Treasury mum on halting mortgage-security purchases“