NEW CRISIS ON VALLEY REAL ESTATE FRONT: San Fernando Valley foreclosures spike in July

This story from the L.A. Daily News is very nearly all bad but key to understanding the future of the Los Angeles real estate market:

http://www.dailynews.com/business/ci_6744880

Foreclosures soared an annual 246.8 percent in the greater San Fernando Valley during July as trouble with adjustable rate loans continues to mount, a university research center said Tuesday.
"This is an ominous sign," said Daniel Blake, director of the Economic Research Center at California State University, Northridge. "There are a lot of possible (loan) resets out there, and we don't know the extent of them."
The foreclosure spike is happening to a great degree because many homeowners with spotty credit took out adjustable rate loans with low initial payments and they are not able to afford higher payments with their interest rate increases.
And credit-worthy buyers who extended their finances with adjustable rate loans so they could buy better homes are also encountering trouble, said Blake.
In all, 263 homeowners lost their properties last month. In July 2006 just 47 homeowners from Glendale to Calabasas lost their homes. At the current rate, foreclosures alone could account for 4,700 homes on the market next year.
"That could bring enough housing on the market to upset the price stability we've seen here," Blake said of the market from Glendale to Calabasas.

Jim Link executive vice president of the Van Nuys-based Southland Regional Association of Realtors, said that it may even bring a buying opportunity because prices have yet to fall by a large amount.
"Roughly 20 percent of the market (sales) being REOS (foreclosures) I think ... would definitely have an impact on prices," he said.
So far only sales continue to suffer, though.
Combined with the deepening credit crunch, home sales continued to spiral in July, hitting their lowest level for that month in at least 22 years, the association said Tuesday.
Last month sales in Valley, excluding Burbank and the Glendale area, fell an annual 22 percent to 617 transactions. Sales also fell 10.6 percent from June, said the association.
The next lowest July sales total is 670 transactions in 1992. And that year ended up being the weakest since 1985.
Nevertheless, the median price inched up 3.8 percent, or an annual gain of $23,000, to $630,000, because more sales are at the high end of the market now than the low end.
So far foreclosures are not depressing prices to a great degree and providing attractive deals to potential buyers. And the tighter credit standards are, in effect, killing sales before they can happen.
Link said that the lower priced end of the market is the toughest to buy into.
"The people getting squeezed the hardest are the first-time homebuyers or people with really good credit but too little income or nothing for a down payment," Link said. "Because so few lenders are offering 100 percent loans at an affordable rate, this segment of the market is paralyzed.
The smaller condominium market showed a similar trend last month. Sales fell an annual 13 percent to 276 transactions and the median price increased 1.9 percent to $407,500.
Combining both markets, 833 properties changed owners in July, an annual decrease of 26 percent. The median price inched up 1.4 percent to $565,000.
At month's end there were 7,195 properties for sale in the Valley, an 8.6 month supply at the current sales pace and 2.6 months more than what's considered a balanced market.
Malaise continued in other markets, too, including the Santa Clarita Valley. Sales of previously owned single family homes fell 18 percent to 194 transactions. And the median price declined 5.8 percent to $570,000.
Condo sales fell an annual 32 percent to 83 properties and the median price slipped 4 percent to $359,000.
Realtors sold 277 homes - single-family and condos combined - even with the previous month, but down a total of 22.8 percent from July 2006.
These reports are similar in tone to one Monday that showed single family home sales falling 22.7 percent statewide. The median home price increased an annual 3.2 percent to $586,030.
The California Association of Realtors report showed that:
In Los Angeles County, sales fell 12.4 percent from a year ago and the median price increased 1.9 percent to $592,300.
In Ventura County, sales fell an annual 17.8 percent and the median price dipped 3.2 percent to $682,920.
In the High Desert, which includes the Antelope Valley, sales plunged an annual 50 percent and the median price fell 11 percent to $296,220. But it is one of the state's most affordable regions.