Equal Housing Opportunity
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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Second Quarter 2011 Antelope Valley News: April May/June


April 2011

Antelope Valley Existing Home News

Foreclosure Inventory

As of the end of March 2011, here are the foreclosure supply numbers.  

Palmdale- 3,254 homes in, or about to be in foreclosure. 
Versus prior month:  down  -311 homes or  -8.72%  
Year over year:  down -823 homes or  -20.43% 

Lancaster- 2,902 homes are in, or are about to be in, foreclosure.        
Versus prior month:  down -303 homes or  -9.45%.
Year over year:  down 890 homes or -23.47%. 

March summary:  The pace of the reduction of foreclosure inventory, vs. February, picked up considerably. Month over month we had 8% and 9% percent declines and year over year both cities had over a 20% reduction.  Eight percent declines in one month probably will not continue, but if they did we would be looking at the elimination of excess foreclosures in about 13 months.  That will not happen though, but it does indicate what a good month March was in reducing foreclosures.  Year over for both cities were over 20%, and if that pace could be maintained we are looking at a supply of about 5 years, based on March’s numbers.  Again, this is static thinking, not dynamic, and markets are dynamic, with the ability to change dramatically as conditions change.  These numbers could easily improve even more if job creation were to improve, or grow in number is the economy slows again.

AV Building Permits Weak in Q1
In Palmdale, Q 1 building permits pulled came in at 40, versus 41 in Q 1 of 2010.  Lancaster had 45 permits pulled in Q 1, but that was way down from the 108 in Q 1 of 2010.  In the unincorporated areas of the AV, just 1 permit was pulled vs. 85 last year in Q 1.  

Existing Home Market:  In March existing home sales in the AV, as measured by GAVAR, were down -19% vs. March of 2010.  Q1 2011 is also weaker, down -17% vs. Q1 of 2010.  In March, the average price of a home (that sold) was $142,156, down 1% from March of 2010.  A well-known residential specialist said, “The AV home market is starting to gain inventory, and while prices remain affordable, buyers are lacking confidence.  A lot of people are still worried about their jobs and the general economy.”
posted 4-20-11.  Chart shows that the Banks are the real MLS.
                                                                                                                                                                        
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-    330 (AV Building Industry Assoc.)

The new home market, while not dead, is just a mere shadow of what it was in 2005.  Today there are 20 active housing tracts (versus 68 in 2005), with homes only being built as they are bought.  No one is building from scratch, starting out with buying raw land.  The deep pocket builders, i.e., KB Homes, Beazer Homes, and Pacific Development have been successful in buying tracts of lots from the banks and thus have lowered their cost per home substantially.  Once the builder breaks ground, the buyer’s deposit goes “hard” or is lost if the sale is later canceled.  Many builders require that upgrades be paid for up front, not allowing financing within the purchase price.  Most of the houses being built are entry level in size, designed to attract first time buyers, but there are flexible floor plans to up the square footage if one desires.  Building permits pulled during the first two months of 2011 were just 45, down 67.9% vs. the same period in 2010.  Builders are using a go-slow, cautious approach, building a home only as it sells.
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Antelope Valley Aerospace & Defense
                                                     
April 1- At Plant 42 in Palmdale, where Northrop Grumman is building the fuselage of the Joint Strike Fighter, the F-35, NG is developing an assembly line for the fuselage.  As one would expect, the assembly line is intended to improve the efficiency of the manufacturing process, process times, increase precision and quality, and reduce the costs of production.  The line includes automatic assembly tool systems, transportation systems, and manufacturing systems, all controlled by centrally and wirelessly by a factory communications system.  Automated guided vehicles also move the fuselage from one assembly station to another. The assembly line will be completed in early 2012 and at that time will produce its first entire fuselage.  Thus far NG has delivered 42 fuselages to Fort Worth, Texas where final assembly of the aircraft is completed.  NG also designs and produces the F-35’s radar and other key avionics. 

April 15- Virgin Galactic, which began advertising on April 1, announces that they have over 150 applications for spaceship pilots.  The pilots will fly SpaceShipTwo and its mother ship, the WhiteKnightTwo.  SpaceShipTwo will carry 6 passengers into suborbital space for a fee, which as of now is about $200,000 per flight.  Virgin Galactic says that 400 people have put down deposits for when flights begin.  No date has been set yet for the first flight.  Virgin Galactic is seeking to hire 3 pilot-astronauts, and as of April 27th, had over 400 pilot applicants.     
                

Antelope Valley News

April 3- In fiscal year 2009-2010 the Antelope Valley saw 252 film projects, pumping $8M into the local economy.  Those projects broke down as follows:  commercials 18%, still photos 36%, TV 14%, feature films 9%, music videos 7%, and miscellaneous projects 16%.  Films shot in the AV include:  Land of the Lost, The Book of Eli, Due Date, and Faster.  Commercials included such firms as ESPN, Verizon, Samsung, IBM, McDonald’s, On Star, Foster’s Beer, Target, Staples, Pepsi, and many more.  TV shows shot in the AV include:  The Closer, Big Love, Medium, Melrose Place, Bones, The Event, Entourage and more.  The AV Film Office says that the AV averages about 300 projects per year.

April 5- In mid-April transit officials held a series of public meetings in Lancaster, Lake Los Angeles, Apple Valley and Adelanto to discuss the future route of a freeway that will someday connect the Fwy 14 to the Fwy 15.  Known as the High Desert Corridor or E-220, this proposed highway has been a topic of discussion for decades.  The meetings allow for face to face public input to those heading the highway’s development.  Project completion is scheduled for 2020-2024.  Cost to build the highway range from $3B to $4B.  There are two major pathways that have been proposed for the highway.  The first uses Ave P-8 east through land owned by Los Angeles World Airports, then goes south to Palmdale Blvd, then due east all the way to the Fwy 15, north of Victorville.  The second route, though not certain at this point, appears to use Pearblossom Hwy east to Hwy 18, the Victorville cutoff, and then due east to the Fwy 15 somewhere south of Victorville, near Apple Valley.  A joint powers authority has been created with leaders from Lancaster, Palmdale, Apple Valley, Victorville, and Adelanto, as well as LA County Supervisor Michael Antonovich.  Caltrans and Los Angeles County Metropolitan Authority are also major players.  At the various hearings, skeptics have wondered, with the state bankrupt and with huge deficits, how will it pay for the highway. Options being tossed around are to make the highway a toll road with private investors paying for the road and or installing solar panels along the right of way to help defer the cost.  Besides the above options, transit authorities must also consider a “no build” option and just making improvements to the existing corridor, Hwy 138.

April 7- Last year, in February and April the Lancaster mayor, Rex Parris, made visits to China.  It looks like those visits are beginning to bear fruit as The City of Lancaster has announced a proposed partnership with solar energy firm, US Topco Energy Inc. of Taiwan.  Approved by the City council on April 12th, the partnership will focus on building large scale electric generating facilities.  The goal of the City is to help US Topco sell their electricity on a commercial wholesale basis; the City in return would reap revenues from the effort through the Lancaster Power Authority.  The overall goal is to create a new, reliable, and consistent income stream for the City.  The Lancaster Power Authority would act as the lead agency in the environmental process, attract public financing, and to use its power of eminent domain to acquire the needed land.  City officials are hopeful, that eventually, Lancaster will be the first City to offset all of the city’s use of electricity.  The first step in the partnership is for the LPA to find potential funding and a buyer for the electricity.  Location and megawatt size of any future plant has yet to be determined.   US Topco officials say that they are hopeful that Lancaster will become a base of operations for other like-minded renewable energy companies for research, development, assembly, manufacturing, sales, and marketing that will be used by other.

April 22- The west Lancaster Cinemark 22 theater opens up their new IMAX theater.  The screen is 39’ x 70’ and runs “wall to wall” and “floor to ceiling”.   The theater has 375 seats and has IMAX’s signature projection and sound systems.  Tickets will range in the $10-$12, with 3D up to $14.  The IMAX digital projection system delivers a crystal clear picture that far exceeds normal movie projections.  The sound system is laser aligned and envelopes the audience.  Theater geometry maximizes the field of view and creates an “immersive” experience for the viewer.

April 29- Antelope Valley Winery announced Farmer’s Market, starting June 4th running through Oct 29th.  This will begin their 3rd year doing Farmer’s Market being held at AV Winery on corner of M & 20th St. West. They have over 30 vendors committed that will sell organic & regular produce, Fruits, Cheese, Fresh Sea Food & Nuts. AV Winery will host Farmer’s Market every Saturday, from 9am-Noon. 

April 30- The California High Speed Rail Authority announces they want to take another look at the alternative to the AV route, which would be along the Fwy 5, from Sylmar, north, over the grapevine. The Fwy 5 route would bypass both Palmdale and Lancaster.  Over the last five years Palmdale officials have spent $600,000 convincing the Authority that the San Diego to San Francisco route should include Palmdale.  The Authority wants to reevaluate the reason the Fwy 5 route was passed over originally, and to reassess cost.  The Fwy 5 route would have a station at Santa Clarita.  The announcement came as a shock to Palmdale officials, as the AV is the fastest growing area in Los Angeles County.                                                                                                                                           

Palmdale officials say that at the Palmdale station, 10% of the trains daily ridership would get on the train.  Under the AV route, the train must pass through Santa Clarita, but would not have a station.  Santa Clarita residents would have to travel to Sylmar or Palmdale to catch the train.  Points in between Palmdale and Santa Clarita, namely Acton, Agua Dulce, and Sand Canyon, have expressed opposition to this high speed rail system zooming through their rural communities, suggesting that expensive tunnels be built.  According to one Authority official, the Fwy 5 route is 25 miles shorter than the AV route, and that the Fwy 5 route lends itself more to the system being built in phases.  The Cal High Speed Rail Authority is shooting for a route that will make it from LA to SF in 2 hours and 40 minutes.  Both routes have seismic and environmental issues, which might be a factor in a final decision.  The bottom line appears to be this: both routes are being carefully studied for possible cost reductions.   

May 4- The City of Palmdale announces, that if necessary, the City will file a law suit against the Cal High Speed Rail Authority to safeguard their route that would bring the train through the Antelope Valley, with a station at Palmdale.  In 2004 the Cal High Speed Rail Authority announced that it would forego the Fwy 5/Grapevine route in favor of the AV route.  In April though, the Authority announced that it was going to reexamine that decision, which puts the AV route in jeopardy.

May 5- Just as newly elected Gov. Jerry Brown was making the case for the tax increase he wants to help “balance the budget”, it was announced that California’s recovery produced $2B more in revenue than anticipated.  You would think that $2B would be used to pay down the state’s debt, but no, the Governor will use it to reinstate programs he had cut, saying the cuts were onerous.  Republican leaders say that the rising tax revenues indicate that renewing taxes increases are not needed.  Brown says that he wants to balance the budget with a combination of tax increases and spending cuts.     
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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 April at 1,772 active land listings, up 55 land listings, or 3.20%.  It would appear that the gradual recovery has encouraged some owners to try and sell their land. While inventory is rising, prices are not, in fact, price action still is very soft and could go lower.  The general economy does not have a direct effect on land, but an indirect one.  In a normal recovery, housing would be leading the recovery which would eventually put pressure on land prices as the home builders come back into the market to buy inventory to build.  Obviously, this is not happening in THIS recovery due to the complete mess the federal govt has made of the housing market.  When an investment goes bad, someone, sooner or later, has to take a loss.  The Obama administration has tried hard to eliminate this economic truth, but point in fact, all they have done is drag out the pain in the housing market.  For political reasons, the administration is doing their best to shift losses from individuals (where it belongs) to banks and lenders.  At the current rate of draw down in the bank’s REO’s, we have at least 3 more years (see AV Foreclosure Activity above) of the current housing market.  Banks have control of the housing supply and thus the overall market.  If land supply does shrink down to the 1,500 area, that would indicate seller pessimism, with many giving up and taking their property off the market.  As it is now, with generally good news on the economy coming out weekly, many land owners are taking another shot at selling.  If owners “market price”, they have a chance of success.  Pricing is the key to get land sold in this environment.
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Supply numbers in perspective:
Supply change vs. last month:   + 3.20%             
Supply change during 2011:      + 9.38%     
Supply change year over year:    + .96%
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Supply at end of Apr 2011: 1,772
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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)
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Demand- April demand (40) was down 1 sale from last month, or statistically no meaningful change. It was the second straight month of 40 +  sales, numbers  not seen since Jan (68) and Feb (50) of 2008. In early 2008 the market was in a full price decline.  As early as mid-2006, I was urging anyone that would listen to sell their “generic” acreage, that its value was headed much lower over the coming years.  By “generic” I mean acreage that is easy to replace, not key locations or sites.  Point in fact, almost all acreage that was being held for investment purposes should have been sold in 2006 and 2007. So, in hindsight, April was another solid month within the overall context of a Bear market.  Price action is still very weak, as evidence by the median price of all active listings, which fell $4,100, or -10.3%, versus March, the prior month.  For just one month, that is a huge move downward as for months, it held around the $40,000 area.  Year over year the median price of all listed land has fallen - 27% from $49,000 (April 2010) to $35,700 (April 2011).  To be objective, sales volume (demand) has improved in 2011 vs. the prior two years.  In 2011 we are averaging 37 sales per month.  In 2010 that number was 31 and in 2009 it was 27 sales per month.  This is good, but it will take a lot more than 40 sales per month to begin to move prices up.  Before land prices can begin to strengthen, liquidity must return to the housing market.  In the Antelope Valley housing market, entry level type homes are the only part of the market that is active.  Mid-range trade ups and higher end homes are dead in the water.  The reason? Those that wish to sell and trade up, cannot because they are upside down and/or refuse to sell for a loss. This has a housing market, as a whole, stagnant and dead in the water.  It is amazing what one can buy in the AV housing market for $500,000.  The home would be $1.5M or more in the Los Angeles area.     
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California Housing News

Notices of Default down……….Foreclosures Up
According to DataQuick, the number of California homes going into foreclosure in Q 1 fell -2.2% versus Q 4 of 2010.  Q1 had the fewest “notices of default” since Q 2 of 2007.  While good news, DataQuick says that it is near impossible to decipher how much of the decline is due to market factors versus strategic decisions made by lenders.  Lenders and servicers have put various holds on the foreclosure process while they work on procedural issues and respond to regulatory and legal challenges (Washington DC).  While notice of default declined, actual foreclosures increased 21.5% vs. Q 4.  ZIP codes that have median home prices of below $200,000 saw foreclosures rise +22.6% vs. Q 4 and rise .5% vs. Q 1 of 2010.  In ZIP codes where the median home price is $800k or higher, foreclosures were up just +7.7% vs. Q 4 and +2.2% vs. Q 1 of 2010.  

Existing Home Sales

The California Assoc. of Realtors is reporting that existing home sales in California, for March, rose
+3.1% vs. February, the prior month, and +1.5% over March 2010.  Statewide the median price of a
home in March was $286,010, up +5.4% vs. February.  Year over year though, that number is down - 4.9%.  Market share of distressed sale homes in March was 51%, down 5% from February. 

As reported by San Diego based DataQuick, southern Cal home sales are off to a slow start in 2011.  After the Q 1, this is what DataQuick is reporting:

- sales are 20% below the norm in the So Cal region
- sales in March were up 35% vs. Feb, but were down -5.2% vs. March 2010
- median price of a southland home is $280,500, down 1.6% vs. March 2010
- 7.8% of all purchases were made with adjustable rate mortgages
- 15.9% of all purchases were made with Jumbo loans, above $417,000
- 36.4% of all sales were foreclosure resale’s
- 18.5% of all sales were short sales
- 26% of all sales were made by investors
- 30.5% of sales were cash purchases
- 32% of sales were FHA insured loans
- 19.2% of all sales were for $500,000 or more
- 3.2% is the flipping rate, homes bought and resold within 6 months

DataQuick puts the blame on a fussy mortgage market, slow job growth, and a continued “wait and see attitude” by both buyers and sellers.  DataQuick officials say that 2001 is off to a slow start and that it doesn’t look like it will change anytime soon.  In the short run, two things that could change the current outlook would be a surge in job creation or another round of price corrections.  Going forward, DataQuick says that the key to housing sales is mortgage availability.

Statewide Building Permits
In March, 4,130 permits were pulled statewide, up + 69% vs. February, and + 9% vs. March of 2010. Statewide, permits for multifamily units are dominating construction as they are up 82% vs. one year ago and up +113% vs. Feb, the previous month. 

Los Angeles County Permits
Permits in March were up +74% vs. the same month in 2010.  Permits county wide in Q 1 were up + 17% vs. Q 1 of 2010.  The increase was driven by condo and apartment construction, as permits for SF homes were actually down - 23.7%. 

Building permits, statewide, county, and in the Antelope Valley, still clearly reflect the excess supply in the existing home market due to the high rate of foreclosures and overhang of supply.


May/June 2011

California Housing News

Foreclosures

On May 26th, RealtyTrac released data that shows that 45% of all sales in California and Arizona are foreclosure sales.  In addition, when a bank sells a home (REO), it sells for an average of 35% less than a comparable property.  In Las Vegas, 53% of all homes sold are in some stage of foreclosure. Nationwide, RealtyTrac says that there are 1.9M distressed properties and that it could take 3 years to “burn” through them.  A spokesman for RealtyTrac said, “This is very bad for the economy.”

Southern California Housing

In the 6 county southern California area, existing home and condo sales were down in April, both vs. the prior month and year over year.  Versus the prior month, March, sales were down -5.5%; year over year, versus April of 2010, sales were down -9.2%.  Southern Cal home resale’s have now fallen, year over year, 10 months in a row.  It was the weakest April since 2008.  In April, the median price of a So Cal home was $280,000.  That is down fractionally vs. March, but down -1.8% from April of 2010. The median price bottom for a southern Cal home was $247,000 in April 2009, with the high point coming in mid-2007 at $505,000.  Foreclosure sales made up 33.9% of all sales in April.  In March, that number was 36% and 36.4% in April 2010.  Short sales made up 17.8% of April sales.  Investors were 25% of the buyers, and “all cash” buyers accounted for 31% of all sales. 

Antelope Valley Existing Home News
Information from SOCAL & GAVAR

Foreclosure Inventory

Here are the most recent foreclosure supply numbers.  The below numbers represent current and future supply of distress home sales.  It is these homes that have depressed market values and have caused the current market weakness.  Home values, and the real estate market in general, cannot rebound and trend upward until this group of homes is reduced to its historical norm.  For this reason, this is THE most important category to track in regard to the progress of the recovery.

Palmdale- 3,429 homes in, or about to go into foreclosure, or bank owned April versus prior month:  up +175 homes or  +5.37%   April 2011 vs. April 2010:  down -516 homes or  -13.07%  

Lancaster- 3,123 homes are in, or are about to go into foreclosure, or bank owned April versus prior month:  up + 221 + 7.61%. April 2011 vs. April 2011:  down 576 homes or -15.57%. 

April summary:  The longer term trend is still down, as year over year inventory is down about 14% for both cities combined.  However, in the near term (April), inventories rose in both cities by an average of about +6%. If we look at the longer term trend, which was down 15% over the past year, and assuming that 15% decline in inventory annually, it will take 5-6 years to reduce the inventory to historically normal levels.  It would be at that point that homes would once again sell on normal supply and demand basis.  Of course, if home sales improve, that 5-6 years could be brought down.  The issue though is two-fold; at what pace will homes sell in the coming months, and how many more homes will become REO’s, increasing supply.  The two forces of supply and demand have been battling it out since the crisis began, and thus far, the supply of REO’s has been building up faster than the market can resell them.  Perhaps if banks would release more supply onto the market, instead of holding them back, we could come to a faster resolution. 

Here is the problem:  only 23% of all sales in the AV are traditional, and even those are at greatly depressed prices.  Low valuations on homes have the trade up or trade out market “locked up”.  Capital in the form of equity cannot move.

Existing Home Market:  In April, median home prices finished as follows:
- Palmdale, $144,500 vs. $143,000 in April 2010
- Lancaster, $140,000 vs. $125,000 in April 2010
- Littlerock, $123,000 vs. $98,000 in April 2010
- Pearblossom, $85,000 vs. $55,000 in April 2010
- Rosamond, $111,000 vs. $107,500 in April 2010
- California City, $65,000, no change
- Mojave, only had 3 sales in April

                                                                                                                                                
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-    330 (AV Building Industry Assoc.)

AV New Home Market

As of April, compared to the first 4 months of 2010, new home building in Lancaster down 58%, and in Palmdale, down 33%.  Builders pulled 60 permits for Lancaster the first four months of this year.  In Palmdale that number was 54.  In the unincorporated areas of the AV, only 3 permits were pulled, versus 86 the first 4 months of 2010.  Home builders are trying to remain positive, saying things like, “We see encouraging traffic trends going through our models”, etc., but the fact remains, that with 3 to 5 years supply of bank owned properties still overhanging the market, no major recovery in new home sales is eminent.  Existing homes can be 30% to 40% lower in price, and that can overcome a lot of objections re: a burned out front lawn etc.  When a building permit is pulled, the builder must pay all regulatory fees due to the city, i.e., park fees, traffic, sewer, water, drainage etc., which can total $30,000 to $40,000 per home.  This is why builders are in the go slow mode, breaking ground on a new home only after it is under contract.  There is no phase building in this market.  The building permit numbers above were released by the AV Building Industry Association.

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Antelope Valley Aerospace & Defense

Inside the Pentagon’s budget is $197M for research and development of a new long range bomber to supplement existing bombers, the B-52 (1950’s & 60’s), B-1 (1980’s), and B-2 (1990’s) bombers. An Air Force official said that the aircraft would have “long range strike” capabilities.  A production run of 80-100 planes is possible.  Most important to the Air Force is that the bomber fleet be much larger than the 20 B-2’s that are currently in service.  Air Force officials say that the B-2’s low numbers make it troublesome and expensive to maintain.  The Air Force now has 66 B-1’s, 20 B-2’s, and 85 B-52 bombers.  There is no word yet on the “full life cycle” cost of the plane or who or where it will be built; it’s still just too early in the program for that type of information to be available.  While Plant 42 is home of the Big 3, Boeing, Lockheed Martin, and Northrop Grumman, all 3 have assembly plants in other states as well.  In the Reagan years, when lawmakers argued for the B-1 to be built, it was said that the B-52 was older than the pilots that flew them.  Obviously that is still true, built rehabbed and updated, the B-52 is apparently still useful. 
                                       
Solar & Wind Energy News

With 300 days of sunshine a year, solar energy is growing rapidly in the Antelope Valley.  Lancaster officials estimate, that alone for their own city, $140M of investment in solar projects has taken place.  This includes homes, commercial businesses, schools, and medical facilities.  Here are some of the participants and the megawatts they are producing.
- Antelope Valley College, 1 megawatt
- the high school district, 9.6 megawatts
- Lancaster School District, 5.8 megawatts
- Eastside School District, 1.8 megawatts
- Kaiser Permanente, 1 megawatt
- eSolar, 5 megawatts

In addition, in the Antelope Valley as a whole, projects totaling 8,000 megawatts are proposed, enough to power between 1.6M and 2.4M households.  Palmdale’s projects are located at:
- 40th St East & Ave M, 5.5 megawatts
- 110th St East & Ave O, 1.5 megawatts
- 90th East & L-8, 3 megawatts
- 90th East & M, 20 megawatts  
- 70th East & Pearblossom Hwy, 5.17 megawatts
- 60th East & M, 160 acres, 20-26 megawatts

If you missed this story from last month, The City of Lancaster  announced a proposed partnership with solar energy firm, US Topco Energy Inc. of Taiwan.  Approved by the City council on April 12th, the partnership will focus on building large scale electric generating facilities.  The goal of the City is to help US Topco sell their electricity on a commercial wholesale basis; the City in return would reap revenues from the effort through the Lancaster Power Authority.  The overall goal is to create a new, reliable, and consistent income stream for the City.  The Lancaster Power Authority would act as the lead agency in the environmental process, attract public financing, and to use its power of eminent domain to acquire the needed land.  City officials are hopeful, that eventually, Lancaster will be the first City to offset all of the city’s use of electricity.  The first step in the partnership is for the LPA to find potential funding and a buyer for the electricity.  Location and megawatt size of any future plant has yet to be determined.   US Topco officials say that they are hopeful that Lancaster will become a base of operations for other like-minded renewable energy companies for research, development, assembly, manufacturing, sales, and marketing that will be used by other.  For solar companies, Lancaster and the Antelope Valley are attractive, providing sunshine 300 + days per year, cheap land, transportation (Fwy, rail and air, Fox Field), and close proximity to Los Angeles.

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Antelope Valley News
                                                                                                                                                                      
May 4- The City of Palmdale announces, that if necessary, the City will file a law suit against the Cal High Speed Rail Authority to safeguard their route that would bring the train through the Antelope Valley, with a station at Palmdale.  In 2004 the Cal High Speed Rail Authority announced that it would forego the Fwy 5/Grapevine route in favor of the AV route.  In April though, the Authority announced that it was going to reexamine that decision, which puts the AV route in jeopardy.  Tejon Ranch developers have strongly come out in favor of the 2004 decision, saying it is already well known that the Fwy 5 route will be more expensive and leave out one of the faster growing areas in the state, the Antelope Valley. 

May 9- California receives another $300M from the Federal govt for its high speed rail program. The money became available when Florida canceled their rail line.  The Florida money was divvied up among nearly 2 dozen different projects around the country.  Oddly, or perhaps not, a lot of the money went to Amtrak lines, slower moving trains.

June 3- Palmdale City officials are threatening legal action against California’s High Speed Rail Authority for the misuse of $700,000 in stimulus funds that will be used to restudy a route, Interstate 5 over the grapevine, that had already been rejected in 2004 by the Authority.  The City is demanding a response by June 10 and will sue unless the study is halted.  Palmdale says that Stimulus funds are intended for actual construction of the rail system, not for studying potential routes.  The re-evaluation of the route has Palmdale officials worried, since they had thought this issue was settled in 2004, and since, have planned city transportation projects in anticipation that Palmdale would be a station stop.  There is also the potential tie-in of the high speed rail with Palmdale’s Air Terminal and the proposed route that would connect Palmdale and Victorville (Fwy 15).      

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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 May at 1,793 active land listings, up 21 listings (+1.2%) from April.  On a broader scale, supply has been in a range of 1,600 to 1,800 since January 2009.  For the foreseeable future, I expect this range to continue.  Sales are not strong enough to draw it down on its own, and the general real estate news is not good enough for large number of sellers to come back into the market.  So, like a “tug of war” that has no clear overpowering force to decide a winner, we will be in this range for quite some time.  Supply is not the real factor that moves the market; it only reacts to it.  Price is the most important factor, and until more brokers and sellers get serious about listing and selling at 2011 market values, and not 2006 values, the majority of listed properties will be overpriced, which is a contributing factor to stagnating sales.  Granted, investors are nervous and times are tough, but you would be surprised how fast investors can find money when the right deal comes along at an attractive price.  These monthly moves in Supply, up or down 50 to 100 listings per month, have no real impact on the market nor are they meaningful.  The important message will come from supply side when we have a dramatic change.  That dramatic change, be it up or down, will be giving us a message, a message that warrants our attention.  I would expect supply to contract further as more sellers give up and take their property off the market, but that remains to be seen.  Many could opt for market pricing to get their land sold.  Probably we will see some combination of both.  For now, I do not expect any such dramatic message soon.  With AV banks holding 3-5 years of REO’s, I do not expect any major trend changes for years.
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Supply numbers in perspective:
Supply change vs. last month:    + 1.2%             
Supply change during 2011:      + 10.67%     
Supply change year over year:    - 1.75%
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Supply at end of May 2011: 1,793
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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)
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Demand (monthly sales) for May came in at 28, which is down 12 sales (-30%) from April.  Year over year, May 2011 vs. May 2010, was up 6 sales this month, or +27%.  These percentage moves sound large, but since we are dealing with small numbers, they are not statistically significant.  Remember, in the years of 2004 to 2006, we were putting up 150 to 250 sales per month.  Month over month, median land prices were down -1.96% and year over year, down -22%.  In the context of this Bear market, would a month of 60 sales have any real meaning?  Yes, to the extra 30 sellers that were able to sell their land, but not in the current trend which is primarily determined by the supply and need for housing.  With an over-supply of distressed housing, there is no fundamental reason for builders to begin buying land at this time, and that is the real factor that will eventually turn this market around.  Bear markets do create opportunity, but having the money and the patience in this environment is the challenge.  Using median land prices, we still have a weak pricing environment.  The lack of clarity as to how long the housing mess will continue is why prices are so low.  If one buys land now, being conservative, one should plan on a 5-10 year wait until the housing and land markets return to historically normal supply and demand fundamentals.  The market could heal faster, if the government gets out of the way, but even that cannot happen until after the 2012, as this President has made government the tool to fix everything, which of course we all know is folly.

 


- Frank Donato, Second Quarter 2011

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