By Annette Haddad
Times Staff Writer

10:27 AM PDT, May 15, 2007

Southern California home sales plunged to a 12-year low for the month of April, dragged down by a dearth of transactions at the lower end of the market even as prices held steady, data released today showed.

The median price paid last month for a house in the six-county region was $505,000, the same as the month before and a 6.1% increase from a year ago, La Jolla-based research firm DataQuick Information Systems reported. It was the greatest rate of year-over-year appreciation since June, when the median rose 7.7%. The median price is the point at which half of all homes sold for more, half for less.

Yet nearly a third fewer homes in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties closed escrow last month compared to a year earlier for the worst April showing since 1995, DataQuick found.

Among new and existing homes, 19,269 escrows closed in April , a 28.9% drop from April 2006 and a 12% decline from March. That’s the fewest number of homes sold in the month of April since 1995, when 15,303 homes sold.

Most of the erosion in sales appeared in the lower-priced markets of the Inland Empire that only a year ago still seemed to be soaring. In Riverside County, sales dropped 45.1% to 2,987 year over year, while in neighboring San Bernardino County, sales plunged 46.7% to 2,049, according to DataQuick, which compiles its statistics from a review of all closed residential transactions each month.

These are areas where the typical home is valued at about $400,000, making them more attractive to investors and to first-time home buyers. But with tighter lending standards now preventing many entry-level borrowers from qualifying for mortgages, and with fewer investors speculating on Southern California real estate, sales in the Inland Empire have plunged.

“The falloff in starter home sales has the effect of pushing median prices up a bit, although it’s still somewhat surprising prices haven’t declined more,” said DataQuick president Marshall Prentice.

Indeed, home price growth in the Inland Empire is waning but not collapsing. In April, the median in Riverside County fell 1% to 409,000, while San Bernardino’s median edged up 2.8%. One year earlier, in April 2006, the median rose 9.4% and 18.4%, respectively.

Elsewhere in Southern California, Los Angeles was the only other county aside from San Bernardino to see a rise in its April median price compared to a year earlier. In L.A. County, the median home price gained 5.9% to $540,000 and was identical to March’s median price. Meanwhile, sales fell 22.2% from a year ago, DataQuick said.

Orange County’s median was virtually flat at $629,000, which was a 0.2% dip from April 2006 and unchanged from the month before. Sales in Orange County declined 24.7%. Meanwhile, the median in Ventura County fell 2.4% to $572,000 as sales dropped 11.7% compared to a year earlier.

In San Diego County, where the region’s housing boom started seven years ago and where many prognosticators anticipated the first signs of a housing crash, the median price dipped 3% to $490,000 for the slowest year-over-year rate of decline since August. Sales fell 13.5%.

Southern California’s housing trends mirror what’s happening throughout the U.S. housing market. Today, the National Assn. of Realtors group reported that existing home sales nationwide fell 6.6% in the first quarter, while the national median price dipped 1.8% to $212,300.

But some analyst see a bottom to the nation’s housing market correction coming as soon as the end of the current quarter.

The pace of the decline in sales has slowed significantly since mid-2006, Ben Garber, an economist for Moody’s Investors Service said in a report Tuesday. That phenomenon, coupled with persistently low interest rates and small gains in income growth, have helped to “ameliorate the extent of the housing bust and set the stage for its recovery,” he said.

By DEBORAH CROWE - 1/1/2007
Los Angeles Business Journal Staff

It was one of the strongest years for U.S. public markets since the dot-com crash – and L.A.’s community of mostly small and middle market public companies in 2006 more than held their own.

Skechers U.S.A. Inc. was the only company with a billion dollar-plus market cap to see percentage share gains in the triple digits. But others weren’t far behind, such as DirecTV Group Inc., which rose steadily on improved revenues from a strategic turnaround to end the year up 77 percent.

Of course, there were more than a few duds, and some big ones at that. Once high-flying homebuilders such as KB Home saw their shares fall by almost a third, mirroring a slowdown in the housing market. And even a long-term stellar performer such as Amgen Inc. suffered the big pharma blues as questions abounded about its long-term growth prospects.

Still, as of the close of trading on Dec. 27, local stocks measured by the LABJ 200 Index rose 18 percent for the year, narrowly beating the Dow Jones industrial average’s 16 percent gain and leaving the Nasdaq Composite Index’s 9 percent appreciation in the dust.

And barring a catastrophic event that sends financial markets into a tailspin, this year is likely to be similarly healthy for growth.

“You also saw a lot of turnarounds that had been in the works for a couple of years, especially post-dot-com bubble, that are showing results this year,” said Ken Tang, director of institutional sales for B. Riley & Co. “As long as that continues and the M&A activity keeps up we should have a good year next year too.”

In addition to a thriving mergers-and-acquisition environment that helped drive the markets’ growth, companies based in Los Angeles’ diverse regional economy benefited last year from increased defense and homeland security spending, record import-export business at the ports and a hot commercial real estate market.

Shares of busy Torrance aerospace contractor Hi-Shear Technology Corp. tripled – the best performance of any local company trading above $5 a share. Hi-Shear’s stock reached as high as $18.90 before falling victim to profit-takers, ending the year at around $9.

More typical of the top gainers was Los Angeles-based PeopleSupport Inc., which was only a few years old when the market crashed. It struggled in the early part of the decade before turning around its global outsourcing service business.

The company, which provides a variety of business services such as accounts receivable, made two January acquisitions that enabled the company to gain more than 150 percent this year to trade at $21.62. It separately acquired companies providing fast-turnaround transcription and captioning services in 15 languages.

PeopleSupport, with its $483 million market cap, is among the lucky small- to mid-sized companies to attract the attention of Wall Street analysts; 11 firms cover it. That attention helps support enough trading volume for a reasonably healthy market in its shares.

New blood in the executive suite also paid off in exciting investors. A revitalized Walt Disney Co. ended the year up more than 44 percent to $34.54. The smooth transition from the Michael Eisner era to his hand-picked successor Robert Iger led to accelerated new media initiatives. And Iger’s success in mending fences with longtime creative partners such as Steve Jobs enabled Disney to juice up its flagship animation division with the acquisition of Job’s Pixar.

Sector struggles

Meanwhile, the diverging fortunes of the residential and commercial real estate markets could easily be seen in performance of local public companies in those sectors.

The weakening home sales market contributed to 29 percent and 25 percent declines respectively for homebuilders KB Home and Ryland Group Inc. That was largely responsible for a 13 percent decline in the construction-engineering sector that not even a 22 percent jump in the shares of Jacobs Engineering Group Inc. could counter. Jacobs, like Hi-Shear announced a succession of government contracts during the year.

It was a far different story in the local commercial real estate sector, dominated by real estate investment trusts, property management companies and brokers. That sector saw 65 percent appreciation for the year. Typical was CB Richard Ellis Group. Inc., which capped a string of acquisitions by swallowing Houston institution Trammel Crow Co., and saw its stock rise more than 70 percent over the year.

Even the county’s largest companies saw strong share appreciation this year, with only Amgen and energy utility Edison International among the 10 largest by market cap not to see double-digit gains for the year.

In fact, Amgen lost ground and that made the biotech-pharmaceutical sector the area’s biggest loser, shedding 16 percent. It joined only five sectors among the 18 different industry categories that comprise the LABJ 200 Index to post negative returns.

Amgen, whose stock gained 24 percent in 2005, was on track to end 2006 down 13 percent. Amgen suffered because it could not meet Wall Street expectations for returns more in line with a small, fast-growing tech than the mid-size pharmaceutical company it has become.

A similar drag on the sector was Abraxis Bioscience Inc., the area’s second largest biotech, whose stock was down 28 percent for the year as the market showed impatience at lagging sales growth for its lead cancer drug.

Only two of 12 companies in the sector – drug developer MannKind Corp. and nutritional supplement maker Natrol Inc. – saw their stock appreciate during the year. MannKind’s gains this year have largely been driven by heightened expectations for an inhaled insulin system that has yet to receive FDA approval.

Energy and utilities was in the middle of the pack among the sectors, showing a 21 percent growth as a whole.

Occidental Petroleum Corp. was in line with that average, riding the wave of record-high oil prices to end the year just under $50 a share, a 24 percent gain. But energy utility Edison, whose shares rose 34 percent in 2005, saw only 5 percent appreciation in 2006, now trading at around $46.

Edison, the parent of electric utility Southern California Edison, has seen lackluster earnings and faces a variety of risks from rising natural gas prices, a vulnerable regional power grid and potentially costly state regulation of greenhouse gas emissions.

The battle over skid row is part of a long war between the poor and those who would displace them.
By Tom Slater
Tom Slater is a lecturer in urban studies at the University of Bristol in Britain. He is the coauthor of “Gentrification,” to be published by Routledge in the spring of 2007.

July 30, 2006

THE STEAM CLEANING of the streets of skid row a few weeks ago — when homeless people were literally swept and hosed out of their makeshift encampments in downtown Los Angeles by employees of the local “business improvement district” — was a troubling moment in the battle over the neighborhood’s future. But it was hardly a unique one.

In fact, the trend toward gentrification has created similar moments in cities all around the world for many years, pitting the poor and the homeless against real estate developers, the police and upscale residents returning to “reclaim” the inner city. As long as there have been low-income neighborhoods, there have been those who want to remove them — and those who have, as a result, been left with no place to go.

The origins of the term “skid row” can be traced to Skid Road in Seattle in the 1880s, which was known for the greased corduroy track of saplings over which logs were skidded toward water to be floated to sawmills. As logging gave way to urbanization, Skid Road came to refer the area of a town where out-of-work loggers congregated. Arrival there signified that one was sliding downward in society, or “going on the skids.” During the Depression, the phrase moved south and east to denote the run-down section of any city where homeless and unemployed people clustered; by 1940, the name had changed to “skid row.”

The term “gentrification” is of more recent vintage. It hails from Britain, and was coined by the late Ruth Glass, a London sociologist, in 1964. She was worried about an emerging pattern she had identified in working-class neighborhoods of inner London: They were being “invaded,” to use her words, by members of the middle classes, who were taking over “shabby, modest mews and cottages” and upgrading large Victorian lodging houses, resulting in the displacement of the original working-class occupiers.

In the years that followed, gentrification was observed in other large Western cities, and researched extensively. It is now so firmly established in American cities that it is hard to find neighborhoods in central city areas from Boston to Chicago to Denver to San Francisco that have not experienced it. (Even Seattle’s old Skid Road is now the upscale Pioneer Square historic district, a major tourist attraction). And gentrification is an increasingly global process, observed in cities as far apart as Cape Town, Kyoto, Jerusalem and Istanbul.

Many policymakers, “business improvement” strategists, real estate agents, middle-class professionals and more conservative academics have treated gentrification as a purely positive trend, as a remedy for the human, environmental and tax-base calamity of “blighted” urban neighborhoods. But as the Central City East Assn.’s efforts to sweep and hose the streets of skid row showed, gentrifying a neighborhood often means displacing those who are already there, and displacement does not usually happen without a fight. Sure, we all like clean streets, cool bars, lattes in the sun, “authentic” historical buildings, converted lofts, art galleries and live-music spaces. But sometimes they come at too high a price.

When I first saw skid row in Los Angeles in 1994, I was appalled that this level of suffering and misery could exist in a city of such fame and wealth; I felt it even more keenly in 2002, when I attended a conference in downtown L.A. That week, a Canadian colleague informed me that there are more homeless people in downtown Los Angeles than in all of Canada — a situation that has only been exacerbated since then by the increasingly hot property market downtown.

When it was first identified by Glass, gentrification fascinated urban planners because it contradicted the conventional mid-20th century wisdom that the middle classes would continue indefinitely to flee the cities and settle exclusively in the suburbs. The realization that some were, in fact, remaining in — or returning to — central city areas and rejecting suburbia came as a shock.

Explanations of gentrification have usually split into two camps. On one hand, some scholars emphasize the economic elements: the workings of urban land and housing markets, framed in the language of capital disinvestment and reinvestment. These scholars focus on the role of speculators, developers, real estate agents and mortgage lenders (usually buttressed by public policy), and argue that gentrification is a clear expression of the perennial search for profits from property.

Other scholars have taken more of a “cultural studies” tack, asking: “Who are the gentrifiers and why do they want to live in central city neighborhoods?” They’ve focused on the emergence and expansion of the “new middle classes,” their consumption practices, the ways in which (in reaction to the perceived blandness of suburbia) they imprint their identities on neighborhoods once considered off-limits.

For many years, there was considerable hostility between the two camps, sustained by political and ideological squabbles. Those who peddled the economic explanations tended to focus on the injustices of the process, whereas the cultural explainers sometimes ended up empathizing with the middle-class desire to seek out a more “urbane” existence. Today, most researchers agree that to understand and explain gentrification, the arguments must be complementary rather than competing.

Although gentrification is an increasingly global process, the most tense and violent struggles have taken place in the U.S., where the market offers limited, if any, protection to vulnerable tenants (unlike, say, Europe, where greater state intervention and regulation of rental housing tends to limit displacement). Problems in the U.S. were exacerbated during the 1980s, when the Reagan administration’s “deinstitutionalization” of psychiatric patients intensified the problems of homelessness just as the first generation of “yuppies” was seeking the edginess and convenience of urban neighborhoods.

What’s more, because gentrifiers in the U.S. are so often white, and those affected are so often members of minority groups, another layer of complexity was added to the process.

The most famous battle over gentrification took place on the Lower East Side of New York City in 1988, when a riot erupted after the police closed Tompkins Square Park in order to drive out its increasing homeless population, most of whom had been displaced because of rising rents as artists followed by young professionals moved into the neighborhood. There, as in many cases, a major role was played by both by municipal government and real estate agents, who had taken to calling the area the “East Village” in order to break associations with the poor immigrants who had dominated the Lower East Side for over a century, and thus appeal to a new wave of “urban pioneers.” It appears that a similar strategy is underway in downtown L.A., where “Central City East” is the name intended for skid row as part of the neighborhood’s “revitalization.”

The terms used in these debates are rarely innocent. “Revitalization,” for instance, suggests that right now there is nothing vital in the area. The term “urban pioneer,” so commonly given to gentrifiers, suggests no one worthy of notice is currently living there.

On the surface, gentrification can be appealing. But alfresco dining, funky clothing outlets and “historic preservation” can be deceptive. Gentrification is a serious issue when housing laws fail to protect tenants, when affordable housing is nonexistent and when no new public housing is being built because of widespread fears of re-creating the unacceptable conditions of L.A.’s existing housing projects, like Imperial Courts in Watts.

Even if people are not made homeless, the conversion of dilapidated hotels into swanky apartments means there that are fewer housing options for poorer citizens, and if this happens on a large scale, it puts massive pressure on already stretched voluntary organizations, charities and social assistance providers.

People living on the streets and in the single-room-occupancy hotels of downtown L.A. have enough to cope with already without being hosed out of the way for iPod-wearing, latte-drinking professionals strolling to work in Bunker Hill. If urgently needed change in downtown L.A. is to improve life at all for those who live there now, some provision must be made for adequate, affordable housing.

Caps on loft conversions, greater rent protections for tenants and subsidies for people unable to afford rental housing would also help ensure that poverty is not simply moved elsewhere.

If the debate about skid row is to be productive, we need to reject the characterizations of its dwellers as unfortunate failures and instead evaluate the ways in which a booming housing market can do damage — economic, social and psychological — to those who live in poor, underserved neighborhoods.

San Diego County set the pace in the run-up. The big question now is how low will it go.
By Annette Haddad
Times Staff Writer

July 13, 2006

San Diego County kicked off California’s housing boom six years ago with dramatic price rises and became one of the nation’s hottest real estate markets.

Now it has attained a more dubious distinction: It’s the first major California real estate market to see its median home price fall below year-earlier levels, according to data released Wednesday.

Another once-sizzling market, Los Angeles County, saw home prices in June rise at their slowest year-over-year rate since 2001.

San Diego County’s median price — the point at which half of all homes sold for more, half for less — for new and existing homes in June was 1% lower than a year ago, a stark contrast to the 20%-plus annual gains it was posting during the peak of the boom two years ago, according to data released by DataQuick Information Systems, a La Jolla-based real estate research firm.

It was the first time the county had suffered a decline in year-over-year prices since July 1996, and means that many people who have bought homes since June 2005 have no equity increases.

The question now is whether the county’s slump is a harbinger of an even deeper decline in prices, or part of a “soft landing” in which prices merely level off in the near future.

Most analysts don’t expect disaster as long as the region’s economy and employment continue to grow.

“Does it mean we will continue to see weakening of the hot housing markets? It almost certainly does,” said Raphael Bostic, an economist and professor at USC’s Lusk Center for Real Estate. “Does it mean that we will see massive declines and loss of values in these markets? No.”

Nonetheless, sellers such as Michael Pines are nervous. The professional real estate investor listed his Encinitas ocean-view home for sale at $1.3 million two weeks ago. But believing that the current downward trend will continue, he figures he may have to lower the San Diego County home’s price soon to close a deal.

“If you believe that history repeats itself and everything goes in cycles, real estate goes in a cycle too,” said Pines, who started selling his half a dozen San Diego area properties two years ago when he believed values had peaked.

Tugging San Diego County into reverse is a tumbling in demand and prices for new condominiums in downtown San Diego, whose rebuilding renaissance sparked a rush of investors and wide-eyed developers. But speculators drove prices too high while builders may have built too many units, leaving buyers today less willing to pay the $600,000-plus prices. In many cases, developers with unsold units are offering discounts and other incentives.

Many other attention-getting U.S. markets, such as Miami, New York and Las Vegas, have also seen sharp decelerations in home price gains — but have yet to post year-over-year price declines. Some smaller California markets, such as Napa and Marin counties, and markets that never joined the boom, such as Wichita, Kan., and Flint, Mich., have started to see price depreciation.

In many ways, San Diego County has been ground zero for a nationwide debate about whether the housing market is in a speculative bubble. It was one of the first regions to see price appreciation soar by double digits beginning in 2000, helping to double values in less than five years.

But over the last year, the county has exhibited many classic signs of a topped-out market: rising inventories of unsold homes, slower sales turnover, a leveling of prices and an exodus of hard-core speculators. San Diego County sales fell 24% in June, the 14th straight month of declines, DataQuick reported.

It adds up to a change in the market that is giving prospective buyers the advantage, local real estate professionals say. Parham Firouzi, a La Jolla-based Re/Max agent, said sellers were finding it harder to get their asking prices. Buyers, he said, “know what they want and what they are willing to pay.”

“You know it’s a buyer’s market when your asking price doesn’t mean anything,” he said.

USC’s Bostic and others point to the underlying strength of the economy nationally and regionally that will help insulate the housing market from a collapse. San Diego County, for instance, is poised this year to gain about 22,000 jobs — an increase of 1.7% — most notably in the leisure and hospitality industries and construction, according to a Los Angeles County Economic Development Corp. forecast.

But a slowing housing market could stem consumer spending and weaken the economy. Appreciating values gave many homeowners the wherewithal or confidence to finance home improvements as well as new cars or vacations.

A slowing market also could put some recent buyers — who could afford their purchases only by stretching their incomes with unconventional, risky loans — into financial quicksand.

San Diego County in particular has been an important and lucrative market for the mortgage industry’s peddling of unconventional loans that enable buyers to squeeze into homes with far less than the traditional 20% down payment.

“People are realizing that they will have more mortgage than value in their house, and that’s making some hesitate,” said William Hinck, a senior mortgage consultant at AME Financial in San Diego.

San Diego County would have to show several months of year-over-year price declines before it could be declared a market in distress, said John Karevoll, DataQuick’s chief analyst, who has been tracking real estate trends since 1988. Last month, San Diego County’s median price was $488,000, the same as in May 2005 and below the $490,000 of two months ago.

Los Angeles County’s median price in June rose 8.8% to a record-high $517,000, DataQuick reported. Sales fell 14.6% to 10,248. DataQuick plans to release data for other Southern California counties within the next week.

Harvey Williams is one San Diego-area homeowner who is confident the market will hold up. The retired dermatologist figures the prime location of the $3-million, custom-built oceanfront estate he bought in Cardiff a year ago and his ability to stay put will trump a slowdown.

“If you have staying power you’ll never get hurt,” said Williams, who was able to pocket an $800,000 profit from the sale of his previous San Diego-area home. He is also about to close escrow on a $570,000 condo in downtown San Diego.

A bright spot, analyst Karevoll and others note, is that the value of existing homes in San Diego is still gaining. The market’s weakness is mainly in new homes, he said.

“Today’s situation is more reflective of a normal environment,” said Karevoll, who predicts that other California markets will follow San Diego County and eventually will hit flat or negative growth, but not give up all the gains made in the last few years.

“San Diego had a 100% increase in the past five years,” he said. “So far, it’s been able to keep 99% of that, which isn’t so bad.”

Increase in home prices may have been psychological, economist says
By Amy Hoak, MarketWatch
Last Update: 1:30 PM ET Jun 16, 2006

CHICAGO (MarketWatch) — The recent housing boom is the biggest the United States has ever seen, but its underlying reasons may have been psychological, economist Robert J. Shiller said on Friday. New data also suggest the market might be at the end of a cycle, he added.
The only time since 1890 that compares to the recent residential real estate market is just after World War II, the Yale University professor said during a presentation on U.S. home prices, held at Standard & Poor’s in New York and broadcast to journalists on the Web.
“After World War II, the soldiers came back and they wanted houses and started the baby boom. And when you had babies, you wanted houses with at least two bedrooms — and that wasn’t so common back then. They went on a buying spree and it pushed home prices up,” he said.
The recent boom, however, doesn’t have the same fundamental variables causing prices to soar, he said, adding that variation in such things as building costs, population and interest rates doesn’t adequately explain the reason for the housing boom.
“I don’t see why home prices should be shooting up that strongly,” Shiller said, adding that speculation may have played a role. “It’s a sign of concern.”
Shiller was co-author of “Irrational Exuberance,” a book that chronicled the stock-market bubble of the late 1990s. He also co-developed the S&P/Case Shiller Home Price Indices, designed to measure the average change in U.S. home prices. The indexes are based on 10 cities — Boston, Miami, New York, San Diego, San Francisco, Washington, D.C., Chicago, Denver, Las Vegas and Los Angeles — and are now the basis of new futures and options trading at the Chicago Mercantile Exchange.
Within that index, Shiller has noticed a short-term trend of cooling home prices that could signal an end to the cycle of steep appreciation increases. Investing in the index could help homeowners hedge against price fluctuations in their homes, he said.
Shiller said he is not allowed to invest in home price index futures.
During a question-and-answer session, he said that the stabilization of home prices could also have some effect on consumers’ means of gaining equity. Low interest rates inspired people to refinance their homes, and the increasing value of their houses allowed them to pad their pockets with spending money; consumers will now have to turn to other means for financing, including credit, he said.
In the future, insurance companies may offer policies to shield consumers from lowering home prices, thanks to the futures now available, said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor’s, who also participated in the presentation. He identified the housing market as a continued stable investment.
“If you want volatility, go to the stock market,” he said. “If you have any doubts of that, take a look at it over the past six weeks.”

By Gretchen Macchiarella
March 1, 2006

Steve States is the selling agent for a house in Camarillo that needs to sell by April 1.

To get the job done, the 17-year veteran threw in a little enticement: a 2006 BMW 325i.

For a list price of $754,777, you get the car and a four-bedroom, two-bath home in Mission Oaks. He said the $30,000-plus car generated a lot of interest in a crowded field, but the seller has not yet accepted an offer.

Little extras have not been very common for about five years as the hot real estate market put most of the negotiating power on the seller’s side, but a recent cooldown has put more homes on the market and increased the competition, States said.

“It has become a level playing field, maybe even in the buyer’s favor,” he said.

The California Association of Realtor’s report released Tuesday showed regions all over the state with slower sales and slower pace of appreciation than last year. Ventura County’s median sales price for an existing single-family home was $682,250 in January, up 6.9 percent from a year earlier.

Statewide, the median price was $551,300, up 13.8 percent from January 2005. Sales

dropped year-over-year by 24 percent, but the beginning of 2005 was unusually busy for a traditionally slow time.

The highest percentage price increase was in the high desert region, which gained 27.4 percent to a median of $321,400. Los Angeles County fell squarely in the middle of the statewide statistics with a median of $560,740, up 17.9 percent, with sales down 23 percent from January to January.

“The California real estate market is beginning to experience the soft landing that we expect to be the underlying dynamic driving the housing market his year,” CAR Chief Economist Leslie Appleton-Young said in a statement. “The number of homes for sale has risen to a six-month supply, which will translate into a slower rate of price appreciation than we experienced in 2005.”

There are still plenty of buyers for the right house in the right neighborhood, said Brian Watnick, broker at the real estate office of Goodwin & Thyne Properties in Ventura. Homes above the college in Ventura, for instance, are still a hot commodity.

Watnick said he been making sure to expand the reach of Ventura County houses for sale by putting them on Santa Barbara and Los Angeles’ multiple listing services. With the number of homes for sale these days, he said, it makes sense to try to bring in as many buyers as possible. “Sometimes you need a little creative marketing,” he said.

He is expecting a warm-up in the real estate market in the spring, when buying activity normally picks up.

States called the current market healthy, even if it is a slightly difficult transition for sellers accustomed to buyers lining up at the door. He said the enticements to get a house noticed might become more common during the year.

“When you have sellers that need to sell quickly ¿ they have to beat the competition and it is kind of a bitter pill for sellers now because we have been spoiled,” he said.

Ventura County’s median home price peaked at $694,690 in July, but has been edging back up toward $700,000. The University of California, Santa Barbara Economic Forecast Project expects the median price in Ventura County to reach $750,000 in 2006. Orange County, a market that typically tracks slightly ahead of Ventura County, was $699,060 in January.

Housing market cooling
By Gregory J. Wilcox, Staff Writer
LA Daily News

California’s housing market continued leaking steam in December as sales plunged an annual 17.6 percent and price increases continued moderating, a trade group said Wednesday.

It’s the third report this month showing that last year ended weaker than 2004’s strong finish.

A market matching December’s pace for all of 2005 would feature 531,910 sales of previously owned single-family homes, said the California Association of Realtors. A year earlier the annualized pace totaled 645,860 sales.

That market ended up setting the sales record, and 2005 will come close to matching it when the final numbers are tallied, said Leslie Appleton-Young, the association’s vice president and chief economist.

“I wouldn’t call December’s sales strong. I would call them moderate; I would call it a good market. I anticipate a soft landing,” she said.

Sales in the Los Angeles County market fell an annual 15.8 percent, the association said.

Rising interest rates and higher housing and energy costs rattled consumers last month.

For example, as the year wound down, mortgage rates spiked above 6 percent for the first time since the middle of 2004, and the adjustable rate rose above 5 percent for three consecutive months.

Association President Vince Malta said the malaise could carry over into this month.

For example, earlier this month the Southland Regional Association of Realtors reported that December’s sales of single-family homes fell an annual 22.4 percent, and DataQuick Information Systems said sales of new and previously owned homes and condominiums sank 13 percent.

The last quarter does seem to be sending a signal.

“I think this is probably an indication of the expected cooling of the market,” said industry analyst Nima Nattagh.

Price gains are still strong, though.

During December, the median price of a California house increased an annual 15.6 percent, to $548,430, and was just under November’s medium of $548,680. In Los Angeles County, the median price increased 19.3 percent, to $552,760.

That’s still healthy appreciation but some sections of the state have seen rates narrow sharply. For example, during December, the median price in San Diego County increased 4.6 percent, to $603,680, and in Ventura County it increased 10.3 percent, to $675,680.

Sales in Ventura fell an annual 15.5 percent.

In the High Desert, which includes the Antelope Valley, the median price increased 31 percent, to $320,490, and sales increased 7.6 percent. That’s the most affordable region in the state and one of two to show a year-over-year sales increase.

Appleton-Young said this adds up to a more balanced market, which is good news for buyers. But housing affordability is reaching historical lows in many areas.

That’s not likely to improve.

“I think affordability is going to be very strained this year. I don’t see price declines (but) rates are rising,” Appleton-Young said.

LOS ANGELES–(BUSINESS WIRE)–Dec. 28, 2005–The California residential real estate market in 2005 will be one for the record books, eclipsing the annual sales and median home price records set in 2004, according to the California Association of REALTORS(R) (C.A.R.).

Here are some highlights from 2005 and a look ahead to 2006:

– Sales of detached, existing single-family homes are expected to reach 635,000 in 2005, an increase of 1.8 percent over last year’s record sales of 624,700. Sales are anticipated to decline by 2 percent in 2006.

– 2005 will be a record year for home prices. The median price of a single-family home in California crossed the $500,000 threshold for the first time in April 2005. The annual median is expected to reach $523,150 in 2005 and increase 10 percent to $573,500 in 2006.

– The median price of a single-family home increased by double-digits for the fourth consecutive year in 2005, though the pace of price appreciation slowed from the 18 to 21 percent annual gains of the previous three years to 16 percent in 2005.

– C.A.R.’s Unsold Inventory Index averaged 3.3 months in 2005. Inventory levels are expected to rise moderately in 2006 but will remain low by historic standards, fueling continued price appreciation in the California market.

– The interest rate for a fixed-rate mortgage (FRM) remained below 6 percent for much of 2005, only surpassing 6 percent in the last months of the year. For all of 2005, the FRM averaged 5.8 percent. In 2006, the interest rate for the FRM is projected to increase but remain low by historic standards in the low- to mid-6 percent range.

– The interest rate for a one-year adjustable-rate mortgage (ARM) averaged 4.5 percent in 2005, finishing just over 5 percent at year-end. The interest rate for the one-year ARM is expected to remain within the low- to mid-5 percent range during 2006.

– With home prices reaching record levels, more homebuyers extended themselves financially in 2005 by utilizing alternative loan products. The share of homebuyers who used adjustable-rate and hybrid loans increased from 11 percent in 2003 to 43 percent in 2005, while the share of fixed-rate loans dropped from 89 percent in 2003 to 57 percent in 2005. The last time more than 40 percent of homebuyers used adjustable-rate loans was in 1994.

– Fannie Mae and Freddie Mac increased the single-family conforming mortgage loan limit from $359,650 this year to $417,000 in 2006, which could benefit more than 28,590 families in California. However, the increase in the loan limit is still far too low to benefit most homebuyers in California, as the median price of a home in California is 29 percent higher than the new loan limits. Nineteen counties in California have a median home price above the new limit.

– Internet use by homebuyers and sellers continued to climb in 2005. Based on C.A.R.’s “Internet Versus Traditional Buyers Survey,” the percentage of homebuyers using the Internet increased from 56 percent in 2004 to 62 percent in 2005.

– The share of sellers who used the Internet in their homeselling process surpassed 50 percent for the first time, rising from 47 percent in 2004 to 57 percent in 2005, according to C.A.R.’s “Survey of California Home Sellers.”

Leading the Way…(R) in California real estate for 100 years, the California Association of REALTORS(R) (www.car.org) is one of the largest state trade organizations in the United States, with more than 180,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

CHRISTINA ALMEIDA
Associated Press

LOS ANGELES - Home builders are beginning to follow the lead of suburbanites, who are returning to some cities in increasing numbers.

Two of the nation’s top subdivision builders opened new units this year dedicated solely to building in urban cores. What suburban developers John Laing Homes and KB Home are quickly learning, however, is that building up isn’t the same as building out.

“It isn’t like building one house,” said Jeffrey Gault, president of KB Home’s new KB Urban division. “You’ve really got to do a lot of forward planning. Once you start, you can’t change.”

Builders say they are drawn to the cities for reasons including increasing antigrowth sentiments in some suburbs. There also are market forces that have suburban residents moving back to the city to eliminate long commutes or get closer to such cultural amenities as fine restaurants and performing arts centers.

“There’s a pull from the attractiveness of city living, and there’s a push from the traffic and congestion,” said John McIlwain, senior resident fellow at the Urban Land Institute.

One new KB Home joint-venture is a condo-with-retail high-rise across from Staples Center in downtown Los Angeles. Laing Homes’ urban group has several multiuse, residential building projects in Hollywood.

The move by subdivision builders into cities is contributing to booming downtown development in cities from Los Angeles to Las Vegas, Chicago to San Diego. In Los Angeles alone, the number of housing units in downtown could more than double to almost 40,000 in five years if all the projects now under development come to fruition.

Suburban developers are finding that building in big cities is far different - the permitting process can be more complicated, the bureaucracies bigger.

The challenges of building urban developments were the main reasons John Laing Homes and KB Home created wholly owned subsidiaries dedicated to cities. One goal of these new subsidiaries: Consolidate expertise in the area of high-rise development.

“It’s much more intensive. It takes longer to plan and longer to get approval,” McIlwain said. “The kind of building is very different from what most suburban builders do.”

Instead of building 1,000 homes on 500 acres of land, 500 units may be packed inside a high-rise on a half-acre of land. Not only must every square inch of available space be maximized, the land itself can present unanticipated problems.

“When you start digging in an urban area, you’re rarely on virgin land,” said Debbie Bassert of the National Association of Home Builders. “You don’t know what you are going to find.”

Some builders had to remove old foundations before setting new ones. One found debris from old docks. A multibillion-dollar development in Los Angeles unearthed delays along with American Indian remains.

For John Laing Homes, part of the trick is to bring suburban customer service to the city.

“We have an opportunity here,” said Phil Simmons, president of Laing Urban. “But we don’t think it’s appropriate having the same people building our suburban communities build our urban communities.”

Mortgage scams thrive amid soaring home prices, little regulation and, in some cases, complicit borrowers. Higher rates result.

By David Streitfeld
Times Staff Writer
December 5, 2005

Real estate fraud is surging, fueled by a booming housing market, feverish refinancing activity and lax regulation, authorities say.

In the last two years, according to the FBI, reports of mortgage fraud nationally have tripled to 21,994, while the dollar value of the alleged crimes quadrupled to $1.01 billion.

The dramatic run-up in the housing market during the last four years was a boom with few equals. Abnormally low interest rates spurred refinancings, construction and speculation, while the industry developed loan products for every income and attitude.

Swindlers have lots of room to hide in an industry so flush, so busy and so much more complex than it used to be.

Mortgage fraud can be as simple as a loan applicant lying about income and as complicated as a ring of conspirators using identity theft, fake appraisals and straw buyers to steal properties from unsuspecting owners.

Much of the industry is not required to report fraud to regulators, so it doesn’t.

The amount of deceit is undoubtedly much greater than the reports indicate, FBI officials say. Fraud increases the price of mortgages for all buyers as lenders pass on their higher costs.

Consumers will take out $2.8 trillion in mortgages this year, but regulation is a hazy patchwork of local and national agencies that have minimal communication with each other.

This is especially true in regard to mortgage brokers, who barely existed 30 years ago but now are key players in the loan process. Two-thirds of home buyers turn to brokers to find financing for the biggest purchase of their lives, industry associations say.

Yet in California the agencies that monitor these middlemen say they don’t know the most basic facts about them, including how many brokers are operating in the state or how often there are complaints.

Regulation of brokers “has sort of fallen through the cracks,” FBI Assistant Director Chris Swecker said.

Some brokers think this neglect opens the door to trouble.

“We’ve got to do something to better protect the consumer,” said John Marcell Jr., an Upland, Calif., broker who is president of the California Assn. of Mortgage Brokers. “We need better education, and better policing.”

But policing requires a regulatory agency with teeth. Real estate has no equivalent to the U.S. financial industry’s overseer, the Securities and Exchange Commission. The number of fraud cases investigated by the FBI is not keeping pace with the rise in reports. The bureau’s conviction rate is falling, from a national total of 256 in 2003 to 170 this year.

Policing also requires victims to come forward. In a boom, they can be hard to find.

“It’s not like you have a bunch of bullet casings on the ground and a victim in the hospital,” said Bill Denny, a deputy district attorney in Alameda County who prosecutes criminal real estate fraud.

“The whole industry hates regulation,” he added. “Lenders never write to us and say, ‘Please [pursue] this case.’ ”

The urge to ignore includes some of the industry’s biggest players. Last summer, the Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and Freddie Mac, the two largest federally chartered lending institutions, ordered them to start informing it of mortgage fraud “in a timely manner.”

The regulation was developed after Fannie Mae was accused of covering up a $6-million fraud instead of reporting it.

Last week, the FBI arrested two people who operated real estate and escrow agencies in Downey and Seal Beach. Martha Rodriguez and Edward Seung Ok were charged with 10 counts of mail fraud in an alleged scheme that preyed on 70 homeowners facing foreclosure.

According to the FBI, the pair would promise to clean up the homeowners’ credit by having a third party cosign the refinancing papers. But the homeowners ended up losing title to their houses while Rodriguez and Ok netted $8 million, the FBI said.

Ok’s lawyer, Roger J. Rosen, said his client “didn’t do anything illegal. He helped these folks out.” Rodriguez’s lawyer didn’t return a call for comment.

In another, more wide-ranging scheme that has only partially come to light, homeowners were not victims but eager participants. This hustle, which allegedly was orchestrated by a California broker, is said to have involved hundreds of people. It illustrates just how easy it is to break the mortgage rules on a large scale, and how minimal the punishment can be if you do.

The scheme worked like this, according to the lender that issued the broker’s loans: The broker put his clients in loans in which they paid a higher-than-normal interest rate in return for negligible closing costs. These loans generate so much money for lenders that they pay brokers a big finder’s fee for them.

To keep the homeowners quiet, the broker split the loot with them. Many of the participating homeowners liked the deal so much they allowed the broker to keep refinancing their loans every few months. Each time, the broker received a new finder’s fee and the homeowners earned enough cash to pay their mortgages for a month or two.

The scheme violated California regulations against deception by brokers. But here’s what happened when the broker’s deceit was finally discovered: nothing. In fact, California regulators say they never heard of the case.

The broker’s first victim was Cleveland-based National City Mortgage, one of the country’s biggest lenders. National City gave $300 million in loans to the broker’s clients under the mistaken impression that they would have a shelf life longer than milk.

Lenders rely on the assurances of the borrower and broker that the borrower needs the mortgage and will use it in a normal manner. If, in fact, the borrower is taking the loan only for a few months because he can get paid for doing so, then the lender is going to pay excessive fees for something that is worthless.

Most lenders sell their mortgages. National City sold the California loans to Freddie Mac, which repackaged them as mortgage-backed securities for sale to investors.

The only public acknowledgment of the scheme came last April when Freddie Mac alerted buyers of 48 of its investment pools that they were, in essence, tainted. Because some of the loans in the pools were being refinanced almost immediately, the buyers of the securities weren’t getting the returns they expected.

Freddie Mac’s announcement “raised an eyebrow,” said Gary Greenberg, a mortgage specialist at Los Angeles investment firm Payden & Rygel. “This was the first time I had heard of something like this happening.”

Despite getting burned, neither National City nor Freddie Mac complained about the broker to California regulators.

That’s in keeping with the industry’s inclination to sweep its problems under the rug, according to some in the mortgage business as well as observers of the industry.

“National City wanted to let this incident die a natural death,” said Marcell, the broker association’s president. “They don’t want their counterparts to know they’re so stupid as to allow this to happen.”

National City said it cut off the broker, which it declined to identify, and disciplined the salesmen who worked with him.

“No laws were broken,” said John Gellhausen, executive vice president of National City’s consumer finance unit.

If not, said Eric Von der Porten, a Silicon Valley money manager who closely follows the housing industry, that’s evidence that oversight of brokers is extremely casual.

“Is it suddenly OK to hoodwink national banks and government-sponsored mortgage companies?” he asked.

Freddie Mac said it referred the scheme to its regulator, the Office of Federal Housing Enterprise Oversight. A spokeswoman for the agency said the regulator didn’t have authority over either National City or the broker.

Both Freddie Mac and its regulator declined to identify the broker.

Jack Guttentag, who runs a mortgage-advice website at mtgprofessor.com, said about a dozen readers have asked him whether it would be permissible to collude with their brokers to refinance at a high interest rate to get a large premium.

“For every one person that’s asked me, there must be at least a hundred who just went ahead and did it,” said Guttentag, a professor of finance emeritus at the Wharton School of the University of Pennsylvania.

Such schemes are so common, Guttentag said, that they victimize anyone who had the income to obtain a monthly mortgage but not the cash to pay settlement costs. These are the people who legitimately need high-interest mortgages, which wrap the closing fees into the loan rate.

Experts say there is so much misrepresentation and outright fraud at this end of the mortgage market that lenders build the cost of fraud into the loan rates, much the way retailers raise the price of items that frequently are shoplifted.

Paying slightly more for your mortgage because of the unethical schemes of others might not have been much of a problem when houses were appreciating 25% a year. But they’re likely to become more of an issue as the market cools.

A slowing market might fuel further abuses. A slack market with rising interest rates would cut down on refinancings. That would create more incentive for a few brokers to churn the market by refinancing the same customers over and over, just like the broker in the National City case.

Brokers in California come under the supervision of two agencies. The Department of Real Estate says there are 127,000 people in the state who hold advanced real estate licenses. All of them can act as brokers. License revocations have doubled in the last two years, the department says, but it had no data on how many of the cases involved brokers.

The California Department of Corporations has issued 3,705 licenses to firms that can then act as brokerages. The firms are not required to report how many employees they have. The department received 386 written complaints about its brokers in the first 11 months of this year, a number that has held steady for the last three years.

Two firms have had their licenses revoked in the last year, a spokeswoman said, while another two have been told to refrain from certain activities.

If mortgage brokers are so lightly regulated, that’s partly because the industry has changed so much so quickly.

Thirty years ago, people obtained their mortgages directly from the local savings and loan, often from a person they already knew socially. Now, most buyers use a broker to scout out the best deal and never even talk to their actual lender unless they refinance.

Brokers will earn an estimated $33 billion in commissions this year. They don’t get paid until the customer gets a loan, which gives them a major incentive to make the deal happen. But they’re paid by the lender, and the higher the rate on the loan above normal, or par, the more they get paid.

This bounty is known as a yield spread premium. It’s what National City was paying the California broker involved in the questionable loans.

Yield spread premiums are controversial because the mortgage seeker rarely realizes what they are. The biggest study on premiums, done with data from the late 1990s, found that nearly all the brokers surveyed were putting their clients into more expensive loans so they could get bounties averaging nearly $2,000.

Although the homeowners paid lower closing costs on these mortgages, “they still weren’t a good deal,” said the author of the study, Harvard Law School professor Howell E. Jackson.

“People should ask their broker how much they’re making, including both yield spread premiums and direct fees, and if it’s over $2,000 they should question why,” said Jackson. “No one says the broker has to make a certain amount. It’s negotiable.”