VoiceofSanDiego.org

Articles that I have written for VoiceofSanDiego.org, a local news publication that provides continuing coverage of San Diego housing and economic issues.

Another Angle on Job Growth

Submitted by Rich Toscano on February 22, 2008 - 6:18pm

Jon Lansner, proprietor of the excellent Orange County Register real estate blog, pointed me at an alternate source of local job data after reading my recent article questioning the accuracy of the monthly BLS/EDD employment statistics.

Like the monthly job report described in the latest article (the Current Employment Statistics or CES), this other data is also put together by the Bureau of Labor Statistics (BLS). It is called the Quarterly County Employment and Wages (QCEW) report and a whole slew of information on it can be found here.

As the name would imply, the QCEW report is released quarterly instead of CES's monthly release. The bigger difference is in the time lag, though: whereas the CES reports on the most recent month's employment, the QCEW reports on the calendar quarter that ended just over 6 months prior. This lag would explain why it doesn't get a lot of press -- people want to know what's happening now, not what was happening half a year ago.

The QCEW has one big advantage, however, and that is accuracy.

read more at voiceofsandiego.org

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January Resale Price Preview

Submitted by Rich Toscano on February 12, 2008 - 1:44pm

Howdy all -- over at voiceofsandiego.org I've got a brief look at the last month's resale price data. The January data rodeo will be up here later this week.

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January's Foreclosure Explosion

Submitted by Rich Toscano on February 8, 2008 - 2:21pm

In the prior foreclosure writeup, I opined that the high rate of December foreclosures was deceiving because it likely represented a period of catch-up from November's abnormally low levels.

I guess I was wrong, because January foreclosure activity came in even higher. During the month, 3,299 default notices and 1,461 trustee sale notices were delivered to delinquent borrowers.

read more at voiceofsandiego.org

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High-Risk Reset Trends

Submitted by Rich Toscano on February 6, 2008 - 7:48pm

A couple of readers responded to my prior article about the study on local mortgage resets to ask how the projected 2008 resets stacked up against those of 2007. The study's primary author, Joseph Galascione, consulted the archives for me and pulled out some stats on the number of high-risk resets expected each month as compared to the same month in 2007: January and February of 2008 looked pretty much unchanged from a year prior, March increased by 2 percent, April by 5 percent, May by 3 percent, and June by 5.5 percent.

All in all, first-half 2008 high-risk resets will run higher than a year earlier, but only very mildly, with the increase skewed towards the later months. According to the foreclosure study's proposed timeline, then, we can expect reset-driven foreclosures to be slightly higher in late 2008 than they were in late 2007.

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Yet More Foreclosures in the Pipeline

Submitted by Rich Toscano on February 2, 2008 - 3:59pm

I got a chance to chat with Joseph Galascione, the real estate broker who was mentioned in the San Diego Daily Transcript a couple weeks back as having authored what appeared to be an interesting study on local foreclosures.

It turns out that the study in question is freely available at the website of Galascione's brokerage, ERA® Metro Realty, and that it is very informative after all.

Galascione and his colleagues analyzed county deeds of trust to see how many San Diego home mortgages were going to reset between January and June of 2008. For each of these mortgages, they determined the likely increase or decrease in mortgage payment upon reset. They also calculated the loan-to-value ratio (LTV) at purchase time, this just being the amount of the loan (or loans) on a home divided by the home's value when the loan was taken out.

Those loans for which the payment was expected to increase by $500 or more and the LTV was greater than 80 percent were categorized as being at "high risk for foreclosure."

read more at voiceofsandiego.org

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BailoutWatch: Lower Rates for Everyone!

Submitted by Rich Toscano on January 25, 2008 - 12:43pm

Yesterday it was announced that Congress and the White House had come to an agreement on an economic stimulus package that would raise the limit for conforming home loans, those backed by government-sponsored loan securitizers Fannie Mae and Freddie Mac, from the current $417,000 to about $730,000 in the most expensive states (of which we are obviously one).

Why does this matter? Because the rates on conforming mortgages tend to be quite a bit lower than those on loans above $417,000, also known as jumbo loans. Right now jumbo loans typically carry rates more than 1 percent higher than their conforming counterparts.

And why are conforming rates lower? Because lenders think that Fannie's and Freddie's debt will be guaranteed by the government.

read more at voiceofsandiego.org

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Questioning the Employment Data

Submitted by Rich Toscano on January 22, 2008 - 12:46pm

San Diego had another pretty good month for job growth, according to data released last week by the California Employment Development Department.

Unfortunately, you may not want to believe the numbers.

Let's see what they have to say, first.

read more at voiceofsandiego.org

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Credit Default Swap Problems

Submitted by Rich Toscano on January 18, 2008 - 8:19pm

Back in November 2006, I wrote a long-ish piece about credit default swaps. These financial instruments, known for short as CDSs, basically function as insurance policies against borrowers defaulting on loans. In (very) brief, the premise of the article was that some CDS issuers, which we can think of as insurers, probably didn't have enough money to cover the losses once homeowners started defaulting en masse. Once this came to light, I wrote at the time, it could cause a tightening of credit for San Diego's leverage-happy homebuying public.

I never really followed up because the credit tightening ended up being triggered by problems with a different type of credit derivative, the collateralized debt obligation.

read more at voiceofsandiego.org
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Boosterism and December Foreclosures

Submitted by Rich Toscano on January 15, 2008 - 4:38pm

The Union-Tribune's latest monthly housing data wrapup features a parade of industry types saying that now is the time to buy. A few of them acknowledge the inventory glut, but not a single one happens to note that homes are still far too expensive in comparison to rents and incomes.

This continued overvaluation is the root of the problem with our local housing market, and now that home prices are no longer being artificially supported by speculative enthusiasm and overly loose lending, there's little reason to expect them to stop falling until they are back in line with the fundamentals. Yet it would seem that we have people lining up to tell the public that it's a great time to buy a home.

Moving on, let's take a look at something else being ignored by the housing cheerleaders: the continued sky-high foreclosure rate.

read more at voiceofsandiego.org

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No Housing Bottom in 2008

Submitted by Rich Toscano on January 2, 2008 - 11:07am

Kelly Bennett's 2007 housing market wrapup quotes local housing analyst Peter Dennehy as saying that "a lot of people believe that this will be the year that the elusive bottom is reached." Mr. Dennehy is surely correct -- many people believe the bottom of the housing market is close at hand. But are they right to do so?

It's true that prices have taken a protracted hit. According to the Case-Shiller Home Price Index, San Diego prices have in aggregate been falling for about two years now and, as of October, had fallen 13.3 percent from their late-2005 peak.

But this decline, steep as it may seem, must be viewed in the context of the enormous speculative bubble that preceeded it.

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The Next Foreclosure Wave

Submitted by Rich Toscano on December 28, 2007 - 3:02pm

Thought the mortgage meltdown was just a sub-prime affair? Think again. There's another time bomb waiting to explode, experts say: risky loans made to people with good credit.

Believe it or not, above quote is not lifted from the pages of the Nerd's Eye View, despite my longstanding tendency to rant to that very effect. It comes from none other than the Los Angeles Times, in a very good article on the looming foreclosure risks posed by option ARM loans.

A more traditional mortgage requires the borrower to pay a certain amount of principal (the amount owed) in addition to some interest each month. An option ARM, in contrast, allows a borrower to make a monthly payment so small that it covers no interest and only a portion of the principal. The interest and principal that the borrower did not pay is then tacked on to the balance of the loan. Eventually, when the loan balance grows larger than a specified amount, such as 115 percent of its original size, the required payment adjusts sharply upward.

These loans were very popular here in San Diego during the late-stage housing boom. The small monthly payments allowed buyers to get into nicer homes than they could have otherwise afforded, and people by and large seemed to assume that the growth to the loan balance would be more than offset by the expected perpetual rise in home prices.

Now, between the recent home price declines and the tendency for these loans to increase in size, many option ARM borrowers are probably underwater.

read more at voiceofsandiego.org

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November Employment

Submitted by Rich Toscano on December 21, 2007 - 12:00pm

Here's a real quick look at last month's job data. Due to issues with today's schedule vis-à-vis familial holiday events, you will be spared all but a minimum of exposition.

read more at voiceofsandiego.org

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Bigger Boom, Bigger Bust

Submitted by Rich Toscano on December 18, 2007 - 10:52pm

The Union-Tribune today ran a very gloomy article on the latest DataQuick housing numbers, a centerpiece of which was the fact that San Diego's median home price has already fallen farther than it did during the entirety of the early-1990s housing bust.

The news is not quite so grim just yet, however. Kelly Bennet performed the same comparison using the Case-Shiller Home Price Index and found that according to that measure, prices have not yet fallen as much as they did in the 1990s. The median has fallen 15 percent so far, compared to 12 percent during the 1990s downturn.The HPI, on the other hand, has fallen just 11 percent during this bust compared to over 17 percent in the last one.

As Kelly points out, the one problem with this comparison is that the latest median figure describes November's prices, whereas the HPI is only current through September.

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In for a Surprise

Submitted by Rich Toscano on December 12, 2007 - 11:56am

North County realtor and regular Nerd's Eye View quotee Chuck Smiar is back with some words of wisdom in a recent North County Times article:

"There's buyers out there, but they're just not buying. They're sitting on the fence, waiting for (prices) to drop more. They're going to see it drop and then they'll wait for it to drop some more," said Chuck Smiar, a Prudential Realtor in Escondido. "They all think it's going to go to zero, and they're going to be in for a surprise."

Well, I'm not quite sure what to make of this one...

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Bailouts Redux

Submitted by Rich Toscano on December 6, 2007 - 8:53pm

A few followup points on the bailout thing.

First, I hope this was clear, but the efforts I mentioned were not by any stretch intended to be comprehensive list of interventions either proposed or already underway. It was just a smattering off the top of my head. I even forgot to include the most appalling one of all: the allegation that Treasury Secretary Paulson was pushing to give taxpayer money to subprime lenders to compensate them for losses they would incur in working out delinquent mortgages. (I was unable to confirm that tidbit anywhere else, so I'm not sure if it's accurate -- hopefully not!)

Second, a reader wrote in to say that this (by which I mean the assorted monetary and legislative interventions underway) is about helping financial markets, not about helping individual homeowners. Now, if you're really going to follow the chain of intent to its end, I would argue that this is about buying votes or re-appointments by trading short-term problems for long-term ones. But that said, I do agree with my correspondent's general theme. By virtue of the ability to turn home equity into money (for a fee, of course), the housing market has come to play a crucial role in both the financial markets and the economy itself. Given that politicians and Federal Reserve members seem to have decided that it's their collective duty to prevent a recession from ever happening again, the bulk of these policies are probably less about helping kindly old ladies stay in their homes than they are about keeping the economy and financial markets afloat.

Third, I don't really want to dig into the guts of the new federal rate freeze because everyone else is doing it and, let's face it, it's kind of boring. But one line in this Bloomberg article jumped out at me:

To be eligible, borrowers must not be more than 60 days behind in their payments or have less than 3 percent equity in their property.

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