Friday, February 29, 2008

South Bay-Beach Cities: 360 South Bay.. Gets The Axe

After months and months of ads and signs touting 360 at the South Bay as the new hot spot and trendy place to live... it seems the party is over. Welcome to ghost town east!

A few weeks ago I received a rather cryptic e-mail from the William Lyon Company that they would no longer be offering employment opportunities. As I had never expressed a desire to work with them I didn't pay a lot of attention. Then last week I received a comment from a reader that they appeared to be shut down.

Yesterday I drove over to see what was happening. The sales agent was very professional. She wanted to be sure that I knew that William Lyon is a privately held company with a lot of resources who was not abandoning the project. She emphasized that they had a large investment in the land and were just waiting until the market improved. I tried to push a bit about the time frame and finally got the idea that they would revisit it in 6 months or a year. I'm not buying it...

This is another example of someone who comes into the South Bay without local knowledge. These guys really need to do their homework. Any agent in town would have told them they were not going to get the prices they want/need in Hawthorne. None of these companies get it that while El Segundo or Manhattan Beach may be literally across the street... price wise they are miles and miles apart.

The Beach Cities are Manhattan, Hermosa, Redondo and El Segundo. Hawthorne. Lawndale and Gardena are not Beach Cities. No one will pay Beach City prices for Hawthorne schools... it's not going to happen. No one is going to pay $500,000-$900,000 for a condo between the 405 Freeway and Aviation. Not today or in 5 years.
My crystal ball tells me that this piece of land will be vacant a long time. The models will get old and dusty. I suspect that the William Lyons company will be looking for a bidder in the not too distant future. Maybe those guys will be smart enough to talk to a few local agents before they pour good money after bad. I'm guessing that the spot is more suited to office buildings then residential housing. But then they didn't ask me...

FYI: Conforming loans rose to $729,750 today in LA County


Anonymous said...

agree 100% with your reasoning. but the crisis continues to seep westward and i doubt it stops at aviation. or sepulveda for that matter ... especially now that the jumbo market is tightening further. as of tomorrow, wells will no longer do jumbos with LTV's >75% in los angeles county.

Kaye Thomas said...

Anonymous 8:12,
Wells is out of the market period..They don't want to make residential loans which is not unusual for them.

They are always in and out of the mortgage market. Right now they are regrouping from some bad loans they ran through a subsidiary.

The jumbo loan market will see some changes when the conforming loan limit increases to $729,750... I have heard that it may happen in two to three weeks. Congress has approved the change and it has been signed into law.

Anonymous said...

That 729-K is maximum possible, and does not mean LA will get it, believe it or not. Rumor has it that it will be more like 560-K. Not much of a dent in a S.Bay house.

Kaye Thomas said...

Anonymous 4:54,
Hmmm.. every lender I've talked to says $729,750.. You are right $560,000 won't help much..

Anonymous said...

729 is absolute limit allowed by bill, but federal agency sets the limit on a county-by-county basis.

Banks take what the government will say in this case.

We will have to see what it come out to be.

Anonymous said...

This is from LA Times a week ago:

"HUD officials said this week that they had not yet come up with numbers. The department is expected to set new conforming limits on a county-by-county basis, just as it does for Federal Housing Administration-insured loans.

If HUD's home-price data are similar to recent figures published by DataQuick Information Systems, analysts say conforming-loan limits would skyrocket through much of California, from the current $417,000 to at least $572,500 in Los Angeles County and $650,000 in Orange County.

Loan balances, however, are just one component of what makes a loan conforming. Other issues include the type of income documentation provided and a borrower's credit score.

At Freddie Mac in McLean, Va., spokesman Doug Duvall said the company was discussing what the standards should be for larger conforming loans.

"We are going to be defining the loan-to-value ratios, how much down payment the person needs and the credit score of the borrower," Duvall said. "These are some of the things that we measure. We are wrestling with how different those will be from the traditional conforming" loans.

Even if Freddie Mac and Fannie Mae begin buying significant numbers of larger loans, it isn't clear how significant an interest saving that will mean for borrowers."

Kaye Thomas said...

Anonymous 7:03,
Guess we will just have to wait and see where limits are when they fnally get the program moving.

The problem is that while Congress passed the bill and Bush signed it.. Lockhart doesn't want it to go into effect and he seems to be stalling

Anonymous said...


you've missed the point of the 7:03PM post. It doesn't really matter where the conforming limit is set. What REALLY matters is the underwriting guidelines. Up until now, there were none. You can set the conforming limit to a trillion dollars and you still won't find enough buyers to qualify under GSE guiedlines to buoy the market at current levels.

Kaye Thomas said...

Anonymous 11:11,
I didn't miss the point. It's now a given that requirements will be tougher. However with higher conforming limits rates will be better then on jumbo loans.

I know this issue has been done to death but believe me there are a lot of people who can and do qualify for loans with excellent FICO scores and who have cash for a down payment.

Anonymous said...


I'm afraid you are grasping at straws. Do you really think a .8% decrease in interest rates will revive this market?!?! No, it won't make any difference. What's more, the benefit to the newly conforming loans may be much less than .8% because the GSEs will be offering those new loans in a separate bond issue in order not to jeopardize the real conforming loans (under $417,000). The bond market doesn't want these loans. You have to pay a higher risk premium to sell them.

Additionally, in a market like MB where homes regularly go for 2, 3, 4 million, what's a measly $312,000 increase in the conforming limit going to do?

You said it yourself, most of your clients and the clients of your cohorts purchased with stated income loans (liar loans). What do you think that's about? Was it really about convenience as you say or was it really about hiding the fact that they couldn't qualify for the loan under normal guidelines?

Kaye Thomas said...

Anonymous 8:00,

Hate to disagree but a .8% difference in an interest rate is fairly significant in an up or down market. Is it going to make or break this market.. probably not... but don't discount the effect it has on the market.

Stated Income loans were made for people who were self employed or had a lot of "bonus" income rather then working W2 employment. They were not initially "liar" loans as you had to prove assets.

Yes these loans were used in ways they were not meant to be used but not everyone who got one did it because they couldn't qualify.

You are making a false assumption that everyone who took advantage of stated income couldn't qualify and/or had no money down.

Would you rather go through the full security line at LAX or use a VIP clearance to bypass it. Most of us would choose to bypass that line if we could. It was the same with stated income loans. People with down payments and good credit would have qualified no matter what type of loan.

Anonymous said...

I'd like to jump in on this one.

70% of non-conforming loans in 2006 were "no-doc".

Of those, 95% exaggerated their income.

Therefore it is extremely likely that many did exaggerate income.

Kaye Thomas said...

Anonymous 8:40,
Of course there were a lot of people who lied and are now in trouble.. all you have to do is look at Hawthonre, Torrance PO, Lawndale and Gardena and the number of foreclosures.

There were even buyers in the Beach Cities who did the same but there were a lot fewer who had to lie to get a loan.

But that's not the question at hand.. that question is about people who did stated income loans because they had less paperwork involved.

There were a lot of those in the Beach Cities.. they were well qualified and will not be defaulting on their loans.

This is the same argument that crops up about cash buyers.. There are still a number of buyers who have cash in the bank and are buying all cash. Are there thousands and thousands .. no.. but there are enough to influence the Manhattan Beach and Hermosa Sand section markets.

Anonymous said...

Oh Kay, I feel sorry for you now. You are really stretching the truth. Frankly, I expect better from you.

Kaye Thomas said...

Anonymous 4:15,
I'm guessing that you didn't like my statement that there were fewer loans made to non qualifying people in the Beach Cities..

A guy in my office works foreclosures.. He sends letters to people receiving NOD's ( Notice of Default).. In MB,HB and RB.. he sends a total of about 6 a month to MB, HB and South RB and so far almost none have hit the market in those areas.. North Redondo is another story and we will see more problem properties there ..which I have noted in other posts.

Check out any foreclosure web site and you will find very few properties in default in MB, HB or South RB..

Anonymous said...

It's Government Land, Ex Ari Force base, with train tracks leading in and out. They are going to use it for a detention facility when they take over the country and you have no constitution or bill of rights. CONCENTRATION CAMP staging area.

Kaye said...

Anon 6:59,
Not owned by gov't anymore.. they did a swap with the city who then sold it to William Lyon

Anonymous said...

Before you even consider this project the Financials for Lyons HOmes and see what's going on..the company has many loans coming due shortly and has gone from a value of 600-700 million a few years ago to today valued at less then 20 million.. NOT GOOD ..all negative income the last two years ..what happens if they default ..well the project is gone several other developeres come in and build separate building prices drop significantly ..Wait until at least 4 qtr of 2011 before you buy or consider anything here the financials indicate as of Dec 2010 only 25 untis in the flats sold and 32 in the next units and thats IT .. 57 units out of 600
another bad sign..this is a very high risk proposition..

Anonymous said...

I work in the area and can tell you that I was extremely surprised to see a development in the area! The prices are outrageous for that location. Perhaps they were counting on Aerospace (don't) or maybe the Air Force. Either way, a horrible investment!!!!