Burbank Real Estate Blog

Economic and real estate recap!

Ana Connell (Exit Family Realty) — Fri, 07 Nov 2008 17:27:18 -0600

Economic Recap:

Pending home sales for September dropped 4.6%, worse than expected.
Showing extremely weak numbers, total domestic light vehicle sales came in at 7.7 million annual unit sales. This the lowest since the recessionary times in the early 80s. The car rate of 3.9 million is the lowest yet in data going back to 1967.
The October jobs report fell for a tenth-straight month, showing larger-than-expected job losses and the highest unemployment rate since 1994. Nonfarm payroll employment in October plummeted another 240,000, following a revised drop of 284,000 in September and a revised decrease of 127,000 in August. The For the year-to-date, the economy has lost 1.2 million jobs net.

Federal Reserve lowered interest rates this week by ½% to 1% for the federal funds rate and 1.25% for the discount rate.
Consumer Confidence is at it’s lowest level, ever! Or at least since they began tracking this number 40 years ago.
So far this year we have had 17 bank failures.
Chicago Purchasing Manager’s Index came in with a steep drop, from 56.7 in September to 37.8 in October. Readings below 50 point to slowing output, reduced orders, which point to reduced consumer spending and demand.
Both the 3 month and overnight LIBOR rates have dropped. There is a great article….Uncovering the mysteries of the LIBOR, for those interested in further reading.

Be on the look out for the advance retail sales report due out end of next week.

As I’ve said before, I think many things need to happen for both the economy and the real estate market to turn around, but key elements include shoring up the unemployment situation as well as our credit markets. How quickly this will happen as well as cleaning up our mortgage situation will determine how fast we come out of the current quagmire.

As far as the Burbank and San Fernando Valley real estate market, we'll have to see how the local economy fares. We’re still not out of the woods with respect to unemployment and the recessionary back drop. How bank lending reacts to the current financial upheaval will prove to be a pivotal factor in our recovery as well as foreclosure bailout proposals being discussed by congressional leaders.

Burbank Real Estate Monthly Activity Report: 10-2008

Property Type: Residential

	New	Avg LP	Under Contract	Avg LP	Sold	Avg SP	%SP/LP	%SP/OLP	Avg DOM
	93	$558,531	39	$535,440	59	$555,834	97.80%	93.40%	54

The columns for New, Under Contract, and Sold represent the number of listings that went into those statuses during the month. These are updated on the 1st and 15th of each month for the preceding month.

Information is Believed To Be Accurate But Not Guaranteed

Southern California Multiple Listing Service

Month to month average sale price from September to October 2008 is up $, year over year, average sale prices are down by $ or %.

Average days on market, year over year are days.

Average square footage is % year over year.

Most notably number of sold properties is down 34% from September 2008 and down 22% from October 2007.

According to the San Fernando Valley Economic Research Center, foreclosures soared 203 percent from July through September compared to a year earlier. 2,589 local families lost their homes in the market collapse.

There were 854 foreclosures in the comparable period in 2007.

The glut of homes on the market pushed down the median price, to $400,000 in September from $620,000 a year ago, down 35.5%. The price fell $21,000 from August levels.

The median price of an existing, single-family detached home in California during September 2008 was $316,480, a 40.9 percent decrease from the revised $535,760 median for September 2007.

Statewide, days on market and inventory on hand is down. We are currently at a 6.5 month inventory for California.

The new home sales report for September points to the possibility that the sector has bottomed. New home sales came in at a better-than-expected annual rate of 464,000, up 2.7 percent on the month. The 464,000 rate is the first back-to-back below 500 rate since the '91 recession. Supplies are coming down and are at 10.4 months, down from 11.4 months in August. The median price, of $218,400, is the lowest in four years.

Impressive reductions this last month in the foreclosure arena! For the San Fernando Valley, in the $200k-$400k segment (yes, there is plenty of housing out there in the neighborhood of $200k), I saw reductions ranging from several thousand to one hundred thousand dollars! This points to the fact that the banks are wanting to clear out some inventory, maybe some year end house cleaning? At any rate many homes have gone into multiple offer situations as buyers are out in full force.

For All Fans of Frank Lloyd Wright Architecture

Ana Connell (Exit Family Realty) — Fri, 31 Oct 2008 01:32:47 -0500

I recently started using stumbleupon.com. It's a very fun web site that literally let's you stumble onto web sites, videos based on your personal interests. For example, you can check photography, architecture etc. and you can explore web sites you never knew about. This is a video I just stumbled and it's amazing to watch. Enjoy!
Fallingwater from Cristóbal Vila on Vimeo.

G-7 Meets.....What's Next?

Ana Connell (Exit Family Realty) — Sat, 11 Oct 2008 01:07:15 -0500

Group of Seven finance chiefs, vowed to do whatever was necessary to prevent the collapse of major banks.

The policy makers included representatives from the U.S., Japan, Germany, U.K., France, Canada and Italy.

The G-7 policy makers were under pressure to roll out new policies, but they came up short on details which will undoubtedly disappoint many investors.

Global central banks have executed emergency interest-rate cuts and pumped more cash into financial markets and the Federal Reserve said it would buy commercial paper and start taking equity stakes in financial companies.

For more on this story, see Bloomberg.com.

Hopefully the aggressive efforts from the Federal Reserve, Treasury, and global central banks are beginning to ease the fear and lack of confidence in our markets.

Next week's economic calendar is full of key reports on manufacturing, inflation, consumer spending, and housing, so we'll see how this impacts the direction of the market and interest rates.

Producer Price Index, Empire Manufacturing, business inventories, retail sales and the Fed's Beige Book release on Wednesday.
Consumer Price Index, Industrial Production and Capacity Utilization, weekly initial jobless claims along with the Philly Fed Manufacturing Index will come out on Thursday.
Housing starts and building permits will be released on Friday. Forecasts are calling for declines in both readings, which may be a good thing as we need for inventories to decline.

Economic Update

Ana Connell (Exit Family Realty) — Thu, 09 Oct 2008 18:39:47 -0500

A couple of things are clear, many people have lost confidence in the financial system and this is not just a U.S. problem as the aftermath of this financial crisis is being felt around the world.

Federal Reserve Chairman Ben Bernanke brokered the broadest coordinated interest rate cut in history, among all of the central banks. Yesterday, the Fed, the European Central Bank, the Bank of England, Bank of Canada and Sweden's Riksbank reduced their benchmark rates by half a percentage point. The Bank of Japan and Switzerland also supported the action and China's central bank cut it's key rate by .27 percentage point.

The stock market has reacted sharply to economic and credit data this week and ended today at 8579, down 679 points on the day. We have not seen these levels since 2003.

The giant safety net that the Fed and Treasury have initiated has helped to keep the financial system afloat, but it has not restored confidence nor has it enabled US banks to start lending to each other again. Banks in Europe, as evidenced by the extremely high Libor rate, remain on the defensive and continue to hold on to cash. The Libor rate is at it's highest level this year.

Why should you care about the Libor rate?

Some business loans and many adjustable rate mortgages in the US are tied to the Libor rate, the rise will probably put added stresses on consumers and could offset some of the easing by the Fed over the past year if the rate stays high. Questions to ponder:

Currently the nominal value of all delinquent US mortgages, as of the 2nd quarter, was put at $680 billion by High Frequency Economics. If this number is accurate, will the $700 billion bailout or rescue plan do enough to alleviate this problem. Additionally there is enough anecdotal evidence to suggest that this number will be rising over the next year. If you look at the reaction of the stock market this week, the answer to that question may be negative.

It's clear we're in a recession, the big question is how long will we stay there and how long will it take the credit markets to unfreeze?

I think many things need to happen for the economy to turn around, but key elements include shoring up the unemployment situation as well as our credit markets. How quickly this will happen as well as cleaning up our mortgage situation will determine how fast we come out of the current quagmire.

As far as the local real estate market, we'll have to see how the local economy is impacted by unemployment and the current credit squeeze as well as the number of foreclosures coming online over the next few months.

Burbank Real Estate Sales Statistics For September 2008

Ana Connell (Exit Family Realty) — Wed, 01 Oct 2008 16:46:31 -0500

Burbank Closed Sales for September 2008

	Bedrooms	Baths	Square Feet	List Price	LP/SqFt	Sale Price	SP/SqFt	DOM
Min	0	1	465	$199,900	$270.57	$185,000	$268.03	1
Avg	2.7	2.25	1524	$560,785	$375.35	$540,557	$363.34	80
Max	5	5	3951	$1,490,000	$513.65	$1,400,000	$547.46	345

Month to month average sale price from August to September 2008 is down $14,258, year over year, average sale prices are down by $127,253 or 19%.

Average days on market, year over year are up 23 days.

Average square footage is down by 8% year over year.

Most notably number of sold properties is down 34% from August 2008 and down 22% from September 2007.

These numbers are reflecting several factors……

More foreclosures have been coming online, loans are hard to come by in the current credit environment.

Mortgage applications have been down, despite lower rates, but mainly due the seizing up of the credit markets.

Economic Update!

Ana Connell (Exit Family Realty) — Wed, 01 Oct 2008 13:45:19 -0500

Senate is set to vote tonight on an amended bailout bill, which includes temporarily raising the FDIC deposit insurance to $250k and continuing some tax breaks for corporations and individuals. Apparently some in the House are working on an amended bill as well. No House vote is scheduled yet.

The National ISM fell sharply from 49.9 to 43.5. Economists were forecasting 49.5.

This is the lowest number since October 2001. ISM points to a recession as a reading below 50 suggests activity is receding and this is evident by sharp drops in new orders, production, and employment.

Moreover, experts are saying conditions may worsen since the full impact from the credit crisis is yet to be felt.

ADP jobs report came in at -8,000 nonfarm payrolls for September, Employment Situation report is due out on Friday.

Mutual fund withdrawals hit a record $74.5 billion in September. The previous record withdrawal month was September 2001, with $27 billion cashed out.

Equity fund withdrawals were over $50 billion of the total $74.5 billion. You could look at that as a really bad sign, but there is the glass is half full view. Those investorswon't be racing back into the market yet, but it does mean there is a lot of cash available to return to the market when conditions are more favorable.

Many have been debating the mark to market or fair-market valuation accounting methods. Some in Congress urged suspension of the rule. But the SEC and FASB have flatly rejected this idea. The FASB has issued a “clarification” of the existing rule.

Under this “clarification” they are now telling auditors that if there is no valid market for securities, the existing rules permit institutions to value securities based on reasonable cash-flow projections. This is huge, and it is also controversial. Considering the mortgage market started to malfunction last year you have to wonder where the SEC and FASB were during all of this and why they have waited so long to "clarify" the rules.

More to come!

Economic Update!

Ana Connell (Exit Family Realty) — Wed, 01 Oct 2008 13:35:45 -0500

Senate is set to vote tonight on an amended bailout bill, which includes raising the FDIC deposit insurance to $250k and continuing some tax breaks for corporations and individuals. Apparently some in the House are working on an amended bill as well. No House vote is scheduled yet.

The National ISM fell sharply from 49.9 to 43.5. Economists were forecasting 49.5.

Moreover, experts are saying conditions may worsen since the full impact from the credit crisis is yet to be felt.

ADP jobs report came in at -8,000 nonfarm payrolls for September, Employment Situation report is due out on Friday.

Mutual fund withdrawals hit a record $74.5 billion in September. The previous record withdrawal month was September 2001, with $27 billion cashed out.

Many have been debating the mark to market or fair-market valuation accounting methods. Some in Congress urged suspension of the rule. But the SEC and FASB have flatly rejected this idea. The FASB has issued a “clarification” of the existing rule.

More to come!

A perspective on our current....well......financial mess!

Ana Connell (Exit Family Realty) — Mon, 29 Sep 2008 23:52:06 -0500

The severity of the state of our credit markets, should be a wake up call for anyone who has not yet made the time to get educated on what’s been going on in our financial markets, today and over the last 20 years.

Understanding the speculation that led to the Great Depression, the repeal of the Glass Steagall Act and how less regulation has impacted the banking industry, the global impacts of our financial system, should all be considered as we head into uncharted territory and try to figure out how to move forward.

I don’t have the answer of what exactly will fix this mess, but I do know that a well thought out plan needs to be crafted, that includes restoring liquidity to our credit markets, decreasing our dependence on credit and restoring common sense rules to the process of issuing credit to consumers. It should include many other items, including accountability, that I will not go into at this time.

Today we lost $1.1 trillion dollars in net worth as a result of the market’s 778 point drop, which represented a 7% drop and the biggest point drop ever! In case you are wondering how this compares to previous drops, here is a list of historic stock market collapses:

12.8%: Drop in the Dow Jones Industrial Average (DJIA) on Black Tuesday (Oct. 29, 1929)

22.6%: 508 points Largest one-day percentage drop in stock market history (Black Monday, Oct. 19, 1987)

4.4%: 504 point drop in the DJIA on Sept. 15, 2008

(If the markets continue to drop, there are circuit breakers that were introduced after the crash in October 1987 and then further revised to take into account the increased volume and index levels. There are trigger levels or circuit breakers for a one day decline of 10%, 20% and 30% of the DJIA. These levels are calculated at the beginning of each calendar quarter using the average closing value of the DJIA for the previous month to establish specific point values for each quarter.)

For more information on this, check out the SEC’s website.

Unfortunately this credit crisis and the fall in the financial markets impacts all of us directly, through our 401k, IRA, money markets, annuities and just as importantly being unable to obtain access to home loans, business loans etc.

We need to move beyond partisan labels and the finger pointing, because the impacts, in the end, will be felt by everyone.

Disclaimer: All information in this post is subject to change without notice and is an opinion, is not guaranteed, may be time sensitive, as well as based on information collected from many sources which are not guaranteed to be reliable.

Market Recap

Ana Connell (Exit Family Realty) — Fri, 26 Sep 2008 01:03:48 -0500

It was quite an eventful day as democrats and republicans tried to get a handle on what's going on with our financial system. Not sure there is a perfect solution, but what's clear is that no one wants to hand over a blank check without firm oversight. Dow was up almost 197 points on hopes that an agreement could be reached, but alas that was not to be.

Let's recap:

Washington Mutual's branch system and deposits bought by JP Morgan after regulators seized the savings and loan. This now represents the largest bank failure in U.S. history. (This happened after the close of business)

Weekly initial jobless claims jumped 32,000 to a seven-year high of 493,000.

Durable goods orders fell 4.5% in August, well below the estimate of a 1.9% decline. Ex-transportation, orders fell 3.0%, south of the forecast of a 0.5% drop. Growth in Japan has been weak, and Europe appears to have entered a recession, which are most likely contributing to orders being down.

New home sales fell 11.5% in August to an annual rate of 460,000, short of the estimate of a 1.0% decline to 510,000. The supply of homes rose from 10.3 months to 10.9 months. Existing home sales, which make up over 80% of residential sales have stabilized over the past year, but new home sales remain in a downward spiral. In order for prices can stabilize, it is critical for the market to absorb the excess inventory on the market.
Existing Home Sales were down in August following a gain in July as tight mortgage credit was blamed on the slow down. Nationally, existing-home sales declined 2.2%.

It looks like further negotiations are needed to come to an agreement on how to handle this mess as the meeting/photo op at the White House today was unsuccessful in building a consensus. Secretary Paulson provided a 2 1/2 page outline of what he and Chairman Bernanke would like to do, which included little to no oversight, no accountability and a $700 billion price tag.

Congress is asking for:

Legislation to help homeowners avoid foreclosure;
limiting compensation to executives of troubled firms receiving assistance, ie, no golden parachutes;
greater oversight than the limited bi-annual reporting requested in the current proposal;
giving taxpayers an equity stake in companies;
decreasing the timeframe for the Treasury workout from two years to one; and
limiting the initial outlay followed by a reassessment early next year prior to providing additional funds.

We'll see what happens over the next few days!

Economic Day In Review.....

Ana Connell (Exit Family Realty) — Mon, 22 Sep 2008 17:17:09 -0500

It's clear that the optimism from last Friday has quickly given way to a no confidence vote for Treasury Secretary Paulson's plan.

Today's highlights:

The Dow was down by 372.75 points but the big story is gold rising by $40 and oil rising by $15 per barrel to close at $120.
Morgan Stanley has received approval to become a bank holding company and talks between them and Wachovia are on hold.
Goldman Sachs received approval to become a bank holding company.

Giving Goldman and Morgan bank status basically allows them access to money through deposits, which would help manitain their liquidity needs.

Secretary Paulson and Fed Chairman Bernanke will be testifying before the Senate Banking Committee tomorrow. Here are some details of the plan for the plan, as I know it:

Secretary Paulson is asking for $700 billion
Original plan was to purchase non performing mortgage securities, but that appears to have changed to any type of non performing asset. It's unclear how they would determine if the price that they are paying for these assets is fair. In theory the banks would submit the assets with a price, but this approach leads to many more questions.
Foreign banks can also participate, if they have U.S. operations......ummmmm.
Increases the debt ceiling to $11.3 trillion dollars since we'll have to issue debt to pay for all of this.
The infrastructure for this plan has not been outlined.
No real plan to help main street, just wall street.

It's clear the markets are not happy with this plan and there are worries about the impacts to our financial system. More details will have to surface and hopefully Congress will not approve a hastily conceived plan without thought to the longer term impacts. More to come as details unfold.

Existing home sales and new home sales are due out later this week.

Are you ready for an earthquake?

Ana Connell (Exit Family Realty) — Sun, 21 Sep 2008 15:08:54 -0500

Living in Southern California for over 35 years has made me somewhat complacent about earthquakes, but I know first hand how devastating they can be and at the very least I keep a good supply of bottled water in the house, just in case. But I know I need to do more.

Just as most people, I get busy with other projects, work, family and at the end of the day, feel unprepared for a catastrophic event.

On November 13th, 10am, the the Great Southern California ShakeOut will take place. This drill, quite possibly the largest earthquake preparedness exercise in U.S. history, includes businesses, hospitals,schools, non-profits, neighborhood councils, basically anyone who would like to participate.

The main purpose is to create awareness and to see how our resources would fare in responding to a magnitude 7.8 quake. If you remember the Northridge quake you saw the devastation and the damage a magnitude 6.7 earthquake can inflict.

They say there is a 67% chance that the Los Angeles area will have a magnitude 6.7 quake, or larger, in the next 30 years. Those percentages should be a wake up call for the many who are unprepared.

If you would like to stock up on emergency supplies, check out SOS Survival Products.

Economic And Housing Round Up

Ana Connell (Exit Family Realty) — Fri, 19 Sep 2008 12:08:25 -0500

To say that it’s been a crazy week is a gross understatement. Let’s recap some items:

U.S. takes over AIG with a $85 billion bailout. This agreement states that the government is providing AIG with a loan $85 billion over a two year period, offered at 11.5%. The government also gets 79.9% equity ownership in the company. It appears at the moment that AIG’s ability to pay claims is intact.

Lehman Bros. goes into bankruptcy and the credit markets froze, basically on concerns that other companies were going to fail.

RTC2? Government has announced a plan to take failed assets off the books of companies, essentially by establishing a fund, similar to the Resolution Trust Corporation (RTC) that was formed during the savings and loan scandal in the late 1980’s. The cost is expected around $500 billion. The two part plan covers the private label mortgage securities underwritten by Wall Street and the already approved purchases of government backed mortgage securities, ie Fannie and Freddie. In theory it looks like the government would purchase the securities at deep discounts and maybe hire a manager to oversee the portfolio and their hope is that the enterprise eventually makes money. This plan requires Congressional approval and the details are not there yet. In case you are wondering….the net result of the RTC was a loss of about $125 billion to taxpayers.

Last night the SEC announced it’s stopping short selling on 799 financial companies until October 2. This is a controversial decision so I’m sure there will be more to come on this one.
Credit markets still under siege, despite the $180 billion infusion from the world’s major banks. The 3 month Treasury bill actually traded at 4 basis points, .4% a few days ago. You have to look back to the 1930’s to find T-bills under 10 basis points.
Two money market funds traded under $1 earlier this week and it led to $89.2 billion being pulled out of money market funds on Wednesday…..I’m sure that was a record.
Secretary Paulson announced that the government would offer to temporarily insure money market funds.

European stocks liked the news, especially when the UK issued a ban on short selling of financials through January 2009.

Dow is up, but keep in mind there’s lots of short covering going on today in light of the ban.

On the housing front…….Has the housing market hit bottom?

While some are comparing this real estate cycle downturn to the real estate downturn in the 1990’s, they are vastly different. The down turn in the 1990’s was driven by very high unemployment and regional factors.

In terms of past history there have been a couple of factors that should be taken into consideration. First, the relationship between incomes and home prices—home prices can only rise so far above income-based affordability before an adjustment period kicks in. Over the long haul, homes must be priced at levels buyers can afford. July’s median house price was $204,000. Assuming a 6.4% mortgage rate, that works out to an initial after-tax monthly payment of $795, or 20.7% of after-tax income, which historically is a relatively low share of median family income. Second, we can look at the number of new-home sales per 1,000 of population, which hit a high of 5.7 at the peak in 2005 and has since plunged to 2.2, just above the all-time low of 2.1 in 1982, after which we saw a rebound.

Existing home sales rose 3.1% in July—the largest increase in 17 months and well above expectations. On the surface this looks great, unfortunately the large number of foreclosed properties being sold at distressed prices is drawing significant buyers into some markets, lifting sales.

In some areas, foreclosures are increasing, housing inventories are higher than normal, and even well-qualified borrowers cannot receive mortgage loans. It’s become clear that credit availability will be a significant factor in a housing rebound as well as regional factors.

Another concern is that homeowners with good credit are beginning to fall behind on their mortgage payments. The percentage of Alt-a mortgages(one step above subprime) behind on payments has quadrupled since last year, while delinquencies among prime loans have doubled over the same period.

There are about $1 trillion in Alt-A mortgages outstanding (compared to $855 billion of subprime loans), with over 16% currently at least 60 days in arrears. Many of these loans were interest-only with the rate resets at three- to five-year intervals (“option ARMs”). Beginning next year, we will see a wave of resets with jumps as high as 4% to 8% from their initial rates. Many monthly payments are set to double!

Given all of this information......no we have not hit bottom.

While what we are going through is different in some ways from past scenarios our take away should be that our financial markets have always pulled through. In light of that information if you are a home buyer be advised that there are deals out there and I think there will continue to be deals for some time.

At the end of the day, your decision to purchase a home should be based on your specific situation. If it makes sense financially(consult with your CPA) and you find a well priced home, you should buy. Waiting for the bottom of the housing market is not all that different from waiting for the bottom of stock market.

Is This The Bottom?

Ana Connell (Exit Family Realty) — Wed, 17 Sep 2008 18:25:14 -0500

We had another eventful day in the financial markets today:

The Dow shed 449 points (4.1%) to close at 10610 amid fears the credit crisis will claim more victims
Interest rates....The 2-year treasury bill closed at 1.64%, the 5-year treasury note 2.52%, and the 10-year treasury bond gained 14/32s to yield 3.41%
Rumors about Morgan Stanley and WaMu's fate abounded, apparently WaMu has hired Goldman Sachs to find a buyer
Financials fell after the Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to go below $1 per share, after writing off $785 million of debt issued by Lehman. Investor redemptions will be delayed as long as seven days, with the fund trading at .97 cents
Housing starts fell to lowest level since 1991 as they fell 6.2% in August

The good news here is that we need less housing inventory on the books and the conventional wisdom has it that when housing starts are way down and housing prices are falling, we've hit bottom.

Problem with conventional wisdom is that we've never been through anything quite like this downturn before. Interest rates are low, which is great, but money is very tight, which will make the recovery take longer. Another bit of good news is that there are so many foreign interests involved with the US financial system that there's alot of motivation to get it back in working order.

We'll have to sit tight and see how this whole thing unravels, but also on the good news front, if it does so quickly then maybe we can begin the clean up process and build a better system.......yes, I really am a glass is half full person.

Burbank Homes For Sale

Economic Round Up and Burbank Real Estate

Ana Connell (Exit Family Realty) — Tue, 16 Sep 2008 19:49:40 -0500

The Federal Reserve left rates unchanged today, at 2% for the key benchmark, a surprise to some, but while they noted that the financial markets are under more strain with the credit crisis,they cited labor worries and inflation as their top concerns. Providing liquidity for the markets is high on their list as well.

Mortgage rates are averaging 5.93% for a 30 year loan.

Despite the talk that the government would not intervene AIG was offered an $85 billion loan from the US government in return for an 80% stake in the company.

What does all this mean for real estate in the San Fernando Valley and Burbank?

For now we have lower mortgage rates but very tight lending standards which means that buyers will have to work harder in order to qualify for a loan and put more money down.

In the long run we need for the financial markets to finish the clean up process in order to help stabilize our housing markets. Look for more foreclosures to come online over the next year and hopefully a return to a more normal housing market after next year.

Here are some numbers to consider:

In August of 2005 there were a total of 80 homes/condos sold with an average of 24 days on market for an average price of $636,630.

In August of 2008 there were a total of 60 homes/condos sold with an average of 60 days on market for an average price os $555,118.

There are several things reflected in these numbers:

Longer days on market
More homes are selling in the lower price ranges
Overall prices are down, but not as much as the average would seem to suggest

The Fallout Continues......Lehman Bros., Merrill Lynch, AIG

Ana Connell (Exit Family Realty) — Mon, 15 Sep 2008 11:46:47 -0500

This year continues to be a dizzying spiral of institutional failures. As you can see below the fallout continues and it's not looking pretty.

Let's review what's going on:

Lehman Bros. (the holding company) files for Chapter 11 as no buyer emerged to save the company
Merrill Lynch, in a surprise announcement, sold itself to BofA for $44M
AIG(American Insurance Group) is seeking capital through asset sales, cash infusions to avoid going under
Federal Reserve has expanded it's lending capabilities
Major Banks have created a $70B lending program for those banks in need
Industrial Production declined 1.1% in August, far worse than expected and is likely to ease inflationary concerns for the FOMC meeting tomorrow

Banks and top brokers labored through the weekend to strike a deal for Lehman Bros., but alas it was not to be. It turns out that no one wants the bad debt on their books. I don't think many of the institutions left standing are feeling comfortable with their balance sheets, or the overall situation. Early estimates have debtors getting 60 cents on the dollar. It is unclear yet how firms that relied on Lehman for financing will fare.

The most stunning announcement so far came from Merrill Lynch, in being sold off to BofA. This tells us that Merrill could have potentially been a bigger problem than Lehman. BofA said they would be aggressive in cost cutting and analysts are seeing this as a risky move for the short term, but positive over the long term.

Another point to consider is the FOMC meeting tomorrow. Rate cut rumors abound......there will certainly be much to talk about and what direction that will take interest rates will be interesting. How that will trickle down to mortgage rates will be positive, but if lending standards remain tight, the effect will be minimal.

The Dow is currently down about 280 points and the European markets were about 3.5% lower on the U.S. news.

Economic News And Impacts On Burbank And San Fernando Valley Real Estate

Ana Connell (Exit Family Realty) — Sun, 14 Sep 2008 14:38:09 -0500

Former Federal Reserve Chairman Alan Greenspan, who served as Fed Chairman for 18 years, said this financial crisis will probably lead to the failure of more firms. He went on to say, in his interview with George Stephanopoulos, that this is the worst financial crisis he’s ever seen.

Treasury and Federal Reserve officials are working on brokering a sale of Lehman Brothers Holdings Inc., the 158-year-old investment bank that reported a third-quarter loss of $3.9 billion.

Given that the Fed acquired a $29 billion portfolio of mortgage-backed debt from Bear Stearns Cos. earlier this year, they are now trying to avoid using any government funds to rescue Lehman.

Crude oil fell to a six-month low in New York, crude oil for October delivery fell $2.10, or 2.1 percent, to $99.08 a barrel oil has fallen 33 percent from a record $147.27 a barrel in July.

Thanks to falling oil prices and the resulting impact on consumer prices, Bernanke may not have to raise rates just yet, an interest rate hike had been rumored before oil started to come down and Fannie and Freddie were taken over.

As far as the Burbank and San Fernando Valley real estate market, we’re not out of the woods yet. The good news is that lower mortgage rates will continue to help buyers get into homes. We have yet to see the impact of the housing legislation passed in May, which is estimated will help about 500,000 homeowners facing foreclosure. Prices have edged up in some areas and days on market have stabilized or gone down, from last month, which in part, indicates that homes are being priced more reasonably. Some areas continue to be hard hit from the number of foreclosed properties coming up for sale.

Economic releases to keep your eye on for next week:

Search for Burbank real estate here!

City Of Burbank Housing Element Update

Ana Connell (Exit Family Realty) — Thu, 11 Sep 2008 23:30:31 -0500

Every few years the State of California mandates that cities provide a policy document that outlines programs that both promote the development of affordable housing and reduce any constraints to the development of added housing. Individual cities that do not comply and complete this document risk losing funding for many future projects.

The draft of the General Plan Housing Element Update Project No. 07-0005885 GPA became available in February and City of Burbank has been holding public meetings to discuss the various elements of this plan and any mitigations that may be required.

On Monday, September 22, 2008 at 6pm the City of Burbank Planning Board will be holding a public hearing on the General Plan Housing Update and the proposed Negative Declaration. The meeting will be held at the City Council Chambers, Burbank City Hall, 275 East Olive Avenue.

In case you are wondering....a negative declaration is a document that basically says that after the completion of a proposed project there will not be any significant negative effects on the environment.

I highly encourage interested Burbank residents to attend this meeting as this will be your opportunity to explore positive changes as well as voice any concerns and ask questions as to how this plan might affect Burbank real estate and/or quality of life.

August Closed Sales for Burbank

Ana Connell (Exit Family Realty) — Wed, 10 Sep 2008 19:31:57 -0500

Burbank August Closed Sales - 58 Properties Found
	Bedrooms	Baths	Square Feet	List Price	LP/SqFt	Sale Price	SP/SqFt	SP/LP	SP/OLP	DOM
Min	1	1	655	$289,900	$254.36	$280,000	$252.53	89.00%	69.00%	0
Avg	2.9	2.25	1584	$575,440	$370.33	$558,743	$362.22	97.00%	94.00%	59
Max	4	5	2547	$1,349,000	$561.23	$1,200,000	$561.50	145.00%	145.00%	287

Month to month average sale price is up $30,186, year over year, average sale prices are down by $104,851 or 15.8%.

Average days on market, year over year are down 3 days.

Number of sales is up almost 10%.

These numbers are reflecting several factors……

• Year over year, you have more short sales and REO or bank owned properties on the market.

• For comparable properties the bank owned properties tend to be priced lower than the short sales or regular sales reflecting the fact that the bank owned properties need more repairs.

• Sales are up because prices are becoming more affordable and buyers are seeing good deals.

Mortgage applications have been up this week due to lower mortgage rates resulting from the Fannie Mae and Freddie Mac takeover.

More on the seizure of Fannie Mae and Freddie Mac.......

Ana Connell (Exit Family Realty) — Mon, 08 Sep 2008 21:23:58 -0500

Yesterday I wrote a post outlining some details of the Federal Housing Finance Agency's takeover of Fannie Mae and Freddie Mac.

Today I want to expand on that post and bring up some other discussion points.

First, let's be clear that the failure of these two entities represents the #1 and #2 largest financial institution failures in history. As such we should be aware that the impact will not be minimal, in fact I think we'll be feeling the pain for years. While the markets reacted favorably to the takeover, the exuberance will be short lived as the reality of the state of the mortgage industry sets in.

Let's start with the portfolio limits that will be imposed on these companies. They shall not exceed $850 billion as of Dec. 31, 2009, and shall decline by 10 percent per year until the portfolio reaches $250 billion.......given that Fannie's portfolio was $758 billion at the end of July, and Freddie's was $798 billion, that's a HUGE reduction.

Additionally it was announced that lending standards will remain tight and remember that the new FHA loan limits that went into effect on March 6, 2008 will expire on 12-31-08.

Former Federal Reserve Bank of St. Louis President William Poole stated that the government is aiming ``to prevent the mortgage market from falling apart,''. It is believed that the Treasury's funds will be needed for a long time, in order to clean up this debacle.

What this says to me is that by 2010 obtaining a conventional loan may become more difficult and that the overall housing market will feel the pain as loans may not only get harder to obtain, but down payment requirements will probably increase.

While interest rates are expected to drop in the short term, some are expecting the Federal Reserve to start raising interest rates in the not too distant future in order to support the dollar.

For those home buyers sitting on the sidelines, loan and interest rate considerations should be right up there with the pricing of the house. For all tax payers, we should be paying attention to both national and local politicians and their voting records on issues that directly impact how these companies operated both in the past and how they will operate in the future.

What to make of the US Government's seizure of Fannie Mae and Freddie Mac

Ana Connell (Exit Family Realty) — Mon, 08 Sep 2008 02:48:37 -0500

Sunday it was announced that the government, through the Federal Housing Finance Agency, was making the landmark, although not altogether unanticipated, decision to take over the Federal National Mortgage Association (FNMA-Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

After suffering from the biggest number of mortgage defaults in 30 years, the two giants are in serious danger of failing and delivering a major blow on the already stressed housing market . In a nutshell, they're worried the mortgage market will fall apart. The end goal is to restore confidence, mainly abroad and at home, for those financial institutions that hold these companies' securities.

Fannie Mae and Freddie Mac together own or guarantee about $12 trillion in mortgages or about half of the US mortgage market. FNMA was formed after the great depression, as part of FDR's New Deal, to provide liquidity to the mortgage market. Freddie Mac was created in 1970 to expand the secondary market for mortgages.

Here are some details of the takeover:

It's anticipated it could cost as much as $100 billion for each company
The Treasury will receive $1 billion in preferred stock, warrants totalling about 79.9% of Fannie and Freddie
The Treasury will start with a $5 billion purchase of mortgage-backed securities
Both companies will be placed under a conservatorship, both CEO's will be replaced, but remain as consultants
All dividends will be suspended
The takeover is "temporary" until a future operating or restructuring plan is hammered out
Common stock holders will remain, but be last to receive any compensation
Interest and principal payments will continue to be made on outstanding debt
All lobbying efforts by both companies will stop immediately

If you have followed this story you may already know that when problems first started to surface we were all assured that everything was fine and that government intervention was not necessary. Problem is that the accounting methods used by these companies overstated the value of their securities and due to the mounting losses it was paramount that they raise more capital.

FNMA is required to have $37.5 billion on hand to meet capital requirements and it had fallen in less than 2 months from $47 billion to $7.6 billion......scary. Freddie was down to $3.3 billion from $33 billion.....again, scary.

It was decided that without a takeover the risk was simply too great for taxpayers for the government to keep infusing capital. From where I'm sitting it does not look good any way you dissect this thing, although the alternative of doing nothing could be far worse.

Many critics, including Steve Forbes and Alan Greenspan believe these companies have been mismanaged and need to be split and sold off. Many in the mortgage industry see this as a positive step in shoring up the sagging mortgage market, while some worry it may not be enough. In the short term long term mortgage rates could dip by as much as 1%, if certain mortgage pundits are correct.

Some lingering questions include:

What happens next? While the goal is to"preserve and conserve" the value of these companies, no end date or time frame exists for ending the conservatorship.

Will key benchmarks or the Treasury plan be met and will that be enough to stabilize the mortgage market?

Will the people who need to be helped get that help?

More to come on this story.........