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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Third Quarter 2003 AV News Briefs: July August September

July 2003 - AV News Briefs:

Antelope Valley News Release - July 1, 2003

LAWA Hires Marketing Exec for Air Service
Los Angeles World Airports has hired Mark Thorpe as director of air service marketing for LAWA's three commercial airports: LAX, Ontario, and Palmdale. Thorpe's primary job will be to balance international and domestic service at LAX, increase service at Ontario, and resume commercial service at Palmdale. LAWA officials say that Thorpe has significant aviation and marketing experience. Thorpe has helped airports in Atlanta and Philadelphia with their air service marketing and also helped UPS in it's successful bid to gain access to China. Thorpe will also be responsible to monitor and interpret complex FAA regulations and monitor federal laws, which includes bi-lateral treaties between the US and foreign countries. LAWA's long-term goal is to regionalize passenger and air cargo service, meaning they want to disperse air traffic around the county to relieve congestion, both in the air and on the ground.


Antelope Valley News Release - July 14th, 2003

Watch-n-Wager at New Fairgrounds in Lancaster to Open
The Watch-n-Wager, located at the new Fairgrounds on Ave H, just west of the Fwy. 14, will open Wednesday, July 16th. Called The Turf Club, the opening will be "soft", with a grand opening ceremony held on July 23rd, which is also opening day at Del Mar Racetrack. The facility will be 18,000 sq feet. The facility has over 100 screens/TV monitors for satellite wagering at horse tracks around the country. This year's annual Fair, held around Labor Day, for one last time, will be at the old Fairgrounds on Ave I and Division Street. The new facility will have individual seats with personal screens and Internet hookup capabilities. There will also be a large restaurant, a bar area, and a smoking patio.


Housing Market:


City Ranch area: Anaverde by Empire Land and KB Homes is moving forward as the grading has begun. The first 400 acres will consist of 450 homes on varying lot sizes. Prices will start at $135,000 and top out near the $350,000 level. There are five homebuilders for the first phase: KB Homes, Beazer Homes, Forecast Homes, Western Pacific Housing, and Richmond American. Empire plans to create a residential-commercial core that is pedestrian friendly- wider sidewalks, narrower streets, and garages that face alleys behind homes. Lot sizes will range from 4,000 sq feet to 7,200 sq feet. The first school is being renegotiated and will be part of the Westside School District. When completed, the entire master planned community will consist of 5,200 homes.

Here is a story that a client told me, that I found amazing. My client's friend sold an 800 sq ft home in Burbank. The lot size was 50' x 150'. He sold it to a builder, who then tore it down to build on it. Price paid was ...$510,000. That is a lot of money for a 6,250 sq ft lot! This is one reason why our home market up here is doing so well...buyer’s in nearby markets are being "priced out" of their market, and pushed up here.

Eliopulos Construction, a long time homebuilder in the AV, says that they will close escrow (sell) on 28 homes in July. EC also says they see no signs that the new home market is cooling off. Neither does anyone else.

Land Market:

This month I am going to address the subject of market value. There are two basic types of market values, i.e. types of land, in the AV: investor properties and developer properties. Developer properties are parcels that a residential, industrial, or commercial user will buy to build out. Developer parcels have all of the necessary requirements to be developed: access, utilities, the desired size, etc. Investor parcels will lack many or all of these features, and thus cannot be economically developed.

The market value of an investor parcel is determined by only one thing- the price an investor is willing to pay to tie up his money. Developer parcels, because they can be turned into a finished product and resold or creates an income stream (i.e. a business), are worth more to a developer than to an investor. End users add value to a property by building it out. For this reason, developer type properties will sell for higher prices than investor parcels. Presently, this is why land values on developer residential parcels have sky rocketed over the past year- homebuilders are here in force bidding against each other. This explanation leads us into why many land listings never sell: many are investor parcels that have developer prices, meaning they are over priced in relation to the properties utility.

An investor should never pay a developer price for their land. A good land investment strategy is to find a "developer parcel", or a parcel that is almost a "developer parcel", that is "investor priced". If one can do that, one has a much better chance of re-selling their land for a profit.


Supply closed out June at 1,755, down 1.4% from the previous month of May (1,780). This is the lowest level since March of 2002. At that time though, supply was rising, now it is falling. Strong demand is now beginning to draw down supply. This is a process that will be slow and gradual, and will not move in a straight line. Over the ensuing months though, I do expect to see the supply number work it's way lower. Buying pressure is beginning to over take supply.


Demand: June, at 119 land sales, was another month that was stronger than the previous month. Compare that number to June of 2002 (47), and you can see just how much stronger the market is today, vs. 1 yr ago. This year, each succeeding month has had more land sales than the previous month. That is a definition of a rising trend. On a short-term basis, I am a bit concerned that this market could show signs of exhaustion- meaning that buyers will back off from the higher prices, which will result in fewer sales. If that does happen, it would only be a temporary, as the market consolidates the big move it has had over the past year.

Summary/Forecast:

Rising land sales, falling supply, and rising prices; sounds like a good definition of a bull market to me. Not every area of the AV is experiencing rising prices. Based on volume, I am calling April of 2002 as the beginning of this bull market in land. If you are interested in getting into this market, the sooner you call me the better. Not that I will rush you into our market, but the sooner I know your buying criteria, the better. As this market ages, it will get harder and harder to find good values. When I talk to homebuilders, they tell me they see no evidence of their sales slowing down. Residential agents tell me that resale supply is tight, which obviously favors home sellers. The housing market cannot slow down until supply begins to exceed demand. Based on current conditions, we are nowhere near that point.


- Frank Donato, July/2003

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

August 2003 - AV News Briefs:

As a by-product of the strong growth in the AV, the Lake Los Angeles area, due to a 16% increase in enrollment last year, is getting a new elementary school. Saddleback Elementary School will be built on 10 acres at the cross streets of 150th St East & Ave N-12. Construction is expected to begin in Jan of 2004, with completion slated for June of 2005


Saying, "Times demand that we change", Los Angeles Mayor James Hahn has put forth a $9B proposal to improve security and efficiency at LAX. The plan also includes revamping gates to accommodate larger jets, reducing the overall number of gates, reconfiguring runways, and limiting the number of travelers to 79M per year. One of the over all goals of the plan, is to spread out air traffic among other smaller airports. "Other smaller airports" is a direct reference to Ontario and Palmdale, also owned by Los Angles World Airports.

LAWA has a joint agreement with the Air Force to allow 50 operations per day at the existing Palmdale Regional Air Terminal. Palmdale last had commercial air service in April of 1998. LAWA has already spent $1M rehabbing the terminal and has hired a marketing firm to recruit one or more airlines. Mayor Hahn fears that failure to modernize will result in LAX losing its status as an international gateway. Hahn has the support of Jack Kyser, chief economist of LA County Economic Development Corp.


DreamWorks Productions, a movie studio headed by Steven Spielberg, has a construction crew of 100, building a set inside of site 9, Plant 42. Site 9 is located near 30th St East and Ave P, and is the site abandoned by SR Technics. DreamWorks has leased it for the shooting of a romantic comedy called "Terminal", which will star Tom Hanks and Catherine Zeta-Jones. The crew is building a huge airport terminal inside site 9. Actual filming is scheduled to begin on Sept 30th. As many as 600 "extras" per day may be needed for the shoot. The film should be released in 2004.


Palmdale's new Sam's Club, on 10th St West at Ave O-8, is progressing on schedule and should be open by August 27th. Over 5,000 people have put in applications for $8-$10 per hour jobs at Sam's Club. Sam's Club is located just 1/2 mile north of the 1M sq ft AV Mall. The west Palmdale Wal-Mart, now located in the Promenade, on Ave P, just east of the Fwy 14, will relocate to the Sam's Club center. Wal-Mart will reopen this store as a super Wal-Mart, offering groceries as well.

Trader Joe's, under construction in west Palmdale, at the Armagosa Commons, on 10th St West, will be open for the holidays. Trader Joe's, at 12,000 sq feet, was the last of the major tenants to sign on at the "Commons". Other retailers include: PetsMart, Shoe Pavilion, Dress Barn, TJ Maxx, Bed, Bath, & Beyond, and Circuit City, which is moving in from Lancaster. Only a few smaller spaces are available for lease in the “Commons".

Anecdotal evidence is pointing the way for Kohl’s Dept store to open up in the new Sam's Club shopping center, at 10th St West & Ave O-8. While Kohl's is not confirming the move, the site plan for the center is being modified to specifications that meet a specific set of criteria that Kohl's demands for any of their new stores. Kohl's is an upscale dept store that emphasizes value pricing. The new Kohl's would be in the area of 90,000 sq feet. The AV far surpasses Kohl's minimum demographic requirements, with a median household income of $63,000. Kohl's requires at least $40,000. Kohl's has 7,000 employees and 450 stores nationwide.

A low income senior housing project, called Aurora Village I, just south of Ave J-8 on 15th St West in Lancaster, is proposing to build 140 more senior housing units, next door, which is the SE corner of 15th W & Ave J-8. Aurora Village II would be a 3-story building with an interior courtyard. The developer says he has a waiting list of 100 for Aurora Village II. The 135-unit Aurora Village I, opened in 2001, and took 4 months to fill up.

The Southern Cal Assoc of Govts is asking city officials of Victorville, Palmdale, and Lancaster if they are willing to grant more residential density in exchange for more roads, parks, and school and water money from the state. SCAG is looking for places where Cal can grow. Palmdale's general plan, which includes 103 sq miles, can accommodate 58,000 more homes, for a total population of 450,000, when completely built out. Lancaster's general plan includes 94 sq miles, and could take on 58,500 more homes, with a total population of 490,000, at full build out. SCAG says this is far short of the 600,000 new homes that So Cal will need by the year 2030. To accept such growth, Palmdale and Lancaster would have to change their general plans. Between now and Jan 2006, SCAG will be holding public meetings to gauge public opinion on this issue. Comment: With 3,400 sq miles in the Antelope Valley, both cities could annex more acreage as needed. East Palmdale has 1,000's of industrial acres that could be rezoned to residential. Lancaster could reduce the number of acres in the Fox Field Specific Plan area, which right how approaches 6,000 acres.


The Turf Club, the Watch-n-Wager at the new Fairgrounds, held a soft opening on July 22nd. The Turf Club is 23,000 sq feet and has a seating capacity of 200. Turf Club officials expect to do $20M a year in off-track betting, of which 2% goes to the AV Fair board to help put on the annual Fair. The balance of the new Fairgrounds will be ready for next years Fair-August 2004.

You may recall from a previous newsletter, that homebuilder and developer, Andrew Eliopolus, had his 90-unit apartment complex in Rancho Vista voted down by the Palmdale City Council. Eliopolus has filed a claim for damages with the City of Palmdale in excess of $2M. The City Council voted down the project, even though the property is master planned for apartments, and even though the planning commission approved it. Public pressure from residents in the Rancho Vista area was the reason the City Council voted it down.

Defense News: Ronald Reagan, who as President, authorized the building of 4 "Nimitz class" aircraft carriers, has now had one named after him. The USS Ronald Reagan was commissioned (put into service) at the Norfolk, Va. shipyard on July 12th in a ceremony attended by 20,000. The ceremony was covered by the Fox News Channel. The USS Ronald Reagan is 20 stories tall and can go 20 years until it needs refueling. It will carry a crew of 6,000, 80 planes and have a life expectancy of 50 years. The flight deck of the USS Ronald Reagan is 4.5 acres. A plane landing at 150 mph will come to a stand still within 400 feet.

As President, Reagan strongly believed that "maritime superiority" was a must, and that, "We must always be prepared, so that we will always be free". Reagan believed in "peace through strength", and with 90% of the world's population living within 200 miles of the ocean, the USS Ronald Reagan would help achieve that goal with the 11 other Nimitz class carriers. The USS Reagan will take 5 weeks to make its way to San Diego, from where it will be based. Currently, the USS Ronald Reagan is the only ship named after a living President. That may change, as the last of the Nimitz class carriers, now under construction, will be named the USS George Herbert Walker Bush. George Bush senior, as an 18/19 year old, flew 46 missions off of US carriers in WWII. He was shot down twice; once being pulled out of the ocean by a US submarine.


In late July I took my kids to Sea World in San Diego. While I was buying a stuffed Penguin for my 2 yr old, in a gift shop, the man was next to me struggling to count the proper change for his purchase, also a stuffed penguin. The man remarked to the sales clerk, "I don't know how to count the coins in my hand." The sales clerk looked puzzled, so I intervened to help and told the sales clerk, "He is a foreign visitor, he is not familiar with US coins". I then asked the man, "From what country are your visiting?" I expected him to reply with a Middle East country, but I did not expect him to say, "Iraq." Knowing what this man, his family, and country had been through the past 30 years, a chill went through me. It was almost like meeting a holocaust survivor that sense that you looking into the face of history. Immediately, I patted the man on the shoulder and said, "congratulations." The man knew, without explanation, that I was of course referring to the liberation of his country by US forces. He smiled broadly, and began nodding his head in agreement, saying "thank you, thank you". Then, thinking that a pat on the shoulder was not good enough, I grabbed the man's hand and shook it vigorously,
and repeatedly said, "Congratulations".

As we walked out of the gift shop together, I took him over to meet my wife, who was waiting for me. My wife was amazed to meet someone from Iraq so soon after Saddam's removal. It costs a small fortune to travel globally, especially in terms of Iraqi wages. The man told us he was here with 12 other Iraqi's competing in an archery tournament. He then pointed to a group of men standing nearby. I remarked to the man, "George Bush must be very popular in your country." The man said, "Oh yes!" The man then said, by traveling in the US and seeing how Americans live (their standard of living), "We want the same thing." I told him that all Americans were pulling for them to make it. He was very grateful and happy. We then parted. You will never convince me, WMD or not, that we did not do the right thing in removing Saddam's regime. This incident did not shape my opinion on this issue it only reinforced it. Most of us were very fortunate to be born into freedom. We were born into freedom because previous generations were willing to pay the price to maintain that freedom and pass it on to us. Who knows what terror or future disaster has been avoided by the removal of Saddam.


On August 1st, Northrop Grumman rolled out it's first production model of the Global Hawk, an unmanned surveillance plane. The Global Hawk flies a pre-programmed mission, and is equipped to carry munitions as well. Northrop Grumman has a contract to build 7 per year, for a total of up to 50, for the Air Force. The US Navy has also ordered 2, with the Coast Guard also considering it's use. Australia and Germany have expressed an interest in the Global Hawk as well. The Global Hawk is built at Plant 42 in Palmdale. The Northrop Grumman facility, at Plant 42, can produce up to 24 Global Hawks per year, if necessary.

Housing Market: Nothing has changed from last month, nor is it likely to over the next several months. Every residential agent I talk to, echoes the same sentiment, "supply is tight, and resale home prices keep going up". Even veteran agents and brokers of the housing market, just shake their heads in disbelief as prices keep marching upward. New homes, which have the ability to create new supply, have strong sales as well. This is going to go on until something changes the current supply (thin) and demand (very strong) ratio.

Here is an example of what I m talking about. This story was relayed to me by a Coldwell Banker agent. A 1500 sq ft home in east Palmdale, that she had listed, received 9 offers. The home sold for $5,000 over full price. One would have to think, that, as new homes are sold into the resale market, at some point in time, supply will exceed demand and this market will rest or pull back. But when will that be? Right now, with the power this housing market exhibits, we are not there, nor likely to be, for months, perhaps years.

When new homes are built, the supply will hit the market in phases. The timing of new housing projects is all different, so future supply will hit the market at different times. This is good because it gives the market a chance to absorb new supply before more new supply hits the market. For now, this market is strong and will be so for the foreseeable future. Nation wide, the housing picture is about the same, as new home sales rose in June by a record number.

Brokers and agents in the Rosamond market, say that they are getting play from both the Palmdale-Lancaster and Bakersfield markets. Homebuyers in the Rosamond market are coming from both areas. Although the Rosamond market does lack the wide range of home choices, home prices are considerably lower, and with that, property taxes are lower too. More choice is on the way for the Rosamond market. The McRae Co. is preparing to build 250 homes on Rosamond Blvd, near 40th St West. Moreland Consulting, a Bakersfield engineering firm, say they have half a dozen projects they are mapping for the Rosamond area.

A new Jack-in-the-Box is being built in Rosamond, at 25th St West & Rosamond Blvd. It will be a prototype restaurant, including a CITGO gas station, and should be open by the end of September.

From June 2002 to June of this year, median home prices have risen in Rosamond 18.6%. In the same period, west Palmdale home prices were up 11.8%, and east Palmdale up 17.3%. West Lancaster home prices were up 13.2%; with east side Lancaster up 28%. East side home prices, which lagged badly when this housing boom kicked off, are now catching up.


Land Market: Why do we invest in land... to make money, or collect parcels? It is OK if one wants to collect parcels. Collectors enjoy holding their land as the market moves up. Holding an asset in a rising market makes one feel smart. Some of these collectors think they will be able to sell their land before the cycle tops. The reality is, that most collectors will get stuck with their entire inventory as the market heads lower. And, as fate would have it, some dire personal need will come up, probably when the market is weak, that requires that they sell one or more of their parcels. As I have told clients many times...the market rarely cooperates with sellers that have to sell.

For those that have the primary motivation to increase the balance in their cash accounts, I have this word of advice. Do not fall in love with your land. The investors that I know, that are successful in this business, are always looking for selling opportunities as well. Do not be afraid when you sell your land that someone else might do better with it. Do not try and squeeze every last dollar out of each and every parcel. Some parcels are special, and should be held. I am not against land banking, but it must be done intelligently. Most parcels should be sold when the opportunity arises.

Selling opportunities, sometimes, can come up much faster than the seller anticipates. Example: those that bought land in 1988 had a great selling opportunity only one year later. As it turned out, 1989 was the best selling opportunity out of the next 13 +years! I can’t tell you how many times over the past 10 yrs I heard investors tell me they didn't sell because they didn't need the money. Do not worry about what to do with the proceeds if you sell. We can always figure that out later. If you have to, you can put the proceeds in a bond fund or a CD while waiting for another opportunity. If you are a cash seller, we can do a 1031 exchange into another piece of land, and defer paying the taxes. There will be other deals that present themselves. Some will be better than what you previously sold; some may not. One thing that 20 + years in real estate has taught me, is that, there will always be another deal.

Being a seller as well as a buyer is actually a conservative and defensive strategy, and forces a discipline upon oneself (not get over invested). For most of us, the original purpose of land investing, or investing in anything, is to make money. Try and remember that. After all, it's only dirt.


I have it from a very reliable source, that a view lot in Godde Terrace Estates has sold and closed escrow for $120,000. This was a sale that was outside of our MLS, so it will
not be reported to the real estate community. These lots were developed by the Godde family and sold in 1987 -88 period. Since that time they have been subject to the forces of the resale market. When the market was weak in the mid 1990's, I know that two of these lots actually were bought for under $30,000. Godde Terrace is located in the
general area of 65th St W and Ave M-8. These lots are terraced into the hillsides. Earlier this year, I wrote an offer for $70k all cash on one of these lots. The seller accepted the offer, but the next day, the buyer changed his mind. I tried to convince the buyer that, at the very least, he was making an economic/investment mistake, by not going forward. The buyer would not relent, and canceled. The sale mentioned above, for $120k, might be the highest price ever paid for a lot in GTE.

Is this a good time to be investing in AV land? With a housing shortage through out California at almost epidemic levels, the Antelope Valley, with it's 3,400 square miles, is being touted by many as one of the long term solutions (next 20 years) to California's housing needs.

Supply closed out July at 1,768, up less than 1% from last month. This reverses a 3-month trend of falling supply. On a macro basis, it still appears to me that supply is in the process of being reduced by a market with increasing demand. That trend was interrupted in July, but I suspect will resume as we move into the fall. Trends do not move in a straight line; they are always zigs and zags along the way. If this market is going to repeat it's behavior from the 1988-90 market, and I do emphasize "if", we have a long way to before any signs of excessive speculation show themselves. In May of 1989, which for the most part, was the top of that market, the supply figure was 567. That is not to say we have to go down to that number for a "frothy" market to occur, but we have to get a lot closer than we are now.

Demand: July (87) land sales pulled back a bit. It was the first month below 100 land sales since February of this year. Last month I expressed a concern, that on a short-term basis, the market could begin to show signs of "exhaustion" at any time, as buyers back off from some of the higher prices they are being asked to pay. We could be in the early stages of that exhaustion and could begin consolidating the year's gains. Certain segments of the market need some time to get used to the new higher prices. Consolidation or not, 2003 is shaping up to be a great year.

Year to date, January thru July, shows land sales are up 91% in 2003 vs the same period in 2002. A consolidation is nothing more than the markets way of taking a rest, digesting previous strong market activity. They are a normal part of market behavior, and good, in that, consolidations have a way of extending market cycles. Eighty-seven land sales in one month, is still a very good activity.


- Frank Donato, August/2003

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

September 2003 - AV News Briefs:

You may recall that James Hahn, mayor of Los Angeles, has proposed a $9B upgrade to LAX. Sheldon Plotkin, a member of the Transportation Task Group for the Southern California Federation of Scientists, has suggested, that for $2B, LAX and Palmdale Regional could be linked by a high speed rail line. The train's speed would be 180 mph and get passengers to and from LAX and Palmdale in about 30 minutes. Plotkin says this would make LAX-Palmdale one transportation hub, transferring passengers from gate to gate, at either facility. An interim plan to get this going, would be a fly-away bus system located near the AV Fwy. 14, with the 45 mile rail system eventually replacing the bus system.


The widening of the Ave S corridor is about to begin. Ave S, from the Fwy 14 to 20th St East, will be widened to four lanes. The improvements will bring turn lanes, traffic lights, streetlights, sidewalks, bus benches, bike paths, drainage, and landscaping to Ave S. Once begun, the improvements will take 18-20 months.


Sonora Investments is building a 16,000 sq ft commercial center on 10th St West, between Ave L and Ave M. The center's first tenant will be Sun Country Bank, moving there from their existing site further north on 10th St West. The center, in general, will provides offices and store sites.


Lancaster Mayor, Frank Roberts, in a speech to the AV Chamber of Commerce, touted his city's recent growth achievements: the opening of the Watch and Wager at the new Fairgrounds, a bike path along Sierra Hwy, year to date- approval of 1,900 single family lots- double from this time last year, the soon to begin Fox Field Ave G improvements, and the positive business climate in Lancaster that has created 8,000 jobs over the past 12 years.

On August 14th, Rosamond broke ground on their first school since 1964, Westpark Elementary School on 35th St West, south of Rosamond Blvd. The school will have 5 buildings, 25 classrooms and cost $8M.

On August 21st, AV residents were given the opportunity to comment on LAX's $9B renovation plan which has been put forth by Los Angeles Mayor James Hahn. A public hearing re: LAX's master plan was held at Palmdale Regional Airport. About 85 people, about 1/2 of which were AV residents, showed up for the public hearing. Most of them expressed strong support for the reopening of Palmdale Regional as a solution to thin out LAX air and ground traffic. Hahn's plan focuses on enhancing security and safety at LAX. Hahn has previously stated his support for using regional airports, such as Palmdale, to disperse air traffic through out the county.

On Monday, Sept 15th, just 3 weeks before the recall election, Arnold Schwarzenegger is holding a $250 per plate fundraiser at the new AV Fairgrounds. As of late August, ticket sales for the fundraiser were described as brisk.

Wal-Mart's Sam's Club, in west Palmdale opened up on Thursday August 28th. As of August 25th, Sam's Club officials report they have sold over 15,000 memberships.

It looks like the next stop for Eliopulos vs. the City of Palmdale, will be the courtroom. Earlier this year, in May, Eliopulos had his apartment complex in Rancho Vista denied by the Palmdale City Council. Denied even though the land is master planned for apartments, denied even though the planning commission had already approved of the project, denied even though the Mayor said it was a mistake to do so, and denied even though the City's own attorneys and three land use specialist, advised against the denial. Eliopulos has filed a claim with the City for formal damages, ranging in the million$ of dollar$. The City, predictably, has denied the claim, so the next stop will be the courtroom. The apartments were to be built (and still may be) on Rancho Vista Blvd & Ave O-8.

Housing Market:

Nationally, July housing starts (released on Aug 19th), were the strongest since April of 1986. Again, on a national level, July new home sales were at a record high. However, this reflects closings in July where homeowners already had their interest rate locked, so it does not reflect how home buying behavior may have been affected by the rising mortgage rates of July and August. July new home sales were down -2.9%, but were still very strong as they were at the second highest level on record. Yes, mortgage rates have risen, but the housing market is nonetheless, acting healthy.


Pacific Communities, with their gated Renaissance tract, near 50th St West & Ave N, reports that sales are two phases ahead of construction. This leaves only 15 or so lots left for the last two phases. PC has also told me that they are planning another gated tract along Ave N, from 35th St West to 40th W. That one is still in the mapping stage.


KB Homes has broken ground on a group of new homes on 55th St West & Ave L-12. With a park and school nearby, they should sell well to families.

As of August 17th, year to date, homebuilders have sold 1,161 new homes in the AV. That is an average of about 154 new homes sold per month. If this monthly average holds up the balance of the year, total new homes sold in 2003 will be around the 1,857 level. Last year, in 2002, new home sales were 1,162. This would be a one-year new home sales increase of 59%. As impressive as this is, we still have a long way to go until we approach the record year of 1990, which had 5,000 new home sales.

Wary of the ugly ending the housing market had in 1990, homebuilders this time around are being more cautious. Many are building out their projects in a more disciplined manner, going with smaller phases. In the last cycle (1988-90), when a home builder had a 100 home tract, they went ahead and built them all out in just 3 or 4 phases. Today, a similar 100 home tract may have just 10-14 homes per phase. Builders are leery of the market making an abrupt turn, and getting stuck with unsold inventory. If history and human behavior is any guide, this current strong home cycle will not end until home builders become over confident and complacent with market risk. I see no signs of that happening yet.

Land Market:

Supply closed out August at 1,755, remaining in the mid 1700 range, which it has done since December of last year. Watching the supply is important, because if there is any drastic change, up or down, it will tell us something about the state of mind of the buyers and sellers. If supply were to suddenly enlarge, it could be telling us that demand is falling off in the face of more sellers that want to sell. On the other hand, if supply were to suddenly contract, it would be telling us that buying power is beginning to overwhelm supply. Obviously, to understand what the supply number is telling us, we must look at it in relation to the demand number. Right now, the two have a good balance, allowing for an orderly market.

Demand: August (110) land sales came roaring back from July's pull back (87). Last month I anticipated that the land market could be moving into a consolidation phase, but with August sales moving back over 100, that consolidation could be happening above 100, instead of below 100. Five out of the last six months have had land sales of over 100. Call it whatever you want, but land sales are very strong, and probably will remain so for the foreseeable future.


- Frank Donato, September/2003

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