Antelope Valley Existing Home News
We all know that the current and pending foreclosures are acting as a road block to returning to a normal market, where distress sales are the exception, instead of the rule, as now. If we follow the supply of foreclosures and pending foreclosures, we will be able to have some idea of the pace of improvement as these inventories get drawn down, which may be able to give us an eventual “get well” date.
If we add up the Dec 2010 columns of foreclosures, Palmdale has 3,790 homes in some phase of foreclosure, and Lancaster a bit less at 3,251. If we add the two cities together, we get a total number of 7,041 homes that are in, or are about to be in, the foreclosure process. As compared to one year ago, when the total number was 8,214, we dropped in this category by 1,173 homes, or about a 14.2% improvement. If we continue to drop 1,100 home per year off of this list, that means we are looking at a period of at least 5 more years of this type of market. However, that is “straight line” thinking and markets rarely move in convenient straight lines. I believe, that as the economy improves, we could see banks release more inventory and sales pick up. If so, that five year number could be reduced to 3 years, but we’ll have to wait and see how things progress.
Existing Home Sales- GAVAR (Greater Antelope Valley Association of Realtors)
December existing home sales in the Antelope Valley were up 13% vs. November, but were down 19% vs. December 2009. Median home price in December were $150,000 in Palmdale and $135,000 in Lancaster. Year over year Palmdale was unchanged, but Lancaster was up 8%.
Antelope Valley New Home News
Antelope Valley Tract Builder’s Sales
1990- total of all new homes sold- 4,900 +
1999- total of all new homes sold- 694 (The Siracusa Co.)
2002- total of all new homes sold- 1,162 (Hanley Housing Report)
2003 - total of all new homes sold- 1,820 (Hanley Housing Report)
2004 - total of all new homes sold- 2,730 (The Siracusa Co.)
2005 - total of all new homes sold- 4,510 (The Siracusa Co.)
2006 - total of all new homes sold- 2,584 (Hanley Housing Report)
2007 - total of all new homes sold- 1,720 (Hanley Housing Report)
2008 - total of all new homes sold- 906 (The Siracusa Co.)
2009 - total of all new homes sold- 669 (The Siracusa Co.) 20 year low
2010 - total of all new homes sold-
Antelope Valley Aerospace & Defense
Jan 13- SpaceShipTwo, the spacecraft that will one day carry pay passengers into outer space, undergoes and passes with flying colors, its 4th unpowered flight test. Taking off at 7am, underneath the wing of its mothership, WhiteKnightTwo, SpaceShipTwo was carried to an elevation of 45,000 feet before being cut loose and gliding back to Mojave Air & Space Port. While gliding, the pilot and co-pilot guided the space craft through several maneuvers before landing. SpaceShipTwo, built by Scaled Composites of Mojave, will be used by Richard Branson’s commercial space line company, Virgin Galactic. Scaled Composite officials said that the aircraft continues to meet its design goals and has been a joy to fly. Virgin Galactic intends to have Scaled Composites build a fleet of these spacecrafts, having orders in for 2 WhiteKnightTwo motherships and 5 SpaceShipTwo spacecraft.
Solar & Wind Energy News
Jan 3- Los Angeles World Airports, owners of some 17,500 acres in and east of the Plant 42 facility in Palmdale, announces they will lease part of this acreage to a major solar power company for a solar farm. Ten solar companies and one wind power company have expressed an interest. The area in consideration is located from 25th St East to 110th St East, north of Ave Q. Beginning in the late 1960’s, LAWA spent 20 years acquiring this acreage with the intent of someday building a new international airport. The acquired land was also intended for factories and other businesses to support the airport’s services and to provide a noise buffer zone between the airport and residential areas.
Some of the land was acquired against the will of owners by the use of eminent domain. The 11 firms that have been approved to compete for leases are: Amonix Inc., Barstow Solar Power LLC, Clipper WindPower Development, FTR International Inc, Invenergy Solar Development LLC, NextLight Renewable Power, Solar Power Partners, SunEdison Utility Solutions LLC, Tessera Solar North America, and World Energy USA. LAWA says that two firms could be chosen. At this time there is no report on how many acres of the 17,500 will be leased for alternative energy production. Actual ground breaking is not expected until 2012.
Jan 10- Another wind farm is being proposed by Houston based Horizon Wind Energy, a company that has over 3,300 megawatts of wind farms across North America. Horizon’s proposed wind farm would generate 300 megawatts of electricity on 4,000 acres in the hills 3 miles NW of Mojave. The company has just recently begun the application process and hopes to be permitted by 2012. The permitting process will determine the total size of the project. The project will be on both private and public land, which means that it is subject to both state and federal laws. The public portion has access from Oak Creek Rd and has been previously “disturbed” as part of it is a failed housing tract with burned out foundations. The area is about one mile from the Wind hub Substation which will transfer electricity from the site to a string of power lines that will feed Southern California.
Jan 24- The local high school district in the AV nears the finish of installing solar panels at all ten high schools. At the high schools, covered parking is being installed, with the roofs of the covered parking being used for installation of solar panels. The installing contractor projected Edison fee hikes of 6% per year over the next 20 years. At that pace of rate hikes, the school district will save $400,000 per year and $40M over 20 years.
Antelope Valley News
Jan 7- As put forth by Jim Ledford, Palmdale’s Mayor, the City has several goals for the new year.
- by April, the City hopes to become the sole lessee of the passenger terminal at Palmdale Regional Airport and would then begin efforts to land a commercial passenger air carrier. The goal is to get 100% control of the airport facility so that the City does not have to rely on other govt entities for marketing results etc.
- two relocations to the Fairway Business Park. A high tech battery firm will relocate at the Business Park from the Sylmar area and bring with it 1,500 jobs. Also, from North Hollywood, a specialty natural stone and tile outlet will also relocate in the business park.
- the AV Mall owners will try and purchase the vacant Harris site from its Spain based owners, then with the city’s help, lure a new tenant or tenants.
- the Yard House restaurant is expected to open in the AV Mall by the summer
- the vacant Smith’s Food King at 20th East & Palmdale Blvd will be filled by Superior Grocery outlet
- ground breaking will occur for a new Vallarta grocery at 47th East & Ave R. Vallarta is a Spanish ethnic market, with very good prices on produce, so has a wider appeal than just the Hispanic community.
- the expected approval of Palmdale’s hybrid electric plant (solar & nat gas) at 6th East & Ave M.
Jan 11- Rally Motors, located in the Palmdale Auto Mall, announces they have acquired AV KIA from its owner, Rick Clutter, and will move it to the Palmdale Auto Mall. The KIA line will be showcased along with Hyundai, a another fast growing Korean brand. KIA, in December, had it best month ever in the US, selling 30,444 autos. Globally, KIA sold 2M autos in 2010, which was up +26% vs. 2009. Rally Motors last year lost their Chevrolet dealership due to GM’s mandatory closures and some quick footwork by a local dealer in the AV who was able to reacquire it for relocation in the Lancaster Auto Mall.
Jan 12- The Yard House restaurant announces they are shooting for a July opening inside the AV Mall. The Yard House is known, among other things, for its transparent keg room which holds 5,000 gallons of beer. The Yard House will be located north of the Claim Jumper and located in what was once part of the old movie theater.
Yard House restaurants are located throughout southern California and are typically about 10,000 sq feet in size, and serve up to 10,000 customers per week. The Yard House is an upscale casual eatery, and is known for its extensive menu, classic rock music, and perhaps the world’s largest selection of draft beer.
Jan 18- Antelope Valley Subaru opens up at the Lancaster Auto Mall, owned by long time AV auto dealer, Rick Clutter. The new dealership will employ 35 and have 200 new and used cars on the lot at any given time. Clutter owns the Honda dealership as well, also located in the Lancaster Auto Mall.
Jan 18- Smith’s grocery store, located in east Palmdale, and vacant almost 15 years, will finally be filled by two new tenants- Superior Grocers and the 99 Cent store. Both plan to be open by this winter. 99 Cent will move in first and take up 22,000 sq ft, employing 40 with plans to be open by Feb 7. Superior Grocers will occupy the remaining 43,000 sq ft with plans to be open by March 3rd. Superior Grocers operates 30 stores in the southern Cal area in the counties of LA, Kern, Orange, and San Bernardino. 99 Cents Only says that each of their stores brings in $5M in annual sales and opening one store per month.
Jan 19- California City officials announce that 200 miles of steel water lines within the City are crumbling badly and need to be replaced. City officials say that at best, the overall system has 10 years of life to go. Cal City tax payers have already rejected Measure E, a $120 parcel tax per year, over ten years, as a way to fund water line upgrades/replacements. Most of Cal City water lines are steel with a cement lining. In many areas the steel pipe has eroded away, leaving only the cement lining, which cannot handle the water pressure. Officials say that about 40% of the City’s waterlines need to be replaced due to age and inadequate water flow to meet modern fire fighting standards. The City would use PVC replacement water lines which last 50-90 years. All 4” and 6” lines would be upgrades to 8” lines which allow 1,200 gallons per minute. The City is also investigating “trenchless” options where the pipes are repaired in place in the ground. Regardless of the solution selected, Cal City, at this time, does not have the money for the work.
Jan 26- A film liaison to the film industry, says that the AV got a $8M economic boost from in the 2009-10 fiscal year from Hollywood. During that period, the AV saw 252 film projects which broke down as follows: photo shoots 36%, commercials 18%, TV shows 14%, and feature films 9%. TV shows that were shot in the AV include: The Closer, Big Love, Medium, Melrose Place, Bones, Chuck, Hoarders, Grey’s Anatomy, and Son’s of Anarchy. Commercials were shot for: Foster’s Beer, ESPN, Toyota, Verizon, Dell, Samsung, American Express, McDonald’s, Honda, IBM, Gillette, Nordstrom, Hershey, GMC, Dodge, Sunkist, Old Spice, and Little Debbie. Full feature movies that were shot in the AV in the 2009-10 period were: Land of the Lost, The Book of Eli, Due Date, and Faster staring Dwayne Johnson, aka, The Rock. The crew for “Faster” spend two weeks building their set, a border crossing, them filmed for 4 hours and tore it down. “Faster” was the first film to take advantage of a new Film & Television Tax Credit of 20%, designed to keep TV and movie business in California. The tax credit is for films with budgets between $1M to $75M, TV shows with at least $1M budgets, and movies of the week or miniseries with a $500k minimum budget. The AV often doubles for other locations, including Morocco (north Africa) and other states such as Kansas and Nebraska. The producers of Star Trek thought that parts of the AV looked like the moon.
January 31- The Rosamond Community Services District announces they will lift the moratorium on the issuance of “water will serve” letters to developers. Will serve letters represent a commitment for the water district to provide services to a given home site or housing project. Conditional will serve letters are based on the project being given final approval, while unconditional letters are issued to projects that have received final approval. The RCSD runs and maintains both water and sewer in the Rosamond area. RCSD has issued 261 unconditional letters for two different housing projects, one at 35th West and another at 45th West, both near Rosamond Blvd.
Feb 1- East Palmdale gets another new restaurant as Panera Bread holds its grand opening. PB is located in the Palmdale Gateway Shopping Center on 47th St East, at Ave R. The Gateway Center is anchored by a Super Target & Home Depot, and also includes El Pollo Loco, Ross, Bath and Body, Bank of America, Pet Smart, Burger King, Staples, Styles for Less, It’s a Grind, Game Stop, a dental office, Nails & Spa, an insurance company, T-Mobile, AT&T, and Famous Footware. City officials say that 2/3 of Palmdale’s residents live east of the Fwy 14 and have a median income of $72,418. Panera Bread already has a west Palmdale and west Lancaster locations.
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 Dec at 1,593, down 27 listings, for an overall decline in supply of 1.66% vs. December. While I don’t expect total supply to hold below 1,600 on this go around, the move below, albeit if only this month for now, is statistically significant. The last time supply was below 1,600 was April of 2000 at 1,587. From that point in April of 2000, supply grew steadily as the market environment slowly improved. This time around as we revisited this number, the market is still very weak as the fundamental backdrop is still not good. By fundamentally, I mean the condition of the housing market. New building drives land prices and with the existing home market still dominated by distress sales of all types, a new round of building in the AV is not just around the corner. This month’s number of 1,593 is likely to bump back up above 1,600 next month. I say that because the last day of each month is often chosen by listing brokers as an expiration date on their contracts, so it is common to see a large number of expirations at month’s end, with many of those listings renewed sometime during the first week of the following month. Also, the break below 1,600 was not decisive, breaking below it by just 7 listings. But in supply, the trend is still down and it would not surprise me to see 1,000 before this market can get turned around. Land cannot appreciate in value across the board until housing gets back into its traditional supply and demand form, the condition it was in prior to the subprime crisis. We will get there, but it’s going to take several years.
Supply numbers in perspective:
Supply change vs. last month: -1.66%
Supply change during 2011: -1.66%
Supply change year over year: -7.11%
Supply at end of Jan 2011: 1,593
Supply at the end of 2010: 1,620
Supply at the end of 2009: 1,673
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 sales 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)
Demand- January demand (37) was up ten sales from December, a percentage gain of 37%. While at the high end of the range of the 25 to 40 sales per month, it is still a Bear market number. I mentioned last month, that it would be constructive to see 2011 land sales exceed 2010 sales. To do so we need to average over 31 sales per month in 2011, so as you can see, January, at 37 sales, is a good start. Again as I mentioned last month, it does appear that 2009 will mark the bottom in the land market; a bottom in sales, but not necessarily price. I expect to see the median price of AV land fall again in 2011. In a period of weak demand many parcels are going to sell for prices that will be hard to believe, approaching levels not seen since the 2000 market. So, going forward, the odds are very high that we will have several more years of low volume land sales activity. The housing market is the key to the land market, when it gets better and returns to traditional supply and demand fundamentals, land will follow eventually. If you have been thinking about using your IRA for land investment, but have not moved your funds to a custodian that will service real estate, do so now, while the market is giving you the time to do so. A buying opportunity is approaching and very good deals do come up now and then. Get your funds ready to “pull the trigger”.
Land- Median Listed Prices
Median price this month = $40,000
Median price one year ago = $49,000
Price change, year over year = -18.36%
Land- Average Days on the Market- 407
Demand numbers in perspective:
Land sales in all of 2011------- 37 (Jan. only)
Land sales in all of 2010------- 371
Land sales in all of 2009--------325
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
As you can see from the average monthly sales below, on a projected basis, we are back to 2000-2001 sales numbers, which were at the tail end of the last Bear market, and 2 years before the 2002-2006 Bull market began.
Average land sales (in 2011) per month- 37 (Jan. only)
Average land sales (in 2010) per month- 31
Average land sales (in 2009) per month- 27
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
California Housing News
Existing home sales in the southern Cal area, in December, were up +20.5% vs. November, but were down -12.5% vs. December of 2009 said DataQuick Information Services. Since 1988, when DataQuick began tracking sales, December has averaged a 12.9% gain over November. 2010 had the lowest year in two decades in new home sales, and 2009 wasn’t much better. Analysts say the pace of recovery in housing will hinge on the pace of the general economic recovery and job growth. The median price of a southern Cal home, which includes new and resale homes and condos, was $290,000. That was up 1% in relation to November, but down fractionally in relation to Dec 2009. The low in median home price in southern Cal came in April 2009 at $247,000, with the high point in mid 2007 at $505,000. Again, in December, 34.3% of all sales were foreclosures, down slightly from Nov’s 35.2% and Dec 2009’s 39.6%. The peak in foreclosure sales was Feb 2009 at 56.7%. In Dec, 21.1% of all sales were at the $500,000 level or more. Over the past decade, 26.9% of home sales were $500,000 or more.
According to C.A.R., California existing home sales in December were at their highest level since May, up +5.9% vs. November, but down -6.8% vs. December of 2009. The median price of a California home in December was $301,733, up 1.7% vs. the prior month. Year over year though the median price was down -1.6% from the Dec 2009 figure of $306,860. For all of 2010 494,900 homes were sold.
California Labor et al News
Jan 21- California’s jobless rate ticked up a bit, to 12.5% from 12.4%. Due to an expanding work force, California’s rate went up even though 4,900 net new jobs were added in December (vs. November). Sector of growth in the Cal economy in Dec were: manufacturing, information services, financial activities, business services, educational and health services, and leisure & hospitality, which added the most jobs in Dec at 9,300. The biggest losing sector in December, govt jobs, down 15,400. Over the past year, construction jobs were the number 1 loser, down 32,900 jobs. The only state with a higher unemployment rate than California is Nevada at 14.5%.