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 2011 Antelope Valley News: July Aug Sept


July 2011

Antelope Valley Existing Home News

Foreclosure Inventory

Here are the May foreclosure supply numbers.  These homes are acting as a roadblock for the recovery of the housing market, both new and existing home sales.  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- 2,945 homes in, or about to go in, to foreclosure, or REO (bank owned)
May versus prior month:  down - 481 homes or  - 14%   
May 2011 vs. May 2010:  down - 603 homes or  - 17%  
The reason, HUD and many other Banks STOP the NOD recordings. 

Lancaster- 2,918 homes are in, or are about to go in, to foreclosure, or REO (bank owned)   
May versus prior month:  down -202  homes or - 6.47%.
May 2011 vs. May 2010:  down -522  homes or -15.17%. 
The reason, HUD and many other Banks STOP the NOD recordings. 

May summary:  The short term trend in the drawdown of foreclosures may be picking up, as Palmdale’s supply fell -14% in May alone.  Lancaster lagged, but fell too, but just 6.4%.  Year over year, which measures the longer term trend, we don’t yet see any dramatic difference yet.  Both Palmdale and Lancaster were just about unchanged (vs. last month), both down around 15% - 17% versus 1 year ago.  It is still a common complaint among realtors that they do not have enough supply to satisfy most of their buyers.  A great of the supply is at the low end, making it difficult to place mid-range buyers.  If we extrapolate the current year over year rate of draw-down of foreclosures, we are looking at another 5 years or so of this type of market.  Of course, the rate at which banks release homes could increase which could change that 5 year number.  Extrapolating a trend over the long term rarely works because conditions on the “ground” always change.                                 

May AV Existing Home Sales

Valley wide, as in most of Southern California, home resale’s slowed in May.  Year over year, May home sales were down -19.6%.  In addition, the first five months of 2011 were down 18% versus the same period in 2010. May’s average selling price was $154,747, down 6.6% from May of 2010.  For the first five months of the year, the average sales price was $143,539, also down vs. the same period last year at -1.3%.  GAVAR President said, “It’s a distressed marketplace, with 80% to 90% of all sales distressed.”  It is estimated that ½ of all sales are foreclosure sales, with short sales accounting for up to 30% of all sales.

California Housing News

Foreclosures

Across the country, foreclosure filings were down in May in 49 states. The reason, HUD and many other Banks STOP the NOD recordings.   The one state where they were up, not down- why California of course.  California had an increase in Notice of Trustee Sale filings which should lead to more REO’s in the months to come.  California was up in both “back to bank” and “sold to 3rd party” transactions.  Nationwide, the average time of the typical foreclosure is 344 days.  This is a number that is still rising.  Cancellations of foreclosure had risen in April, but in May were falling again in California, Nevada, Arizona, and Washington.
Released June 15, the median priced home of a California home in May ($249k) was unchanged as compared to April, but is down -10.4% versus one year ago ($278k).  May sales, year over year, were also down, -13.3%.  Monthly year over year comparisons have now been down 8 months in a row. 2010 is a tough comparison as one year ago we were in the middle of tax credit incentives offered for buying a home.  Even the meager month over month gain of +.9% is far below the historical average of +6.2% between April and May, says DataQuick.  In May, distress sales dominated the action as 53% of all sales fell into that category.  Actual foreclosure sales accounted for 35.5% of all sales.  The 15 year average of foreclosure sales is 14.7% of the market.  Short sales were 17.9% of transactions, up 1% from April, but down 2% from May 2010.  In Northern California, versus Southern California, sales were weaker, down -15.4%, with the median price of $372,000.  In Northern California, year over year, the median price was down -9.3%. 


Southern California Housing

In the 6 county southern California area in May, existing home and condo sales slowed to a 3 year low.  Trade up sales are very sluggish as were new homes sales.  Southern Cal home sales in May were down -17.4% vs. May 2010, and only up a fraction, +.3%, vs. April, the prior month.  According to DataQuick, historically, home sales rise an average of +5.7% from April to May.  Across the entire Southern Cal area, 1,152 new homes were sold in May, the lowest May total since DataQuick began tracking this activity in 1988.  Remember, one year ago we were in the midst of the federal tax credit for buying a home, an artificial stimulus.  In May, the median price for all new and resale houses and condos was $280,000, the same as April, but down -8.2% from May’s 2010 $305,000. 

In Los Angeles County, the May median price of a home was $345,000, also down at -7.2% vs. May 2010.  Across the entire Southern California 6 county area, foreclosures made up 33.4% of all sales, with short sales coming in at 18%.  Conclusion:  Foreclosure activity remains high by historical standards, but is well below the peak levels reached over the past two years.

                                                                                                                                                
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

KB Homes has announced that on their new homes in their Arroyo tract, they will be offering solar power as a standard feature.  KB Homes will be using SunPower solar panels, to which I can attest, work very well, as I have them on my own custom home, added as an aftermarket product.  Besides the monthly savings on their electric bill, homebuyers will also be able to take a federal tax credit on the system, for the tax year the home is purchased.  The Arroyo tract homes are built on ½ acre lots and have a ten year limited warranty.  The homes are Energy Star-qualified. Homes sizes available are:  1,837 to 3,037 sq. feet, 3-5 bedrooms, and 2-3 baths.  The KB Homes Arroyo tract is located near 17th St East & Ave K-8.  From 10th St East, go east on Ave K-8 to 17th East, then follow the signs.

AV Building Permits

Palmdale- 11 pulled in May, 65 year to date, down - 28.6% vs. first 5 months of 2010
Lancaster- 16 pulled in May, 76 year to date, down - 49.7% vs. first 5 months of 2010
Unincorporated areas- 2 pulled in May, 5 year to date, down - 94% vs. first 5 months of 2010
Entire LA County- 1,574 pulled in May, 4,475 year to date, up +57.5% vs. first 5 months of 2010 

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Antelope Valley Aerospace & Defense

Here is a snapshot of what is going on at Northrop Grumman at Plant 42 in Palmdale.
- in the AV, employs a total of 3,300
- at Plant 42, employs 2,800
- employs 500 at Edwards Air Force Base & Mojave Airport
Projects in progress at Plant 42: 
  - B-2 modification work
  - assembly of center fuselage for the F-35, Joint Strike Fighter
  - assembly of Global Hawk, unmanned aircraft
  - the X47B, unmanned stealth aircraft being developed for the Navy
  - the Firebird, a twin tail aircraft from Scaled Composites of Mojave designed for “reconnaissance”,      manned or unmanned.  Northrop Grumman has owned Scaled Composites since 2007. 
                                      
Solar & Wind Energy News

One of the first major solar projects that will break ground, AV Solar 1, located in the area or 170W & Ave D, has announced they have purchased and will set aside 480 acres for “open space” near the poppy fields.  The 480 acres are part of the environmental mitigation program used to placate opponents of the solar farm project.  AV Solar 1, to be built in phases, will break ground sometime in July and in total is 2,100 acres.  The area is known as Fairmont Buttes.  The set aside of this 480 acres will block all prospects for this 480 acres to be developed.  A motor-cross racetrack has been trying to locate in this area.   

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Antelope Valley News
                                                                                                                                                                   
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).

June 14- The City of Lancaster approves of their 2011-2012 budget.  The approved $154M it will take to run the City over the coming year represents a 25% reduction in spending vs. the prior year. The City has cut or laid off 54 workers, but for those that remain, work hours are not being cut.  Employee cut backs were accomplished by incentive separations, retirements, and attrition.  No one lost a job without voluntarily leaving.  City officials say, that while they have cut spending 25%, it will be able to maintain service levels.  The budget breaks down as follows:  $92.3M to run the City and $61.7M for the Redevelopment Agency.

June 15- Located in the Palmdale Auto Mall, Robertson Honda has acquired a $500,000 loan from the Palmdale Community Redevelopment Agency to finish up its $1.5M remodeling project of its dealership showroom.  Robertson Honda has been located in the auto mall since 1992.  The showroom work is being done by Toneman Development Corp., a local Lancaster firm which is located on 4.54 acres at 5th St West, on Ave L.  In June of 2007, I had this parcel listed and Toneman purchased it through his own agent.

June 16- At this juncture, it does appear that Palmdale’s proposed 570 megawatt hybrid power plant is a go.  A sub-committee for the California Energy Commission, which has reviewed the plan, has recommended approval of the facility.  The plant will be located on 300 acres at 10th St East and Columbia Way (Ave M).  The hybrid system will combine natural gas jet turbine engines with solar energy generating equipment.  The solar component will generate approximately 10% of the total power produced by the plant.  The City of Lancaster has opposed the plant from the get go over environmental concerns re: air quality, that the plant will pollute the air over east Lancaster.  The Ave M site sits right on the northern border between the two cities.  The Air Force, on site at nearby Plant 42, has stated no objections to the plant.  City officials say, that if approved by the state Commission in August, the plant could up and running sometime in 2013.

June 20- Three major projects will soon come before the Kern County Planning Commission.  The first project, surprisingly, is a tract map for 148 homes on 40 acres at 30th West & Willow Ave, about 1 mile north of Ave A.  Lot sizes will vary from 6,000 to 12,964 square feet.  The second project is a wind powered farm on 90th West, 3 miles south of Oak Creek Rd, due west from Mojave.  The wind project, called the Lower West Wind Energy Project and has been proposed by AERO Energy, will require a change in land use from agricultural to wind energy zoning.  Lastly, Renewable Resources Group has proposed a 650 megawatt solar facility, that has the general boundaries of 70th West to 115th West, and from Ave B to Holiday Ave.  The solar project will probably be required to add some access roads. That said, it looks like all 3 projects are deemed likely to be approved during the summer months.

June 29- A proposed 292 acres Leona Valley development has been voted down, 3-2, by the Los Angeles County Planning Commission.  Leona Valley residents were successful in lobbying the commission that the project would negatively affect traffic, scenic views, population density, and the overall quality of life.  The developer, Valley Vineyards, argued that the project would be self-sufficient community.  The commission deemed the proposed 117 acres of vineyards, included in the project, as commercial use, and not residential.  The project was to be located west of Bouquet Canyon Rd. and about 1 mile south of Elizabeth Lake Road.  As mentioned above, the developer said that it would be the first project in the state of Cal that would have a sustainable land design.  The homes would have been built below the hilltops to protect the ridgeline.  The developer attended more than 50 Leona Valley town hall meetings and changed the project several times to win their approval.  The developer can appeal the decision to the LA County Board of Supervisors.  Unless the appeal overturns the planning commission’s decision, Valley Vineyards will have to redesign the project and go back to the beginning of the county’s approval process.  

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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 June at 1,809 active land listings, up 16 listings versus the prior month, a rise of less than 1%.  While I do expect one more substantial move down in supply before this Bear market is over, it appears we will be in + 1,500 area for quite some time.  As I have said, this trading range behavior has no real message for us, however, when and if I am right about one more big move down in supply, that would be a major indication of sellers giving up.  That would be a major sign that finally a bottom is forming from which an eventual recovery can be launched.  This will coincide with a recovery in the housing market, so watching the foreclosure levels will be important.  At present, AV banks and lenders own 3 to 5 years of REO’s, so recovery in the overall real estate market is not just around the corner.
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Supply numbers in perspective:
Supply change vs. last month:    + .089% (less than 1%)            
Supply change during 2011:       + 11.66%     
Supply change year over year:    + 1.73%
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Supply at end of June 2011: 1,809
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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 June came in at 29, which is up 1 monthly sale from May, a 3.5% gain. Year over year, June 2011 vs. June 2010, was down 11 sales this month, or - 27%.  Month over month, the median land price was unchanged, but year over year it is still down - 22%, for the second month in a row.  The unfortunate, undeniable truth about Bear markets is that they create opportunity for those that have cash and patience.  Bear markets transfer assets from weak hands to strong hands.  With no fundamental reason for builders to begin buying land at this time, a true recovery is years away as the banks completely control the available supply (REO’s) of housing.  For now, I will continue to monitor the foreclosure supply and supply and demand in the land market for any signal that a turnaround is in the cards.  Early in the statistical turnaround, most investors will be complacent and not believe that a turnaround is imminent, just as they were complacent in 2005 and 2006, and did not heed my warning to stop buying and start selling.  As you can see below, we are on pace to break 400 land sales for the year, which would be about 11.5% better than 2010. 
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Land- Median Listed Prices

Median listed land prices continue to work their way lower.

Median price this month     =    $35,000
Median price last month     =    $35,000
Median price one year ago  =   $45,000
Median Price vs. 12 months ago:  - 22%     

Land- Average Days on the Market406

Demand numbers in perspective:   
Land sales in all of 2011------- 207  (6 months)  
Land sales in all of 2010------- 371  
Land sales in all of 2009--------325                                                                             
Land sales in all of 2008------- 475
Land sales in all of 2007------ 1,637              
Land sales in all of 2006------ 2,648 
Land sales in all of 2005------ 3,376
Land sales in all of 2004------ 2,372   
Land sales in all of 2003------ 1,240
Land sales in all of 2002------   679
Land sales in all of 2001-------  407
Land sales in all of 2000-------  307
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As you can see from the average monthly sales below, we are back to 2001 sales numbers, which were at the tail end of the last Bear market, and 2 years before the 2002-2006 Bull market began.  The next Bull market though, is not just 2 years away.                      

Average land sales (in 2011) per month-  34 (6 months)
Average land sales (in 2010) per month-  31
Average land sales (in 2009) per month-  27
Average land sales (in 2008) per month-  40
Average land sales (in 2007) per month- 129
Average land sales (in 2006) per month- 221
Average land sales (in 2005) per month- 281
Average land sales (in 2004) per month- 198
Average land sales (in 2003) per month- 103
Average land sales (in 2002) per month-  56 
Average land sales (in 2001) per month-  34
Average land sales (in 2000) per month-  26


August 2011

Antelope Valley Economic Report

Many hours and support by professionals are put into these reports every month. Please remember Frank & Fidelity Title on your next Title Policy. I can receive credit anywhere in the United States!

Foreclosure Inventory

Here are the July foreclosure supply numbers.  These homes are acting as a roadblock for the recovery of the housing market, both new and existing home sales.  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- 2,970 homes in, or about to go in, foreclosure, or REO (bank owned)
July versus prior month:  up + 163 homes or  + 5.8%    
July 2011 vs. July 2010:  down - 518 homes or  - 14.8%  

Lancaster- 2,752 homes are in, or are about to go in, foreclosure, or REO (bank owned)        
July versus prior month:  down - 120  homes or - 4.5%.
July 2011 vs. July 2010:  down -541 homes or - 16.42%. 

July summary:  Looking at the annual declines of REO’s of the two cities, 500 + per year, based on this statistical pace of draw down, we have 5 + more years of this type of real estate market.  This assumes, perhaps incorrectly, that the pace of draw-downs or that the rate of new foreclosures coming onto the market, stays constant.  I can assure you, eventually, neither will stay constant.  For better or worse, eventually, something will change the pace. Removing all govt interference and letting market forces “clean this up” would be a good start.  Under this president, there is no chance that could happen.

The Macro picture:  major banks and lenders have slowed down on foreclosing, pending their negotiations with the federal govt over their “robo signings” and other “misdeeds”.  The slowdown is growing the “shadow inventory”, which means at some time, a lot more houses will come on the market, one way or another.  The settlement for the entire industry may exceed $20B, but the banks are looking for broad liability releases so that they cannot be sued by state and local govts next.  The banks would rather litigate than settle, and then be sued again and again by other entities.  If the federal govt is smart, they will settle, for they have plenty of blood on their hands as well regarding the mortgage fiasco.  After all, it was new federal laws under the Home Reinvestment Act that created loose lending standards, that eventually led to no standards at all, i.e., no doc loans, stated income loans, and thus, liar loans. 
   
AV Existing Home Sales

Valley wide, in July, the sale of SF homes fell 10.6% vs. July of 2010.  Year to date, through July, sales are down - 16.7% versus the same period in 2010.  In July, the average selling price of a SF home was $138,985, down -6.5% versus July 2010.  For all of 2011, through July, the average selling price of a SF home in the AV was $140,286, down 3.5% versus the same period in 2010.  Short sales are rising in popularity as the lenders choice, versus foreclosing.  Short sales are faster and cheaper for the lender, and allow the home owner to recover their credit rating much faster.
                                                                                                                                    
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Antelope Valley Aerospace & Defense

June 24- The C-17 cargo plane has successfully undergone testing at dropping cargo loads at altitudes as high as 35,000.  The test payload dropped was 60,000 pounds.  Dropping at higher altitudes, accurately, was made possible by an avionics software upgrade. 

July 22- Rocket builder Masten Space Systems has requested a 2 year lease on a second facility at Mojave Air & Space Port.  Masten will lease a 2,250 sq. ft. building located on a 27,210 sq. foot fenced lot.  Masten has 12 employees and has been located at Mojave since June 2006.  Masten has a $250,000 contract with NASA to perform 4 flights to test their rocket engines.  Of his decision to locate at Mojave Air & Space Port, CEO Dave Masten said, “No one complains when we fire off our rocket engines.”   
  
Aug 25- Nationwide, Northrop Grumman announces they will lay off 700 workers from their aerospace systems sector in southern Calif.  NG says they are taking this action because of defense budget uncertainties and pressures on projected business.  The layoffs will have no effect on NG’s workforce at Plant 42 in Palmdale, as over the next 12 months NG plans to hire 500 more workers for the fuselage assembly of the F-35 Joint Strike Fighter.  Nationwide, NG has 23,000 workers, with 18,000 of those in California.  Lockheed Martin has previously announced, again nationwide, cuts of 1200 workers in its Space Systems division and 1500 more cuts in its aeronautics business, which will include operations at Plant 42 in Palmdale.  Lockheed Martin employs 28,000 at their 3 sites of Palmdale, Fort Worth, Tex, and Murrieta, Ga.

Aug 26- Three years late, Boeing’s 787 Dreamliner is finally certified and approved for delivery by the FAA.  The first plane will go to Nippon Airlines on Sept 26.  For the plane, Boeing has 55 customers for more than 800 planes.  The planes cost $185M to $218M each.  As of this date, Boeing’s Plant 42 site has no involvement in the 787.     
                               
Solar & Wind Energy News

July 20-  The City of Lancaster has signed a Memorandum of Understanding with TopCo Energy Inc. of Taiwan, to develop solar power facilities that will produce 200 megawatts of electricity.  The Lancaster Power Authority has already provided a 25 acre site for Topco to build a $3.9M solar facility in which the Lancaster Power Authority will receive 12% of the income.  Rex Parris, the mayor of Lancaster, has a stated goal to make Lancaster the first net-zero-energy city in the world, and with this agreement, Parris believes Lancaster can get there within 5 years.  In addition to being net-zero, the City will also make money in the process.  Southern Cal Edison has agreed to build the transmission lines needed to sell the electricity into the state’s grid.  The City of Lancaster consumes 200M kilowatts of electrical power per year.  Southern Cal Edison is on record, having told the AV East Kern water district (the major wholesaler of water in the AV), that electricity rates will go up 7% per year over the next two years.

July 26- Solar Ranch One, the huge 2,300 acre solar farm facility on 170th West, Avenues C to D, has survived another challenge as the Fairmont Town Council failed in their bid to halt it.  The project was approved by the LA County Supervisors last November and will break ground in July 2012.  Solar Ranch One was approved to help move the state to 33% of all electricity produced by renewable sources by the year 2020, a state law and goal.

Aug 5th- San Francisco based Current Energy, has 10 small scale solar power plants on the drawing board in the Antelope Valley.  All ten are in Kern County, with a total of 214 megawatts for all 10 facilities.  Each site will average about 20 megawatts.  Four of the ten projects already have contracts with Southern Cal Edison, totaling 55 megawatts.  The first site could break ground in Q 1 of next year.  Here are the locales of some of their projects. 

- Columbia project, 3 plants on 400 acres totaling 50 megawatts, south of Mojave, west of Hwy 14, south of Purdy Ave, and east of Holt St.
- Rio Grande, one solar plant producing 5 megawatts on 47 acres.  Two miles south of Mojave, north of Silver Queen Rd and west of Hwy 14.
- Great Lakes, single plant on 40 acres, 5 megawatts, south of Rosamond, between Patterson Rd and Ave A, west of 10th St West.
- Rosamond project, two plants on 320 acres, total of 40 megawatts.  At 65th West, between Dawn Rd and Favorito Ave. 
- two sites are ticketed for Tehachapi and one NW of California City.

Current Energy says that all projects are on native desert land, preferring acreage that has been previously disturbed, probably previously farmed.  And there is the usual issue of the impact to endangered or threatened species, i.e., desert tortoises and the burrowing owl.  And each site must be surveyed for Joshua trees.  Some areas require the relocation of Joshua trees or a payment in-lieu fee.  The purchase of preserved land, called land mitigation, is also sometimes required. 

Aug 10- The City of Palmdale has their 570 megawatt hybrid power plant gain final approval from the California Energy Commission.  When built, the plant will occupy 300 acres near the SE corner of Sierra Hwy and Ave M (Columbia Way).  The City says construction will begin after they secure a developer and a power purchase agreement.  Upon approval, the project is now “real” in the eyes of power plant developers.  The plant will produce enough electricity for 600k homes, create 600 construction jobs, and 40 to 50 permanent jobs.  500 megawatts of power will be produced by turbine engines powered by natural gas and 70 megawatts by parabolic solar panels.  No timetable has been set for finding a developer, but once begun, construction will take 18 months.  The City could also sell low cost electricity to aerospace businesses at nearby Plant 42 and use it as an incentive to recruit new contractors to the site.    
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Antelope Valley News
                             
July 19- The City of Palmdale files a motion with a federal judge to stop the $700,000 study into whether building the high speed rail line along the Fwy 5, over the grapevine, would be better than building it through the Antelope Valley. The City is taking this action because the AV route had been previously approved, with a high speed rail station planned for Palmdale.  Knowing that, the City since that approval, planned the City accordingly, developing a transportation center near 3rd St East and Ave P-8.  The City is also arguing, that the source of the $700,000 does not allow it to be used for another study. 
                                                                                                                                      
July 21- Here is a list of businesses that have opened up in Palmdale over the past 6 months:  the Yard House restaurant, Superior Grocers and the 99 Cent store, (both of which occupy the old Smith’s Food King site in east Palmdale), DD’s Discounts, Panera Bread (east Palmdale), and Fresco II, formerly a Lancaster eatery that has relocated along restaurant row at the AV Mall in Palmdale.

July 22- If you had not heard, Los Angeles County’s Regional Planning Department is developing a new land use plan for the unincorporated areas of the Antelope Valley.  Areas of the AV that are in the city limits of Lancaster and Palmdale are NOT included.  The county is calling the plan, The Town and Country Plan.  A work in progress that will also include public hearings and input, when finished, will be a map and rules guiding future development.  Public input is being sought to try and develop a common vision for the future.  The area affected is 1,800 square miles and includes about 2 dozen communities. In general, it appears that the “plan will increase areas deemed ecological significant and also reduce the number of dwelling units permitted for development.”  The plan directs most of the future growth to around Palmdale, Lancaster, and other communities known as rural town centers.  Rural town centers are identified as: Acton, Antelope Acres, Gorman, Lake Hughes, Lake Los Angeles, Leona Valley, Littlerock, Pearblossom, Quartz Hill, Roosevelt (area of 90E & J), and the Sun Village area.  Since these areas have infrastructure for development, they are most likely to grow in the future. Link to view county plan:  www.planning.lacounty.gov/tnc           

July 23- Taking advantage of the new Lancaster Blvd makeover, developer Scott Ehrlich is opening a new movie theater on THE Boulevard.  As of this writing, the theater is 99% complete and will be a 3 story, 23,375 square foot facility.  Each theater (3) will be small by traditional standards, with only 50 to 60 reclining couch seats, and much wider aisles making it easier to move to and from your seat.  The screens will be at nearly eye level, and fully digitalized, both visual and audio.  Beer, wine, full meals, high end snacks, a tea bar, and a lemonade bar will all be available.  Ehrlich intends to show independent art and foreign films at $10 per ticket and market it as a “date experience”.  The theater is being built on the former parking lot of the Lancaster Performing Arts on Fig Ave, south of Lancaster Blvd.  City officials are hoping to use the site to resurrect the AV Film Festival which closed down in 2008 after a 12 year run. On Aug 11 the Laemmle Boulevard Cinema held its grand opening by hosting a fund raiser for a local charity.  The theater is part of the makeover the entire Lancaster Blvd. has undergone over the past 18 months.   

July 26- Under orders by the US Supreme Court to release some inmates in the overcrowded Cal state prison system, the state is reclassifying the Lancaster state prison as a “release center” for inmates that are eligible for parole or “probation release” in the closing weeks of their incarceration.  The release of inmates from the Lancaster site will be done in one of three ways:  they are picked up at the front gate by family members, or they are transported to the Metrolink train station in Palmdale where correction officers make sure they get on the train and leave the station, or they are met by their parole officer as they exit the prison.

July 29- The Rally Auto Group, located in the Palmdale Auto Mall, has added the Mitsubishi line of autos to their dealership.  Rally will add 8 sales staff to handle the new line.  Rally offers Kia, Hyundai, Buick, GMC, Cadillac, and now Mitsubishi.  Mitsubishi dealerships were formerly located in Lancaster and Valencia, but were victims of the recession and were closed.  The Rally Auto Group has served AV customers since 1969.

Aug 4- The City of Palmdale has been under negotiations with Los Angeles World Airports for a year now, seeking to take over the unused Palmdale Air Terminal at 25th West & Ave O-8.  The City wants full control over the marketing process in recruiting a new passenger air carrier.  The City is also under negotiations with LAWA over Site 9 at Plant 42.  Site 9, a massive warehouse type structure where the B-1 Bomber was built in the 1980’s.  Presently, part of Site 9 is being used by NASA and part is being used as a movie sound stage.  If the City can acquire Site 9, their goal would be to recruit a major aerospace firm, or one complimentary to the industry, to occupy the site and bring more jobs to Palmdale.      

Aug 4- The City of Palmdale is hoping to break ground soon on Transit Village, a master planned 110 acre mixed use project consisting of homes, condos, apartments, and neighborhood retail near the Transportation Center near Sierra Hwy, south of Ave P-8.  The goal of Transit Village is to offer affordable housing for modest income workers who wish to use the City’s bus and Metrolink stations near Sierra Hwy and Ave P-12 to go to work.  Transit Village would be bounded by Sierra Hwy, Technology Dr (P-8), 3rd St East, and Ave Q-3.

Aug 15- The Lancaster Planning Commission grants the owners and developers of the proposed Target Center (at the SE corner of 60W & Ave L) a one year extension to begin construction.  The site is 40 acres and will house 395,000 sq. feet of retail space when completed.  Original approval of the center came in July 2009. No changes are being proposed during the extension.  The site is located across 60W from Quartz Hill HS.

Aug 24- Here is an update on the proposed High Desert Corridor, that is to extend east from Palmdale to the Fwy 15 and the Victorville / Apple Valley areas.  While 2 different routes along the way are possible, the most likely route appears to be Ave P-8, going east from Fwy 14, until it reaches the Lake Los Angeles area.  Then continue east, going near Adelanto and on to the Fwy 15.  There is also a possible southern option where the Ave P-8 route would turn south somewhere in the Lake LA area and proceed south to Hwy 138 (Pearblossom Hwy).  It would go east to Hwy 18, the Victorville cutoff, and use Hwy 18 to go all the way to Fwy 15.  The “southern option”, due to its disruptive effects to communities along Pearblossom Hwy, is expected to be dropped.  The corridor is estimated to cost $3.5B to $4B with construction slated to start no earlier than 2014 and be finished by 2020.  The LA County Transportation Authority is still in the process of public hearings over the EIR, which is required to meet state and federal funding requirements. 

Aug 30- Here is a summary of the major names and venues in and around the Fox Field Corridor.  The Corridor extends from the Fwy 14 (approx..), west to 60th West, and from Ave H, north to Ave E. 

- 1997, Michael’s (arts & crafts) announces they will build a 432k, Lancaster provides a 40 acre site.
- 2004, the Antelope Valley Fairgrounds, moves from Division St & I to its current site on Ave H, at 23rd West.
- 2005, SYMGA, a provider to fast food / restaurants, builds and moves into a 230k sq. ft. facility
- 2005, California National Guard constructs a new 52,837 sq. ft., two story, armory, the Lancaster Readiness Center, located on 45th West, north of Ave G, on Barnett Ave.  
- 2005, the industrial / commercial arm of Larwin Investment Co., builds a 9 building, 283k sq. foot business park at the NW corner of 45th West & Ave G.  The units are for sale or lease.

A major attraction to the area, Fox Airfield has a runway long enough for corporate jets and 24 hour refueling for cargo planes.  Distribution trucks have easy access to the Fwy 14.
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Economic News Briefs

“Those who fail to participate in politics will be governed by their inferiors .”  - Plato   

July 18- Perhaps you heard that Cal Gov. Jerry Brown has signed a bill into law that requires on-line retailers to collect and send in California sales tax.  Almost the same day, in response, Amazon.com announced that it was severing ties with some 10,000 affiliates in California.  Affiliates are small companies that make a living by selling their goods on Amazon.com.  Overstock.com is following Amazon’s lead as are many other internet retailers that are smaller and don’t make the news.  The legislation was intended to raise tax collections, but as usual, short sighted politicians failed to foresee the unintended consequences.  Less income by the affiliates means less income tax revenue to the state, accomplishing the exact opposite of the states intended goal.  The legislation also means less jobs, with many affiliates announcing they would move out of California to resume their on-line business with Amazon. More importantly, it sends a chilling message to any business considering California as a home:  You had better think twice about coming here.

July 21- Here is a great short video with Milton Friedman on the 4 types of spending.  Well worth it.  http://www.youtube.com/watch?v=5RDMdc5r5z8&feature=player_embedded

July 22- On occasion in this newsletter I have briefly discussed China’s growth and questioned how much of it real.  By “real” I mean growth projects based on real demand and need, not just building  induced by access to cheap capital and a central government’s plan to “create jobs”..  Here is a partial answer at least.  The link below leads you to an article about China’s Ghost Towns, entire cities built just to create jobs and are just sitting empty today. Link:  China's ghost towns

July 24- Nancy Sidhu of the Los Angeles Economic Development Corporation releases their mid-year forecast for the LA county and Antelope Valley economies.

- there is a recovery, but it is slow in LA County and even slower in the AV; it is stealth in nature   and visible only to a few outside of the economics fraternity.  It can be measured, but not seen.
- cuts in local govt and a struggling commercial real estate market are acting as brakes on growth
- LA County is forecast to add 28k jobs this year and 65k in 2012
- For the AV, the two engines of growth, housing and aerospace, both have issues
- Housing will be a slow recovery due to the overhang of foreclosures, REO’s.  The lack of ready   bank financing for new projects is also a problem
- the high jobless rate is also retarding the formation of new households, as the young stay home longer
- in aerospace, the F-35 Joint Strike Fighter, which employs 100’s at Lockheed Martin at Plant 42, has had encountered budget over-runs and is on notice to solve these problems fast.  Defense spending will only have modest growth, if at all, in the near future.  Pentagon officials are getting tougher on price and quality and are putting all defense contractors on notice.  The growing interest in unmanned aircraft is a plus though, and so are the “black programs” at Lockheed Martin & Northrop Grumman.
- retail trade, construction, and professional business services were hit the hardest on jobs
- Education and health care have benefitted from the continued growth in population
- in the county, business travel and tourism is also improving

July 27- You’ll love this.  Jeffrey Immelt, CEO of General Electric, and on the President’s special commission on creating jobs, has announced they are closing the X-ray portion of GE’s business in Wisconsin and moving it to China.  During the recovery, GE has created and hired 8,000 workers in the US; overseas GE has hired 60,000.   

Aug 2nd- On this day, when the debt ceiling raise was signed into law, the US Govt borrowed an additional $238B which pushed the US’s total borrowing above the entire 2010 GDP of the nation. The US govt has borrowed over 100% of its own GDP.  GDP in 2010 was $14.5265T; we have now borrowed $14.5807T, $54B more than last year’s GDP. (Source:  Heritage Foundation)

Commercial & Industrial loans are still turning up, but the rate of growth is slowing, as the line below is beginning to flatten out.  The slowdown in C & I loans means they will be little to no help in creating jobs.  Whether it be individual investors, business owners, or major corporations, the watchword now in the economy is “caution”, be careful, do not lose money. 

GDP-  (Commerce Dept, the value of all goods and services produced in the US)
The Commerce Dept makes 3 estimates of GDP, with each one based on more complete data.
Q 2, +1.0% (first revision, released Aug 26)  
2010, +2.9%
2009, - 2.6%
2008, +1.1%
2007, +2.2%
2006, +2.9%

Hi-lites
- Q 2 GDP, at +1.0% growth, revised down from the July 29th release of +1.3% 
- Q 1, originally reported at +1.9% growth, was revised downward to a fractional +.4% gain
- revisions include more data from the private sector, giving a more accurate picture
- analysts say that it is quite obvious that the economy remains in a fragile state
- average GDP growth over the past 6 months has been +.7%
- 9 of the past 11 recessions have been preceded by a period of 1% growth or less
- over the past 12 months GDP has fallen by 1.5%   
- the US economy has never avoided recession if it has fallen 2% over any 12 month period
- a Wells Fargo economist called the report a game changer, that the economy was seriously weak
- revision down was driven by lower exports and slower inventory growth
- consumer spending revised up to +.4% vs +.1%, still weak after +2.1% gain in Q 1
- orders on durable goods were weak, led by weak auto sales
- orders on non-durables were not much better, at +.1%
- business investment was up +6.4%, led by RE buying (+15.6%) & equipment & software
- state and local govt spending was down -3.4%, but Federal spending was up +2.2%
- exports revised down to +3.1% vs 6%.  imports +1.3%
- real disposable income rose at an annual rate of +1.0%
- Prospects for Q 3, the current quarter, many are saying 2% growth   

Summary
While job creation has been meager at best, supporters of the President’s stimulus recovery program, prior to the Q 2 GDP report, could have at least pointed to the GDP growth as evidence the stimulus was working.  During the 3 month period of Feb, March, and April, where the economy averaged 217k new jobs each month, it looked like, just maybe, the economy was turning the corner.  Since that time though, job creation has dropped off dramatically as has GDP growth.  In addition, the weak 1st and 2nd quarters came in the face of the FED’s $600B QE 2 program, which was specifically designed to jump start growth, which apparently did not.    

Consumer Price Index CPI  (Labor Department )  
Inflation:  a monetary phenomenon that occurs when the supply of money exceeds the demand holding it.
- Scott Grannis, supply side economist

July, +.5%  Core rate,  +.2%
CPI  Year over year, +3.6%
2010 CPI +1.5%
2009 CPI +2.7% 
2008 CPI +.1% 
2007 CPI +4.1%
2006 CPI +2.4%
2005 CPI +3.4%
2004 CPI +3.3%
2003 CPI +1.9%
2002 CPI +2.4%
2001 CPI +1.6%

Summary
- the ½% rise in July was the largest one month gain since March
- the number came in higher than the expected +.4%
- over the past 12 months the CPI has risen +3.6%; the core rate has risen +1.8%
- the core rate has now been below 2% for 32 months in a row
- while shelter prices were up +.3%, energy was the usual culprit in a higher overall number
- after declining in May and June, energy prices were up +2.8% in July
- others:  food +.4%, clothes +1.2%, used cars +.7%, new cars were flat, medical care +.3%
- the FED’s longer term target on the core rate is 2%, so the FED will not be bothered
  by a one month rise of the CPI
- the FED is forecasting that inflation will settle down over coming quarters
- in Europe, inflation is at 7 month lows

Future Inflation Gauge (FIG)
Economic Cycle Research Institute (leads cyclical inflation turns by 9-11 months)
Sept 2nd             99.3
Aug 1                  99.5             
July 1                  98.5
1 yr. ago              97.4       
Mar        2009    77.9  (51 yr. low)
Oct          2005   126.5  (cycle high) 
   
ECRI remarks- Inflation pressure are fractional higher than last month, but not threatening.   
      
California Housing News

Statewide in July, SF home sales fell - 4.1% vs June, but were up +4.5% versus July of last year. The median price of a home in California fell fractionally, -.3% to $294,230, as compared to June, but fell more, - 7.6%, versus July of 2010.  Pending home (going into escrow) sales in July were down -1.7%.  Distress sales in July totaled 44.5%, down from June’s 46.9%.  In July 2010, distress sales totaled 47.7% of all sales.  Also in July, new home construction in California was way down, falling - 53% vs June, and down - 45% vs July 2010.  Permits pulled to build new homes are near the January 2009 lows.  

Southern California Housing

Existing home sales in July fell to 4 year lows in southern California, says DataQuick.  In the six county region of southern California, sales were down 11.9% versus June and down - 4.5% versus July 2010. Analysts blame the increasing number of weak economic reports, yet say that, while sales were weaker year over year, it was only a small pull back.  The median price of a SF home/condo in the 6 county area in July was $283,000, down .7% vs June and down - 4.1% versus one year ago.  Cash buyers were 28.5% and FHA loans 31.5% of all sales.  

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

Year to date through July, 179 permits have been pulled, all for single family homes.  This is a drop of - 57% versus the same period in 2010.  The surplus of less expensive foreclosures and short sales around the valley has killed off, albeit temporarily, the new home market.  This is also true nationwide.

 

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 August at 1,750 active land listings, up 19 listings versus the prior month, a 1% rise. Supply is currently basing between 1,600 and 1,800 and has been since 2009.  In 2008, supply at the low end of the range was 2,200.  The Bear market in land is in its 5th year.  If we look at the housing market, and gauge the rate of drawdown in the REO market, we have about 5 more years of this type of real estate market.  During that 5 year period, I expect at least one, perhaps two, more legs down in supply.  While not a prerequisite, I fully expect to supply to work its way lower to 1,000 to 1,100 before this Bear market is over.  Supply falls for two major reasons.  One, quality parcels acquired at higher price levels and owned by strong hands, goes off the market.  Two, patient sellers realize they cannot get the price they want, and take the property off the market.  

Selling Information

 The following information is reviewed and updated each month as needed.  
- we are now in a confirmed buyer’s market, the recognition phase, moving into the capitulation phase
- monthly sales volume has fallen 90% since mid-2005, with market values down 50%-80% since 2006.
  In 2005 our MLS was selling 8 parcels per day; today that number is 1 per day
- over pricing in and of itself prevents offers from being made; it sends buyers to other properties
- the buyer’s hot button in this market is “price”; buyers are out looking for value, not terms 
- the new home market, the fuel that drives land sales, will be mired in its present condition for years
- one cannot rule out the possibility, that as the housing market continues to struggle, land values could
  fall even more.  Price momentum, albeit slowed, is still to the downside.
- to help get a property sold, THE most important thing a seller can do in this market is to price correctly
- if one cannot price near “market”, it is probably better to remove the property from the market
- the next Bull market, and the next great selling opportunity, is over 5 years away.  If you think that you will need or want to sell sometime over the next two years, do it now, don’t wait.  In two years, prices could easily be lower than today.
- liquidity levels are poor; it takes proper pricing and a lot of patience to sell land in this market 
- market wide, investor patience is running out, many are price cutting and “capitulating” to market forces
- land prices will come back when home builders can buy raw land, entitle it, and build homes for profit.
  At present, with the oversupply of REO’s & short sales, we are years away from that type of market.
- note below, that year over year, supply is falling, albeit slowly
---------------------------------------------------------------------------------------------------------------------
Supply numbers in perspective:
Supply change vs. last month:    + 1.0%             
Supply change during 2011:       + 8%     
Supply change year over year:   - 3.42%
----------------------------------
Supply at end of Aug 2011: 1,750
----------------------------------
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 August came in at 35, which is up 11 sales from July, a + 45% gain.  In most investment statistics, a 45% gain would be very good and excite it’s participants.  In reality though this one month move is not dramatic or game changing.  Due to the “rule of small numbers” a small gain of 11 sales looks big on a percentage basis, when in fact, it was just another ho-hum month in this Bear market.  We have consistently done between 25 and 40 sales each month in this Bear market, so August came in at near the high of that range.  Year over year, median land prices are down - 22%.  While the rate of decline has slowed, price action still has a downside bias. 

Buying Information

The following information is reviewed and updated each month as needed.

- Bear markets separate weak holders from their money, but create opportunity for someone else
- we are now in the early stages of the capitulation phase of the market cycle.  This phase will   probably go on for several years.
- it may be a confirmed buyer’s market, but that does not mean one can buy “hand over fist”.  Listed prices, across the board, are still too high.  Our low volume is proof of that. 
- just because land values have fallen 50%-80%, don’t assume land values can’t fall even more
- well located property at today’s market value is still very hard to find; be patient and deliberate in anything you buy; make sure you understand both the potential down side and upside before entering into a deal
- in lieu of better options, build up your cash reserves.  There nothing wrong with cash in the bank while waiting for good - low risk - opportunities to surface.  If the wait is months, so be it.  
- be careful not to overpay; experience has taught me, “there will always be another deal”              
- follow land market valuations by studying the monthly sales at the bottom of my newsletter; being aware of relative values in our valley will give one the confidence to “pull the trigger” when an opportunity comes
- the goal of being patient is to acquire land at lower prices, and thus lowering market risk
- buying in the current environment is for long term capital gains; there will be no immediate gratification by “flipping”
- if one buys land now, figure on a holding period of at least 5 years, perhaps as long as 10.  The market could turn around sooner, but we cannot count on it.
- experience is the factor that separates investors that make money from those that don’t.  If you don’t have experience in our market, call me.  I will save you money by keeping you out of overpriced slow growth areas, and make you money by keeping you in good growth areas that have strong demand in good markets, w/o overpaying 

Disciplined buying in weak markets + patience + selling in strong markets = strong capital gains    
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Land- Median Listed Prices

Median listed land prices continue to work their way lower.

Median price this month     =   $35,000
Median price last month     =   $35,000
Median price one year ago  =   $45,000
Median Price vs 12 months ago:  - 22%     

Land- Average Days on the Market428

Demand numbers in perspective:   
Land sales in all of 2011------- 266  (8 months)  
Land sales in all of 2010------- 371  
Land sales in all of 2009--------325                                                                             
Land sales in all of 2008------- 475
Land sales in all of 2007------ 1,637              
Land sales in all of 2006------ 2,648 
Land sales in all of 2005------ 3,376
Land sales in all of 2004------ 2,372   
Land sales in all of 2003------ 1,240
Land sales in all of 2002------   679
Land sales in all of 2001-------  407
Land sales in all of 2000-------  307
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Average Land Sales per Month, Year by Year

Average land sales (in 2011) per month-  33 (8 months)
Average land sales (in 2010) per month-  31
Average land sales (in 2009) per month-  27
Average land sales (in 2008) per month-  40
Average land sales (in 2007) per month- 129
Average land sales (in 2006) per month- 221
Average land sales (in 2005) per month- 281
Average land sales (in 2004) per month- 198
Average land sales (in 2003) per month- 103
Average land sales (in 2002) per month-  56 
Average land sales (in 2001) per month-  34
Average land sales (in 2000) per month-  26

 


September 2011

Antelope Valley Housing News

 Ask for Frank & Fidelity Title on your next Sales!

AV Existing Home Sales
- August, the sale of SF homes fell - 2.5% vs. Aug of 2010. 
- Jan thru August sales, - 17.3% versus the same period in 2010. 
- August average  sales price, $142,440, down -1.4% vs. Aug 2010
- Jan thru August avg sales price, $144,992, down -3.4% vs. same period in 2010
- Foreclosure sales in 2011, 48.4% of all sales
- Short sales in 2011, 36.6% of all sales
- both foreclosure and short sales are up slightly from year ago levels
- Jan thru Aug, all cash transactions were 33% of all sales

 Palmdale / Lancaster REO Inventory
 Here are the AUG foreclosure inventory (supply) numbers.  This is THE most important category to track in regard to the progress of the housing recovery.

Palmdale- 3,271 homes in, or about to go in, foreclosure, or REO (bank owned)
Aug versus prior month:  up + 301 homes or  + 10.1%    
Aug 2011 vs. Aug 2010:  down - 601 homes or - 15.5%  

Lancaster- 3,114 homes are in, or are about to go in, foreclosure, or REO (bank owned)        
Aug versus prior month:  up +362 homes or + 13.1%.  
Aug 2011 vs. Aug 2010:  down -758 homes or - 21.5%. 

Aug summary:  Short term, month over month, slow overall home resale’s have REO supply rising.  However, year over year we still have a falling trend, which is good.  At the current rate of decline in the year over year numbers, and assuming banks do not change the pace of releasing homes, we have a current supply of REO of 4 to 5 years.  A rising jobs market could speed up this process, but that does not appear likely this year or next.                                                                                                                                    
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Antelope Valley New Home News

Antelope Valley New Home 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.)
2011-  permits issued thru Aug 31-   200 (vs. 342 same period in 2010, AV Building Industry Assoc.)


 Antelope Valley Aerospace & Defense

Sept 19- The Spaceship Company, a joint venture between Scaled Composites and Virgin Galactic (Richard Branson), dedicates their new factory at Mojave Air and Space Port.  The factory will do final assembly, integration, and flight testing, and are confident this will kick off a global market in commercial space travel.  Their product line is SpaceShip Two and its mothership, the WhiteKnightTwo.  Two hundred people attended the ceremony in the 68k sq. foot, $8M facility.  This is the second such facility at Mojave.  The Spaceship Company currently employs 100 and is looking to hire 100 or so more.  The company is in the process of qualifying suppliers for subcontracting the cabin of the spaceship.  As of now the timeline for getting into space is sometime in 2012.  SpaceShipTwo will be sold all over the world.  Virgin Galactic has booked 500 seats for their initial flights.  At $200,000 per seat, they have raised $60M in deposits.  Virgin Galactic will operate its commercial flights out of a Spaceport America in New Mexico.     

Sept 26- Lockheed Martin Aeronautics announces 540 layoffs nationwide, 55 from their Plant 42 site in Palmdale.  LM sites at Fort Worth and Marietta, Ga. are taking the brunt of the layoffs.  LM says that the cuts will improve operational efficiency, a euphemism for “cutting overhead costs”.  LM also says that the cuts will not affect their ability to service their military contracts/customers.  Last summer LM cut 600 directors and vice presidents and in the spring announced 1,200 layoffs from their Space Systems Co.  The 55 or so layoffs in Palmdale has no effect on LM’s goal to hire 500 workers over the next 12 months for the F-35 Joint Strike Fighter program which involves the assembly of the fuselage.  Final assembly of the F-35 is done at LM’s Fort Worth, Texas plant.
                       
Solar & Wind Energy News

On the north side of Lancaster, at Sierra Hwy and Ave G, Pasadena based eSolar operates its technology demonstration solar plant.  The 20 acre, 5 megawatt plant does not use traditional solar panels to gather the sun’s energy, but rather, uses 24,000 mirrors to reflect the sun’s heat to boilers on top of two 200 foot towers.  When the boilers heat up, water inside each boiler creates steam, which in turn powers turbines which generate electricity.  The 24,000 mirrors are controlled by a computer program that keep the mirrors at the most efficient angle to the towers to maximize the sun’s effect.  eSolar says that this technology is getting a lot of attention world-wide.  In June 2011, General Electric announced they were investing $40M with eSolar. 

Sept 30- AV Solar Ranch One, which is in the process of building a solar power farm on 2,300 acres in the area of 170th West and Ave D, is given a loan guarantee of $646M by the federal government for their project.  First Solar the owner of Solar Ranch One, had applied for the loan guarantee.  A loan guarantee by the federal govt means that if the loan goes into default, the federal govt will step in and make the loan good, either by paying if off or resuming the payment schedule.  Federal loan guarantees remove all risk for the actual lender.  When the facility goes on line at full operation by early 2013, it will produce 622,000 megawatt hours of electricity per year, enough to power 54,000 homes.  While 350 to 400 construction jobs will be created, once completed, a crew of just 20 can operate the entire facility.  The facility will have 3.8M solar panels which have an operational life of 20 years.  First Solar has sold the project to San Francisco based NextEra Energy LLC, but will still build and operate the project.  First Solar’s loan guarantee is a different circumstance than the disastrous loan guarantee to solar film maker Solyndra.  Solyndra’s product line was being turned out at $6 per copy, when its global market price was just $3, an business plan that was doomed to failure as soon as they burned through their loan.  First Solar already has a buyer for the electricity they will produce as it will go into the state’s power grid.        
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Antelope Valley News
 September was a very light month on news.
                          
Sept 14- Call it a rotary, a traffic circle, or a round-about, as one has been approved by the Lancaster City Council for the intersection of 10th St West and Lancaster Blvd.  The project will cost $3M and was approved by a vote of 4-0.  The traffic circle will be at the west entrance to the Blvd, the $10M makeover of the downtown area of Lancaster.  It is believed that the rotary will slow traffic and decrease collisions.  The traffic signal at the intersection will be removed and none of the buildings at the intersection will be touched.  The center of the round-about will be a landscaped plaza.  Since pedestrians cross traffic that goes in only 1 direction, it should also be safer.  Each cross walk will have a center island, so traffic can be crossed in stages.  The existing curbs will be redesigned to configure the circular movement of traffic.  No word yet on when construction will begin.  

Oct 6- The City of Palmdale has been told by Los Angeles World Airports (LAWA), the site 9 on Plant 42 is no longer for sale.  For the past year the City has been negotiating with LAWA to purchase it.  Site 9 has two huge manufacturing hangers on 150 acres.  The B-1 Bomber was built in site 9 back in the 1980’s by Rockwell International.  Part of site 9 is leased to NASA, but ¾ of it are sitting idle.  The City intended to buy site 9 with the lease to NASA, improve the facility, then to seek a long term tenant.  LAWA board has changed over the past year, and the new board members have no interest in selling site 9.  The City believed they had an “agreement in principle”, but with nothing in writing, no contract, the deal is a no-go at this time.  Palmdale Mayor Ledford plans to meet with Los Angeles Mayor Villaraigosa re: site 9.  This is the second confrontation the City has had with LAWA; the other being a major disagreement over the running of and recruiting for, the Palmdale Air Terminal.  The City’s goal from the beginning was to get site 9 occupied, producing jobs and tax income for the City.  
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Antelope Valley Land Market
 " If you want long term opportunities, Bank Land now “

Supply closed out September at 1,757 active land listings, up 7 listings versus the prior month. With the AV land market now in its 5th year, supply remains range bound between 1,600 and 1,800. I still feel, that before this Bear market is over, supply could work its way down to the 1,000 area. There is nothing earth shaking about a supply of 1,000, but it would represent 100’s of sellers giving up and taking their property off of the market.  Those who sell between now and 1,000 on the supply number, will be those that are highly motivated to sell, either out of want or need.  Remember, supply falls for 3 major reasons:  One, quality parcels acquired at higher price levels and owned by strong hands, go off the market as those owners refuse to “give it away”.  Two, patient sellers realize they cannot get the price they want, and take the property off the market.  And third, aggressive price cutting puts some parcels in escrow and gets them off the market.  Reason 1 above happens early in the downturn, as the quality of available land “falls off the table”.  Reason two goes on throughout the Bear market, as each individual seller hits his own breaking point and gives up.  Lastly, aggressive price cutting is just beginning, and of course, is of part of the “capitulation phase”.     

Supply numbers in perspective:
Supply change:
- since last month:       no change             
- since Dec 31, 2010:   + 8.45%     
- year over year:            - 2.87%
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Supply at end of Sept 2011: 1,757
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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 September came in at 38, which was up 3 sales from August, a  + 1% gain.  The land market continues to put between 1% and 2% of all active land listings into escrow each month, very slow and not good.  Year over year, land prices are still down - 22% and continue to have a downside bias.  Yes, most of the price destruction is probably over, but if a parcel has fallen from $5,000 per acre to $1,000 per acre, then is purchased, and in the ensuing years drops to $500 per acre, that buyer has still suffered a 50% draw down from his purchase price.  Buyers know that there is no hurry to buy and they are acting like it.  It is very difficult to get buyers to commit and enthusiastically buy.  In Bear markets, buyers always fear they paid too much; in Bull markets sellers always fear they sold too low.  Psychologically, we are now at the opposite extreme of the summer of 2006 and it is going to last several more years.  For anyone buying land now, they should plan on a holding period of 5 to 10 years.

 


- Frank Donato, Third 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.