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AV News Briefs - By Frank Donato
 

Frank Donato is a long time Valley Resident and Businessman, and a V.P. Account Manager for Fidelity National Title. Frank currently serves as A.V.E.K. Water Board Director (since 1987), and has served as A.V. Fair Director (1997-2001) and North County General Plan Advisory Council Member (1981-1986). Frank is also a Wine Grape Grower and Consultant and Owner/Partner of Antelope Valley Winery. We thank Frank for sharing his knowledge and unique perspective on current issues!

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First Quarter 2009 Antelope Valley News: Jan/Feb Feb/Mar


January/February 2009

Jan 8- the 5 mega watt solar power plant capable of supplying electricity for 4,000 homes is under way. The power plant, which is the first of its kind being built in the US since 1981, is located at Sierra Hwy, near Ave G. The developer of the plant is Pasadena based eSolar, and as of this writing, 24,000 mirrors are being installed that will reflect the sun’s heat at 200 foot towers that has a central boiler. The boiler will then boil water, which will produce steam that will turn steam powered turbine generators. The 24,000 mirrors are controlled by computer to follow the sun and reflect the sun’s heat at the most optimum angle. The power plant has a life span of 30 years; possibly more depending upon how the plant is maintained. This system of solar power is not deterred by cloud cover as the mirrors need only capture the sun’s heat, not it direct light. The only environmental risk to the system is the AV’s high winds. If necessary, the mirrors can be turned away from the wind to protect them. The mirrors though, are not delicate, and can sustain hail storms or other small objects in the wind. The mirrors have been tested to military specs. Security and maintenance staff will be on site at all times. Mirrors can be replaced with only a socket wrench and screw driver; no power tools are needed.

Jan 19- Lancaster city officials are reviewing plans for a 22 acre shopping center at the NW corner of 60th St West & Ave K. The site was a former 9 hole, pitch n putt golf course. City officials are now reviewing the project’s Environmental Impact Report and taking comment on such by the public. The 22 acre site is currently zoned R 7,000 so if the project is to go forward, the parcel will have to be rezoned to commercial by the City. The shopping center plan calls for 236,109 sq feet of retail space, with 171,069 of the feet for a home improvement center. Over the past two years, this is the second shopping center proposal for 60th St West. The other is for a Super Wal-Mart and Target to be built at the intersections of 60th St West and Ave L, one mile south of the 60th West & Ave K site. The Super Wal Mart would be located at the NWC of 60th West & L, on 40 acres, with the Target being located at the SEC of 60th West & Ave L, on 35 acres.

Jan 20- As many of you know, the City of Lancaster has been reviewing their General Plan over the past 2 + years. A rough draft, in three different variations, has emerged. This is how each version looks: version 1 keeps the existing General Plan in place, letting most of the growth come from SF homes; the second version is being called the “Balanced plan” where most of the growth would come from higher density housing built in the area of shopping centers to decrease auto travel; the third version is being called the “Focused growth plan” and would encourage high-density housing mixed in with commercial and shopping developments as well as revitalization of older urban areas which is served by mass transit. A collection of interested citizens have stated they prefer the merging of plans 2 and 3, which would be a 4th version. General Plans must tell how the city will:
- use land within its boundaries
- fulfill housing needs
- foster transportation
- conserve natural resources
- retain open space for agriculture and recreation
- control noise
- promote safety 

Jan 20- Two major housing developers, obviously looking ahead to better times, have applied with the City of Lancaster to each build master planned communities, two on the west side and one on the east side. Specific Plans allow for a project to be built outside of any General Plan restrictions. Master planned communities usually include not just housing, but also schools, commercial, parks, various residential lot sizes, and any other amenities the City deems necessary, i.e. a golf course as in the Rancho Vista master plan. Here are the boundaries of the two master planned requests. 1,600 acres from 80th West to 110th West, from Avenues L to M; the 645 acres between 92nd West & 105th West, from Ave G to Ave H; and the 1,100 acres from 40th East to 70th East, Avenues J to K. 

Jan 22- The City of Palmdale has filed a civil lawsuit vs Antelope Valley Community College for misuse of Measure R 2004 bond money. The City says there were led to believe that Measure R monies, about $139M, would be used to begin building an east Palmdale community college site, and that Measure R funds would be used to acquire matching funds of $278M from the state to finish the college. AV College which paid $5M for the land, 60 acres on 25th St East, just south of Pearblossom Hwy, has opted to use most of the Measure R funds to make on campus improvements at its west Lancaster campus at 30th West and Ave K. It is Palmdale’s contention, that at least $52M of the original Measure R money should have been used to build phase 1 of the east Palmdale college site, and that the AV College board violated the Brown Act, which requires public entities and agencies to hold all meetings in public, with public notice for anyone that wants to attend. Palmdale Mayor Jim Ledford said, “Palmdale residents had an expectation that has not been met from the college’s use of its bond funds. As a City, we are challenging the college processes. How the college talks to the community is being challenged and how they conduct business is being challenged, and I (Ledford) think that is appropriate.” …….Of course, the College’s viewpoint is quite different, which is why we have a law suit.

Jan 23- According to the 2008 Kosmont-Rose Institute Cost of Doing Business Survey, Lancaster has been voted one of the top ten LEAST expensive cities in LA County in which to do business. Survey founder Larry Kosmont says the survey is used by many businesses as a “tie breaker” by companies considering a move or expansion. Cities with low cost ratings tend to have low utility taxes and business fees, and may be making efforts to reduce property taxes. The survey objectively compares 402 cities nationwide based on taxes and business fees on such items as sales, utility, income, property and business taxes. Lancaster is also a past winner of the “Most Business Friendly City” award given out by the Los Angeles Economic Development Corporation. Lancaster, over the years, has earned their business friendly reputation by fast tracking permits and offering tax credits through the State Enterprise Zone which they share with Palmdale. Said Lancaster Mayor Rex Parris, “With our large commuter population, one of our goals is to keep our residents working close to home, thus maximizing their work-life style balance.

Jan 26- Tejon Ranch, which as of now is 422 sq miles of grazing land, located along the Fwy 5, north of LA County – Kern County border, will have two high schools within its master planned community called Centennial. Centennial, some 6,000 acres and the two schools, will be located are the far west end of the Antelope Valley, from 300th St West to the foothills of Quail Lake. The two high schools will be under the jurisdiction of the Antelope Valley Union High School District. Each school will be designed for 2,850 students. On various size home sites, 23,000 homes are planned for Centennial. Tejon Ranch, the general area, will also have 240,000 acres of open space for wildlife habitat, open space, and parks. The master planned agreement calls for not more than 30,000 acres of residential/commercial development. Tejon Ranch Company battled three counties, Los Angeles, Kern, and Ventura, and Fish & Wildlife for a decade over the area, as environmentalist fought hard to get the project killed off. Other partners with the Tejon Ranch Company are Pardee Homes, Lewis Investment Co, and Standard Pacific Homes. The developers will bear all the costs of building the two high schools. Gorman School District will hear a similar proposal regarding elementary schools in February or March. The developers have completed their Environmental Impact Report on the project which is being released for public review by the Fish & Wildlife Service. The EIR covers 142,000 acres and intends to protect 27 sensitive species which also includes the California Condor. The public comment period is 90 days and ends on April 22.

Jan 27- Los Angeles World Airports, owner of the airports at LAX, Ontario, Van Nuys, and Palmdale, announced that it will give up its federal certification to operate the airport in Palmdale. LAWA says that the costs to maintain the Palmdale Airport under the certification regulations are just too costly when the airport has no current commercial service. When airline service does once again begin, LAWA says that it is an easy process to recertify Palmdale. The Palmdale Air Terminal is located on land leased from the Air Force, with the Air Force allowing airliners to use Air Force Plant 42 runways. Palmdale City officials have been critical of LAWA efforts in the past to recruit and hold a carrier in Palmdale. The City wants to take over the airport and do their own recruiting. If Palmdale does so, LAWA says they will not interfere. The Palmdale Air Terminal, about 5,000 sq feet, is located at 25th St East and Ave O-8. LAWA owns all of the Plant 42 land and acreage out to the east to 50th St East. In total, LAWA owns 17,000 acres, and has owned most of that acreage since the late 1960’s. The general boundaries for the Plant 42 area are: Sierra Hwy on the west, Ave M on the north, 40th St East on the east, and Ave P on the south. LAWA’s large land holdings, for decades, has generated speculation that they will eventually build a new international airport on their acreage.

Feb 2- The Lancaster City Council, acting as the Lancaster Redevelopment Agency, has approved of the purchase of 2.4 acres, north of Ave L, on 10th St West for $1.5M. The parcel is a small car dealership and is contiguous to the 110 acres that will be Lancaster next shopping center. The center will be called The Promenade at Amargosa Creek. Plans for the shopping center were approved in August of 2007 and will provide between 1.2M and 1.5M square feet for new stores, restaurants, and a hotel.

Feb 4- A welder doing some work on the roof of the “new & under construction” Palmdale Medical Center, accidentally set the roof on fire. The fire did not make it past the 10 inch thick concrete roof as only roofing material, on top of the concrete, caught on fire. 90 fire fighters showed up and had the fire under control inside of an hour. The 5 story medical center will have 239 beds and 35 bed emergency room. Floors 1 through 3 are completed with floors 4 and 5 still under construction. The fire did no structural damage and the hospital will open on schedule sometime in 2010. 

Antelope Valley Housing Market
2008 - new homes projected to sell- 941 
2007 - total of all new homes sold- 1,720
2006 - total of all new homes sold- 2,584
2005 - total of all new homes sold- 4,579
2004 - total of all new homes sold- 2,503
2003 - total of all new homes sold- 1,820 
2002- total of all new homes sold- 1,162
1990- total of all new homes sold- 4,900 + 

Antelope Valley Commercial

As I told you last month, anecdotally, just by driving around the AV, it is fairly obvious, in relation to the state of the economy that industrial and commercial buildings are now in a surplus. One industrial developer trying to buck the economy and move ahead anyway is Toneman Development Corp. Toneman is investing between $5M and $6M on a three building, 56,420 sq feet complex at 620 West Ave L. The 4.5 acre site was purchased by Toneman through his own real estate agent and was offered for sale by myself, jpBroker.com. Toneman will use one building as his own headquarters and lease space on the other two. The complex can offer space ranging from 1,600 sq feet to 9,696 sf. Each building, until leased, is an empty shell and can be customized to the tenants needs. A study by Grubb-Ellis, a commercial broker, says that the office vacancy rate in Los Angeles County is now at 12.2%, with no expected serious recovery until late 2010. 

Real Tracking, a real estate reporting firm, has identified more than 1,000 large commercial properties, nationwide, worth $25.7B, that are already bank owned or the landlord is in default. Real Tracking also estimates, that this year, another 3,700 properties worth $80B, could potentially fall into trouble. This forecast is supported by the Howard Davidowitz forecast for retail in 2009 (above in the retail section).

The Palmdale eastside Chili’s restaurant, open for just two years, will close on February 10th, a victim of the recession. The restaurant is located at 4611 East Ave S and is one of 35 restaurants that Brinker International, the corporate parent is closing down. Brinker also owns On the Border, Maggiano’s Little Italy, and Romano’s Macaroni Grill. Brinker is also shutting down plans for any new development this year. Chili’s is the third restaurant to close in Palmdale in as many months. In December, Romi’s Fine Dinging filed for chapter 11 bankruptcy and in January, Applebee’s, located on 10th St West, across from the AV Mall, closed its doors. The owner of Applebee’s, John Gantes, who owns 110 Applebee’s in 4 states, filed for chapter 7 bankruptcy. Chapter 7 means liquidation and going out of business. Chili’s still has two restaurants in the AV; one on the perimeter of the AV Mall and one in west Lancaster, on 10th St West, south of Ave K. 

After the late December closure of Mervyns Dept Store and the January Chapter 11 bankruptcy filing of Gottschalks rumors have been floating around that Dillard’s Dept Store would be next. Dillard’s director of sales for the western region of the US gave a strong denial, saying the Palmdale store was one of their best performing stores in the region. The Palmdale Dillard’s is one of three in California. Thus far, Dillard’s is the only two story store at the AV Mall. In 2008, Dillard’s did close a handful of underperforming stores, but as the Dillard’s official said, “Palmdale is not even on our radar to close.”

AV Mall officials, almost with lightening speed, have attained a tenant for the Mervyns site- Forever 21 a trendy fashion store chain that will take up to 20,000 sq feet of the site. The old Mervyns site is a total of 60,000 sq feet, so presumably, other tenants will be added eventually.

Antelope Valley Land Market

"Supply and demand, in the end, determines the value of all things." 
- Adam Smith, "Wealth of Nations" 18th century Scottish economist

Supply closed out January at 1,866, a one month fall of 234 land listings, or a contraction of supply by 11%. A large drop like this at the beginning of the year indicates that probably a lot of sellers whose listings expired in January, gave up and did not relist their land for the new year. For the sellers left behind, still trying to sell, that is good. The leaner the supply, the sooner supply will start working in favor of sellers, versus the buyers it is helping now. As regular readers here know, I have been on record since late 2005, forecasting that supply will drop to at least 1,500 before this bear market is over. A decline to the 1,500 area would represent, in round numbers, a 50% decline in supply from the market top. As I look at January’s rapid drop, and the current weak state of demand, it does appear we will go well below 1,500 on supply before this market totally unwinds. Across the board, land prices as they are listed are still too high. How do I know this? Because monthly sales are still very weak.

Falling supply, in this part of the market cycle, is a representation of seller pessimism. Most of the drop in supply will come from frustrated sellers as they take their property off of the market, giving up. With monthly land sales down 90% from the market top, and only about 1 land listing per day going into escrow, actual sales will have only a minor effect on moving supply lower. Bottom line: the market has more work to do in getting supply lower, weeding out the sellers that are not pricing according to the market as it is now, not as it was in 2006. 
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Supply numbers in perspective:
Supply change vs. last month: - 11% 
Supply change, year to date: - 11% 
Supply in Jan 09 vs. Jan 08: - 38%
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Supply at the end Jan 2009-1,866
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Supply at the end of 2008: 2,100
Supply at the end of 2007: 3,134
Supply at the end of 2006: 3,263 (market peak in prices) 
Supply at the end of 2005: 2,264 (market peak in volume) 
Supply at the end of 2004: 1,902
Supply at the end of 2003: 1,607
Supply at the end of 2002: 1,770
Supply at the end of 2001: 1,665
Supply at the end of 2000: 1,800
Supply in May of 1989: 587 (market peak in price)
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Demand- January demand (33) was just slightly higher than December, coming in at + 4 land sales per month, vs December. That represents a January gain of +3.44% vs December.  Although monthly sales were up slightly, there is no major trend change since March of 2008 when sales began to touch the 30 per month level. The strongest month of 2008 was January at 68 sales. Year over year monthly land sales are down -51%. In terms of demand, we are close to a bottom. Presently we are hanging around the 30 sales per month level. If we get as weak as the 1990’s land market, which is possible, we could see monthly land sales bounce around between 20 and 30. We have seen supply and demand fall considerably since 2005.

The next shoe to drop, on a broad basis, will be price. While prices have already fallen on the bid side, those actually closing escrow, on the ask side, listed prices, prices across the board are still too high. High ask prices are one reason we are down to just 30 land sales per month; buyers will not pay 2005 prices in 2009. I expect 2009 to be the year that most real sellers get serious on price, either by a formal price reduction, or by just telling their broker, “get me out”. When housing prices finally bottom, that will be the time start picking over the MLS for deals. I expect this process of falling land prices to run 1 to 2 years.  From that point, strength in the economy and the quality of the housing recovery will determine when land prices once again begin to recover as well. The real key as to when land prices will recover is the housing recovery. Although there has historically been a lag time between the housing price recovery and land price recovery, waiting for housing values to begin to recover gives us a much safer entry point in the land market. Once housing prices begin their recovery, land will follow, but it will be a very gradual recovery. 

In January: 
- the mean (average) listing price on a piece of land was….. $268,504
- the median (middle) listing price on a piece of land was.….$49,500
- the average days on the market………………………..……..334 
Demand numbers in perspective: 
Land sales in all of 2009--------396 (projected) 
Land sales in all of 2008------- 475
Land sales in all of 2007------ 1,637 
Land sales in all of 2006------ 2,648 
Land sales in all of 2005------ 3,376
Land sales in all of 2004------ 2,372 
Land sales in all of 2003------ 1,240
Land sales in all of 2002------- 679
Land sales in all of 2001------- 407
Land sales in all of 2000------- 307
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Average land sales (in 2009) per month- 33
Average land sales (in 2008) per month- 40
Average land sales (in 2007) per month- 129
Average land sales (in 2006) per month- 221
Average land sales (in 2005) per month- 281
Average land sales (in 2004) per month- 198
Average land sales (in 2003) per month- 103
Average land sales (in 2002) per month- 56 
Average land sales (in 2001) per month- 34
Average land sales (in 2000) per month- 26
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Aerospace & Defense

Despite the recession, East Kern Airport District reports that business is strong at the Mojave Air and Space Port. The airport has 100% occupancy on its leasable space. Fuel sales, combined with hangar and property leases, are the airport’s prime source of income. Fuel sales in 2008 came in higher than forecasted. In Dec 2008, Mojave Air & Space Port sold 62,000 gallons of air fuel, versus 21,400 in Dec of 2007. Airport officials estimate that fuel sales in 2008 were up 20% vs 2007. In addition, East Kern Airport District has accepted a $2.36M grant to refurbish the general aviation area of the Mojave Air & Space Port. The grant will pay for the airport’s primary infrastructure project for 2009, replace the asphalt surrounding the hangar area at the west end of the airport flightline as well as make repairs to the taxiways. A secondary project, pending funding, would replace deteriorating concrete on the airport’s main runway. Due to the recession, Mojave Air & Space Port officials remain cautious, but are very optimistic regarding its future, especially when commercial space flights begin in earnest, which could be within a year or two. Mojave is a major transportation hub for the shipping of goods and services. Trucks, rail, and air transport all move through Mojave as it is also a freeway junction where the freeways move in four different directions out of Mojave. Fwy 14 goes to the NE and south back to Lancaster, and the Hwy 58 goes NW to Bakersfield as well as east to Barstow and the Fwy 15. The Fwy 15, on the eastern border of the Antelope Valley, goes north to Barstow and Las Vegas and south to Victorville and San Bernardino. 

National Housing Market

The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend. 

Jan Builder sentiment as measured by the National Association of Home Builders / Wells Fargo (survey of 419 home builders since 1985). Survey results were released on Jan 21st and fell to a new record low of 8. The reading was down from Nov and Dec’s 9. Needless to say, the mood of home builders has never been worse. A reading of 8 means that only 8% of the builders surveyed have positive sentiment about the housing market. Already weak last fall, the index fell even more when the banking and financial crisis hit. Home builders are pushing Congress for a 10% tax credit, up to $22,000, for home buyers who purchase a home over the next year. Builders would also like to see a temporary interest rate reduction on 30 yr fixed mortgages. In the West, builder confidence is even worse, falling to 4 in January. While many are hopeful that 2009 will bring a bottom in the housing market, at this point in time, there is little evidence that will happen. TARP 2 will soon be released. If TARP 2 money is used to buy bad assets from banks, this could help free up lending. If the new TARP money is also used to provide principle forgiveness on mortgages, this may help with the foreclosure problem as borrowers would have an incentive to stay in their home and continue to make their payments. However, never underestimate the power of government to screw things up. Less we forget, government policy is at the foundation of the mortgage crisis, as in their quest to make owning a home a national priority, lending regulations were so relaxed and watered down, it was only a matter of time before bad loans came back to bite everyone- the borrower, the lender, neighborhoods ravaged by foreclosures, investors buying the bundled mortgages, and eventually, the entire US & global economies. 

The SP Case-Shiller Home Index, since 1987, has measured home prices in 20 major cities of the US. The Index tracks the sales of the same homes in each city, so the survey is not affected by a change in the mix of what homes sell. In 2003 through June 2006, homes in the 20 city index soared in value by +52%. November, released January 27th, show that home values in the 20 city index of this survey fell -18.2% since Nov 2007. Month over month, the 20 city index was down -2.2%. Prices in the 10 city index have fallen a record -19.1% from Nov 2007 to Nov 2008. From the peak of the housing market in mid 2006, home values are down -25%. Falling home values have thrown the balance sheets of banks and consumers into chaos if not bankruptcy. Consumers have lost trillion$ and lenders have lost billion$ in the housing market since 2006. Who wants to own or loan on an asset that is still falling in value? The fact that home values are still falling, is at the crux of the credit crunch. This is why many banks have severely cut back their lending. Both the home and the buyer must be squeaky clean. Over the past year, the downside leaders are the usual suspects: Phoenix -33%, Las Vegas -32%, and San Francisco -31%. The best performing city over the past year has been Dallas at just -3.3%. Housing analysts estimate, based on this study, that nationwide, housing is losing $380B per month which comes out to $370 per adult per week. Analysts, after reviewing this report, concluded that, “It is unlikely that we are anywhere near a nationwide price bottom in the housing market.”

Dec housing starts (Commerce Dept), released January 22nd, falls -15% to an annual rate of 550,000, the lowest monthly number on record. The report was weaker than the expected 600k number. Last month, in November, housing starts were down over 18%. In the context of a housing market with a surplus of homes, contracting housing starts is a good thing, for supply cannot be drawn down unless most buying comes from the existing home market. After all, when one finds themselves in a hole, the first thing one should do is stop digging. The more starts slow up now, the sooner home inventories can be drawn down, which might limit any further drops in home values. For all of 2008, housing starts fell -33% to 904,000, the slowest pace of construction since 1959 when the government began keeping housing data. In 2007, 1.355M homes were started; in 2006, 1.8M homes were started. With the housing market being brought to its knees, many builders have closed up shop for a while until the environment improves. For all of 2008, housing completions were also down, -26% to 1.12M. While homes are near all time affordability levels, affordability is still no match for mounting job losses and tightening credit standards. At present, all we have now for an improving housing market in 2008 is hope. 

Dec building permits, (considered a leading indicator and a signal of future activity) also released January 22nd, fell -10.7% to an annual rate of 549,000. For SF homes only, permits fell 12.3% to an annual rate of 363,000. Both numbers are record lows. Building permits are considered a more reliable guide to the state of the new home market because they are not affected by weather. 

Dec existing home sales (Natl Assoc of Realtors), released January 26th, rose 6.5% to an annualized rate of 4.74M. Year over year, existing home sales were down -3.5%. For all of 2008, existing home sales were down 13% while prices fell 9.3%. The resale market is still dominated by foreclosure and distress sales as 45% of all home sales in December fell into that category. The median sales price of an existing home in December was $175,400, down -15.3% from one year earlier. Housing analysts say that the price drops in 2008 are just about the worst since the Great Depression. Inventories dropped - 11.7% to 3.68M. Home being held by banks, but not on the market, are not included in the inventory figure. EX condo sales, the sale of SF homes, in Dec, were up 7%. For all of 2008 SF home sales fell -12% to an annual rate of 4.35M. The West, where prices have fallen 30%, was the strongest sector of the country in December. While the rise in prices and sales in December is a step in the right direction, we will need many months of the same type of action before we can declare a rebound in housing is in effect. Affected homeowners are patiently waiting to see if TARP 2 will provide any meaningful mortgage relief. In the eyes of the bewildered mortgage holder, meaningful means principle forgiveness, not just adjusting the interest rate or length of the loan. 

Dec new home sales (Commerce Dept., reported when a contract is signed, not at the close of escrow, nor are cancellations reflected in this monthly data). Released January 29th, fell -14.7% to an annual rate of 331,000. This is THE lowest monthly level of new home sales since record keeping began in 1963. For all of 2008, analysts estimate that 482,000 new homes were sold, a number down -37% from 2007, also a record number. Inventories of new homes fell -10% in December, but due to very slow sales, actually rose as expressed in time, rising to 12.9 months vs November’s 12.5 months. The median sales price of a new home was $206,500, down -9.3% as compared to Dec 2007. Regionally, new home sales came in as follows: NE -28.2%, the West -20.2%, the South -12.1%, and the Midwest fell 5.6%. 

As foreclosures mount and price continue to fall in the existing home market, it becomes tougher and tougher for a new home to compete on a price basis. Many builders, in some areas of the country, have temporarily given up and closed down, knowing full well they cannot price compete against homes selling below the cost of production, which may even have more amenities, vs a new home, put in the home by the previous owner. While it is true that new homes have a big emotional advantage, that advantage has long disappeared due to bargain prices in the resale market.

February/March 2009

Feb 2- The Lancaster City Council, acting as the Lancaster Redevelopment Agency, has approved of the purchase of 2.4 acres, north of Ave L, on 10th St West for $1.5M.  The parcel is a small car dealership and is contiguous to the 110 acres that will be Lancaster next shopping center.  The center will be called The Promenade at Amargosa Creek.  Plans for the shopping center were approved in August of 2007 and will provide between 1.2M and 1.5M square feet for new stores, restaurants, and a hotel.

Feb 4- A welder doing some work on the roof of the “new & under construction” Palmdale Medical Center, accidentally set the roof on fire.  The fire did not make it past the 10 inch thick concrete roof as only roofing material, on top of the concrete, caught on fire.  90 fire fighters showed up and had the fire under control inside of an hour.  The 5 story medical center will have 239 beds and 35 bed emergency room.  Floors 1 through 3 are completed with floors 4 and 5 still under construction.  The fire did no structural damage and the hospital will open on schedule sometime in 2010. 

Feb 9- Another restaurant in the Palmdale area closes their doors.  The latest victim, On the Border, a Mexican style eatery.  The owner, Brinker International, also closed down an east Palmdale Chili’s last week due to under performance.  Applebee’s, another restaurant near the AV Mall has been shut down since January.  Romi’s Fine Dining, a very high end steak eatery, also located on the perimeter of the AV Mall, has filed for Chapter 11 bankruptcy which means they will try and financially reorganize and give it another try. Chili’s still have two AV sites, one on the perimeter of the AV Mall and one on 10th St west, south of Ave K, in west Lancaster.  Brinker International, besides On the Border and Chili’s, also owns Maggiano’s Little Italy and Romano’s Macaroni Grill, both of which have NO locations in the AV.  Brinker International, in total, has 1,704 restaurant sites.  The east Palmdale Chili’s was one of 35 restaurants being closed as a result of the recession.

Feb 10- The first phase of building Lancaster’s new shopping center in the area of 10th St West & Ave L, which is to spend $12.25M to cover and mitigate Amargosa creek, should begin in the Spring.  Work to cover the 1 mile streambed should be completed by Dec 2010.  The project will involve making the
streambed slightly deeper and then covering it with a cobblestone like material that will allow water to seep into the aquifer.  The channel will be covered with a steel arch-like structure.  The City of Lancaster is paying up front the full cost of the work, with almost $5M being recouped from the developer, L Street Properties.  The shopping center, which will be called the Promenade, will consist of 110 acres and also include a hospital built by Kaiser Permanente.  The Promenade will be bordered by 10th St West on the west, Ave K-8 on the north, 5th St West on the east, and Ave L on the south.

Feb 11- a state plan to build a Fwy east across the AV, to the Victorville area, held a public hearing.  Caltrans held the hearing to update the public on possible routes and to also get public feedback on any environmental issues of each route.  Caltrans has basically two different routes.  Option 1 would run east from the Fwy 14 along Ave P-8 all the way east to 110th St East.  Option 2 would also start at the Fwy 14, go east to 15th St  East, then bend south ¼ mile to about Ave P-12, continue east to 55th St East, then dip south a bit, then go due east to 70th St East, then turn north to 100th St East to join up with option 1.  Further phases of the project would extend the Fwy to the San Bernardino County line, then eventually to the I-15.  At the south end of the AV, presently, the only way east to the I-15 and Victorville, is Hwy 138.  Caltrans has spent $200M widening Hwy 138 to make it safer and faster, but even that project is not yet done.  In addition, the State of California has serious money issues.  Caltrans is using the public hearing to gather data for their EIR, environmental impact report.  The rough draft of their EIR will not be done until January 2010, with the final EIR being done by May 2010.  If Caltrans decides to go ahead with the project, and if the money is available, construction would not start until the spring of 2014.  The simplest route to build would probably be route 1, as it is a straight line, and once past 40th St East, is vacant desert land all the way out to 110th St East.  Along the Ave P-8 route there are no obstructions until one gets to 150th East, which is the Black Buttes and the community of Lake Los Angeles.  At 145th St East, going south to Ave Q, at least visually, looks like the next leg.  Once east of Lake Los Angeles, along Ave Q extended, we have flat desert land all the way to the Adelanto area.  Once at Adelanto, the proposed Fwy would have to divert south to go around Adelanto’s huge airport, formerly an Air Force Base.  Piggy backing Hwy 395 to the south, then creating the last 6 miles east to the I-15 would seem to work.  Right of ways have to be created.  Easements have to be granted, purchased, or taken by eminent domain.  All in all, that is a process that can take years.  Remember, Caltrans has not even decided upon the exact route yet, so we are years away, perhaps decades, until we have a Fwy east all the way to Victorville.  From the north end of the AV, from Mojave, there is Hwy 58 which goes east to the I-15, cutting into the I-15 a few miles south of Barstow.

Feb 20-   Annual Business Out Look Conference, AV Fairgrounds in Lancaster

Bob Trautman of Universal Health Services, says that the fire in January at its new west Palmdale hospital, which is under construction, will not delay its opening.  The fire damaged only building materials that were sitting on the roof, waiting to be installed.  Trautman also said that he expects the 239 bed facility to be an engine of white collar job growth for Palmdale.  The $12M hospital and medical center will ultimately employ 775 and is expected to provide an economic impact to the AV of $280M.  When it opens, the hospital will end Palmdale’s 12 year run as California’s largest community without a hospital.  Universal also owns Lancaster Community Hospital on 10th St West, located between Ave J and Ave K.  Nationwide, Universal Health Services has 13,000 hospital beds. 

Wayne Stevens of eSolar, spoke about his project to bring solar-thermal power to the AV.  With eSolar’s demonstration power plant almost done, Stevens says that his goal is to make the AV the solar capital of the world, saying, “We will keep building as long as Edison has the capacity and transmission lines. We are delighted to be here in the AV.  We feel this is our home.”  In the eSolar system, fields of mirrors are utilized to reflect the sun’s ray on a boiler to heat water into steam.  That steam is then used to power turbine generators which produce the electricity.  eSolar’s demonstration is located at Sierra Hwy and Ave G. The demonstration plant will produce 5 megawatts, enough power for 4,000 homes.  Expansion of the demonstration site to 7.5 megawatts can be done.  The electricity produced by the demonstration site will enter the Edison power grid at Edison’s Lancaster substation.  eSolar hopes to have its permanent site done by 2011. 

Nancy Sidhu, economist for the Los Angeles County Economic Development Corporation, says that the unemployment will rise to 10% in Los Angeles County by 2010, with a possible turn around in the general economy by early 2010.  Since unemployment is a lagging indicator, it could still rise in the early portion of a recovery.  Sidhu contributes the turn around to the massive spending by the federal government with its stimulus program just signed into law on February 17th.  Sidhu says, “We are about to find out how loudly money talks.  My guess is there is so much money flowing into the economy it will simply have to stop falling and turn around (the economy).  I don’t see how it cannot.”  Sidhu also said that the collapse of oil prices will also help the economy, saying that, “Lower oil prices are probably better that the tax cut we are about to get.”      

Andrew Winston, co-author of  “Green to Gold”, told the audience that, “Smart companies are using environmental strategies to innovate, create value, and build a competitive advantage.  Seeing your business through an environmental lens is not an option anymore.  It drives innovation and represents a new and fundamentally better way of doing things”

John Mendez, Wal Mart’s public relations executive, cited his employers efforts to reduce their carbon foot print, saying, “Going green makes good business sense in order to reduce energy costs and energy dependence.”

Los Angeles County Supervisor, Michael Antonvich, warned of future inflation as the economy’s eventual response to the Obama stimulus plan.  Antonovich said, “There is no way you can create a trillion dollars out of thin air (borrowed from the FED) and another trillion dollars out of thin air, and expect those dollars to keep their value (purchasing power) after 2 or 3 years.  Inflation is the cruelest tax of all.”

Feb 23- Lancaster based RV maker, Rexhall Industries, has filed for Chapter 11 bankruptcy reorganization.  Rexhall listed the recession and resulting weak sales as the cause of their problems.  In their filing, Rexhall listed $5.1M as assets and $4.9M as liabilities or debts.  Since 2004 Rexhall says that RV sales have fallen -66%.  As part of their reorganization, Rexhall will forego using dealers to sell their product line and sell direct to the public.  There is also a plan to begin to offer environmentally friendly RV’s as well.  Rexhall’s sales and service center is on 23rd St West, backs up to the Fwy 14, and north of Ave I.  Their production plant is on 7th St West, east of the Fwy 14, and north of Ave H.  At one point Rexhall employed over 400 people, but is now down to just 40.  The move to separate from using dealers to sell their line will give Rexhall higher profit margins and more negotiating room with their buyers.  Rexhall expects sales to improve by 2010.

Feb 26- The City of Lancaster is going to begin their own stimulus program to help the local auto dealers.  The City has dedicated $200,000 to rebate the state registration fee to the consumer who buy a new car beginning on April 1st.  Auto registration fee runs 1% of the purchase price, which on a $30,000 car would be $300.  The new car buyer will not be given the rebate in cash, but in gift cards to stores and restaurants in the Lancaster area.  This ensures that the money stays in Lancaster and also helps retailers, which are also having a tough time in the recession.  The city is hopeful that the rebate program will stimulate $21M in auto sales at Lancaster Auto Mall.  The program will stay into effect until the $200,000 runs out.  The City has also set aside an additional $100k to pay bonus commissions to real estate agents and brokers that find tenants or buyers for industrial or commercial space in the City.  On top of that, another $100k will be spent on promoting the stimulus plan to shoppers.  If all goes well, the City expects that over $500k will flow back into city coffers via sales tax.

Feb 28- The City of Lancaster has decided to do something about a blighted tract of homes smack dab in the middle of west Lancaster.  The Trend tract, built in 1970-72 period, consisting of about 350 homes, is visually blighted and has a serious crime problem.  Cars are often seen parked up near the front door of a house, on a burned out lawn.  The area is primarily renters and has been a “black eye” for Lancaster since the late 1970’s.  The homes were originally built for many of the employees of the B-1 bomber program and purchased under an FHA loan program known as 235 loans.  In the ensuing years, the B-1 bomber program was canceled by President Carter, with many of the home buyers walking away from their homes.  Many of the homes were then purchased by investors as rental properties.  Over the years the area has transformed into mostly low income renters, with very few owner occupied homes, and with increasing crime.  While not very pleasant at day, landlords know very well not to visit a tenant at night as the area becomes even more dangerous.  Even in the early 1980’s the area was so bad, that as a young real estate agent at Century 21, I often heard other agents say the whole tract should be torn down and started over.  That said, its general location of central west Lancaster is very good.  The basic boundaries of “Trend” are Ave L on the south, 38th St west on the west, Ave K-10 on the north, and 35th St West on the east.

The City’s Plan to clean up Trend includes:

- eliminate cul-de-sacs; connect existing streets
- add traffic calming options at intersections, i.e., circular intersections
- develop infill housing on adjacent land that is used for dumping
- establish a neighborhood recreation park and enhance landscaping to promote pride
- create new pedestrian & vehicle entryways to reduce criminals using dead ends to flee police
- improve public lighting, repair public streets, and programs for helping owners repair their homes
- reduce the amount of territorial fencing that indicates a high level of fear among residents

The improvements in Trend tract will be done in phases over time.  Believe me, what they should do is evacuate the entire tract, then fire bomb it.  It’s that bad.  Eventually, the Lancaster Redevelopment Agency may have to buy whole streets, and then tear down the houses on that street.  Over the years, the Agency could work its way street to street, eventually doing this to the whole tract.  Once enough houses are torn down, a block of vacant lots could be sold to any one of a number of major home builders.  The land itself is well located, as I said, in central west Lancaster.   Even if it took 10 years to raze all of the houses, in the long run, it would be a major plus, as it would also greatly reduce crime in the area.  Believe me, neighboring tracts would stand up and cheer.

March 4- Here is a great example of how the weak economy created a crisis for one company, but at the same time, created a great opportunity for another.    Linen N Things, once located in the Palmdale Market Place on 10th St West, south of Ave P, has gone bankrupt and out of business.  Moving in to fill the void, Smart & Final, a store that sells items to consumers and businesses alike, will move into the vacated Linen N Things location. The new Smart & Final Extra!, which is like a mini warehouse store, will be twice the size of typical Smart & Finals. Smart & Final will close two other AV locations and consolidate them into the new site.  The larger store will is expected to increase employment, as the previous two stores employed 25 each, while the new store, being larger, will employ 100.  The larger stores, of which there are 13 in California, are called Smart & Final Extra!  The Extra! stores carry an additional 4,500 items not carried by the original, smaller, Smart & Finals.  Besides the usual fresh produce, packaged foods, kitchen / restaurant supplies, and cleaning supplies, the Extra! stores will offer expanded dairy and deli items and a larger fresh produce section.  The Extra! stores will also carry new products such as baby food, diapers, and health & beauty supplies.  Many items are sold in bulk for businesses.  The new west Palmdale Smart & Final Extra! store will be 34,000 sq feet and is scheduled to be open by April 15.  Smart & Final operates 230 stores in the western US and northern Mexico.        
                                                   
AV Aerospace & Defense

Hiring at Plant 42 in Palmdale in 2008 more than held its own.  The aerospace capital of the world closed out 2008 with a total employment of 7,039, up from 6,858 at the end of June.  Aggregate payroll at the end of 2008 was $576.5M.  Plant 42, which is government owned, contractor operated, has 8 separate production sites and is home to the Big 3 of aerospace, Boeing, Lockheed Martin, and Northrop Grumman.  Northrop, which currently employs 2,500, says they will add another 500 people by the end of 2009.  Lockheed Martin’s workforce has held fairly steady at 3,600.  Boeing, between Plant 42 and it’s test facilities at Edwards Air Force Base, employs about 800.  In addition, the Federal Aviation Administration employs 500 at its Palmdale Air Traffic Control Center.

Jack Kyser, top economist for Los Angeles County Economic Development Corporation, says that while housing and retail will have a rough year, aerospace will be a “bright spot” for the 2009 AV economy.  Research and development, the production of unmanned aircraft, and significant sub-contract work on major projects will help both the AV and southern California economies.  Kyser says that the new administration is unlikely to make any major changes in procurement until 2010.  This means that current programs will remain in place for quite some time.  Kyser says though, that the aerospace workforce is aging and there are concerns that skilled replacements will not be readily available.  The LAEDC’s forecast report, partly authored by Kyser, is calling for negative GDP growth of -2.9% this year and modest growth of +1.5% in 2010.  Kyser sees the unemployment rate in the mid 9’s by mid 2010.  Industries likely to see growth this year and next are healthcare and private educational firms that are training and retraining the work force.  The two sectors will grow this year by over 15,000 jobs.  Areas of distress are the usual suspects:  retail, housing, auto sales, and restaurants.  For those that do have jobs and income, the news is not all bad as bargains can be found in mortgages, housing, and retail shopping.  If you are making a major purchase this year, if one is patient, a good bargain can be found.       
   
Antelope Valley Housing Market

For years I provided new home sales data for the Antelope Valley.  My source of that information was the Hanley Housing Report which was given to me “gratis” by Fidelity National Title.  New regulations put out by the State Insurance Commissioner on what title companies can and cannot do for brokers and agents, on a free basis, have changed.  Thus, my source for this report has disappeared. For now, I will leave this information here for historical purposes.  Granted, without the current housing number, it is not of much use, but it is better than nothing.  In addition, a source for current numbers may evolve over time.

2008 - total of all new homes sold- 1,070 
2007 - total of all new homes sold- 1,720
2006 - total of all new homes sold- 2,584
2005 - total of all new homes sold- 4,579
2004 - total of all new homes sold- 2,503
2003 - total of all new homes sold- 1,820  
2002-  total of all new homes sold- 1,162
1990-  total of all new homes sold- 4,900 +    

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John Laing Homes, an Orange County based homebuilder who built several tracts in west Palmdale during the boom years of 2003-2005, has filed for Chapter 11 bankruptcy protection.  Chapter 11 is reorganization in an attempt to restructure their debt in relation to current income so they can survive the downturn.  The bankruptcy filing lists assets of $1B and debt of $500M to $1B.  The company’s roots date back to 1848 when James Laing began building homes in England.  John Laing Homes entered the US market in 1984.  In 2006, John Laing Homes was purchased by Dubai based Emaar Properties, one of the world’s largest developers.                   

AV January existing home sales, as reported by GAVAR, our MLS association here, were up + 238%  versus January 2008.  In January, 652 homes were sold valley wide.  While sales are doing well, home values continue to fall as foreclosures keep coming onto the market.  In January, the average home was on the market 65 days vs 88 days in January of 2008.  Inventory of existing homes has dropped like a rock since last August.  In August of 2008, 5,300 homes were on the market in our local MLS, but now, January of 2009, supply is down to 3,042.  Steven Rice, President of GAVAR, says that 80% of all sales are foreclosure properties.  Home affordability is high now, with 76% of AV residents being able to afford a home.  In December, the statewide affordability level was 59%.  There can be no doubt; price is driving buyers to the Antelope Valley, as entry level homes are in the $125,000 range.  First time buyers and investors seeking a rental are the primary buyers.  First time buyers now have the added incentive of the recently passed $8,000 tax credit.  On many homes in the AV, a mortgage payment is lower than the rents on a home in the LA area or the San Fernando Valley.  As to what percentage of homes are bank owned and on the market, estimates run as high as 90%. 

In the face of the moratoriums put forth in the fall of last year by various levels of government, which artificially lowered the number of visible homes in the foreclosure pipeline, Obama will now begin his own program of housing stabilization backed up by $275B of tax payers money.  If history is any guide, expect any government action to be slow in coming, which will keep homeowners hanging on, wondering if anything at all will ever happen.  If the stimulus does help, i.e., the $8,000 tax credit, analysts say that it may not show up in the statistics until the summer. This is due to the long lag in the process finding a home, purchasing a home, closing the deal, and getting the data reported in our local MLS.  


- Frank Donato, First Quarter 2009

Information presented above has been compiled from reputable sources, and is deemed reliable but not guaranteed. All opinions expressed are those of the Author.