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 2007 Antelope Valley News: August September


September 2007

Sept 1st- The LA/Palmdale Regional Airport announces, that in the first two months of air service to and from San Francisco, the airport has served 5,043 travelers. The airport has been open since June 7th, offering twice daily flights, in each direction, to SF. In June, passengers totaled 1,271. In July business improved, with 1,772 passengers. The air carrier, United Airlines, uses 50 seats regional jets for the service. Averaging the two months together, and United had 55 passengers per day. Undoubtedly, air travelers are taking advantage of Palmdale free parking and the convenience of using a small airport; no long lines and quick security checks. United is moving up their morning flight to SF, leaving Palmdale at 6AM versus the previous take off time of 10:30AM. If a passenger is transferring to another flight, this allows them to reach their final destination during the same day, in most cases, late afternoon or early evening. It’s a great flight!

Sept 7th- After 3 months of road work, the 10 mile stretch of Hwy 138 leading east from Palmdale to the Fwy 15, has reopened. The improved part of Hwy 138 passes through Wrightwood, goes through the Mormon Rocks area, then proceeds east to the Fwy 15. The improvements include: a new truck lane, wider shoulders to 5 feet, added a 4 ft high median to separate on-coming traffic, and realigned a curve west of Lone Pine Canyon Rd. Caltrans will continue road improvements in the area through November, with some lane closures, but still allowing traffic to pass.

Sept 21st- The highly popular southern Cal food chain restraint, Claim Jumper, receives approval from the City of Palmdale to sell alcohol in their new, soon to be location, inside the AV Mall. Claim Jumper will one of several new restaurants located in the space vacated by Cinemark Theaters, which moved to a free standing location outside the Mall. It has also been reported that the Elephant Bar will also locate in this space. The new Claim Jumper will be 13,058 sq feet and include an outdoor patio for eating outside. CJ could be open by June 2008. CJ has 42 restaurants in Cal, Arizona, Colorado, Nevada, Washington, and Illinois.

Sept 25th- The Lancaster Redevelopment Agency votes to approve $1.9M towards the revitalization of downtown Lancaster. The vote will round out the $6M needed to jump start an already approved project which will begin the process of changing the downtown Lancaster area to a place to live, work, and shop? The first phase of the work will divide up the 14,000 sq ft S & S Furniture store into two parts. S & S willretain 1/2, with the other half becoming two restaurants. It will also create a public plaza downtown for public gathering, socializing, festivals, and other events. New housing is also planned for the area: Arbor Grove, a 150 unit senior housing project, Arbor Court, a 336 unit senior housing complex, and Arbor Gardens, yet another 76 unit senior housing development. This entire redevelopment project is being called the Arbor of Downtown.

Sept 26th- a front page article appears in the AV local paper and reveals that, Monday thru Friday, 64,000 people commute to work, south, down the AV Fwy 14, to parts "down below" (Santa Clarita, San Fernando Valley, and LA). Every morning, Monday thru Friday, the Fwy 14 is jammed pack.

Oct 5th- The Palmdale City Council has approved of a temporary ice skating rink, in the mall, for the Christmas holidays. The rink will be near the site of the old movie theater, with ticket sales almost covering the cost of setting up the rink. The City estimates a net cost to the city of $14,000 to provide holiday skating for Palmdale residents. Officials plan to market it as follows: come to mall to shop, eat, and skate."

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National Housing Market

The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend in sales activity. The following data in on the NATIONAL housing market, and may or may not be in "sync" with the AV housing market.

National Association of Home Builders & Wells Fargo, on Sept 20th, released their most recent survey of Home Builder Sentiment. Down 2 points to 20, which is the lowest reading since January of 1991 when this index was at 19. The number means that only 20% of the builders surveyed, believe that the housing market is good. That of course means that 80% believe it is not good. This index has fallen 16 pts (%) over the past 6 months. "Home buyers are getting spooked by the many headlines they are seeing on the mortgage market issues," said one housing analyst. Another analyst said, "No doubt those problems across the mortgage finance arena are taking their toll on buyer demand." The biggest decline in the survey came from home builders in the west. This home builder sentiment survey began in 1985.

The Case-Shiller Home Index for July, showed that over the past year, homes in 20 major cities fell in value by 3.9%. The year over year decline was the largest in the 7 year history of the index. The largest price declines in homes came in the rust-belt and in the formerly boom areas along the coasts. California has 3 cities in the index: Los Angeles, -4.8%, San Diego -7.8%, and San Francisco down -4.1%. The last time home prices in the index fell this much, it took 8 years for home prices to return to their peak levels. Home sales remain soft and inventory levels remain high, so no immediate recovery in housing is expected. Goldman Sachs says that the latest housing data are on track to meet their forecast of 7% declines in housing prices this year. The effects of the weak housing markets are likely to come next year, with weak consumer spending and declining consumer confidence, said Robert Shiller, which could lead to recession. Shiller went on to say that he "saw no end in sight" of the weak housing market.

Aug housing starts (Commerce Dept), released Sept 19th, falls -2.6% to an annual rate of 1.33M which represents a 12 year low? Starts of single family homes was even worse, falling 7.1% to a 14 year low. Over the past year, housing starts are down -19.1%. In the NE, starts were down the most, down 37.7%; in the West they were down 18.4%; starts in the Mid west were up +4.2% and in the south they rose +11.4%. Most housing analysts believe that we will not see a turn around in the housing market until well into 2008.

Aug building permits, (considered a leading indicator and a signal of future activity) also released Sept 19th, fell 5.9% to an annual rate of 1.307M units, also a 12 year low. Over the past year, permits are down 24.5%. Both housing starts and permits came in weaker than forecasted. As was the case for starts, permits for single family homes was even weaker, down -8.1%, also a 12 year low.

Aug existing home sales (Natl Assoc of Realtors), falls for the 6th month in a row, down -4.3%, to an annual rate of 5.50M. Year over year, Aug 2007 vs. Aug of last year, existing home sales were down -12.8%. Inventory rose to 4.58M which represents a 10 month supply. The inventory figure was an 18 yr high. The rise in inventory was driven by slower sales, not more supply coming onto the market. The median sales price of a home was $224,500, up fractionally from one year ago.

Analysts say that the ongoing credit crunch is hurting closings, as many loans are not funding to allow escrows to close. Existing home sales were down in all four regions of the country. In the NE, they were down -2%; in the West they were down -9.8%; in the Midwest, down -5.2%; and in the south they were down -2.7%.

Aug new home sales (Commerce Dept.), released Sept 27th, came in very weak, falling -8.3% to an annual rate of 795,000, the lowest number since June 2000. The expected number was 825,000, so this report disappointed to say the least. Over the past year, new home sales are down 21.2%. The median sales price of a new home, vs. one year ago, fell - 7.5% to $225,700. On a percentage basis, it was the largest year over year decline in new home prices in 37 years. Inventory of new homes fell -1.5% to 529,000, the fifth straight monthly decline, which in a market that has too much supply, is a good thing. The 529,000 available homes represents a 8.2 month supply of new homes. Unsold completed homes now represent 34% of all homes on the market, a high for this business cycle. In the NE, sales rose + 42.3%; in the Mid west they also rose, +20.5%. But in the sunbelt areas of the country new home sales faltered. In the West they were down 20.8% and in the south they were also down, -14.7%. With a glut of new housing available, sales falling out due to mortgage funding issues, and the negative psychology affecting housing due to falling prices, weakness in the housing market may go the better part of two more years. As one housing analyst said, "People don't like to borrow to buy depreciating assets and lenders don't like to lend on them either." That just about says it all.

July Pending homes sales, released Oct 2nd, falls 6.5%, to the lowest level in more than six years. The index, released by the Natl Asso of Realtors, is now at it's lowest level since it's inception in 2001. Compared to one year ago, pending home sales are down - 21.5% and are down 22% as compared to 6 months ago. In August, the credit crunch had a major effect on closings, as many buyers lost their financing in escrow and could not close on their purchase. Analysts are saying that home prices are still too high and that mortgage availability issues are hurting the housing market. In the south, pendings were down - 9.5%. In the NE, they were down -8.3%. In the mid west pendings were -2.9% and in the west, they were down - 2.7%.

Sept 20th- FED Chairman Bernanke testifies before the House Financial Services Committee, saying that borrowers still face mortgage resets that will cause more delinquencies and foreclosures. Of the 50 basis point rate cut on Sept 18th, Bernanke said, "We took that action to get out ahead of the situation."

Comment: I have seen estimates, that 75% of all mortgage resets are still in front of us. In the present environment, that cannot be good for the housing market.

Sept 21st- According to Irvine, Ca. based RealtyTrac Inc., nation wide, the number of homes in foreclosure rose 36% in August vs July, the prior month. When compared year over year, August 2007 vs August 2006, foreclosures are up 115%. A RealtyTrac spokesperson said, that with mortgage resets now ongoing, that this could be the next "wave" of increasing foreclosure activity. In August, the national foreclosure rate was one filing for every 510 households.

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Housing Market News

Southern California Existing Home Market

As reported by DataQuick, in August, during the ugly part of the credit crisis, the drop-off in jumbo home loans (over $417,000) was hardly a blip. Through August 17th, 43.4% of the southland's home loans were jumbo loans. Southland or southern Cal refers to the 6 counties that make up the southern Cal region.

From August 18 until the end of the month, that number dropped off only to 39.7%, which hardly represents the panic we saw in the financial markets. In August, foreclosure sales accounted for 8.8% of all sales, up a bit from July's 8.3%. In August of 2006 foreclosure sales were 2.2%. Sales in the southern Cal market, new homes, existing homes, and condos, were down in August .6% vs July. Versus August of 2006, sales were down 36.3%. DataQuick says that the median price paid for a southern Cal home in August was $500,000, which is down 1% from July's $506,000. However, vs August of 2006, median home prices are up 2.7% ($487,000).

In Los Angeles County, home sales in August of 2007 vs Aug of 2006 are down 34.4%, however, median home prices over this same period in Los Angeles County, are up 5.8% to $550,000. For the So Cal area, it was the slowest August for home sales since 1992. "Market uncertainty has squeezed out most discretionary buying. Prices appear to be holding steady in expensive markets because sellers can wait the market out. That is not the case in the more affordable areas where we are seeing price declines," said a Dataquick official.

Antelope Valley Building Permits

The Burbank based firm of Construction Industry Research Board has released building permit data for the AV for the first 8 months of this year. Following are some numbers released from the report.

Single Family home permits, 2007 vs 2006 (1st 8 months)

Entire AV SF home permits, -41%

Palmdale SF home permits, -25.7%

Lancaster SF home permits, -52.4%

Unincorporated area SF home permits, -37.1%

Existing Home Statistic from GAVAR

The following average listed price of an existing home comes from the Greater Antelope Valley Asso of Realtors. As of Sept 1st, 2007, the average price of a listed home on GAVAR's MLS was $359,953. One year earlier, Sept 1st, 2006, that number was $407,297. A lot of factors can affect average price, fewer homes for sale at the high end, more homes for sale at the low end due financial troubles of the buyers in that sector, but the statistic does point out, at least to some degree, that home values are falling.

AV New Home Sales Data - as of Sept 23rd, 2007

(source:Frank Donato-Fidelity Title The New Housing Monitor, a Hanley Report)

-New Homes sold year to date - 1,498

-New homes sold since last month, + 373

-New homes selling per day in 2007 - 5.6

-New homes projected to sell this year at current sales pace- 2,048

-New home sales, year to date vs. same period in 2006 (- 2.5%)

-Number of "new home" builders in the AV- 33

-Number of open subdivisions with sales in 2007- 80

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2006 - total of all new homes sold- 2,584

2005 - total of all new homes sold- 4,579

2004 - total of all new homes sold- 2,503

2003 - total of all new homes sold- 1,820

2002- total of all new homes sold- 1,162

1990- total of all new homes sold- 4,900 +

Home builders in the AV (alphabetical order)

American Premier * Beazer Homes * Capital Pacific Homes * D R Horton * Eliopoulos Enterprises * Empire Homes (Anaverde) * Fieldstone Communities * Featherstone Communities * Fieldstone Communities * First Pacifica * Forecast Homes * Frontier Homes * Gibraltar Homes * Grenhill Development * Harris Homes * Hearthside Homes * Heller Development * John Laing Homes * KB Homes * K. Hovnanian Co * .Larwin Co * Lennar Corp. * Matthews Homes * MBK Homes * Mitchell Development * New West Builders * Odyssey Homes * Pacific Communities * Pacific Gateway Homes * Pinnacle Communities * Pulte Homes * Rancho Vista Development * Richmond American * Rising Star Communities * Standard Pacific * Stratham Group * Sun Cal Communities (Ritter Ranch) * Tandis Homes * Trimark * US Home Corp. * Warmington Homes * Western Pacific

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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 September at 3,170 which is up + 1.3% vs last month (August). More important thanthis number, is the fact that supply is not yet falling, but still rising. Supply remains very near all time highs and eventually, when demand weakens also, will be a factor in falling prices. The record for supply in active AV land listings is north of 3,300. We saw those levels in mid 2006. With demand in September falling off - 35% (see below), the time needed to sell all active land listing ballooned from 19 months in August to over 29 months in September. As I pointed out last month, much lower supply numbers are no guarantee of a pending bull market, but they are a prerequisite. When the next bull market begins, we will have much lower supply numbers than we have now, but we could have low supply numbers for years before renewed strong demand kicks in. In terms of time, the peak of the supply strength came in July of 2005, when all land listings could have been sold in 5.6 months. In any market, when supply is too high,it becomes potentially vulnerable if demand were to also fall off. That appears to be happening now.

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Supply numbers in perspective:

Supply change vs. last month: + 1.3%

Supply change, year to date: - 2.8%

Supply in Sept 07 vs. Sept 06: - 3.2%

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Supply at end Sept 2007- 3,170

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Supply at the end of 2006- 3,263

Supply at the end of 2005- 2,264

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

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Why is the supply number important? The market value of all things, eventually, comes down to the basic principle of supply and demand. The supply number helps to tell us the psychological condition of buyers and sellers, by it's change and it's rate of change. In combining this data with the demand number below, we can assess the current status of the land market. When supply numbers approach historical highs and lows, they can also be useful in signaling major turning points. For example, at the peak of the 1988-90 bull market, supply made a low in May of 1989 at 587. In hindsight, May 1989 was at or near the point of peak speculation in our market, as demand over-whelmed supply, drawing it down. The value in following supply, is not in the number itself, but in it's change relative to demand and the magnitude of that change.

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Demand in September (106) falls a whopping - 35% vs last month, August. Since the bull market, volume has had three different months in which volume made serious breaks, meaning that fewer buyers were buying AV land. In July 2005, volume broke it's trend then, falling -32%. Then in July 2006, volume again fell dramatically, down -21%. In both instances, after the break, volume failed to regain it's former stronger trend. And now, Sept 2007, volume fall - 35%, to just 106 monthly land sales. Before Sept, we had been hovering around the 150 level in monthly land sales. We have not had this low of a monthly sales number since the 98 land sales of November of 2003. In 2003 though, the market was gaining strength, not losing strength as it is now. If this trend continues, in the next month or two, we will easily break below 100 sales per month. In regard to volume, bear market territory would be in the 20 to 50 per month range. The question that remains to be answered is, "Is Sept's 106, a blip, or is it the beginning of even weaker months to come? If we compare Sept's 2007 106 number to June's 2005 number of 266, volume has fallen off a whopping 60%! The weakening trend since July 2005, and market history, tell me we should expect weaker sales ahead. How soon and how weak? Only time will tell that.

Avg days on the market- 190 days, up 4 days from Aug's 186 days.

Demand numbers in perspective:

Land sales year to date- 1,218

Sept 2007 vs. Sept 2006 - 41%

Land sales projected for 2007- 1,623

Land sales in all of 2006- 2,648

Land sales in all of 2005- 3,376

Land sales in all of 2004- 2,372

Land sales in all of 2003- 1,240

Land sales in all of 2002- 679

Land sales in all of 2001- 407

Land sales in all of 2000- 307

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Average land sales (in 2007) per month- 135

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

August 2007

Aug 3rd- Work is progressing on the new 99 suite Staybridge Suites on 5th St West in the Palmdale Trade Center, west of the Fwy 14. Staybridge, a brand of Holiday Inn, will offer 1 and 2 bedroom suites and be a full service hotel. Staybridge is intended to be an extended stay hotel and is located next door to the Palmdale Holiday Inn.

August 6th- The Palmdale Planning Commission gives their approval of yet another hotel, this one larger than all previous, at 7 stories and 150 rooms. The new Embassy Suites will be the tallest building in the AV. The new hotel will be located in the Palmdale Trade & Commerce Center, at the SWC of 5th West & Ave P-4, near the Fwy 14, just 400 feet from Mulligan's Fun Center. The plans of the new hotel indicate it will have a restaurant, lounge, coffee bar, computer room, exercise room, and a pool and spa. The developers, Sun Development & Management Company of Indianapolis, say the project will cost $15M and take 18 months to build.

August 10th- The City of Lancaster announces that the final plans for it's new shopping enter, the Promenade at Amargosa Creek, is near approval. Property owners have agreed to pay the cost for covering the creek channel and the City will pay to cover the channel under the medical facility. City officials estimate the channel portion alone will cost $10.9M. The channel must be built to the specification dictated by the Dept of Fish and Game. The 150 acre site is bounded by Ave K-8 on the north, 5th St West on the east, Ave L on the south, and 10th St West on the west. The developers, which may be different than the current property owners, will pay for off-sites such as streets and sidewalks etc. The medical facility may be housed by Kaiser Permanente as they are trying to work out a development agreement with the City of Lancaster. On August 14th the City Council did approve of the project's Environmental Impact Report and also gave their approval of the General Plan Amendment regarding the zone change from light industrial to commercial use. The center is intended to combine shopping, amenities, dining, hotel services, and medical services as well. The center is designed to be pedestrian friendly, with a town square layout, mixed use qualities, and Main Street style features. The center will contain 1.2M to 1.5M sq feet. 44 acres has been earmarked for a Kaiser Permanente medical center. No word yet on when ground breaking on the channel will occur.

August 13th- The City of Palmdale begins running a TV commercial on KCBS Channel 2, Los Angeles. The commercial touts the city's quality lifestyle, business opportunities, and business friendly environment. Airtimes are approximate due to schedule changes, but the commercial has shown during the following TV programs: Face the Nation, CBS Sunday Morning, and Sports Central, a post game wrap up show for NFL pre-season football games. The commercial was seen in Los Angeles, Ventura, San Bernardino, Orange, western Riverside, and east Kern County.

August 14th- ceremonial ground breaking takes place on the Meridian Business Center, located at Trade Center Dr and Ave Q in the Palmdale Trade & Commerce Business Park. The complex will consist of 8 free standing single story medical and professional buildings with suites ranging in size from 1,200 to 9,500 square feet. The new buildings area located just 1/2 mile from Palmdale's new hospital, at Tierra Subida & Ave Q-8.

August 17th- The City of Palmdale officials join 13 other southern California cities in supporting the MagLev technology for the high speed bullet train. The MagLev train would start in Palmdale, go south to Santa Clarita, then Los Angeles, then south through South Gate, Downey, Cerritos, and then into the Orange County cities of Los Alamitos and Anaheim. The Maglev would then proceed to San Diego, then east to El Centro, then turn back north to Palm Springs before proceeding to Victorville. From Victorville the MagLev would go west back to Palmdale. The Maglev line would follow existing road and railroad rights of way, including along the AV Fwy 14. The MagLev system is far less expensive than the high-speed rail system that the State is working towards. The system will need to be a funded through a joint effort of both public and private funding, which means that in time, it is still years away, but none the less, very interesting.

August 29th- Palmdale's eastside Wal Mart, located at 47th St East & Ave S, finishes a "four wall expansion" and now is considered a Wal Mart SuperCenter. The 188,000 sq ft store has gained an additional 38,396 sq feet, adding a full line of groceries, a bank, and other convenience services. The store is open 24-7.

Sept 1st- The LA/Palmdale Regional Airport announces, that in the first two months of air service to and from San Francisco, the airport has served 3,043 travelers. The airport has been open since June 7th, offering twice daily flights, in each direction, to SF. In June, passengers totaled 1,271. In July business improved, with 1,772 passengers. The air carrier, United Airlines, uses 50 seat regional jets for the service. Averaging the two months together, and United had 55 passengers per day. Undoubtedly, air travelers are taking advantage of Palmdale free parking and the convenience of using a small airport; no long lines and quick security checks. United is moving up their morning flight to SF, leaving Palmdale at 6AM versus the previous take off time of 10:30AM. If a passengeris transferring to another flight, this allows them to reach their final destination during the same day, in most cases, late afternoon or early evening.

Sept 7th- After 3 months of road work, the 10 mile stretch of Hwy 138 leading east from Palmdale to the Fwy 15, has reopened. The improved part of Hwy 138 passes through Wrightwood, goes through the Mormon Rocks area, then proceeds east to the Fwy 15. The improvements include: a new truck lane, wider shoulders to 5 feet, added a 4 ft high median to separate on-coming traffic, and realigned a curve west of Lone Pine Canyon Rd. Caltrans will continue road improvements in the area through November, with some lane closures, but still allowing traffic to pass.

Defense & Aerospace News

August 5th- The US Navy has awarded a $635M contract to Northrop Grumman to develop a pilot-less combat aircraft. The aircraft will be developed at Plant 42 in Palmdale. The plane, known as the X 47B, will be designed to takeoff from aircraft carriers and carry out both bombing and surveillance missions. The plane will make use of stealth technology, making it difficult to locate by radar. The first plane is expected to be completed by late 2009. The first carrier landings are planned for 2011, with the project being completed by 2013. The aircraft will be a multi-mission raft, being able to carry out a variety of missions.

August 31st- The airborne laser ballistic missile defense system has passed flight testing of it's beam control and fire control systems. The system now moves on in preparation of airborne test firings. The system will be mounted in the nose of a highly modified 747 aircraft. The laser is designed to knock down missiles while they are still in their boost phase. The laser brings down rockets by puncturing holes in the missiles fuel tank, causing the fuel tank to rupture. This uses the missiles own pressure and fuel to bring it down.

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National Housing Market

The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend in sales activity. The following data in on the NATIONAL housing market, and may or may not be in "sync" with the AV housing market.

National Association of Home Builders & Wells Fargo, on Aug 15th, released their most recent survey of Home Builder Sentiment. In July the number was 28 a 16 year low. In August the number fell even lower, coming in at 22. The number means that only about 22% of the builders nationwide believe that the housing market is good. One year ago, the index stood at 33. Two years ago, sentiment was at 67. I have one question: what are those 22% smoking? We are going to have "softness" in the new home market for quite some time, perhaps well into 2009.

The Case-Shiller Home Index for the 2nd Q 2007 was released on August 28th. This index tracks multiple sales of the same homes in 20 of the US's largest cities. The purpose of the index is to track home values.

The release on Q2 was not good: home prices fell 3.2% vs Q2 of 2006 and was the largest year over year decline in indexes 20 year history. That would include the "ugly 1990's". One year ago, nationally, home prices were rising at a 7.5% pace. Prices fell in 15 of the 20 cities surveyed. Here are the weaker home markets: Detroit -11%, Tampa -7.7%, San Diego -7.3%, Washington DC -7%, Phoenix -6.6%, Las Vegas -5.1%, Miami -4.8%, Los Angeles -4.1%, San Francisco - 4%. A few cities were up: Portland +4.5%,Dallas +1.6%, Atlanta + 1.6%, Charlotte +6.8%, and Seattle +7.9%.

Here is a synopsis of analysts comments on the Case-Shiller report.

-the pullback in US residential real estate is showing no signs of slowing down

-the slowburn downswing in housing appears to have a long way to go

-the backlog of housing has reached a level at which buyers are going to get nasty, insisting on steep price cuts

-with supply still growing and mortgage financing getting tougher to obtain (the credit crunch), home prices are likely to soften further in the quarters ahead

-the last time home prices fell this much, it took 8 years for home prices to return to peak levels

Keep in mind that the Case-Shiller report included housing data up to the end of June, well before the recent problems in the mortgage markets. I would expect even weaker numbers in the Q3 report.

July housing starts (Commerce Dept), released Aug 16th, fall -6.1% to an annual rate of 1.381M. It was the lowest level in ten years, since January of 1997. Over the past year, housing starts are down -21%. The report was viewed by housing analysts as negative, with one analysts saying, "The end to this painful correction is still far off." Almost all housing analysts agree that housing won't recover this year and won't recover until the overhang of unsold homes is worked off, and that builders must slow the pace of new construction to help to lower supply. Regionally, only the Midwest showed a gain, up 2.6%. The South was down 11%, the West down 3.7%, and the Northeast was down 1.3%.

July building permits, (considered a leading indicator and a signal of future activity) also released Aug 16th, fell 2.8% to an annual rate of 1.373M. It was the lowest figure since October of 1996. Overall, the housing data was viewed of "gloomy", with a recovering now being pushed into 2009, at best. Over the past 12 months, permits are down 23%.

July existing home sales (Natl Assoc of Realtors), released August 27th, fell .2% to an annual rate of 5.75M. It was the slowest pace of existing home sales in 5 years. Inventories (supply), rose + 2.2% to 3.85M homes. This represents a supply of 9.2 months, the highest level in 16 years, dating back to October of 1991. As compared to July 2006, home sales were down 9%. After reading the report, one housing analyst said, "The inventory glut is not going away anytime soon." If you are trying to sell a home, don't feel bad, at least it's not a condo, as inventories of unsold condo's rose + 20%. About 25% of the realtors surveyed, said that they had at least one client who previously committed loan had fallen through. Nationwide, the median price of an existing home is now $228,900. This is down .6% as compared to July 06. Regional sales: Midwest, down -2.2%; the South, unchanged; in the Northeast,up 1%; and in the West home sales were down -1.8%.

July new home sales (Commerce Dept.), released Aug 24th, surprised analysts by rising +2.8% to an annual rate of 870,000. Inventory of homes also dropped, falling 1% to 533,000. It was the 4th straight month of falling inventory. This represents a 7.5 month supply. Inventory, when compared to July 06, is down 7%. The median home price of a new home now stands at $239,500, which is up 6/10 of a percent vs one year ago. In the West, sales rose +22.4%; in the South, sales were up + .6%; in the Northeast sales fell - 24.3% and in the Midwest, sales fell almost -1%. Analystreaction to the report was cautious, with one saying, "At best, this report is the first sign of a slow and unsteady climb back to health for the new home market." The July data extended through the end of July, before the credit squeeze in August forced many mortgage lenders out of business. Due to the credit crunch, most analysts expect home sales to fall further, even if only temporarily. While improving sales is good, remember that home builders are piling on the incentives to attract buyers, which, on a per home basis, is squeezing their profit margins.

July Pending homes sales, released Sept 5th, falls 12.2%, the largest drop in the history of the report (Sept 2001). A pending sale is when a buyer signs a contract to buy a home and goes to escrow. Versus one year ago, pending sales were down 16.1%. Pending home sales were down in all four areas of the country; Midwest, - 13.1%; in the NE, -12.2%; the South, -6.6%; and in the West, - 20.8%. This index had been up + 5% in June, the prior month, so analysts were a bit taken back by the weakness.

Comment: Keep in mind, that all of the above housing data was tallied and reported BEFORE the blow up in the mortgage markets in August. Expect even weaker numbers next month.

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Housing Market News

Southern California Existing Home Market

As reported by DataQuick, July home sales in southern California were the lowest level since the mid 1990's. Existing home sales were down 11.4% vs the prior month, June, and down 27.4% vs July of 2006. It was the weakest July since 1995 when California was battling post recession blues.

Although sales volume continues to fall off, the median price of home retouched the May high of $505,000. In July, foreclosure resales accounted for 8.3% of all sales. In June that figure was 7.7% and one year ago, in July of 2006, that figure was 2.0%. DataQuick says that foreclosure sales do not yet have a marketwide effect on sale prices.

Antelope Valley Building Permits

The Burbank based firm of Construction Industry Research Board has released building permit data for the AV for the first 7 months of this year. Following are some numbers released from the report.

Single Family home permits, 2007 vs 2006 (1st 7 months)

Entire AV SF home permits- down 41.7%

Palmdale SF home permits, down 30.5%

Lancaster SF home permits, down 51.5%

Unincorporated area SF home permits- down 32.1%

Statewide home permits- -22%

In multi-family permits, the two cities are light years apart. Palmdale had 236 multi-family permits pulled in the first 7 months of 2007. Lancaster just 2. Much of Lancaster's acreage that is zoned for multi-family is located in areas where there is little infrastructure or other development.

Commercial - industrial permits- 1st 7 months of 2007 vs 2006

Palmdale- + 85% for a total valuation of $42,845,000

Lancaster- -21.9% for a total valuation of $27,218,000 (down from 2006)

AV New Home Sales Data - as of Aug 19th, 2007

(source: Frank Donato The New Housing Monitor, a Hanley Report)

-New Homes sold year to date - 1,125

-New homes sold since last month, + 24

-New homes selling per day in 2007 - 4.8

-New homes projected to sell this year at current sales pace- 1,769

-New home sales year to date vs. same period in 2006 (-40%)

-Number of "new home" builders in the AV- 33

-Number of open subdivisions with sales in 2007- 65

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2006 - total of all new homes sold- 2,584

2005 - total of all new homes sold- 4,579

2004 - total of all new homes sold- 2,503

2003 - total of all new homes sold- 1,820

2002- total of all new homes sold- 1,162

1990- total of all new homes sold- 4,900 +

Home builders in the AV (alphabetical order)

American Premier * Beazer Homes * Capital Pacific Homes * D R Horton * Eliopoulos Enterprises * Empire Homes (Anaverde) * Fieldstone Communities * Featherstone Communities * Fieldstone Communities * First Pacifica * Forecast Homes * Frontier Homes * Gibraltar Homes * Grenhill Development * Harris Homes * Hearthside Homes * Heller Development * John Laing Homes * KB Homes * K. Hovnanian Co * .Larwin Co * Lennar Corp. * Matthews Homes * MBK Homes * Mitchell Development * New West Builders * Odyssey Homes * Pacific Communities * Pacific Gateway Homes * Pinnacle Communities * Pulte Homes * Rancho Vista Development * Richmond American * Rising Star Communities * Standard Pacific * Stratham Group * Sun Cal Communities (Ritter Ranch) * Tandis Homes * Trimark * US Home Corp. * Warmington Homes * Western Pacific

 


- Frank Donato, Third Quarter 2007

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