Hello once again to my Blog network of friends. I have not been able to get with you in a few weeks. As some of you know I am about to go to Trial on my lawsuits ageist Olympic Medical Center. As you may recall that is the hospital that nearly killed me and succeeded in crippling me for life. However, there is a matter that is more pressing and as equally important to future of my company and me.

STATE OF REAL ESTATE IN LOS ANGELES IN THE GLOBAL ECONOMY
As most of you know I have been, Real Estate Appraiser, Consultant and Real Estate Agent for almost thirty (30) years. I spend most of my time in my home office now that I cannot work as before. So I get to see a lot of television, C-SPAN, MSNBC, CNN and FNC. (Fox). Time and time again I see and hear Politicians, Economy experts Talking Heads and Treasury Secretary Paulson say the bottom line reason for problems in our Economy including the problems on Wall Street is because of "those people that took loans on homes that they could not afford".
Well as Tavis Smiley would say let’s unpack this theory. In the 1980's the economic philosophy of our country changed from The New Deal, The New Frontier and The Great Society. With that change came the Reagan philosophy of THE TRICKLE DOWN THEORY. The major components of that theory were kill unions, redefine the lines of wealth and DEREGULATION of financial institutions. In particular, the Savings and Loans witch were created to loan money for financing residential property. As a young appraiser I saw the sales price of single family homes in my area double. Then came the Savings and Loan scandal and the bail out that followed. From these developments I came to understand the importance of real estate to the future growth of the American economy.
By the late 1990's a group of people, who were both very smart and greedy noticed that interest rates were low money was cheap. They decided to take advantage of an opportunity and make a killing in the market and the New Global Economy. They made it easy to investment in real property with the introduction new loan products "The Stated Loan’, "The Pick-a-Pay Loan" and other such schemes. Armed with these products, new lenders sprung up over night and the old ones joined hands to give anyone who wanted to buy a house the opportunity to do so. All one needed was a recent paycheck stub and a credit score above 500. Just about anyone could get a house. It appeared that FINALLY TRICKLE DOWN was here for the forgotten masses. For twenty years the top ten percent made so much money that they decided to share the wealth and make more money in the process.
I live in the Carthey Circle section of Los Angeles where homes and duplexes were selling for three to four hundred thousand dollars in 1990 when I moved to the area. Beginning in late 1990's the prices began to rise quickly. Now the same duplexes are selling for a million and a half. However, the first sign of trouble became apparent in 2004 when I appraised a 900 square foot, two bedroom, one bath single family home with no garage for three hundred twenty-five thousand ($325,000.00) dollars. This property was located on 103rd Street and Grape Avenue. (For those of you who do not know the area, it is south east of where I grew up in the heart of Watts). This made it clear to me at that point the real estate market was going to be in big trouble very soon. Think about it, a small house in one of Los Angeles’ and the country’s poorest neighborhoods valued at almost one half million dollars.
My father bought the house where I grew up in South Central after World War II for six thousand ($6,000.00) dollars. It was now selling for four hundred fifty thousand ($450,000.00) dollars and it is about 1,100 square feet with three bedrooms and one bath.
First time buyers were inundated with inducements to purchase homes. The offers were "no money down" 100% loans and potential buyers were told, "You have to buy now". "You can get a house, free money, including the money for the down payment and closing cost." Yes indeed there were 103 – 106 percent loans out there. If you could fog a mirror you could get an loan. The prevailing thought was that only a fool would turn that down a free house and free money when they had been left out of the system and the main stream of society all of their lives.
The author Kevin Phillips (Politics of the Rich and Poor, Boiling Point, Wealth and Democracy) writes in his recent book Bad Money, that bad capitalism drives out good capitalism because of sleaze, lies, deception and fraud. The financial sector over took manufactory section and is now 21 percent of GDP. The rise in the debt industry, credit cards, mortgage and other Wall Street products that drove up the debt of the American pubic this another fraud put on the backs of Americans.
Wall Street brokers took all of the sub-prime loans that they could find, packaged them and put them on the world market as mortgage backed securities at a time when values of property were going through the roof with no end in sight. The smart money was just waiting for the bubble to explode and the bail out. After all, we have seen this movie before in the 1980s staring most of the same cast of characters.
The housing market in Los Angeles from all reports and published statistics is in a huge decline and an ever-deepening recession. However, this is only true in the sub-prime area. It is not so true on the Westside. As a real estate appraiser I am at ground zero of the market and I see and help to provide the real statistics, not the ones you hear on the evening news. As values continue to fall in the sub-prime areas, there are millions to be made. We have not seen the bottom of this market yet. With increasing REO’S on the market, the new bailout planned is driving prices down to create a new market. Throughout South central re-gentrification has taken hold and created a brand new market that is worth millions of dollars for the smart inventor. Keep an eye on the government to see how they are going to dispose of its inventory of foreclosed properties; it should be a boom for local investors.
Lately there has been an idea floated that I believe, if our government were to implement, would be a positive stimulus to this stagnate economy and at the same time show some fairness to the people on "Main Street". Reduce the mortgage payment based on the current value of the property that they own to today’s market value. This would keep people in their homes and free up some disposable income.
George B. Johnson, CREA