Record Delinquincies on Home Equity Loans

Late payments on home-equity loans rose to a record in the first quarter as 18 straight months of job losses and a slumping economy left more borrowers unable to pay their debts, the American Bankers Association reported.

Delinquencies on home-equity loans climbed to 3.52 percent of all accounts from 3.03 percent in the fourth quarter, and late payments on home-equity lines of credit climbed to a record 1.89 percent, the group reported today. An index of eight types of loans rose for a fourth straight quarter, to 3.23 percent from 3.22 percent in October through December, the group said.

“The number one driver of delinquencies is job losses, which we’ve seen build and build,” said James Chessen, the group’s chief economist. “Delinquencies won’t come down without a dramatic improvement in the economy and businesses will have to start hiring again.”

Delinquent bank-card accounts jumped to a record 6.60 percent of outstanding card debt in the first quarter from 5.52 percent in the previous period, a signal unemployed borrowers are relying on cards as falling prices erode the equity in their homes. More borrowers are using cards to meet daily expenses after losing their jobs, the ABA said.

U.S. banks issued 9.8 million credit cards from January through April, a 38 percent decline from the year-earlier period, according to data compiled by Equifax Inc., a credit bureau, quoted today in USA Today. The average limit on a new card fell 3 percent to $4,594, Equifax reported.

“There is less equity to draw on and certainly financial institutions have been scaling back the available lines of credit,” Chessen said. Banks boosted reserves for losses on delinquent loans and have adopted more cautious underwriting policies, he said.

California Update 07/03/2009

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Enjoying Our Freedoms

We usually send out a patriotic email this time of year (Real Estate Marketing 101) but are going to go a different route this year. For the last few weeks we have been pondering the events so far this year and have come to the conclusion that we are at a true crossroads in American history. Not necessarily the end of the world but not the beginning of Camelot either.

So far this year we have seen the first Iranian uprising since the Islamic Revolution in 1979. They may or may not succeed and are at a bigger crossroad than we are; we should all pray for those who are courageous enough to step up and risk their lives or freedom for what they believe in. We have seen the President of Honduras forcibly removed and exiled when he triggered a clause in the Honduran constitution that was written in specifically to prevent what he was trying to do (illegally extend the number of terms that a President may serve). The Hondurans have been down that path and don’t like it- they were acting fully within their law; we wish our State Department, President and the rest of the world would stand down on the accusations of a coup down there. Seeking to understand first before trying to be understood is not in fashion these days.

We have some significant bills heading through congress right now; the Climate Bill was admittedly not even read by any of the Congressmen and Congresswomen who voted for or against it; the bill actually holds clauses for helping out the people who lose their jobs because of it (Section 426) and for giving a “monthly cash energy refund” to those at 150% of the Poverty Line or less for their loss of purchasing power due to the passage of the bill- meaning even the authors know it is going to increase everyone’ s energy costs (Section 432).

We have seen 170 years of established bankruptcy law precedent turned on its head with the handling of the GM and Chrysler cases. Those of us who live in California (one of the top ten economies in the world) have a state government issuing IOUs because it has run out of cash. Perhaps those in Washington on both sides of the aisle should come out and visit us here in California to see what happens when you have unchecked spending. The Law of Unintended Consequence is alive and well, I hope it is being considered as they move forward with these actions. Can you imagine what would happen if the Federal Government tried to issue IOUs for its obligations?

We are not pointing these things out in order to make a political statement; we are pointing them out to illuminate that we as Americans have a very sacred right of self-determination. It comes in the form of your vote on Election Day; it also comes in the pressure you put on your elected representatives to act appropriately and in the best interests of the nation and state when they cast their vote. There are right and wrong ways to approach every problem; imitating sheep or voting the party line (on either side) rarely represents the best interests of the constituents.

Be sure to exercise your freedom- you are not risking your life or imprisonment by educating yourself on the very real and significant issues that will be affected by the legislation that will be coming up for a vote later this year. We don’t care which side you support, just educate yourself (beyond MSNBC or FOX) and if you have an issue with what is being legislated be sure to let your representative know about it. Don’t be the person who didn’t vote on Election Day and then complains about who got elected.

Freedom isn’t free. We all have it – don’t waste it.

Have a safe and Happy 4th!

Rick and Kirsten

The State of California Real Estate

. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2009 was 4.2 months, compared with 8.7 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

. Thirty-year fixed-mortgage interest rates averaged 4.86 percent during May 2009, compared with 6.04 percent in May 2008, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.75 percent in May 2009, compared with 5.24 percent in May 2008.

. The median number of days it took to sell a single-family home was 53.5 days in May 2009, compared with 49.2 days (revised) for the same period a year ago.

Regional MLS sales and price information are contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORS® throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.

In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, nine of the 353 cities and communities reporting showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)

Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices for April may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at
http://www.car.org/economics/historicalprices/2009medianprices/may2009medianprices

. Statewide, the 10 cities with the highest median home prices in California during May 2009 were: Los Altos, $1,484,000; Palo Alto, $1,400,000; Cupertino, $965,000; Santa Barbara, $870,750; Danville, $785,500; Los Gatos, $769,500; Newport Beach, $767,500; Santa Monica, $740,000; Arcadia, $700,000; and Campbell, $691,000.

. Statewide, the cities with the greatest median home price increases in May 2009 compared with the same period a year ago were: Poway, 29.7 percent; Auburn, 8.3 percent; Arcadia, 7.5 percent; Atascadero, 6.3 percent; Cypress, 5.0 percent; Palo Alto, 4.9 percent; Campbell, 4.7 percent; Walnut, 2.3 percent; and Torrance, 0.4 percent.

New Tax Surprise From Our Friends In Sacramento (Thanks for THAT!)

To help balance its budget, California has reduced the state tax credit for dependents.

The change will increase a family’s California taxes for 2009 by about $210 per dependent compared with 2008.

A family with one dependent that normally gets a state-tax refund will get back $210 less when they file their 2009 return next year. A family that normally owes money will have to pay $210 more. Multiply that by two or more dependents, and it really adds up.

This may come as a shock to parents who have been too busy shuttling between soccer games and viola lessons to keep up with the state’s budget fiasco. The Franchise Tax Board is trying to get the word out, so families can prepare.

At issue is the exemption you get for each person listed on your tax return. The credit reduces your tax bill dollar for dollar. (The exemption credit phases out for couples with more than roughly $326,400 in adjusted gross income and singles with more than $163,200. This column applies to those under the limit.)

The change essentially takes us back to where we were before 1998.

More great news!

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Real Estate Update May 28,2009

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Increase in L.A. County Median Home Price

For the first time in years, we have a 0.2% increase in the median home price for Los Angeles County. It’s not much but anything positive is certainly preferable to any more decline.

In a separate report, Integrated Asset Services is calling the increase for the Los Angeles County MSA (Metropolitan Statistics Area) at 1.1%. Here are more details:

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New Trends in Short Sales

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Real Estate Update 5/5/09

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