California Median Home Price Over Time

Following Message Is From Irene Kiang

Now this is a fascinating chart because it shows how big the bubble got during the boom. The fact of the matter is, the median family income in California still can’t afford the median priced home. However, much of the data is distorted because the mix of sales. That is, many of the homes that sold over the last year happened at the lower end of the market thus misrepresenting the median price. So although the median price is down, it is a reflection of the massive amount of foreclosure resales. In the mid to upper tier of the market prices remain stubborn on the downside.

That will change as more and more shadow inventory makes its way to market in 2010. There is simply no other way around it. Many of the Alt-A loans, those made to “better income” borrowers occurred in more expensive areas. When these hit recast dates, a new inventory surge will hit the market and a simple rule of economics will play out. That is, more supply equals lower prices. There is no way around this fact.

California Commercial Mortgage Delinquencies Drop in Q110

Article by JON PRIOR

Monday, April 26th, 2010, 2:09 pm

In California, the delinquency rate of commercial mortgages fell to 0.63% in Q110, a 34-basis point (bp) drop from 0.97% at the end of 2009, according to the California Mortgage Bankers Association (CMBA).

On a dollar basis, the delinquent rate reached 0.63%, which translates to a 0.29% delinquent rate on a loan-volume basis. Of the more than 6,400 commercial loans surveyed by the CMBA, 19 loans totaling $344.6m were more than 90 days delinquent. The survey included 16 mortgage banking firms and $54.7bn in commercial and multi-family loans.

Fifteen of the delinquent loans, worth $317.6m, were still three or more payments behind while four reached foreclosure. The largest delinquent loan was a $16.1m retail property in Riverside County.

Retail was the second worst performing category with $19.4m of loans more than 90 days late. Leading the way were office properties. More than $306m of those loans fell into delinquency, or 3% of the surveyed portfolio.

Ten of the 16 participating companies reported no delinquent loans.

“It is encouraging to see the delinquency rate fall, and it reinforces the overall strength of the portfolio,” said Peter Ulrich, commercial real estate consultant for the CMBA. “While the commercial/multifamily real estate sector is not out of the woods yet, the fact that over 99% of loans in a $50bn-plus portfolio are still performing well is a sign that the fundamental underwriting and subsequent servicing of these loans is excellent.”

While there might be more optimism on the default side of the commercial space, the national Mortgage Bankers Association (MBA) reported worse news on the origination side.

The volume of commercial and multifamily mortgages originated in 2009 declined 46% from a year earlier, to $82.3bn of loans, according to the MBA.

The state of the commercial market varies from analyst to analyst. According to Cushman & Wakefield, the market is in better shape than many anticipated given the largest employment declines in more than 70 years, but regional markets with the highest job losses, and the related overabundance of commercial properties vacant as businesses fail, will take longer to dig out of the recession.

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Southern California apartment rents are expected to keep falling

A study shows the average cost dropping as much as 3.5% in L.A. County this year, 2.4% in Orange County and less than 1% in San Bernardino and Riverside counties but inching up in San Diego County.

Apartment rents are expected to fall as much as 3.5% in Los Angeles County this year, according to a study released Wednesday, as landlords compete for tenants in a market battered by stubborn joblessness and saturated with freshly constructed housing units.

For apartment dwellers, falling rents have been the housing bust's thin silver lining: During the boom, rents had climbed in tandem with housing prices.

Southern California's high number of foreclosures and the rampant overbuilding during the housing bubble has resulted in a glut of rentals as demand has slackened with high unemployment, according to the Casden Real Estate Economics Forecast.

Meantime, many struggling young adults have moved back in with their parents, and older people who have lost their homes have started living with relatives, according to a separate study for the Mortgage Bankers Assn.

That study -- by Gary Painter, a professor in USC's School of Policy, Planning and Development -- found that a net 1.2 million American households disappeared from 2005 to 2008.

While rents are likely to fall 3.5% in Los Angeles County and 2.4% in Orange County, those declines are expected to be more moderate than in 2009. Rents should fall less than 1% in Riverside and San Bernardino counties but inch up less than 1% in San Diego County, according to the Lusk Center study.

"The take-away is that the economy is showing some small signs of improvement. All markets are going to perform better than the previous year, but for some that still means a decline," said Tracey Seslen, a professor at the USC Lusk Center for Real Estate who co-wrote the Casden study. "L.A. is going to perform the worst."

In Los Angeles County, the average monthly rent fell to $1,488 at the end of 2009, a 5.8% decline from a year earlier.

More than 5,700 apartment units were completed in the county in 2009, about 42% of the new supply for the region last year. This year, 4,805 units are scheduled to be built, representing more than half of new construction in Southern California.

Property owners are feeling the pinch.

"It is a way more competitive marketplace now, where before at the high end you could still rent an apartment quickly," said Mark Howell, who owns the historic La Fontaine building in West Hollywood as well as several smaller rental properties in West Hollywood and Beachwood Canyon.

"You really have to sit on that apartment to get that tenant, so you will often wait two or three months to get what the apartment is worth. You really have to lower the rents," he said.

Howell estimates the income from his buildings has fallen 2% to 3% since 2007. While rents at La Fontaine and other high-end properties have held up, he said he has had to lower his price on units in another building, to $2,200 from $2,500 for a two-bedroom apartment, for example, or to $1,550 from $1,700 for a one-bedroom. His portfolio hasn't declined more because he has brought other units up to market value as tenants have left, he said. Nevertheless, 2009 was intimidating, he said."

Everywhere you would go in West Hollywood you would see a 'for rent' sign," he said. "It was scary."

The average Orange County apartment rented for $1,464 in 2009, a 4.4% decline from 2008, as the fallout from the subprime mortgage crisis took its toll.

Jessica Nicole Filicko, 30, said she was renting a condominium in Fullerton last year for $1,100 a month when it was foreclosed on by the lender. While the experience was stressful, she said, the lender ultimately paid her $3,500 to vacate the property, and she found a comparable unit in the same complex for $995.

"It definitely is a noticeable change," she said. "I do see a little bit more of my income, and I don't have to live paycheck to paycheck. If something were to happen, there is that cushion, which is a little less stressful."

The average rent in the Inland Empire -- San Bernardino and Riverside counties -- fell 3.8% to $1,024 in 2009 from the year before.

Seslen of USC said that, while investors have poured money into the region snapping up foreclosed properties, they are not putting many on the market as rentals but are rather holding on to them.

"Their holding costs are relatively small compared to your average Joe," she said. "So they may find that it is worthwhile to keep the home unrented until they decide the time is right to resell."

San Diego County's average monthly rent had the smallest decline in the region, 1.3% to $1,323 at the end of 2009 compared with a year earlier.

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Riverside had nation's highest percentage of distressed home sales in January

April 8, 2010 11:49 am

The city of Riverside had the nation’s highest percentage of distressed home sales in January, surpassing even Las Vegas and underscoring the deep difficulties facing the Inland Empire’s housing market this year, according to a report released Thursday.

The report by the Santa Ana research firm FirstAmerican CoreLogic factors in the number of short sales (in which a lender agrees to sell a property for a value that is less than the outstanding mortgage) with the number of foreclosure properties sold by lenders.

Banks and other lenders are increasingly turning to short sales as a way of dealing with defaulting borrowers, as these kinds of transactions tend to save lenders money over foreclosures, though they still make up a small share of the market. The average price for a foreclosed property sold in January was $141,900, compared with $215,300 for a home sold through a short sale, according to the report.Out of the nation’s largest 25 housing markets, Riverside topped the list with 62% of the homes sold in January being either foreclosure sales or short sales. Las Vegas was second at 59%, and Sacramento third at 58%.

Nationwide, short sales accounted for 8% of all sales in January, up from 7% in December and 5% in January 2009. During the 12 months ended in January, there were 974,000 distressed sales: 740,000 were foreclosure sales and 234,000 were short sales.

San Diego's short-sale share was 19% in January, making it the highest-ranked short-sale market, followed by Sacramento with 18% and Oakland at 16%.

Distressed sales in January were at their highest level since April 2009, accounting for 29% of all U.S. sales in January, according to the report. Distressed sales hit their peak in January 2009, when they accounted for 32% of all sales nationally, then fell through the summer but began to rise again through the second half of 2009.

Foreclosed? Here comes the tax man

By Les Christie, staff writer April 8, 2010: 10:21 AM ET NEW YORK (CNNMoney.com) --

Did you lose your house to foreclosure this year? Did your lender forgive some of your mortgage debt because you sold it for less than it was worth? If so, you could be facing a big tax hit. It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You'd have a debt forgiveness of $5,000, which the IRS would count as income, just like your wages.The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Act. That ended the liability for many homeowners -- but not all.In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won't add insult to injury by counting the difference as income. At least until 2012.There are four major exceptions to the rule:1. You did a cash-out refinance and splurged.Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats or vacations. Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent. Only the funds used to actually improve your home won't be taxed. Yes, even if you spent the money on paying off your student loans or credit cards. The IRS' reasoning is that only the money spent on home improvement actually added to your home's value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed. Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it. 2. You have a home-equity line of credit.During the boom years, many homeowners tapped soaring home equity to make all sorts of consumer purchases. But the same rules that apply to refinancings also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent improving your home. And, tax experts advise, you'll need to show receipts to prove you did. 3. You lost your vacation home or investment property.So the market tanked and you lost your vacation home. Unfortunately, if you didn't use it as your primary residence for at least two of the previous five years, you're going to pay the tax man.More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.When the bust hit, second home prices cratered. The median price paid for investment properties fell 43% to $105,000 in 2009, from $183,500 in 2005, according to NAR. For vacation homes, the median price paid dropped 17% to $169,000. If an investor bought a property in 2005 at the median price and sold it in 2009, he could have run up $75,000 or so in forgiven debt. If the investor is in the 25% income tax bracket, that would add nearly $19,000 to their tax liability. Ouch!4. You owned a multi-million-dollar home.It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home. But owners losing one could be on the hook for a huge tax bill. Only the first $2 million in forgiven debt will be voided under the relief act; all the overage is taxable as income. So, say, for example, you're Scarlett Johansson. You paid $7 million for your Hollywood Hills villa in 2007. (With a 100% mortgage; this is hypothetical, remember.) But now, you have it on the market for $4.59 million. Say you can't unload it, your movies tank and you have to a short sale. (Hey, it happened to Nicholas Cage; he went into foreclosure.) If you sell it for $4 million, leaving a $3 million balance, the IRS would forgive the first $2 million. But the remaining million? You better hope you have a good accountant and a lot of deductions.The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. "If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes," he said. "It can also be discharged in a bankruptcy and approved by court order."

And then there is CaliforniaWhile most states follow the IRS lead and don't tax most forgiven mortgage debt, California still makes you pay. The state legislature hopes to change that before April 15, but right now California taxpayers are legally liable for paying state income taxes on forgiven mortgage debt.The state, which has endured some of the worst price declines and foreclosure rates in the nation, did follow the federal lead when it passed the original debt forgiveness bill, but the state only authorized the relief for the 2007 and 2008 tax years. There have been successive legislative efforts to extend relief through 2009, but none have succeeded.One attempt at passing an omnibus "conformity" bill resulted in a veto by Gov. Schwarzenegger for reasons having nothing to do with mortgage debt forgiveness. The governor objected to a different provision covering erroneous tax reporting by businesses.Confusion and anxiety is running high, according to Rocky Rushing, chief of staff for democratic state Sen. Ron Calderon, who is spearheading new legislation. His office has fielded many calls from unhappy taxpayers.