Zillow app now available on iPhone

Ever wonder how much easier it would be to have information on homes you're scouring in various neighborhoods or their current 'Zestimate' value? Zillow has launched an app for the iPhone which allows you to do just that (hat tip: Future of Real Estate Marketing blog):

Bank chooses to destroy new homes rather than pay daily fines

What a waste of good materials. Rather than continue to pay daily fines to the City of Victorville for unfinished new homes built by Matthews Homes on which they had foreclosed, Guaranty Bank of Irvine instead hires a company to bulldoze them. And, according to a member of the wrecking crew at the site, they've got another 26 homes in Temecula on their destruction list. Is this really the best way to handle this problem? (Hat tip: Calculated Risk):

Jumbo loans making a comeback

For buyers of homes in high-priced areas or looking to move up to a home that's too high for Fannie Mae or Freddie Mac to buy, there's some good news: jumbo loans are reappearing for terms that are becoming more reasonable. From a BuilderOnline.com story:

Forced to near extinction by shaky credit markets, the jumbo mortgage loan is making a comeback, which is good news for builders who sell high-end homes or build in expensive markets.

Interest rates have improved, and more financial institutions are starting to lend money for home mortgages with price tags too high to be bought by Fannie Mae or Freddie Mac, said industry watchers...

Bank of America recently announced it was jumping back in the jumbo business. ING has also been offering the loans above the $417,000 conforming limit in most markets and $729,750 in high-cost areas.

Keith Gumbinger, of HSH Associates, a mortgage research firm and publisher, said banks are more willing to lend money for jumbo loans because they have more cash to lend, and there aren’t many other profitable places to put it. Banks have more cash on hand because of TARP money and because the low interest rates have led many home owners to refinance their homes, paying off their old loans in the process....

Still, while rates on jumbo loans have declined significantly from last fall, roughly 160 basis points from 7.90% at Halloween, they still are higher historically compared to conforming home loans. Last year there was roughly a three percentage-point difference and now it’s down to closer to a two-point spread...

Phoenix the first market to see 50% declines in home prices

Although the drop in the Case-Shiller index seems to be slowing in some markets, even the lower rate of decline has meant overall drops of well over 30% for most markets which participated in the housing boom and bust. In Phoenix, the total price decline since the crest was reached in 2006 has now passed 50%. From a New York Times story:

Phoenix has achieved the unwelcome distinction of becoming the first major American city where home prices have fallen in half since the market peaked in the middle of the decade, according to data released Tuesday.

Though historical statistics are scant, experts said the precipitous decline probably had few if any equals in modern times...

Home prices in the Sun Belt city, the 12th-largest metropolitan area in the United States, dropped 4.5 percent in February, according to the Standard & Poor’s Case-Shiller Home Price Index. Prices in Phoenix are now down 50.8 percent since the market peaked in June 2006.

For the country as a whole, the Case-Shiller numbers offered the thinnest of silver linings: things are still getting worse, but more slowly.

In February, the price of single-family homes in 20 major metropolitan areas fell 18.6 percent from the year earlier, compared with a record drop of 19 percent in January.

“Finally, we’re seeing a touch of moderation,” said David Blitzer, chairman of S.& P.’s index committee. “This is the kind of thing one might see if we’re beginning to see a bottom. I would not run out and celebrate, but I would not dig the bunker any deeper.”

Economists said housing prices would probably continue to fall as Americans, worried about rising unemployment and the recession, put off big financial decisions like buying a home.

Some economists expect housing prices to fall another 5 to 10 percent before they hit a bottom; others say that prices could decline by as much as a third. According to the National Association of Realtors, the median price of a home in the United States, which peaked above $230,000 in 2006, has fallen to $175,200.

As prices have dropped, frozen housing markets in hard-hit areas like Southern California, Phoenix, Las Vegas and South Florida have begun to thaw. Record-low mortgage rates and huge inventories of foreclosed homes and other fire-sale properties have enticed first-time buyers to the market and lured others who had been sitting on the sidelines.

Home sales in Southern California and the San Francisco Bay area, where foreclosures dominate many markets, have snapped back this spring as prices dropped. But sales have slowed to a crawl in other markets like New York City, where prices declined 10 percent from a year ago...

And over at the Calculated Risk blog, there's a handy chart comparing the major metro areas studied by Case-Shiller, which you can find here.

Obama Administration extends housing aid to second mortgages

Since one of the major issues blocking loan modifications has been the fact that under-water homeowners have both first and second (or piggyback) loans on their properties, the Obama Administration is expanding its incentive program to second mortgages. From an L.A. Times story:

The Obama administration, stepping up efforts to stem foreclosures, will offer lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion.

The new measures announced Tuesday would especially help many distressed homeowners who have both first and second mortgages -- and can't afford either. The Treasury Department now wants lenders and their customer-service agents to agree to modify both loans as part of a comprehensive solution...

The program would slash second-mortgage interest rates to as low as 1% for five years for some borrowers. It also seeks to revive a Federal Housing Administration effort to persuade lenders to cut loan balances enough so that borrowers again have equity in their homes.

Money for the plan would come from a previously authorized $50-billion allocation from the $700-billion Treasury Department bailout fund that Congress established last year. The $50 billion already has been used to create incentives for modifying first mortgages...

The future of new housing is green

When green building terms and techniques first entered the construction industry’s policies and procedures manuals, they were initially designed for new commercial office buildings, allowing developers and cities to advertise their forward-thinking designs with iconic structures in well-trafficked locations.

Today, however, with increasing consumer sensitivity towards sustainability and a higher awareness among home builders that energy-efficient homes can boost both absorption rates and profits, building green homes will likely become the most important trend this industry has seen in a generation.

The market could be huge: according to a McGraw-Hill Construction Residential Building SmartMarket Report from 2006, green homes could make up as much as 10% of new construction by 2010 – a quintupling from a comparatively measly 2% in 2005. Seeking to retain its leadership in a quickly changing world, the National Association of Home Builders (NAHB) recently announced that more than 2,700 builders, remodelers have achieved the Certified Green Building (GCB) designation, which requires 24 hours of classroom instruction, two years of industry experience, commitment to continuing education and adhering to the CGB code of ethics.

Not to be outdone, the U.S. Green Building Council’s now-ubiquitous LEED certification (Leadership in Energy and Environmental Design) -- which began for commercial structures in 2000 -- naturally led to “LEED for Homes” in late 2007 following a two-year pilot program. The national certification program, which awards points for various categories and ranges from simple certification (45-59 points out of 136) to Platinum (90-136 points), has quickly become a powerful marketing strategy that now mirrors the EnergyStar® label for appliances.

Since applying for the LEED Platinium status is so rigorous, most green builders today are opting for the more permissive Silver label, but in all cases applicants are judged in eight primary categories: Innovation and Design, Location & Linkages (site placement), Sustainable Sites (using the entire property responsibly), Water Efficiency, Energy & Atmosphere (especially heating and cooling design), Materials and Resources (minimizing waste, using local supplies when possible and selecting environmentally friendly materials), Indoor Environmental Quality, and Awareness & Education (to the homeowner, tenant, or building manager).

In many cases, green building techniques simply involve some common sense and creativity, such as including larger, south-facing windows for more natural light (and free solar heating), installing second-generation low-flush toilets, using factory-built components such as roof trusses and pre-hung doors whenever possible, and adding covered entries over exterior doors to prevent water intrusion. In other cases, such as re-introducing drought-tolerant landscaping in arid climates, preserving trees on building sites and striving to cut down on the two tons of waste that the average new home throws into landfills, some builders will lead while others will choose to follow – if at all.

But for those who do lead, the benefits are hard to ignore. In the master-planned Whitney Ranch community of Rocklin, California, in January of 2007 local builder Grupe Company created Carsten Crossings, the country’s first all LEED-certified new home community. Ranging in size from 2168 to 2755 square feet, not only did the builder’s plans out-sell its competition by a factor of 2:1, but found that having a third-party reviewer as judge and jury dramatically reduced customer calls and complaints.

At the same time, Grupe managed to divert 75% of its waste from concrete, drywall and wood from the local dump, squeeze out energy efficiency ratings 35% higher than what California’s tough laws require and installed on-site solar arrays that can reduce electricity bills by up to 70%. Not bad for construction costs of $70 per square foot!

In San Jose, First Community Housing was so good at proving that green building techniques could also be applied to multi-family affordable units, in January of 2008 it won California’s first LEED Gold certification for its 35-unit Gish Apartments project. Although the green features increased building costs by 1-2% to $145 per square foot, various sources of funding helped pay for the extras, and a grant from the city chipped in for the rooftop photovoltaic array.

But let’s also not forget some extra bonuses. Firstly, homes offering the latest technologies in energy efficiency and sustainable components will, by definition, no longer have to compete with similar designs built by the same builders in the recent past. Secondly – and perhaps more importantly -- builders who’ve long been chastised for contributing to insensitive urban sprawl can now actually lead (if they so choose) the way for a sustainable planet.

Some new home builders starting up as market is down

One of the interesting parts of a down cycle in the housing industry is when the former executives of larger public home builders decide to leverage their contacts and experience and start up their own companies. I think this provides several benefits to potential home buyers, including a greater variety of designs and floor plans, seasoned executives overseeing the process and more competition in the marketplace. From a BuilderOnline.com story:

“We feel like the timing is pretty darned good,” said Jay Lewis of Surrey Homes, who is building the business with the backing of investors. “I believe that existing-home prices aren’t going to get any lower.”...

In this market, being private, as long as your debt level and other costs are low, is a distinct advantage. He can have the nimbleness and depth of market knowledge of a small, private company yet still capitalize on big-builder buying power because trades and other suppliers, desperate for business, are willing to sell him goods and services at the same rates they charge production builders in return for fair margins. Lot developers, too, are offering options on softer, more reasonable terms...

He said his company’s hurdle rate is low enough for him to sell homes at those prices with some upgrades standard, such as solid-surface countertops, tile, and Energy Star appliances.

He plans to also differentiate his homes by including a longer-term warranty and maintenance plan. Under the maintenance plan the company will schedule routine visits to the houses for warranty plus three more years to caulk cracks in stucco and perform other preventative maintenance.

Lewis admits it’s a risk to start a new building business now, but it’s mitigated by strong partners and no debt, he said. Homes will be built with cash on hand, rather than by borrowing...

Click here for full story.

April column for Builder & Developer magazine now online

My latest column for Builder & Developer magazine is now online, and focuses on staffing up for the eventual housing rebound. For now, an excerpt:

...sometime over the next 18 months, builders and developers will again be staffing up to fill various positions, and yet on social networking sites such as LinkedIn, I see people with 15 to 20 years of doing the exact same thing with different companies. Perhaps they’re good at some specific task, but for the next stage of real estate development, I think hiring people with multiple skill sets will ultimately separate the winners from the laggards.

Being brave enough to try out new things -- whether it’s striking out on your own or switching to an entirely new department – also shows the type of leadership qualities which help mold future executives. In many cases, those hints of future brilliance often occur in places far outside of the building industry, such as volunteering for a local political race, coaching a soccer team or organizing a church event, all of which reveal skills essential for any workplace...

HELOC abuse in Hancock Park

For the past couple of months, the Irvine Housing Blog has been noting posts of interest from The Housing Chronicles for a regular weekend thread. This weekend, however, blogger Larry Roberts is dissecting the HELOC abuse for a luxury home in one of L.A.'s most desirable neighborhoods (at least where I'd live if I had the money), Hancock Park. It's a very interesting read:

On Thursday in the astute observations, someone known as “E” asked about the largest HELOC abuse case we had profiled so far. We have profiled a couple for around $1,000,000 (The Ultimate Post, Responsible Homeowners are NOT Losing Their Homes), but Irvine is not old enough or valuable enough to have truly spectacular HELOC abuse cases. In a series of emails and a long phone call, “E” told me about a property in Hollywood that makes the pretenders in Irvine look like the wannabes they really are.

The way “E” described this neighborhood, it is the home of many of the truly rich, the famous, and the “Joneses” that want to be. Many in Irvine are trying to keep up with the Joneses; the Joneses live in Hollywood, and they are trying to keep up with the rich and famous who live here. Today’s featured property belongs to the Joneses (not their real name).

The interesting part of the keeping-up-with-the-Joneses phenomenon is that the people at the top of the heap often do not care about impressing anyone or making the Joneses jealous. Many at the top are just living their lives and trying to keep a low profile. When you really are rich, you don’t care if anyone knows about it.

So how do the Joneses really live? Well, if you are near the top rung of the ladder, you own a house in the best neighborhood, you milk that house for every penny it appreciates, throw opulent parties, and try to make everyone on the next rung down the ladder jealous. It goes something like this:

• This property was purchased in the early 70s for around $150,000. My data does not go back that far, but the total assessed value is $346,592 which would account for the original valuation and the proposition 13 adjustments since it was passed.
• I do not know what the original mortgage was, but for the sake of calculating MEW, lets assume it was $120,000 which is 80% of $150,000.
• My records pick up in 1998. On 10/23/1998, there was a new first mortgage for $250,000. This point also marks when the property went from being owned by a couple to being owned by just a woman.
  
• On 2/9/1999 the owner refinanced a $400,000 first mortgage.
• On 7/2/1999 she opened a HELOC for $150,000.
• On 3/31/2000 she opened a HELOC for $759,000.
• On 2/16/2001 she opened a HELOC for $609,300.
• On 3/1/2004 she opened a HELOC for $1,200,000.
• On 10/2/2006 she refinanced with a $2,700,000 Option ARM with a 1.5% teaser rate.
• On 10/2/2006 she opened a HELOC for $200,000.
• On 3/12/2007 she opened a HELOC for $787,500.
• Total property debt is $3,487,500. (which explains the current asking price).
• Total mortgage equity withdrawal is $3,367,500.

I am speechless…

Click here for entire post.

California's $10,000 tax credit helping new home builders

You've got to chalk one up for the California Building Industry Association's lobbying arm, since they definitely had a hand in crafting the $10,000 tax credit for buyers of new homes in the state. In fact, the program has been so successful that the development community has suggested lifting the $100 million cap on the tax credit program.

Yet others argue that since foreclosures are a much bigger problem in the state, creating an artificial stimulus for new home sales only prolongs the inventory correction.

I would argue that the issue is a bit more complex than that, and if we can devise a plan to help some builders limp along with a core operation until the market rebounds while also focusing even more on getting rid of existing home inventory (mostly foreclosures), then that's perhaps the optimal solution.

From a Wall Street Journal story:

California's hard-hit home builders say they're pouring more foundations and hiring more workers this spring, partly because of a state tax credit of as much as $10,000 for buyers of new homes.

Nationally, the Commerce Department said Friday that new-home sales fell 0.6% to an annual rate of 356,000 units in March, a sign the free fall in new-home sales may be over. In the West, home-builder sales rose 15%, likely reflecting a boost from California's new-home credit.

Now, less than two months after the new-home credit became available, some lawmakers in California's financially strapped government are proposing to eliminate the $100 million limit on the total amount of credits that home buyers can tap...

Despite the industry's enthusiasm, some economists say the credit is doing little to fix what truly ails California -- one of the nation's largest residential markets -- because it doesn't encourage the sale of foreclosed houses that are weighing on prices. Economists warn that if the tax credit is expanded too much, it could exacerbate the housing glut here...

Other states are considering their own subsidies to supplement the recently enacted $8,000 federal credit for certain first-time buyers of existing or new homes. But California has one of the most robust tax credits targeting new-home purchases...

The Californian Building Industry Association, which led the lobbying effort for the credit, estimates that each new-home sale generates $16,000 in tax revenue from construction workers' income, as well as from sales taxes paid on appliances and furnishings, among other home-related items...

About one-third of the $100 million tax credit allocation has been already claimed, according to the state Franchise Tax Board, which administers the program. At this rate, lawmakers expect the pool could be gone by early summer, well before the program is scheduled to end in February 2010.

For home buyers, the credits mean big savings, as home prices keep falling and mortgage rates are near historic lows. Certain first-time home buyers in California can qualify for a combined $18,000 in state and federal credits on new homes, which had a median price of $339,990 in February.

Will we be seeing more consolidation of homebuilders?

When the news of the Pulte-Centex merger broke recently, it was a surprise for most of us (still) eeking out a living in the building industry mostly because it occurred so early in this part of the cycle, but for me it also brought up two big questions: (a) would this put more pressure on other public builders to merge; and (b) what, exactly, was Pulte getting for its investment? Will this simply mean even more lookalike homes in major markets? A story in Fortune magazine ponders these same questions:

Large, well-capitalized homebuilders with low debt, such as D.R. Horton Inc., (DHI, Fortune 500) KB Home (KBH), and Pulte (PHM, Fortune 500) - as well as cash-flush private equity firms - will likely be shopping around, while highly leveraged builders with significant chunks of debt coming due in the next three years are likely targets, industry experts say.

Like companies in just about every other industry, homebuilders are having a tough time refinancing in the frozen credit markets. As a result, distressed builders, unable to meet debt calls, could be forced to sell assets or the entire company at bargain-basement prices.

Builders with debt-to-market cap ratios above 75% include Beazer Homes USA Inc. (BZH), Hovnanian Enterprises Inc. (HOV), and Standard Pacific Corp. (SPF), according to Bob Curran, managing director at Fitch Ratings. Their high debt makes them vulnerable to takeouts if the credit markets don't improve in the next two years, experts say...

KB Home could fit well with Ryland Group Inc. (RYL) which shares a similar market cap and business strategy, says UBS analyst David Goldberg. But, he notes, "Who knows if KB wants to be acquisitive?"...

Most industry experts believe consolidation will accelerate, but many wonder if Pulte might have jumped in prematurely and overpaid for Centex (CTX, Fortune 500).

"We have always felt that there would be additional consolidation in the industry - just not right yet," said Joe Snider, vice president and senior credit officer at Moody's Investors Service in New York. "We're in the middle - we're not at the end yet - of a very deep and long-lasting downturn."

Based on Pulte's closing price on April 7 just before the deal was unveiled, the transaction valued Centex at $10.50 a share, which represented a 38% premium to its closing price of $7.62.

"My gut would tell me that what Pulte paid was a little bit high," says Goldberg. If the market rebounds and prices go up, "Pulte will look like geniuses for buying a big land position at the bottom of the market," he says. But if the market tanks for two or three more years, he believes the merger will be viewed as ill-timed...

Analysts expect a number of distressed builders to exit the market through bankruptcy filings, mergers or fire-sales in the next year or two.

So far, about 17 of the country's top 100 homebuilders - including three publicly-traded builders - Levitt & Sons LLC, WCI Communities Inc., and Tousa Inc. - have filed for Chapter 11 bankruptcy protection over the past two years, says Reichardt. More recently, Comstock Homebuilding Cos. Inc. indicated it may seek bankruptcy protection

Publicly-traded builders, in general, are better capitalized than their rivals in the private sector. Many learned tough lessons from the crippling downturn almost 20 years ago where high debt and inventory levels pushed a flurry of builders into bankruptcy...

Still, many companies are at risk. "Some of the weaker public builders have already gone, and there may be more to go," says Kim. And that's where the well-capitalized players can step in, but they may be best suited to hold off a while longer...

New home sales in 2008 hit record low

By now it shouldn't come as any surprise that new home sales in 2008 fell to a record low of 331,000 annualized sales by December. Yet because the sales are so low, it would still take nearly 13 months to burn off the existing inventory (although some economists would argue that the time line for market equilibrium of new versus existing homes aren't the same because it takes much longer for home builders to create the product to sell). From a Washington Post story:

Builders cut production and prices but are competing against a backlog of foreclosed properties that are selling at significant discounts, economists said. Until more buyers venture back into the market, prices will continue to fall and sales will remain slow, they said.

In December, new-home sales tumbled 15 percent compared with November, to an annualized rate of 331,000 sales, and were down 44.8 percent compared with December 2007, according to the Commerce Department. For all of 2008, builders unloaded 482,000 new single-family houses, down 37.8 percent from 2007. That is the biggest year-over-year sales decline on records that go back to 1963...

Meanwhile, prices have tumbled to 2004 levels. The nationwide median sales price fell 9.3 percent, to $206,500, in December from $227,700 a year earlier, the biggest drop since 1970. For the year, prices fell about 7 percent, to $230,600, from $247,900 in 2007.

Despite industry efforts to cut supply and prices, there are still far more homes than buyers. It would take 12.9 months to sell all the homes on the market at the current rate, according to the Commerce Department. That is the worst sales rate on record...

The current number of homes for sale might have been acceptable two or three years ago, but the sales rate was much faster then, economists said. While new homes await buyers, existing homes in pockets of the country are being snapped up by bargain hunters, according to industry data released earlier this week. But that market is being fueled by foreclosed homes and distressed sellers that have dragged down prices...

Have new home sales hit bottom?

Have new home sales in the U.S. finally hit bottom? It's certainly a question on the minds of many in the building industry, and there's certainly no shortage of funds remaining on the sidelines waiting to pounce on the right opportunities. From an AP story via Yahoo! Finance:

After a staggering 74 percent decline from the peak in July 2005, new U.S. home sales appear to be bottoming out.

The pace of home sales, which hit a record-low in January, jumped in February and was flat in March, the Commerce Department said Friday. At the same time, the inventory of new homes for sale dropped a badly needed 5 percent from February levels....

Sales varied dramatically around the country. The best performance was in the West, where sales rose more than 15 percent from February. The worst turnout was in the Northeast, where sales sank more than 32 percent. They were unchanged in the South, and down nearly 8 percent in the Midwest.

Since the data measures signed contracts to buy new homes rather than completed sales, they probably got a boost from the new $8,000 tax credit for first-time buyers passed in mid-February. In addition, California offers a $10,000 state tax credit for buyers of new homes, and that's likely boosting sales in that state.

An index of builders' confidence released earlier this month posted its biggest one-month jump in five years as many homebuyers seized on lower prices and incentives and took advantage of lower interest rates and tax credits...

Book review of "After The Fall" published at Inman News

My review of the book "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade" by Steve Bergsman is now online at Inman News. As an adjunct to this review, I also interviewed Bergsman for my new Housing Chronicles show on BlogTalkRadio, which you can listen to by clicking here or listening to it on the widget below:



From the review:

With the housing market still in tatters but showing some signs of life and the commercial markets starting their own freefall, many investors continue to consider real estate one of the last places to put their dollars to work.

In his new book, "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade," veteran real estate and travel writer Steve Bergsman argues that now is precisely the time to start considering what types of real estate sectors -- whether residential, commercial or leisure -- should be on your shopping list, both today and in the future...

For each chapter, the author takes us through a brief business journey beginning with an overview, followed by "Where We Are Today," "Where We Were," "Where We Are Headed" and "Fundamentals."

Readers can easily thumb through to whichever chapters they deem most relevant for analysis on the past, present and future for their sectors of interest. In addition, a "Bonus Box" at the end of each chapter focuses on a recent trend for a particular land use sector, such as "The Office Condominium," "Flex Space" (for industrial uses) or "Locations for Knowledge Workers" (for retail uses).

In the case of the commercial real estate markets, Bergsman paints a future portrait of haves and have-nots, in which the largest investors will favor larger urban, international centers such as New York, Washington, D.C., or Los Angeles, while largely ignoring tertiary, largely domestic markets such as St. Louis or Minneapolis.

By 2012, however, the author thinks it will actually be the sleepy, stable apartment market that will be one of the best places for institutional dollars, having likely rebounded from several years of weakness in that sector's underlying fundamentals and a dearth of new construction...

One sub-sector expected to resist the outgoing tide is senior housing, which already went through its own boom-and-bust cycle earlier in the decade and, by 2010, will enjoy a strong surge of favorable demographics as boomers begin to retire in larger numbers.

Looking ahead, two residential sectors Bergsman expects to underperform the market include: condominiums (especially those in popular vacation areas such as Las Vegas or South Florida) and, at least until the next decade, second homes.

However, due to future demographic trends pointing to an aging population, smaller families and a growing preference for returning to the city centers, condos located in urban areas that haven't been overbuilt could return to health as early as 2010, he said...

Finally, although most real estate sectors are expected to return to basic fundamentals for most of the 2010-20 years, one heralded star of the housing boom -- the exurban McMansion built on the far fringes of metropolitan centers -- could likely become its most visible victims of the bust.

Featuring large lots at the expense of a long commute and few public transit options, some industry observers think such single-family homes will eventually be subdivided and become housing for the poor -- which, ironically, is exactly what happened to buildings in various downtown areas as a car-crazy populace moved out to new suburbs during the mid-20th century (see Inman News report on urban, suburban and rural growth and planning trends in the aftermath of the housing boom).

Of the 57 million existing single-family homes on large lots, nearly 40 percent, or 22 million, could have considerable trouble finding buyers in the years ahead as larger economic, political and cultural forces change the way Americans live and view residential real estate as an investment class...

Click here for entire review.

L.A. Times reporter Annette Haddad loses battle with cancer

I got some news today that I'd been dreading for months, which is that Annette Haddad, a veteran reporter for the L.A. Times who started covering residential real estate just as I started talking more to the press when I worked with MarketPointe Realty Advisors and then Hanley Wood Market Intelligence, had lost her battle with cancer.

What I always liked about Annette was that she was fair, and more than willing to change her mind about something if presented with the right back-up material. She and I were also about the same age, and over time we developed a solid friendship in which I would explain to her how new home builders functioned, and she would coach me on how to provide better, pithier quotes for stories.

She was also very open to story pitches, and when I told her about the first new-home auction I'd seen since the early 1990s, a story on that subject appeared soon thereafter. It's largely because of her advice that I learned "PR 101." When she was named Web Deputy, we'd meet and discuss ways to keep the Times' offerings on real estate data relevant in the online era, but of course when she got sick those ideas were all put on hold.

But my best memory of Annette was when I had a meeting at the Times and we met for lunch in the paper's cafeteria on the first floor: greeting me into the foyer of the original Times building built in 1935, she took me on a personal tour of the building and introduced me to many of the names behind the bylines. It's a tour I'll never forget.

Annette was also a fierce protector of the Times' objectivity. Last year, when I was writing a freelance story for the paper's late real estate section on builder incentives, it was Annette who raised a red flag to the section editor because she was concerned about any appearance of a conflict of interest. Once it was cleared that neither builder noted in the story was a client of mine, the story ran, but it also forced me to institute a new rule that I can't be considered a consultant to the building industry while also writing about them as a freelance reporter. Consequently, I now only write columns, blog posts and book reviews.

When I talked to her later about the issue, however, she was mostly concerned about our friendship, saying, "I really like you, but I had real concerns about this story and thought you'd be upset if I killed it." Frankly, that commitment to the Times made me like and respect her even more, and when she came back for a short time and was elevated to also help oversee the online Business section, I knew it was a great choice.

I suppose I should take some solace that she died on Earth Day, but at this point it just seems so unfair, since she had so much left to give to the Times and to those who knew her. I miss her already.

From an L.A. Times story:

Although she had spent much of her career at The Times as an editor, she embraced the idea of covering real estate when offered the chance in 2004.

During her time on the beat, she had 17 Page 1 stories on a variety of aspects of the market, including a sharp Column One feature that provided an early look at the impending foreclosure crisis...

In reporting on residential real estate, she focused her coverage from a financial perspective looking at market trends, housing economics and home-building companies.

She loved her assignment, her husband said.

"After a long week of work, she thought nothing of spending her weekend covering open houses and loved talking to actual buyers," Doggett said.

After her diagnosis in 2007, she underwent surgeries and chemotherapy before returning to work coordinating Business coverage on the paper's website. But a return of the cancer a few months later forced her to quit...

In lieu of flowers, donations may be made to The Humane Society of the United States.

World economy still in severe recession

Although there have certainly been some kernels of promising information lately about the housing market and economy, the fact is the most significant world-wide slowdown since WWII remains in a severe recession. From a Reuters story via Yahoo! Finance:

The International Monetary Fund on Wednesday slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy's recovery from a severe recession.

In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.

Growth is set to re-emerge at a sluggish 1.9 percent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system...

Just three months ago, the IMF had projected global growth of 0.5 percent, although last month it warned of a deep recession.

The Washington-based institution said it revised its forecasts downward because financial markets appear likely to take longer to stabilize than it had thought earlier...

The IMF said on Tuesday that banks and other financial institutions around the world faced losses which could amount to $4.1 trillion. It said banks would likely need to raise $875 billion in fresh capital.

In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery.

It said interest rates in major advanced economies are likely to be lowered to or remain near zero, and said authorities should move quickly to cut interest rates where there was room for further easing...

The IMF said the United States remains at the epicenter of the crisis, and it said it now expected the U.S. economy to contract 2.8 percent this year.

It said while there were signs the U.S. recession might be easing, a recovery was unlikely to take hold until next year, which would leave 2010 gross domestic product flat...

What will the devastation to 401k balances mean for the housing market?

Although it's not technically a housing-related story, the collapse in the value of many people's 401k balances could have a large impact on their home purchasing decisions -- especially for those over age 50. About the time the market was starting to see-saw in late 2007, I moved my 401k balance over to a self-directed IRA, where it's mostly sat in cash ever since, but most others weren't so lucky. From a 60 minutes report:

Checked your 401k lately? The recent financial collapse has devastated this retirement resource. Older workers are hardest hit, as their financial futures may now be at risk. Steve Kroft reports.


Watch CBS Videos Online

Web site to find new homes launched

New home data provider Hanley Wood Market Intelligence and DataSphere Technologies have teamed up to launch www.newhomelistings.com to provide information on more than 14,000 new home communities. From the press release:

Today, Hanley Wood Market Intelligence, in partnership with DataSphere, launched www.NewHomeListings.com, a consumer focused website that will connect potential new home buyers to builders by featuring the most comprehensive database of new home community information available online.

The NewHomeListings.com approach offers several distinct advantages over other national and regional web sites with new home listings:

1) The site will be more compelling to consumers because of its unique and comprehensive content. With approximately 14,000 communities, NewHomeListings.com has twice as many communities as its competitors, covering national, regional and local builders.

2) Listings and leads are free. NewHomeListings.com does not charge builders for basic listings or to receive leads. This is a significant advancement from today’s business model for this service. Eventually builders will have the opportunity to upgrade their services levels for a fee.

3) The NewHomeListings.com platform will deliver greater traffic and actionable leads through its robust syndication network. This network was customized to maximize lead volume and lead quality from other online sites, including sites that currently have no new home content.

Introducing the Reverse Mortgage Adviser Blog

I wanted to introduce readers of Housing Chronicles to the blog at the Web site Reverse Mortgage Adviser. The main site was set up to provide people with information regarding the various types of reverse mortgages, which was something I covered in a feature story for the Los Angeles Times in February of 2008 (and which you can find here). I've added their related blog to my own blog roll.

Who We Are

Reverse Mortgage Adviser is a free service that was developed to assist seniors and their loved ones interested in a reverse mortgage. We are NOT a lender. Reverse Mortgage Adviser is constantly seeking out lenders with a consistent track record of reliability and commitment. In an effort to ensure that seniors seeking reverse mortgages receive objective information, free of fraudulence Reverse Mortgage Adviser is a member of NRMLA and adheres to its Code of Conduct and other Best Practices, in addition to holding a membership with the National Aging in Place Council (NAIPC).

Objective Information

We strive to provide the most up-to-date and honest information, including access to relevant articles, calculators, and analyses. We do all of this so that seniors and their loved ones can learn about the reverse mortgage process in a secure environment, without being hassled by high pressured salespeople.

Straightforward, Honest Help

Our counselors are here to answer all of your questions and help you determine whether a reverse mortgage is the right choice for YOU. We assist you with the research necessary to determine how much you are eligible for, as well as assisting you in finding a reputable and trusted lender. We encourage you to take advantage of our research and utilize our Reverse Mortgage Lender Network for qualified lender recommendations in your area. This is a FREE PUBLIC SERVICE provided by Reverse Mortgage Adviser and you are under no obligation to proceed.

Industry Compliancy

We believe in integrity and know that finding a lender you trust is important. Since dishonest brokers and lenders are a danger to consumers and the industry; we ensure that only the most reputable are included in our Reverse Mortgage Lender Network. Help us to maintain the integrity of Reverse Mortgage Adviser and the industry by reporting any consumer complaints through our Compliancy Center.

Know anyone who's looking into a reverse mortgage? This looks like it would be a good place to start.

Mortgage industry throws more hurdles onto borrowers

Although home prices continue to fall and mortgage rates are historically low, nervous lenders continue to pile on new fees and requirements for borrowers hoping to jump back into the market. From the "Nation's Housing" column in the L.A. Times:

Take Fannie Mae's and Freddie Mac's add-on fees for loans purchased after April 1. In some cases, applicants are being hit with extra fees of 3% to 5% because of the type of property they want to buy or refinance, their credit scores or the size of their down payment.

Some major lenders who sell loans to Fannie and Freddie are going further -- tightening underwriting rules beyond what either corporation requires...

Fannie Mae now has a mandatory fee of three-quarters of a percentage point on all condominium loans, no matter how high the applicant's credit score...

On top of these extra fees, borrowers are now starting to get hit with two sets of cost-raising appraisal rule changes. Fannie and Freddie have begun requiring all appraisers to complete an extra "market condition" report that includes detailed statistical analyses of local sales and pricing trends -- above and beyond the regular appraisal data. Many appraisers are charging an extra $45 to $50 for the time required to complete the form. Home buyers and refinancers can expect to pay the higher fees.

On top of that, beginning May 1, Fannie and Freddie are refusing to fund loans with appraisals that do not follow a set of new rules known as the Home Valuation Code of Conduct. Among the procedural changes: Mortgage brokers no longer can order appraisals directly, but instead must allow lenders or investors to use third-party "appraisal management companies" to assign the job to appraisers in their networks.

How does that affect the consumer? Consider the notification one Connecticut brokerage firm recently received from a major lending partner: Starting April 15, all good faith estimates provided to applicants must indicate a flat $455 charge for appraisals arranged through the appraisal management company. The broker previously charged $325. Consumers will now have to pay the appraisal fee upfront -- before any inspection or valuation is completed -- using a credit card, debit card or electronic fund transfer.

What happens if the appraisal comes in low and the applicants can't qualify for the refi or purchase program they sought? Tough luck: They'll have just two choices: Pay another $455 for a second appraisal -- with no assurance that it will solve the problem -- or cancel the application...

Click here for entire column.

How useful are economists?

First most of them missed the degree of the recession, and now they can't agree on what to do. Having missed lessons of the Great Depression, some would argue that they've let the economy spiral out of control due to bad forecasts, an unwillingness to admit mistakes and an arrogance which suggests they're quite confident that most people consider economics to be beyond their own comprehension or control.

Yes, I'm talking about economists, and they're the subject for a BusinessWeek magazine cover story entitled "What good are economists anyway?"

Of course many bloggers and a few economists -- such as Christopher Thornberg, a partner to MetroIntelligence -- were warning of a great housing bust and a recession to follow as early as 2004, but such voices were largely drowned out by a cheerleading press and a dishonest NAR economist named David Lereah, whose objectivity was rarely questioned.

So where did these economists go wrong and what lessons should we learn from their profound mistakes? From the story:

Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can't agree how to solve it. People are starting to wonder: What good are economists anyway?...

To be fair, economists can't be expected to predict the future with any kind of exactitude. The world is simply too complicated for that. But collectively, they should be able to warn of dangers ahead. And when disaster strikes, they ought to know what to do. Indeed, people pay attention to economists at times like this precisely because of their bold claim that they know how to prevent the economy from sliding into a repeat of the Great Depression. But seven decades after the Depression, economists still haven't reached consensus on its lessons. The debate has only intensified in recent weeks...

The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient. And they take sides in quarrels that freeze the progress of research. Those few who defy the conventional wisdom are ignored...

Click here for full story.

San Diego Conference materials now online

If you missed the April 14th Economic Forecast Conference in San Diego, you can still review the speakers' presentations as well as download a copy of the 100-plus page book which was given to all attendees:

Click on the links below:

Conference Book

Christopher Thornberg Presentation

Brad Kemp Presentation

Gary London Presentation

The next forecast conference by Beacon Economics will cover the Inland Empire and take place on the morning of May 19th at the University of Redlands.

Click here for more information or to register!

Who are the buyers of land today?

Yesterday I spent the day in Orange County with G.U. Krueger, most recently the Chief Economist with Institutional Housing Partners, an adviser to CalPers. During the course of the day we met with a series of land brokers and Wall Street analysts in town to see how we might assist in their due diligence efforts, and this is pretty much where the market is today:

1. There are 3 types of buyers: builders, wholesalers and speculators, and each group is looking for different-sized deals in specific markets.

2. Most deals are small, often consisting of groups of finished lots (30-150) that wholesalers (often families or groups of friends) can then flip to builders when the market rebounds; given the past discounts on inventory, many builders are already starting to run out of such land but still prefer small, rolling take-downs that many banks aren't set up to provide.

3. Institutional money remains on the sidelines, waiting for other larger deals to happen before they jump in. Some hedge funds with longer time horizons (up to 10 years) are looking for more speculative plays, often in tertiary markets that could a higher reward given the greater risks, but these are still anecdotal.

4. Some opportunistic farmers are buying back land at agricultural values after having sold the same parcels to builders at inflated (residential land) prices.

Given some strands of good news, there are lots of buyers kicking tires, but deal flow is still very low due to sellers not yet capitulating on price. But as the FDIC continues to take over banks and put pressure on those still operating, you may see deal flow from banks increase over the next year as they're forced to get these non-performing assets off of their balance sheets.

Plunge in housing starts: good news or bad?

Lately, it seems that trying to figure out the health of the housing market from the most recent stats on starts, sales and prices is a lot like reading tea leaves. The latest bit of news is that housing starts fell sharply in March, although starts for single-family homes has remained constant. According to the L.A. Times, that could mean good news:

Groundbreakings on single-family homes held steady for the third month in a row in March, even as the number of condominium units and apartments under construction fell sharply, according to federal data released Thursday.

Economist Edward Leamer, director of UCLA's Anderson Forecast, said the stability in single-family home construction is a positive sign.

"The downward trend we've been seeing for a long time isn't evident anymore," Leamer said. "We won't know if we've really hit the bottom for a couple of months, but this is certainly consistent with being near the bottom."

But not all the news was good. Construction began on 152,000 apartment buildings nationwide in March, down nearly a third from the previous month and 51% from a year earlier. In the West, builders began work on just 10,000 multi-family buildings in March, a fourth of those that were started in February and down even more from the previous year.

That, along with the fact that there's still less construction going on now than there was last year, brought the overall numbers for new housing down 48% nationwide over the same month in 2008.

Over at the New York Times, they're painting a slightly different picture:

“There’s still no clear indication that the construction market is coming back,” said Mike Larson, a housing analyst at Weiss Research. “Even if companies want to start projects, they’re having a harder time getting the money to do so. We’re being overwhelmed by distressed inventory as well as regular sellers trying to get out of their homes. There’s not a heck of a lot of incentive for builders to ramp up construction.”

Still, some housing experts say the decline in home building was a crucial step toward lowering the glut of unsold houses and condominiums on the market so that housing supply once again lines up with demand...

And what about foreclosures?

Also on Thursday, the data firm RealtyTrac reported that foreclosure filings surged 9 percent, to 803,489 properties, in the first quarter of 2009. RealtyTrac said that foreclosure notices increased 17 percent in March from February.

“We saw a record level of foreclosure activity,” James J. Saccacio, chief executive of RealtyTrac, said in a statement. He added that foreclosures would probably increase in the next months as temporary halts to foreclosures expired at banks and agencies like Freddie Mac and Fannie Mae.

The flood of cheap foreclosed homes and distressed properties has helped push home prices lower across the country, especially in areas hit hardest by the housing downturn, like Southern California, Arizona and Florida...

SoCal home prices stabilizing?

The latest numbers from MDA/Dataquick are out, and show that the median price for an existing home in Southern California remained stuck at $250,000. What makes this interesting is that this is the third month in a row that it's remained stable, although that's really due to the huge influence of foreclosures (mostly in the Inland Empire). So if one month does not make a trend, does three?

I discussed this subject for local station ABC7 on their 5:30pm newscast, and whereas prices for entry-level homes have already fallen by 40% to 50%, those for move-up and luxury homes have fallen by 30% to 40%, so I would expect to see further price declines throughout 2009 and into early 2010 for higher-priced homes. However, in terms of the level of overall median price declines, I think we're past the 7th inning stretch.

Also, from an L.A. Times story:

The median sale price for a Southern California home remained the same in March for the third consecutive month, indicating that the housing market may be stabilizing for at least starter housing.

The median price paid for a home in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties was $250,000, the same as it was in January and February, according to MDA/DataQuick information services in La Jolla.

The median sales price had not held steady for two straight months since it peaked in 2007, the firm's data shows. The March sales price median was down 35% from a year ago. The $250,000 median price is down 51% from the peak price of $505,000 in mid-2007.

Foreclosed homes accounted for 55% of homes sold during March...

But the robust sales activity has been concentrated on lower-priced homes, DataQuick said. The firm estimates homes in more costly neighborhoods have dropped in value by only half as much as homes in lower-priced areas.

Sales at the high end "are dormant right now," said DataQuick president John Walsh. The median sales price will rise if activity picks up in that segment. But mortgages of more than $417,000 -- even those that do not meet the definition of a jumbo loan in states like California -- remain more difficult to obtain, Walsh said. A jumbo loan is a mortgage that is too large to be backed by the federally chartered mortgage giants Fannie Mae and Freddie Mac.

For now, the median prices are "simply a reflection of what is selling -- mainly distressed properties in the more affordable neighborhoods," Walsh said.

San Diego Economic Forecast

Miss the San Diego Economic Forecast Conference on Tuesday, April 14th? Fear not, as you can still download the presentations by Beacon Economics' Christopher Thornberg and Brad Kemp. As soon as the .pdf is available online, you can also download a copy of the nearly 100-page conference book which accompanied the presentations.

Here are some excerpts from the residential section, written by MetroIntelligence as part of our partnership with Beacon Economics:

San Diego County closely followed statewide trends during the recent boom-and-bust cycle, with total new home sales (including homes that are not part of major subdivisions) reaching a nadir of over 4,200 units by the second quarter of 2005. Since then, however, sales have fallen steeply, declining by as much as 73 percent between the fourth quarters of 2006 and 2008.

Sales have also dropped faster than most experts anticipated, falling to 752 homes by the final quarter of 2008, representing a decline of 61 percent from a year earlier and 21 percent from even the third quarter of 2008. Projections are for continued declines in 2009, with fewer than 2,500 annual new home sales at major subdivisions.New home prices in San Diego, however, took a slightly different path than new home prices in California from 2003 to 2008. Whereas new home prices in California continued to rise through the first quarter of 2006, in San Diego County prices experienced several drips and rebounds.

For example, according to DataQuick, after rising to nearly $488,000 at the end of 2005, median sales prices fell steadily to $415,000 in the beginning of 2007 before rising again to exceed $530,000 in the first quarter of 2008. Consequently, new home prices rose by 6 percent over the past year and have changed by little more than 1 percent between the third and fourth quarters of 2008.

According to new home data provider Hanley Wood Market Intelligence, new home prices at the subdivisions they track have also risen. Between the fourth quarters of 2007 and 2008, median minimum asking prices rose by 20 percent, to $560,000, although not all sectors performed the same. For example, median asking prices for condominiums rose by 52 percent, to $479,000 (a rise that probably stems from the conversion of more affordable developments to rental stock), while median asking prices for single-family homes fell by 2 percent, to $725,490, and prices for townhomes and duplexes fell by over 8 percent ,to $348,686.

At the same time, new home sales tracked by Hanley Wood fell by 78 percent during the fourth quarter, to just 197 homes, with condominium sales falling to almost zero. Sales of single-family homes closely tracked the overall market, showing a decline of 57 percent. The decline in net sales activity occurred in part because of the sharp rise in the cancellation rate, which more than doubled at 44 percent. For condominiums, the cancellation rate soared to 103 percent, indicating that nothing is moving. For all of 2008, cancellation rates rose from 13.6 percent to 18.6 percent, with cancellation rates for condominiums doubling from 14.5 percent to 30.2 percent

The absorption of new homes, or the rate at which new home communities sell their inventory, fell by nearly 70 percent, to just .31 units per month per development during the fourth quarter, although absorption rates for single-family homes remained slightly healthier at .47 sales per month. For all of 2008, monthly absorption rates fell by 46 percent, to .90 homes per project.

Even though builders are pulling back on new building permits, in some cases existing phases of active developments must be built out, especially for large attached projects which are built all at once. Consequently, although the number of new homes that are under construction but unsold fell by 36 percent, to 1,321 units by the end of 2008, the level of standing inventory rose by 6 percent, to 1,262 homes. Of these unsold units that have been completed, most are condominiums. At current net sales rates, these unsold homes would take 19 months to sell for standing inventory and 13 months for homes still under construction.

Housing Chronicles in this month's NewsTex Blogger Spotlight

In early 2008, I signed up with a blog syndication service called Newstex, and they regularly feed my blog posts to LexisNexis, Thomson Reuters, CanMedia West and, most recently, the Amazon Kindle. This month they asked me to participate in their monthly "Blogger in the Spotlight" interview series, in which they inquire why I started blogging, my plans for the future and what I think about the media landscape and where blogs fit in that universe. You can read that interview here, but for now here are some excerpts:

Newstex: How did you get started writing your current blog?

Patrick Duffy: I started my blog in November of 2007 after noticing that almost all of the housing blogs online were focused only on the housing bubble as well as to promote my company, MetroIntelligence Real Estate Advisors. Many didn’t even pretend to be objective, only focusing on the bad news that would help the authors substantiate their theory that the housing market was certainly doomed. Since I wanted to create a blog for the long term, I specifically avoided any reference to a housing ‘bubble’ or ‘crisis,’ and instead chose the very generic term ‘Housing Chronicles.’ Over time, I’ve expanded it to include coverage not just on housing, but also on commercial development...

Newstex: What makes your blog unique?

I write my blog from the perspective of a consultant to the building industry for over 20 years who has already been through one of these boom-and-bust cycles. My regular reading list is pretty comprehensive, including most major newspapers and a variety of magazine titles related to current events, politics, general business as well as real estate development...

Newstex: What is the best thing that has happened to you as a result of your work on your blog?

I’d say definitely the new blogger friends I’ve made online as well as new clients I probably wouldn’t have met through traditional networking. For example, last week a reporter and blogger for the Orange County Register interviewed me for his BlogTalkRadio show, and I was so impressed with the technology and the final product that I’ve signed up for my own show and will be interviewing the authors of the real estate books I review. Another blogger with traffic exponentially greater than mine became a fan of my writing, so now he features some of his favorite posts for a weekend thread, which in turn has helped build my traffic...

Newstex: What effects do you think blogging will have on traditional media? How about on your industry?

I think that blogging is already having a tremendous impact on traditional media, and I’m not sure that attacking bloggers who use material from AP is going to save their business models; what the industry needs to do is come up with a ‘fair use’ policy, so bloggers can cite a maximum number of words from an original article and must provide a link as well as appropriate credit.

From the very beginning of Housing Chronicles, I’ve made it a policy to cite my sources at least two to three times in a post. In order for traditional papers to survive, they’re going to have to make it palatable to charge users for content (either through micropayments or subscription models), reduce their cost structures and see bloggers as alliance partners rather than enemies.

Last call for San Diego Economic Forecast Conference

Last call for the next Beacon Economics Forecast Conference in San Diego at the Hyatt Regency at Aventine in La Jolla tomorrow morning (Tuesday), April 14th! Click here for more information on how to sign up:

Get answers to 2009's burning questions...

• Are fears of depression realistic or just hype?
• Will the Federal stimulus plan help?
• Will California be the first or last to emerge from the darkness?
• What does it all mean for the "finest city in America"?

All conference attendees receive Beacon's new San Diego Economic Forecast Book - an unprecedented overview of the region's current economic conditions and analysis of what the near future holds.

Hyatt Regency La Jolla at Aventine

3777 La Jolla Village Drive
San Diego, California

Tuesday, April 14, 2009

Registration and Breakfast 8:00 AM
Program: 8:30-11:00 AM

Recession or Depression in 2009? How bad is it really going to get? On Tuesday, April 14, 2009, Beacon Economics will present their second annual San Diego Economic Forecast Event.

Printable Brochure

FEATURED SPEAKERS
Christopher Thornberg Principal Beacon Economics	Brad Kemp Director of Regional Research Beacon Economics	Gary London President The London Group Realty Advisors

When will the housing market rebound?

I was recently asked by Beacon Economics and the State of California Controller's Office to write an article on the timing of a housing rebound for their monthly Summary Analysis Report, a .pdf of which you can find here. Here are some excerpts:

Following multiple months of dire news on California’s housing market, more recently a combination of factors are starting to show the beginning of stabilization in the state which has practically defined sub-prime lending gone sour and greedy speculators reaching beyond their means. While the real estate market is certainly still bad – and is likely to remain so through the end of 2009 – there are some definite signs of hope for 2010 and beyond.

First, the bad news. After a temporary dip in foreclosures during the last quarter of 2008 due to moratoriums and procedural changes in the way lenders handled loan defaults, by February of 2009 the combination of default notices, auction sale notices and bank repossessions in California rose to nearly 81,000 properties – the most of any state and representing a 5% increase from January.

When compared with February of 2007, foreclosure activity spiked up by 51%, with auction sale notices alone skyrocketing by nearly 180%. And, whereas the percentage of loans in California entering foreclosure had been far less than those for the overall country as recently as the first quarter of 2007, by the end of 2008 the ratio had flipped, or 1.36% (California) versus 1.01% (U.S.). Furthermore, the ratio for loans already in foreclosure in California leapt from just 0.17% in the middle of 2005 to 4.19% by the end of 2008 – nearly 100 basis points above that of the U.S. (3.3%)...

At the same time, no matter how many incentives home builders pile onto sales contracts – estimated by one of the country’s largest public builders to exceed $50,000 – they’re still finding it almost impossible to compete against substantially discounted existing homes, over half of which are foreclosures...

Even with pricing declines of $100,000 from the 2006 peak to under $350,000 for a new home by the end of 2008, that median sales price was still nearly $100,000 higher than for both existing single-family homes and condominiums. Consequently, sales of new homes have continued to steadily decline, reaching just over 10,000 units in the fourth quarter of 2008 – a drop of 73% since the peak reached during the second quarter of 2006...

Still, there do remain a couple of wrinkles for a sustained housing rebound. One is that banks, wanting to avoid further depressing prices, have been sitting on foreclosures and only doling them out to the marketplace in small amounts. Should they release a larger group of properties at once, prices could fall further – although that could encourage even more buyers to snap up the new discounts...

Another concern is the much-heralded S&P/Case-Shiller Index, whose primary flaw (like all housing indices) is its inability to accurately gauge the quality of its paired home transactions. For example, if a home that sold at the peak of 2006 sells again as a gutted, semi-destroyed foreclosure in 2009, the decline in value speaks more to structural changes in the home itself than an accurate reading of the local marketplace. Consequently, some critics contend that this index can over-state swings in the marketplace -- especially price declines -- and magnify equity losses in areas with greater foreclosures...

Yet even the Case-Shiller Index is showing a flattening of price declines, and that’s because buyers are starting to show up with visions of low mortgage rates and potential positive cash flow. Finally, as the programs initiated by Realtor groups, home builders, and the federal government begin to gain traction -- and as lenders have learned which loan modifications work best --we may see a slowing of foreclosure activity and a rebound to a more market-based housing market sooner rather than later. But patience is still warranted.

Staffing up for the (eventual) rebound

Back in the early 1990s, I once interviewed for a market research job with a public home builder for which I knew I was perfect. With multiple recommendations from industry contacts as well as from the person who currently had the job but was leaving the company, I figured I was a shoo-in for the position. But I wasn’t. In fact, the job went to a guy who had worked for a well-known accounting firm which focused on real estate. Yet something in my gut told me this guy wouldn’t last because the job was much more than simply figuring out spreadsheets: it also involved the sort of qualitative experience that allows an experienced consultant to identify what makes a community, floor plan or marketing strategy better than the competition’s.

Less than a year later, the winning applicant had moved on, probably to another accounting firm, thus leaving the builder to replace the same position twice in as many years. So what went wrong in the hiring process? I’d say it was because the person making the decision made the very common mistake of hiring the resume, and not the person behind it.

With that experience behind me, I had the chance during the recent boom years to hire a consultant to work with other members of a well-entrenched team. For someone focused too much on the resume, he certainly wasn’t a shoo-in, either, having hopscotched for years between new home consulting and selling existing homes. But I was still impressed with his reasons for trying out new positions in real estate, his easy-going nature and thought that both existing staff and clients would like working with him.

The kicker, of course, was whether or not he could write with the clarity and vocabulary required of the position, so I asked for a writing sample. And not only was he a gifted writer, but he turned out to be a tremendous asset to the team – all because I considered his resume merely a starting point and nothing more. In fact, it was his varied experiences which made him even more qualified for the position, because we could then take on a greater variety of assignments as opposed to the limited menu that had been typical in the past.

I bring this up because sometime over the next 18 months, builders and developers will again be staffing up to fill various positions, and yet on social networking sites such as LinkedIn, I see people with 15 to 20 years of doing the exact same thing with different companies. Perhaps they’re good at some specific task, but for the next stage of real estate development, I think hiring people with multiple skill sets will ultimately separate the winners from the laggards.

Being brave enough to try out new things -- whether it’s striking out on your own or switching to an entirely new department – also shows the type of leadership qualities which help mold future executives. In many cases, those hints of future brilliance often occur in places far outside of the building industry, such as volunteering for a local political race, coaching a soccer team or organizing a church event, all of which reveal skills essential for any workplace.

My own resume still lists some of my own volunteer work from five to ten years ago, and I know some well-meaning experts might declare such things irrelevant. But I think it’s still quite relevant how I managed -- through sheer force of will and preparation -- to convince a nationally known charity, a top television network, a major studio and one of the most successful sitcoms on the air to take a chance on an unproven idea that had never been done in the history of the medium.

In August of 1999, “An Evening With Frasier” was the first of five charity fund-raisers set around a live taping of a top TV show, and that experience taught me that in any business, success is achieved by assembling the right team, constantly leaning into your own zone of discomfort and having the willingness to respectfully ask for the moon but remaining flexible enough to deal with ‘no,’ And you’ll never find those qualities if you simply skim through resumes looking for specific code words.