San Diego Housing Market News and Analysis
Articles that I have written for VoiceofSanDiego.org, a local news publication that provides continuing coverage of San Diego housing and economic issues.
Submitted by Rich Toscano on September 17, 2008 - 10:29am
I spoke too soon yesterday. After Treasury Secretary Paulson apparently refused to bail out AIG, the Federal Reserve stepped in and cut the mortgage giant a check for $85 billion in exchange for 80 percent of AIG shares. That $85 billion of taxpayer money is just a loan, we are told, but I don't quite understand the distinction between and loan and a handout when the whole trigger for this loan was that AIG is unable to pay back its other loans.
Once again, this is being covered everywhere in the MSM. Here's a good overview.
Although a cut in the Fed funds rate had become widely expected by yesterday, the Fed ended up holding rates steady. Perhaps they are trying to limit themselves to one Wall Street bailout per day.
Today is a new day, however.
Submitted by Rich Toscano on September 16, 2008 - 9:01am
My snarky comment in the prior post notwithstanding, the folks at the Treasury have to their credit not directly bailed out either Lehman or AIG. (They have stepped up the indirect bailouts, however: the Fed will now be lending more money to more people with more questionable collateral, and word is that they may also cut rates again today.)
But while they are finally turning some pigs away from the trough, the government's frantic interventions to date suggest that they will not sit idly by as things get really out of hand. We shall see.
I haven't gone into much detail on this week's drama because for the most part I'd be rehashing what's already been, uhm, hashed many times over. All the mainstream outlets are covering the issue, but for good up-to-the-minute updates and commentary I've been enjoying the coverage at the blog Naked Capitalism.
(written for voiceofsandiego.org)
Submitted by Rich Toscano on September 15, 2008 - 10:30pm
Back in early 2007 I wrote about the risks in the market for credit default swaps, a type of financial instrument that basically serves as insurance against bond default. The crux of the article was that some of the insurers in question might not be able to pay when the time came, and that would be trouble.
Almost exactly a year later, in January of this year, I wrote that the Fed's bailout of investment bank Bear Stearns may have been intended to prevent exactly that type of situation (though I noted that I'd expected the trouble to come from hedge funds, not from full-fledged investment banks).
Today, the bankruptcy of investment bank Lehman Brothers may have set some CDS market trouble into motion. As this Bloomberg article dryly notes:
It turns out that Lehman was one of the ten largest "counterparties" (credit insurers) in the default swap market, so their failure is obviously a big deal.
On the other hand, things probably won't be allowed to get too bad before the next bailout is put into place.
(written for voiceofsandiego.org)
Submitted by Rich Toscano on September 12, 2008 - 11:51am
Soon I will be putting up some thoughts from longtime FOP (Friend of Piggington) Ramsey Su, to be followed by the monthly data rodeo.
In the meantime, get your Friday data fix over at voiceofsandiego.org.
Submitted by Rich Toscano on September 8, 2008 - 7:49pm
We just witnessed yet another weekend bailout for the financial markets. The government takeover of ailing mortgage behemoths Fannie Mae and Freddie Mac was no surprise (prior editorializing can be found here and here) and has been jumped all over by the mainstream press. So I'm not really going to get into the details, as anyone interested doubtless already knows them.
However, I thought that the official nationalization of the mortgage market at least deserved a mention here at the Nerd's Eye View.
Someone asked me how this would change the housing and mortgage markets. My initial thought is that it won't. This move was intended not to cause something to happen, but to prevent something from happening. That something was the imminent bankruptcy of the two entities that account for about 80 percent of U.S. mortgage issuance.
Such an outcome would have changed the game, to be sure, but now it's not going to happen. Mortgage rates may adjust downward a bit, but from a big picture standpoint, it will be business as usual. (That is, until the new government-owned entity starts writing down mortgage principal balances for defaulted borrowers and other fun unintended-consequence-inducing activities).
Business as usual, by the way, continues to be declining home prices.
Submitted by Rich Toscano on August 21, 2008 - 2:19pm
I think it's funny that the folks at the North County Times have created a "Bottom calling" tag in their new business blog.
The titular bottom-calling in their inaugural post for the new category was made by longtime DataQuick pundit John Karevoll. In addition to opining that sales volume had already hit bottom, Karevoll said:
Karevoll was pretty circumspect -- in addition to the disclaimers above, he noted that the market is likely to "drag along the bottom for a while.”
Nonetheless, this is a fairly bold call.
Submitted by Rich Toscano on August 15, 2008 - 12:07pm
San Diego County shed jobs again in July, according to the EDD's latest estimates. As in the prior month, the problem wasn't that the housing-related sectors accelerated their decline, but rather that the non-housing sectors were unable to make up for housing's weakness as they had in the past.
Submitted by Rich Toscano on August 12, 2008 - 11:48am
While the number of homes entering the final stage of foreclosure hit another all-time record in July, the number of homes entering foreclosure actually declined.
This decrease may not be very meaningful, however.
Submitted by Rich Toscano on July 30, 2008 - 8:59am
City Attorney Mike Aguirre has filed a lawsuit against Bank of America and its new subsidiary Countrywide. The central complaint of the suit appears to be that Countrywide engaged in fraudulent practices by putting people into high-risk mortgages and that Countrywide, as Aguirre put it in a press statement, "originated loans with little or no regard for the borrowers’ financial ability to afford the loans or to sustain homeownership." The suit is intended to prevent Countrywide (now Bank of America) from initiating foreclosure on any homeowner who has a high-risk mortgage and who actually occupies the home.
The lawsuit may be well-intentioned, but it's unlikely to help San Diego and there's a fairly good chance that it will make things worse.
It's also yet another bailout attempt.
Submitted by Rich Toscano on July 25, 2008 - 9:39pm
Earlier this year I wrote about Joseph Galascione, a San Diego real estate broker who does some serious digging into the local mortgage pool to try to ascertain the prevalence of future foreclosures. Below are some conclusions from Galascione's recently released study of mortgages due to reset in the third quarter of this year. The study, incidentally, is freely available at the website of Galascione's firm, ERA® Metro Realty.
To review the premise, a resetting loan is considered to be at "high risk for foreclosure" if the borrower made a down payment of less than 20 percent and the monthly payment is expected to increase by at least $500 upon reset.
Submitted by Rich Toscano on July 14, 2008 - 3:41pm
I will begin this blog entry with an allegorical play in three acts -- starring you as the protagonist!
Submitted by Rich Toscano on July 11, 2008 - 12:42pm
Fannie Mae and Freddie Mac, collectively known as the government-sponsored enterprises or GSEs, are huge government-backed yet privately owned companies whose main purpose is to buy mortgages. They are also, according to a recent Fed governor among others, insolvent -- that's "broke" to you and me.
This story is all over the news so I'm not going to rehash it -- here's a NY Times piece for those who want more. I just wanted to note that this is a huge crossroads for the housing and mortgage finance bailout efforts about which I've written several times on these pages.
A failure of the GSEs would be huge. They either own or guarantee over $5 trillion worth of mortgages, accounting for nearly half the mortgage debt in the country. And in the days of dwindling private mortgage issuance, the GSEs provide a huge chunk of the lending that takes place. Were they to stop buying mortgages, as the Times article puts it, it "could bring much of the American housing economy to a standstill." Many think that the government would step in and take over the companies before that was allowed to happen.
Submitted by Rich Toscano on July 1, 2008 - 4:44pm
We haven't paid much attention to mortgage rates of late, a fact that is understandable given that the real action in the mortgage market has involved defaults on high-risk loans rather than incremental rate changes. But let's check back in on the topic.
Submitted by Rich Toscano on June 27, 2008 - 3:08pm
I'll just say up front that this is one of those lame blog posts that links to another person's blog post and then appends a little extra commentary at the end, which is exactly the type of blog post that one might expect on a Friday afternoon in late June.
The linked-to blog post in question comes from local real estate luminary Jim "The Realtor" Klinge, and it offers up a host of data comparing subprime and Alt-A mortgages in California. The difference, to put it simply, is that while "subprime" describes mortgages given to borrowers with low credit scores, "Alt-A" describes high-risk mortgages granted to people with better credit scores.
I've long argued that subprime loans weren't the only ones at risk of default, and Jim's data (sourced from the New York Fed) shows that this is true. (For instance, 23.5 percent of Alt-A loans have late payments over the past two years.) But what interests me most about Jim's post is that it suggests that much of the Alt-A pain may still be pretty far in the future.
Submitted by Rich Toscano on June 17, 2008 - 10:21pm
Last week I noted that May had been another good month, as these things go, for home sales. But there is more to the story, as you might expect. Just as there has been a huge disparity in price declines between different areas of San Diego, the recent surge in sales activity has been every bit as uneven.
Using the zip code-level sales data kindly offered up by our pals at the Union-Tribune, I collected information on all zip codes that had more than 20 sales either in May 2007 or May 2008. I put the resulting list in order based on the year-over-year change in sales activity, with the biggest sales increase at the top. Then I took some averages for the top 20 zip codes (those with the biggest increases) and the bottom 20 (those with the biggest decreases). The two lists are here for anyone who wants more detail.
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