Meltdown Was More of a Mixed Bag: REAL ESTATE: Despite flat market, some cities saw home sales skyrocket in 2006.

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By DANIEL MILLER & DAVID NUSBAUM
Los Angeles Business Journal Staff

Even though 2006 was a flat-to-down year overall for the housing market in Los Angeles County, a review of full-year data released last week shows that many affordable areas enjoyed a banner year.
But many of the expensive areas got rocked.
There was no housing downturn in Inglewood, for example. The four ZIP codes that make up the city had a combined median house price of $585,000 in December, making it a reasonably affordable area for Los Angeles’ pricey market. In 2006, the number of homes sold in those Inglewood ZIP codes increased a whopping 55 percent. The price of homes increased more than 15 percent.
The same is true in Carson, where sales increased 28 percent and prices increased 9.2 percent.
All those numbers were better than the county as a whole. For 2006, the number of homes sold declined 21.8 percent to 82,690 units. The median price from December to December increased 4.8 percent to $550,000.
But at the same time that many affordable areas were enjoying a good, even great, 2006, several high-end areas hit a very rough patch.
Malibu saw its sales volume plunge 45 percent and prices drop 15 percent. Beverly Hills’ three ZIP codes had a composite sales volume drop of 35 percent and a price drop of 38 percent.

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Tenants in Transition

By Robert L. Cain, Copyright 2006 Cain Publications, Inc.

They were sold the dream of homeownership. And did the lenders and Realtors ever make it easy for them. You saw the ads: "Buy the home of your dreams with nothing down and an 'introductory' interest rate of only 1 percent!" "Bad cr edit? No problem. We can find a loan for you."
Little did they realize that the 1 percent interest rate included negative amortization and that the payment adjusted monthly with no annual or lifetime cap. Little did they know that the value of the home they bought was about to take a precipitous drop. Their house payment jumped 52 percent and the value of their home dropped 9½ percent. They couldn't make the payments and they couldn't sell the house for what they paid for it.
They handed the keys back to the bank or the lender foreclosed. In the process they became part of a growing trend. Nationwide, almost 971,000 foreclosure filings were reported last year, 51 percent more than the 641,000 in 2005, reports Foreclosures.com.
Now they are our customers again. But their cr edit is shot and they have been beaten on, chewed up and spit out by the real estate machine. They are tenants in transition.
Undoubtedly this is a disheartening time for them.
Tenants-in-transition is one of the four classes of tenants that we have always seen. The other three are tenants by choice, tenants new to the market and tenants who couldn't and shouldn't rent a Barbie Playhouse. Tenants-in-transition is a group we as rental owners and managers count on as customers and a group we need to be ready to serve.
How, then, are we to handle this influx of returning tenants?
Their cr edit is likely in the tank. They may not only have the foreclosure, or deed in lieu of foreclosure, on their cr edit report, but they may have other slow pays because they let other bills slide while they tried to keep up with their mort gage payments.
They were often some of our best customers before we lost them to homeownership. Now their cr edit might look just as bad as that of some of our worst applicants. But we want these customers back, unlike the bad applicants. The problem is, if you accept someone with a bad cr edit report who just went through a foreclosure, you may run into Fair Housing complaints if you reject someone with an equally bad cr edit report who has never owned a home and he or she is a member of a protected class.
Our job is to rent to the most qualified applicants we can attract. Poor cr edit often disqualifies an applicant. But a bad cr edit report that resulted from a foreclosure might to be a mitigating factor, much as a bankruptcy due to medical bills is a mitigating factor to mortgage lenders. We need to rethink our cr edit policies so that we can welcome these tenants-in-transition back to the rental market.
Rethink them how? One way is to restructure our rental standards so that a poor cr edit report need not disqualify an applicant if it is the result of a foreclosure and other debts are current. That can eliminate the conflict of accepting a former homeowner and rejecting a bad tenant each with a horrible cr edit report.
Another way would be to be willing to look at an applicant's explanation of the mitigating circumstances of the bad cr edit report.
Yet another way would be to accept a less-than-ideal cr edit report if the rental history and landlord references are satisfactory.
These were some of our best customers. They are likely to be again. We need to find ways to see to it that we are able to rent to them.

Copyright 2007 Cain Publications, Inc., used by permission
Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter or Northwest Landlord call 800-654-5456 or visit the web site www.rentalprop.com.

Home, borrowed home

A bird in Irvine, CA ; by Vadim ; Travel, US/Southern California

EDITORIAL - latimes.com
Home, borrowed home
Buying a house with no money down was always sort of crazy -- but the market is just now realizing it. January 5, 2007

INVESTORS, BANKERS and economists — not to mention 80 million U.S. homeowners — are constantly sifting through data to figure out what's going on with the real estate market. New housing starts, raw material costs, time on the market, average rent/mortgage ratios, the Federal Reserve chairman's loose lips — all of these are supposed to give us vague and partial hints about whether the market is heating up, cooling down or "just right."

Yet the answer may be staring us right in the face. If you can't get a house with no money down, the sky is obviously falling.

That may be how William Dallas, chief executive of Agoura Hills-based Ownit Mortgage Solutions Inc., must be feeling right now. Ownit, which specialized in 100% financing of home purchases, closed its doors last week, bowing to a growing number of mortgage defaults and a financial industry rapidly losing interest in bonds secured by pools of high-risk mortgages.

The downturn for independent "sub-prime" lenders like Ownit is causing pain nationwide. Connecticut-based Mortgage Lenders Network USA Inc. has announced that it is withdrawing from the sub-prime market and seeking an "alliance" with a Wall Street firm. Locally, Irvine-based Option One Mortgage and Orange-based Ameriquest Mortgage Co. are looking to be bought. The problem for all these firms is that their market — people who want to own homes but have bad credit, little income, few savings or all of the above — is understandably at a much higher risk of default than the mortgage market as a whole.

Real estate is a topic so fraught with schadenfreude, forlorn hopes and visions of catastrophe that it almost seems like bad form to remain calm in the face of such bad news. The sub-prime market's 45-fold growth, from $13 billion in 1995 to $594 billion in 2005, stands as a monument to the nation's home-buying mania. You'd need the proverbial heart of stone not to laugh at the suffering of the gamblers who bet that the real estate market could increase indefinitely.

But sub-prime lending isn't going away. A larger share of the action will go to bigger players that can afford to engage in risky loans. Meanwhile, folks who need to shop in the bad-credit emporium will still get service; it just won't be as fast and loose as it used to be.

There's a puritanical impulse to say, "If you can't afford a down payment, you shouldn't be buying a house." But it may be more appropriate to marvel at a nation in which you can buy a house the way you'd buy a used car, and to thank the market's powers of natural selection that this behavior is now being curtailed.