The original plate glass dome in the Banco Popular Bldg lobby will be preserved
Century is happy to announce our continued investment in making downtown Los Angeles a more livable place with the closing of a $10.165 million acquisition loan to Standard Development, LLC, for the purchase of the Banco Popular (aka Herman H. Hellman) Building on Spring St. Standard Development will convert the ten-story building, built in 1903 and once the largest steel-framed building in Los Angeles, into studio, 1- and 2-bedroom apartments, with 38 apartments set-aside for very low-income households with incomes between $30,000 and $40,000.
The development will be financed with a combination of tax-exempt bonds with FHA credit enhancement, historic tax credits and low-income housing tax credits, totaling around $48 million. Construction should begin in late 2012 and be completed in mid-2014.
Banco Popular Bldg. (photo by Gary Leonard)
A recent article in the Wall Street Journal, reports that a study by Andrew Davidson & Co. shows that “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago, during the go-go lending days, after factoring in down payment requirements and other financing terms…”
The article goes on to quote the author’s explanation for why the current record-low interest rates and reduced prices are not leading to a home sales bonanza: “At the peak of the housing bubble, loan payments were the only cost that borrowers had to consider given the ability to take out no-money-down loans. But today, loan payments constitute roughly 50% of the total cost of ownership ‘and are rather modest by historical standards,’ the paper says. ‘This explains why the record-low interest rates do not impress borrowers and do not propel home prices up.’”
On the other hand, on the AirTalk radio show carried by KPCC-FM, a public radio affiliate, two “experts” reach the opposite conclusion. Stuart Gabriel, a noted LA area economist and director of the Richard S. Ziman Center for Real Estate at UCLA, and Andrew LePage, an analyst with Dataquick Information Systems, believe that the market has bottomed out and is now trending upward.
I am not convinced.
As prior posts here, and innumerable articles in the media, blogs and other sources, remind us, there is still a serious mortgage default and foreclosure problem, particularly in California.
Enter Mortgage Resolution Partners, who have apparently been shopping a new idea on how to dig out from under this problem. A story from Reuters says this mortgage firm is proposing that governments use their eminent domain power to condemn, not the homes, but the mortgages.
A big part of the problem with the real estate market is that many borrowers are “upside-down,” or “underwater.” That is, the home owners have negative equity–they owe more on their mortgage than their home is worth in today’s market. A recent report estimates that nearly one in three home buyers owe more than their home is worth, and altogether, the difference between the real value of the homes and the mortgages is $1.2 trillion. Continue reading
The news has been filled with conflicting headlines the last few weeks. On the one hand, the National Association of Realtors® reported that sales in April are “up strongly from a year ago,” but down from March. And, the California Association of Realtors® reported that “home sales and median price both jumped in April.” That is great news, because it points to a recovery from the mortgage foreclosure crisis.
Then the headlines told us that the Case-Shiller Index, one of the nation’s leading indicators, showed that home prices have reached their lowest point since the peak in 2006. And, the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, reported that mortgage interest rates are still below 4. That is a lower interest rate than at any other time since 1980, and less than one-half of what it was during the savings and loan crisis at the end of the 1980s, the last time the U.S. experienced a banking and real estate collapse. Low interest rates make housing more affordable, so buyers are willing to pay more, which usually supports higher prices. If prices are still dropping while interest rates are at historic lows, then the market must still be in trouble, and not recovering at all.
So where are we really? Has the housing market bottomed out and started to recover, or are things still headed down to an even deeper bottom? Continue reading
As many affordable housing developers deal with the challenge of the end of redevelopment agency funding, some are able to move forward on projects because they don’t require significant public subsidy. Century’s latest loan closing is a $2,000,000 site acquisition loan to Aszkenazy Development, Inc. for the site of Harding/Fermoore in the City of San Fernando, where 112 apartments (in two buildings) for low-income families get under construction in late 2012.
elevation of Fermoore Bldg.
This project will be built without any funding commitments from the City of San Fernando or Los Angeles County, as both of those jurisdictions, like most in California, have budget issues that preclude significant support for affordable housing. The high demand for low income housing credits and low loan interest rates make it possible to build without those direct subsidies, however, if developers have the confidence to proceed.
Beacon Economics most recent Employment Report for California (based on the May 18th release from EDD) is very positive on the job-growth trend, especially in private sector employment, where 219,000 jobs have been created in the past year (April 2011-April 2012), helping to offset a loss of 43,000 government jobs, of which more than 70% were from local governments. While the numbers in April 2012 were not great, the follow significant upward adjustments from initial estimates (February numbers were adjusted from 4,000 jobs gained to 38,000 jobs gained, e.g.). Statewide, the unemployment rate continued to drop, to 10.9%, from 11.0% in March.
click for a larger image
In this morning’s Los Angeles Times Alejandro Lazo reported on a just-released analysis done by Zillow, the on-line home value estimator, that pegged the percentage of homes with negative equity (or underwater mortgages) at 30% in Los Angeles County, up from 28.6% in the 4th quarter of 2011. The analysis, done with data from Zillow (home values, from their database) and TransUnion (mortgage balances), is available here, and an interactive mapping tool can be found here.
map of LA County ZIP codes: more red = more underwater homes
Hearty congratulations are in order for the San Joaquin Valley Housing Collaborative for the successful inaugural San Joaquin Valley Affordable Housing Summit 2012 held May 22nd in Fresno. The Summit program covered a wide range of issues, especially the depth of the foreclosures and accompanying loss of home values in the Central Valley, but also showed some causes for optimism, as the trends for employments, home values, and opportunities for investment are showing some upticks that can be sustained. Continue reading
In a twist, George Lucas has pledged to develop affordable housing in Marin County in response to NIMBY opposition to his commercial development plans – probably not what the local homeowners expected to hear. In an April 10th letter to the Marin Independent Journal Skywalker Properties stated that instead of continuing to battle NIMBYs over building film production facilities on their Grady Ranch property (see map here), Lucasfilm would instead look to sell the property to an affordable housing developer because “low income housing … is scarce in Marin.”
Rendering of now-canceled Grady Ranch
The Los Angeles Times reported today that the Federal Housing Administration (FHA) is planning significant changes to the rules that currently limit the availability of low-cost FHA insured mortgages for condominium buyers. This will be a welcome change for residential real estate in California, where a major obstacle to homebuyers, especially first-time buyers, is not finding a home to buy, but finding a mortgage to buy it with. With less restrictive standards, condominium prices will stabilize more quickly and the market can move more units out of the “shadow inventory” and into new buyers hands. Such changes will also attract some construction lenders back into the market, as the obstacles to selling the finished condos will be reduced and more predictable. Continue reading