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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Fourth Quarter 2011 Antelope Valley News: Oct Nov Dec


October 2011

Antelope Valley Housing News

AV Existing Home Sales

- September, the sale of SF homes rose +3.1% vs. Sept 2010
- in total, there were 497 homes sold in Sept in the AV overall
- 148 of the sales were short sales, and 234 were REO’s
- year to date thru Sept, 4,381 homes have been sold, down -12.8%
  vs. same period 2010 which was supported by tax credits
- average selling price in Sept was $147,644, down -1.8% year over year
- average selling price for the Jan - Sept period was $145,247, down -3.1%
  from same period 2010

Antelope Valley New Home News

- year to date, through Sept 30th, compared to same period in 2010, permits are down -54.8%
- in Palmdale, during this 9 month period, issued 86 permits, all for SF homes, and down -34.4% vs. the same period in 2010
- in Lancaster, through Sept 30th, 124 permits were issued, all for SF homes, and was down -51.4%  vs. the same period in 2010

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. 442 same period in 2010, AV Building Industry Assoc.)

Palmdale / Lancaster REO Inventory

Here are the Sept foreclosure inventory (supply) numbers.  This is THE most important category to track in regard to the progress of the housing recovery.

Palmdale- 2,740 homes are in, or about to go into foreclosure, or are bank owned (REO)
Sept versus prior month:  down -531 or  -16.2%    
Sept 2011 vs. Sept 2010:  down - 528 homes or -16.1%  

Lancaster- 3,114 homes are in, or are about to go into foreclosure, or are bank owned (REO)        
Sept versus prior month:  down -566 homes or -18.1%.
Sept 2011 vs. Sept 2010:  down -738 homes or - 22.4%. 

Sept summary:  Pre-foreclosures account for almost all of Sept’s decline.  Due to the robo-signing scandal, banks had slowed down their rate of Notice of Default’s filed against delinquent borrowers.  The Federal govt has also been negotiating a settlement with the offending banks for these transgressions.  As these issues become settled, banks will soon resume filing NOD’s at their historical normal speed, which means that another wave of foreclosures are in the pipeline.  In addition, the Obama Dept of Justice is on its last legs, meaning the closer we get to the election, the more power and influence they lose.  Why?  The Obama DOJ just won’t have the time for major prosecutions- they can take years.  The new DOJ can choose to ignore or follow up any actions on their plate when they assume office.  If I were a bank’s attorney, I would be preaching delay, delay, delay.  As time runs down, the Obama DOJ, wanting to wrap it up before they leave office, will be forced to settle for much less than originally hoped.  If banks can delay enough, into the next administration, they will find a much more market friendly President.  For now though, looks like bank owned properties will be rising.           

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Antelope Valley Aerospace & Defense

Oct 19- Northrop Grumman’s entry into the world of UAV’s (unmanned aerial vehicles), the X-47B, made a successful test flight recently, as announced by NG.  The surveillance and mini-bomber is being designed for the US Navy.  The aircraft took off and flew at cruising speed.  Best described as a small B-1 bomber, also designed and built by NG, the aircraft has a wing span of 62 feet, with the wings folding up for storage aboard aircraft carriers.  With the wings folded, the aircraft is approx. 35 feet wide.  The 47B can carry two 2,000 pound guided bombs.  Test flights involving carrier landings are scheduled for 2013.  Whenever there is an “X” in front of an aircraft’s name or number, it means “experimental”.  The 47B is also “stealthy”, which means that the first warning enemy combatants will have of its presence will be the concussion of bombs exploding.
   
Oct 20- The Mojave Air & Space Port has announced they will give their administration building a “makeover”.  Officials feel that the drab white administration building is not fitting of the history that has been made there.  The makeover will include new landscaping to “warm up” the entry, a new sign at eye level, a more professional marquee, and clock sponsored by Breitling, a high end watch maker who has contacted officials seeking a branding agreement.   Work is already underway. 

Nov 2- The Mojave Air & Space Port announces they have signed an agreement with a similar facility, Spaceport Sweden, above the Arctic circle.  It is the hope of both parties that the agreement will stimulate innovation and the growth of commercial suborbital space travel.  Spaceport Sweden is located in Kiruna, in what is known as the Lapland region, within the Arctic Circle.  The site in Kiruna has a long history of atmospheric research with rockets and high altitude balloons.  Spaceport Sweden is also seeking an agreement with Virgin Galactic to market space travel to Europeans.    

Solar & Wind Energy News

 No additional news this month. 

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Antelope Valley News
                             
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.

Oct 11- Antelope Valley film and TV production is up 33% from July 2010 through June 2011. In dollars terms, the improvement was from $6M to $8M.  Due to a law signed into effect by Gov. Brown, filmmakers can take a 25% tax credit toward production costs.  This law runs thru June 2015.  During the time period mentioned in line 1, total productions were up, shooting days were up, movie films were up slightly, and TV productions about the same.  Commercial productions also rose as did music videos.  The film industry benefits AV businesses such as hotels, restaurants, and contractors.  The AV offers open spaces and picturesque locations.  The source for this information is Paula East, AV Film liaison whose job is to attract filmmakers to the AV and surrounding areas. 

Oct 20- San Francisco based Meridian Property Co. has purchased Challenger Business Park, located on 5th St West, just south of Palmdale Blvd.  The center will be renamed to the Sierra Pelona Medical Center.  The center has 5 one-story buildings totaling 34,300 sq. feet and sits on 5.73 acres.  The center and 3 adjacent acres were purchased for $3.6M.  Meridian says that demand is strong for medical office space in Palmdale, as many doctors are moving from Lancaster to Palmdale to get relocated near the new Palmdale hospital/medical center. 

Oct 22- The SYGMA distribution center at Fox Field, at 50th St West and Ave G, is an impressive operation.  SYGMA is a major distributor to  restaurants and the fast food industry.  Some of their clients include Wendy’s, Panda Express, Panera Bread all of which have sites in the AV.  The huge warehouse is 241,000 sq. feet, over twice as large as the original plan of  100,000 sq. feet. SYGMA distributes more than 2,400 dry refrigerated and frozen goods to over 1,000 customers in Southern Cal, Washington, Arizona, Portland, Oregon, and Las Vegas.  The distribution center is open 24 / 7 and employees 239.  Over the past 4 years sales have risen 50%.  SYGMA is a subsidiary of SYSCO, a Fortune 500 company.  The warehouse was built in 2006 at a cost of $15M.  The SYGMA warehouse distribution center in Lancaster is one of 17 nationwide.

Oct 26- A travel guide writer names the revitalized Lancaster Blvd as one of the top ten Main Streets on historic Route 6.  The writer starts Route 6 in Provincetown, Mass and traverses the country all the way to Long Beach, Ca.  The redesign of Lancaster Blvd has made the BLVD pedestrian friendly by slowing down traffic and lining each lane of traffic with trees and “1940’s era” street lights.  The Blvd has only one lane of moving traffic in each direction, with 45 degree angled parking now set aside in what was formerly two middle lanes of traffic.  Low volume outdoor speakers play relaxing music and bird sounds.  Route 6 formerly went all the way into Long Beach, but when California built their interstate Fwy system and renumbered their highways, Route 6 was stopped at Bishop, Ca.

Oct 27- The City of Lancaster announces, that any builder developer that comes in and takes over a half finished housing tract, will have his building permit fees waived.  While the fee could vary based on the size of the house, on average, the break will save developers $1,300 per house, not a major savings when one considers an “existing home” could be 30% to 40% cheaper than a newly built home.  The City says that half-built and empty homes area nuisance, as homeowners in the area of some of these tracts report unlawful occupancy, theft, and other illegal activities. 
Comment:  This move is a step in the right direction, but in the current environment, dominated by “distress sales”, will only help on the margins, if at all. 

Nov 1- Scott Ehrlich, one of the prime developers of the new Lancaster Blvd, announces he will build a destination 5 story “Boutique hotel” on the BLVD, at Gadsden Ave.  The hotel will be “high end” with modern rooms with mini-kitchens.  The first floor will be retrial space, the 2nd floor office space, with the hotel on floors 3,4,and 5.  The hotel will break ground in mid-2012 and be completed sometime in 2013. Lancaster officials say, that thus far, the revitalization of Lancaster Blvd has resulted in 1,900 jobs, 39 new businesses, 800 new residential units and an overall economic benefit of $273M.

Nov 1- A new business plan for the California High Speed Rail system is released.  The new report says that the cost will now be $100B, over double what was estimated just in 2008.  More importantly to AV officials, is that the report did not answer the question of the final route, over the grape vine along the Fwy 5, OR through the Antelope Valley, stopping at Palmdale.  The rail system is being “planned” to connect San Francisco to Anaheim, with private investment chipping in 20% of the total cost.   

Comment:  With the cost having been estimated at “just” $43B as recently as 2008, the new report is all but the kiss of death for this project.  Besides cost, the project has many problems.  Some smaller communities are complaining of being by-passed, while others just don’t want it going through their quiet rural area.  No matter, with the cost sky-rocketing, and California a financial basket case, the odds that this “boondoggle” will ever be built is about 1 in 1,000.  There isn’t even one high speed rail system in the world, that on its own, is profitable and can pay for itself with user fees.  Every one of them would loses money and is subsidized by by their government, yes even China.  The more stops the train makes, the longer it takes to go from SF to LA, which was once projected to be just a 90 minute ride.  The Commission is already projecting ticket prices to go from Palmdale to LA at $20 to $45.  Prices for a LA to SF ticket is projected to range from $52 to $123.  At those prices, the train will be competing with a 45 minute plane ride on a major carrier.  Have you ever been on the overhead rail system in Las Vegas?  People ride it once just to see what it is like.  When I rode it with my family, it was 90% empty.  Another example:  look at Amtrak, passenger rail service provided by the federal government.  It loses $400M per year, yet the govt keeps pumping money into it.  It will be the same way with this system if ever built.  The economics of the “high speed” train just will not work. 

Nov 4- The City of Lancaster announces, that beginning early next year, they will begin monitoring troubled neighborhoods from an airplane using a hi-tech aerial surveillance camera.  Under a contract with Aero View, ten hours per day of surveillance will be provided at times to be determined by the LA County Sheriff Dept officials.  The camera was developed by Lancaster based, Spiral Technology.  Mayor Rex Parris hopes to shorten response times, catch more criminals, save lives, and perhaps even prevent some crime.  Parris considers the contract and the technology, “an experiment”.  The aerial surveillance system can follow suspects and cars from 1,000 to 3,000 feet above ground.  The camera uses visible and infrared images for tracking.  The aircraft will operate out of Fox Airfield at 50th St West & Ave G.  After the first 12 months of the contract, the City will pay Aero View $90,000 per month.  Parris plans to eventually have the City own part of Aero View, so as prices come down, the City could generate income for the city by selling the technology to other cities or companies. 

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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- October 
active land listings,  1,723
Oct vs. prior month, -34 listings
mo over mo % change, -1.93%
yr. over yr. % change, +2.74%
2011 vs. 2010 thru Oct, +6.35%

Comments- The AV land market is now nearing the end of its 5th year in this Bear market.  Supply has been range bound, bouncing around in the 1,600 to 1,800 area.  My longer range target for supply is down around 1,000, but that is not an absolute.  It may or may not happen.  We are now in the early stages of the “capitulation phase” as many sellers are now pricing at today’s market values.  I am turning down sellers that insist on over pricing.  As in any business, I do not want inventory that I cannot sell.  As a land owner or potential seller, you should know that we probably have 4 to 5 more years of the current market environment.  Why?  Because, based on the current foreclosure numbers, that is how long it will take the housing market to draw down and clear its excess inventory.  Land prices will be flat until home builders decide they need land for projects, and that cannot happen when an existing home is 30% to 40% cheaper than a new home.  To put it bluntly, the backed up housing market is blocking and retarding the recovery and the entire US economy.  Thousands of homeowners would like to sell to move, trade up, relocate, or just cash out, but can’t because their equity is locked up.   
 -------------------------------------------------
Supply at end of Oct 2011: 1,723
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)

Sell Side 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


November 2011

Antelope Valley Housing News

AV Existing Home Sales

- October, the sale of SF homes rose +13.8% vs. Oct 2010
- in total, there were 521 homes sold in Oct, a +4.6% gain vs. Sept
- year to date through Oct, 4,913 homes were sold, down -10.4% vs. same period 2010
- residential agents say that says improved because inventory rose, however
  the banks are still doing controlled releases of their inventory
- average selling price in Oct was $144,950, down -7.4% vs. Oct 2010
- month over month, average price was also down, -1.82%
- for the first ten months of the year the average selling price was $145,222,
  down -3.7% vs. the first ten months of 2010

 Palmdale / Lancaster REO Inventory

Here are the Oct foreclosure inventory (supply) numbers.  These numbers tell us how many homes are in the foreclosure “pipeline”.  This is THE most important category to track in regard to the progress of the housing recovery.

Palmdale- 2, 766 homes are in default, in foreclosure, or are bank owned (REO)
Oct versus prior month:  up + 26 or  +1%    
Oct 2011 vs. Oct 2010:  down - 771 homes or -21.8%  

Lancaster- 2,472 homes are in default, in foreclosure, or are bank owned (REO)        
Oct versus prior month:  down -93 homes or - 3.62%.
Oct 2011 vs. Oct 2010:  down -790 homes or - 24.2%. 

Oct summary:  Add it all up and AV banks/lenders own or control 5,238 homes.  Yes, that is an ugly number, but not as ugly as the 8,000 they owned 3 years ago.  Year over year, the bank refuse to file NOD’s which many economist believe their over 6 mil who haven’t made a mortgage payment in 3 years.  Over the past year, most of the institutional blue chip lenders, i.e., B of A, Wells Fargo, Chase, halted foreclosures due to the “robo signing” controversy & law suits.  That back log is now coming back into the pipeline, so we will see just how badly that will affect the numbers.  Most residential agents expect to see the REO count go up, but it could vary from area to area, so we will see.  On a macro view, we are making progress in getting the inventory down, but it is too slow.  This is due mostly to the “brilliant” govt programs that have come out of Washington DC to help and or save homeowners.  Beginning in 2008, if the market had been allowed to work, the market would have cleared this inventory by now, or be very close to doing so. By the summer of 2012, we would have probably seen the beginning of an earnest housing recovery.  This confirms an old adage:  government cures are worse than the disease and usually accomplish the opposite of the stated goal. One by-product of the speeded up foreclosures:  owners that have decided to walk may not be living rent free for as long, so this could affect consumer spending, as it is likely that mortgage payments NOT made, at least in part, were going to consumer spending- new stuff.  Some went 2 and 3 years before being kicked out of their home.  Multiply your rent or mortgage payment times 24 or 36 and see what number you get.

AV New Home News

- in September, just 21 new homes were sold in the Antelope Valley
- in Aug, that number was 41
- Sept average selling price was $227,600, up +2.6% vs. August, but down -12.2% vs. Sept 2010
- in Los Angeles county overall, 221 new homes were sold in Sept. West Los Angeles had the best sales at 82
- countywide, the average selling price of a new home was $520,200 which was up +19.5% vs. August, and up +6.6% vs. Sept 2010
- a weak new home market is one reason the Cal economy has not shown its typical post-recession strength

Antelope Valley New Home Sales History

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. 442 same period in 2010, AV Building Industry Assoc.)

 

Antelope Valley Aerospace & Defense             

Nov 2- The Mojave Air & Space Port announces they have signed an agreement with a similar facility, Spaceport Sweden, above the Arctic circle.  It is the hope of both parties that the agreement will stimulate innovation and the growth of commercial suborbital space travel.  Spaceport Sweden is located in Kiruna, in what is known as the Lapland region, within the Arctic Circle.  The site in Kiruna has a long history of atmospheric research with rockets and high altitude balloons.  Spaceport Sweden is also seeking an agreement with Virgin Galactic to market space travel to Europeans.

Nov 17- The new unmanned stealth mini-B-1 look alike aircraft, the X-47B, being developed for the US Navy, is under testing at Edwards Air Force Base, with early tests very positive.  Current testing is incrementally putting the aircraft through greater flight conditions such as speed, altitude, and flight weights.  Eventually the X-47B will go through mock aircraft carrier takeoffs by catapult and landings, arrested by a tail-hook and cable.  The communications and electronic instructions to go on between the aircraft and a carrier during a landing is no minor feat and is very precise.  Officials testing the X-47B are very pleased with the aircrafts performance, saying, “The precision we are seeing is extraordinary.” Aircraft carrier testing is the last phase of testing but won’t begin until 2013.  The aircraft will be pre-plumbed for mid-air refueling, giving the aircraft an almost endless range.  The X-47B has a wing span of 62 feet, similar to that of a F-14 fighter, and weighs 45,000 pounds.  For storage, its wings fold up reducing its width to 35 feet.  The weapons bay can deliver two, 2,000 pound guided bombs. Two X-47B’s are being flight tested at Edwards Air Force Base.       

Solar & Wind Energy News

Major solar developers, west of Lancaster, are having to break open their check books to sooth residents and get their approval.  NRG and First Solar have already agreed to make donations to various communities and or non-profit organizations.  NRG Solar, which will soon break ground on 800 acres in the area of 210th West and Ave B, has agreed to donate $750,000 (over several years) among several town councils in the area.  The agreements are confidential.  First Solar has made six $10,000 donations to various community groups such as Del Sur School, Antelope Acres Community Center, and the sheriff’s boosters, et al.  First Solar is already in the process of building their solar farm on 400 acres near the cross streets of 170th West & Ave D.  In some communities, not west Lancaster, solar companies are offering huge cash sums, sometimes in the million$, to gain community support.   
Comment:  these are “for profit” businesses, so any cost these solar companies incur in development, will certainly be passed along when they sell their electricity to Edison and into the state’s grid.  This means higher costs for electricity for end users.  
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Antelope Valley News
                             
Nov 4- The City of Lancaster announces, that beginning early next year, they will begin monitoring troubled neighborhoods from an airplane using a hi-tech aerial surveillance camera.  Under a contract with Aero View, ten hours per day of surveillance will be provided at times to be determined by the LA County Sheriff Dept officials.  The camera was developed by Lancaster based, Spiral Technology.  Mayor Rex Parris hopes to shorten response times, catch more criminals, save lives, and perhaps even prevent some crime.  Parris considers the contract and the technology, “an experiment”.  The aerial surveillance system can follow suspects and cars from 1,000 to 3,000 feet above ground.  The camera uses visible and infrared images for tracking.  The aircraft will operate out of Fox Airfield at 50th St West & Ave G.  After the first 12 months of the contract, the City will pay Aero View $90,000 per month.  Parris plans to eventually have the City own part of Aero View, so as prices come down, the City could generate income for the city by selling the technology to other cities or companies.

Nov 9- Latin super market chain, Vallarta, opens their second east Palmdale site at 47th East & Ave R, in the Plaza Vallarta shopping center.  The store specializes in imported Latin food products, but in addition, has the most affordable fresh produce in the AV.  It is the 5th Vallarta in the AV as Palmdale west has 4 and Lancaster one as well.  The new store is 52,000 sq. feet.  All of the Vallarta’s, in addition to the extensive produce section, have bakeries, a meat section, deli, general merchandise, and in store dining.  Plaza Vallarta also has a Chase Bank and eventually will also have a CVS, a Subway, Little Caesar’s, and an auto parts store.  Vallarta Supermarkets has 39 stores in California and employs 8,000.

Nov 11- Roberson’s Honda, located in the Palmdale Auto Mall, celebrates the completion of the $1.5M makeover.  The remodeling job took 4 months.  Robertson Honda has been in Palmdale now for 20 years. The work included interior reconstruction of walls, floor and ceiling work, added a conference room, and repaving of the parking lot.  Palmdale’s Redevelopment Agency loaned Robertson Honda $500,000 towards their redo, which will be paid back with sales tax from the sale of new and used autos, parts, and accessories.

Nov 14-  The main street of the bedroom community of Quartz Hill, 50th St West, will finally be getting a drainage system.  50th St West, over the years, has often become flooded during prolonged rain storms, making it difficult to access homes and businesses.  The job will take 39 weeks and end at M-8, passing in front of Quartz Hill Elementary school during the summer when school is not in session.  The drain will run from M-8, north along 50th St West, to Ave K, where it will meet up with an existing 8 ft. round drain pipe.  Streets M-8, M-4, and Ave M, which are perpendicular to 50th St West and also flood, will get lateral drains and are included in the drainage system.  Phase 1 of the project will start construction at Ave K and go south to Ave L.  Phase 2 will be from Ave L to L-8 and include curbs and gutters.  The third phase will go from L-8, south to M-8.  The cost of the 2.5 mile drainage system will be $12M and will come from a LA county wide utility user tax.  County road funds will pay for the repaving of the streets when the drainage system is complete.

Nov 18- Tom’s Famous Family Restaurants opens their 6th AV restaurant at the SWC of 30th St West and Ave L. Tom’s numbers their restaurants so this one, # 30, is the 30th restaurant they have opened in the southern California area.  Tom’s is a family style restaurant that is well known by its customers for large portions and fresh ingredients.  Each Tom’s serves breakfast, lunch, and dinner and employs 40.  The family owned and run chain is very popular with “seniors” and families, as one gets a lot of food for a very reasonable price.

Nov 21- Chinese auto and battery maker, Build Your Dream (BYD), says that although business has slowed on mainland China this year, they are still looking to open a manufacturing plant in California, with Lancaster still in the running.  BYD officials say, that while they do build consumer electric cars, their immediate focus is on electric buses.  BYD has opened an office in Los Angeles, hiring 20 of the eventually planned 150.  BYD projects their HQ in Los Angeles will have 100 employees by the end of 2012.  BYD had a rough 2011, with profits falling nearly 86%.  BYD now says that sales are starting to improve.  Before BYD can aggressively expand their electric car sales in the US, more electric recharging infrastructure is needed.  BYD which has attracted investment dollars from highly respected US investor, Warren Buffet, also produces solar panels, batteries, LED lights, and of course, their line of electric cars and buses.  Earlier this year, BYD gave the City of Los Angeles 10 electric cars for testing.  Hertz rental cars in China, uses BYD autos.  Earlier in 2011, Lancaster Mayor, Rex Parris, twice visited China to tell Chinese investors and businesses the “Lancaster manufacturing story” of cheap land and an educated work force.  Parris was hoping to land BYD or another Chinese manufacturer while he was still Mayor.  With US and global economies slowing, that may not happen.  In business dealings, the Chinese are very patient, and are more than willing to wait for the right time and opportunity.

Nov 28- The Antelope Valley Healthcare District has purchased the NEC corner of 15th St West and Ave J-8. The 25.32 acre site is zoned commercial and is located across the street from the AV Outpatient Imaging Center.  The sales price was $3M ($2.72 per sq. foot).  AV Hospital has no immediate use for the land, but thought its location was ideal for any future expansion or programs.  Hospital officials say that, eventually, they will seek permission from the City of Lancaster to build an overpass across 15th St West to the newly acquired land.

Nov 30- Lancaster Mayor Rex Parris announces, that in January, he will attend the World Future Energy Summit in the world at Abu Dubai in the United Arab Emirates.  Over 135 countries, 35 official delegations, and 3,600 CEO’s will be in attendance.  The Mayor had previously met with the ambassador from the UAE, and has subsequently been invited to speak on the topic of “sustainable energy communities”.  Parris is greatly responsible for the City’s move into the solar energy field, with many local businesses and schools following.  Among other topics, the trip will also be a great “networking opportunity” for the Mayor in terms of creating relationships that could lead to business for Lancaster and the Antelope Valley.

Dec 2- As you may have read in your own newspaper, the high speed bullet train from SF to LA is all but dead.  There are several reasons for its demise.  One, a conservative House will not fund its future.  Two, the state of California cannot afford it.  Three, in a update on the project, the cost has doubled from its original $43B number.  Four, it is illegal to spend 2008 bond money on the projected first leg of the system, because that projected first leg is not a high speed rail system, but an ordinary railroad system.  The $9.95B in bond sales, intended to build the first leg of the system, specifically states that bond money can only be used for a high speed system only.  Five, the Cal High Speed Rail Authority has not yet acquired the environmental clearances they need to begin construction by a date certain in 2012.  Six, if construction does not begin sometime in 2012, by law, the approval of the 2008 bond issuance expires.                   ================================================================================

Legislative News

Nov 16- according to the US Treasury, total US debt for the first time ever, reaches $15 Trillion. From 1776 to 1992, a period of 216 years, the US had built up a federal deficit of “just” $3.7T. President Obama has accomplished that in just 2.5 years.  The debt of $15T is 100% of our GDP from 2010.  For every dollar the federal govt spends, they borrow $.40 cents.
  
Nov 18- another run at a Balanced Budget Amendment is debated on and then voted on in the House of Representatives.  While passing on a majority vote (261-165), it does not get the required 288 votes (2/3 majority) required of amendments to the Constitution, and thus fails.  Four Republicans voted against the BBA, while 25 democrats voted for it.  The last time the Balanced Budget Amendment came up for a vote was 16 years ago where it passed the House, but failed in the US Senate by 1 vote.  While the 25 democrats that did vote for the BBA appear to be in favor of it, that is not necessarily so.  For one, a Congressman will sometimes vote for or against a bill, knowing his vote won’t make any difference because the bill will pass or lose anyway.  This is done to officially please voters back home.  In close votes where the outcome is not certain (rare), House rules allow a Congressman to actually change his/her vote after the vote is over.  Usually a vote in the House or Senate is not called for until leadership knows on which side of the issue all of the votes will come down.  While this vote may appear to have been a waste of time, I differ.  With an election coming up next year, it is important for voters to clearly understand where their Congressman and Senator stand on major issues- this is one of them.


December 2011

Antelope Valley Housing News

AV Existing Home Sales

- November, the sale of SF homes falls -5.9% vs. Nov 2010
- in total, there were 428 homes sold in Nov, down from 455 in Nov 2010
- year to date through Nov, 5,345 homes were sold, down -10% vs. same period 2010
- average selling price in Nov was $138,901, down -7.9% vs. Nov 2010
- for the first 11 months of the year the average selling price was $140,074,   down -3.9% vs. the first 11 months of 2010
- month over month, average price was also down, - 4.17%
- realtor comments:  “It is typical for our housing market to slow down in Nov and Dec.  Housing inventory is tight and nothing will be released until the first part of the year.  New supply will help sales pick up.”

Palmdale / Lancaster REO Inventory

Here are the Oct foreclosure inventory (supply) numbers.  These numbers tell us how many homes are in the foreclosure “pipeline”.  This is THE most important category to track in regard to the progress of the housing recovery.

Palmdale- 2,698 homes are in default, in foreclosure, or are bank owned (REO)
Nov versus prior month:  down - 68 or  - 2.45%    
Nov 2011 vs. Nov 2010:  down - 822 homes or -23.3%
Number of months needed to sell off foreclosures at the “12 month trailing pace” (2,698 / 822) = 39 months

Lancaster- 2,534 homes are in default, in foreclosure, or are bank owned (REO)        
Nov versus prior month:  up + 62 homes or + 2.5%.
Nov 2011 vs. Nov 2010:  down - 899 homes or - 26%.
Number of months needed to sell off foreclosures at the “12 mo trailing pace” (2,534 / 899) = 34 months   

Oct summary:  AV banks and lenders still own or will own, 5,232 homes.  This is much better than the 8,000 they owned 3 years ago, but it is only down 6 homes versus October, the prior month.  The year year numbers show REO’s falling by 20% + per year.  If that pace were to continue, it will take the better part of 5 years to draw down the REO’s to a level where they will not affect the overall market.  Realtors have been claiming for 2 years + that banks were releasing their inventory too slowly, limiting the supply available to buyers.  While this is still true, it remains to be seen if the banks will become more aggressive in releasing and selling their REO inventory.  As an investor, I think it prudent to count on 3-5 more years of the type of market we have currently.  If the housing market improves faster, that will be easy to handle.

AV New Home News

- for November, for all of the AV, 28 permits were issued
- year to date through Nov, 275 SF home permits have been issued, down 45.9% vs. 2010
- for October, 28 new homes were sold, vs. 21 in September and 41 in August 
- in October 2010, 30 new homes were sold
- average selling price of a new home in Oct was $231,800, up from Sept’s $227,600
- in October 2010 the average selling price was $234,800
- through Oct 31st, 247 building permits had been pulled, down 50% vs. 2010
- again, through Oct 31st, Lancaster permits were 143, Palmdale 96, other areas 8
- regarding new construction, President of Greater AV Assoc. Realtors said,
  “Building is not in the conversation now.  Building will come back, but not while   75% of all home sales are short sales or foreclosures.”

Antelope Valley New Home Sales History

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. 442 same period in 2010, AV Building Industry Assoc.)

AV Aerospace & Defense News             

Dec 14- Scaled Composites of Mojave and Stratolaunch Systems of Alabama have announced a joint venture to build the biggest airplane ever flown, with 6 jet engines and a wingspan of 385 feet.  The aircraft, unnamed at present, will weigh 1/3 more than the Air Force’s current biggest cargo plane.  Stratolaunch Systems has signed a 25 year lease at Mojave Airport where, in conjunction with Composite Systems, the aircraft will be built.  Stratolaunch Systems is building two hangars on 20 acres at the Mojave Air & Space Port.  Looking much like the mothership the WhiteKnightTwo, which is used to launch SpaceShipTwo, only much larger, the new aircraft will be used to launch privately developed rockets into space.  The aircraft will be 50% larger than the largest and newest 747’s and will be able to carry cargo weighing 1.2M pounds.  The aircraft will also be able to carry a winged rocket booster weighing up to 245 tons.  Hawthorne, Ca. based, SpaceX, will build the multi-stage rocket booster.  If the aircraft were parked on the 50 yard line of a football field, its wingtips would extend ten feet beyond the end line of both end zones.  The aircraft will be even larger than Howard Hughes’s Spruce Goose, which made one short flight in Long Beach harbor in 1947.  The Stratolaunch aircraft will be able to launch rockets and satellites into orbit at a lower cost, with greater safety, and with more flexibility in regard to varying orbits.  Company officials also believe that the aircraft will also be able to be used for commercial passenger space flight as well.  This project has both the deep pockets and the technology to succeed.  Paul Allen, co-founder of Microsoft, owns Stratolaunch.  Richard Branson of Virgin Airlines is already in joint venture with Scaled Composites of Mojave, which has proven their design and technology already works with the successful flights of SpaceShipOne and SSTwo.  

AV Solar & Wind Energy News

On the evening of Dec 6th, Kern County supervisors gave their approval on 8 different wind and solar projects.  In total, Kern County officials gave their approval for 134 wind turbines and 3M solar panels on more than 8,000 acres.  Here is a summary of the approved projects in Kern County.

- Catalina Renewable Energy, proposed by EnXco Development Corp., will put 134 wind turbines and 2.2M solar panels on 6,739 acres, ten miles NW of Rosamond, west of Fwy 14, between Backus Rd and Dawn Rd.  Wind turbines go on the hilly western portion, with solar panels on the flat eastern portion.
- RE Columbia, 250,000 solar panels on 400 acres, two miles south of Mojave, west of the Fwy 14, near Purdy Ave and Holt St.
- RE Great Lakes, 25,000 solar panels on 40 acres, two miles south of Rosamond, north of Ave A, west   of 10th St West and east of the AV Fwy 14.
- RE Rosamond One and RE Rosamond Two, 200,000 solar panels on 320 acres, six miles NW of Rosamond, on 65th St West, north of Dawn Rd.
- RE Barren Ridge 1, 370,000 solar panels on 588 acres, 11 miles NE of Mojave, will be located on both sides of Hwy 14, north of Phillips Rd.

On Dec 26th, a small solar farm built by Heliocentric and West Hills Construction, announces they are ready to “throw the switch” and sell electricity into the So. Cal Edison grid.  The project is located on the western half of a 20 acre parcel (ten acres), in the area of Ave L-8, east of 90th St East.  The facility is the first free standing solar power farm to go operational, is Phase 1 of the project, and has 7,500 solar panels.  The site has another ten acres on which it can add more panels.  The solar farm took 61 days to build.  This project, probably due to its size, being smaller, flew under the radar, not getting the publicity of the larger projects ongoing in the AV.

Dec 30- In an action that caught city and county officials by surprise, Arizona based First Solar has laid off 50% of the construction crew on their mammoth west side solar farm.  The solar farm site is near 170th West and Ave D.  On Dec 30th, at the end of the work day, 37 of about 80 total workers were told they were no longer needed.  No explanation was given.  First Solar says that the project is on schedule and should start producing electricity in late 2012 and be in full operation by 2013.  County officials were furious at the announcement, as it was not part of the First Solar’s original business plan to have high layoffs, nor were county officials forewarned of First Solar’s action.  County officials are studying complaints by local residents to ensure that First Solar is following the conditions in their conditional use permit.  Comment:  In the middle of construction, nearly 50% layoffs is odd.  It’s almost as if the layoffs were needed for the company to cut overhead.  I don’t know this for a fact, but something smells fishy here.  Remember Solyndra?  If I were an investor in this project, this news would be a major red flag.  I hope I am wrong.         

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Antelope Valley News
                             
Dec 2- As you may have read in your own newspaper, the high speed bullet train from SF to LA is all but dead.  There are several reasons for its demise.  One, a conservative House will not fund its future.  Two, the state of California cannot afford it.  Three, in an update on the project, the cost has doubled from its original $43B number.  Four, it is illegal to spend 2008 bond money on the projected first leg of the system, because that projected first leg is not a high speed rail system, but an ordinary railroad system.  The $9.95B in bond sales, intended to build the first leg of the system, specifically states that bond money can only be used for a high speed system only.  Five, the Cal High Speed Rail Authority has not yet acquired the environmental clearances they need to begin construction by a date certain in 2012.  Six, if construction does not begin sometime in 2012, by law, the approval of the 2008 bond issuance expires.

Dec 7- Lancaster Blvd., now referred to as The BLVD by Lancaster officials and residents, City officials say that the BLVD makeover has created 1900 jobs, 39 new businesses, and 800 new residential units, for a total economic impact of $273M.  Businesses on the BLVD belong to the BLVD Association and have been actively involved in the initial revitalization, presenting events, planning business workshops, organizing charitable events, and also provides input to the city’s plans.  
   
Dec 9- The City of Lancaster has been identified as one of the top ten least expensive cities in Los Angeles County in which to do business.  Lancaster was placed there by the Kosmont-Rose Institute Cost of Doing Business Survey.  The survey compares government fees as a determining factor as to what attracts businesses to certain cities.  The survey objectively compares 400 cities nationwide based on a variety of taxes and fees imposed upon business.  The survey is considered by businesses as the “tie-breaker” for companies contemplating a move or expansion and have already determined the importance of other factors such as quality of labor force, cost of housing, and proximity to suppliers and customers.  Other Los Angeles County cities in the top ten were:  Agoura Hills, Bell Gardens, Diamond Bar, Glendora, La Puente, Santa Clarita, Santa Fe Springs, Signal Hill, and Westlake Village.  The CEO of Kosmont said, “California puts its own cities in a difficult spot, as in most areas in California, business is squeezed by rising local fees, and the already high cost of the state’s taxes.  The truth is, companies still want to be in California because of its weather, amenities, diverse workforce, and strategic Pacific Rim location, but because of high taxes and fees, CEO’s are asking, ‘How small an office can  get away with and still be able to service this market?’ Typically, the sales office will go up in California, but most of the back office jobs will end up in a low tax state, like Tennessee or Texas.”  California has no cities in the nation’s top ten.

Dec 12- The City of Palmdale announces that Mayor Jim Ledford, will travel to Hawaii in January to attend the annual meeting of the American Association of Airport Executives Aviation Issues Conference.  The conference is being held in Kona, Hawaii.  The mayor’s purpose in attending the meeting is to get face to face with all the important people in the aviation industry, including officials from the Federal Aviation Administration and Dept. of Defense.  Mayor Ledford is seeking to get the Palmdale Air Terminal reopened, but reopened under Palmdale’s control, not as it is now, under Los Angeles World Airport’s control which also owns the airports at Van Nuys, Ontario, and LAX.   Ledford says the conference puts him face to face contact with people that have the power to help city officials bring back passenger flight service to Palmdale. Ledford says that 680,000 airline tickets are sold every year to AV residents.  Palmdale officials feel that LAWA will not make any major changes to outlying airports that could hurt their crown jewel, LAX. I for one would love to fly out of Palmdale, wish Mayor Ledford lot of success!
  
Dec 27- The site of the former Lancaster Community Hospital, at 10th St West & Ave J-12, is torn down to make way for a new one-story, 6,500 sq. foot, 160 bed convalescent hospital.  The site had been home to the Lancaster Community Hospital from 1965 to 2010, but has been vacant since the opening of the new west Palmdale Regional Medical Center last year.  Completion of the demolition process could take up to 60 days.

Jan 7-  The Antelope Valley Enterprise Zone, which since 1998 has helped over 1,100 businesses in the AV, will expire on Jan. 31st.  The Zone has provided numerous tax breaks and benefits for both new and existing businesses and has been a magnate for business in the AV.  Officials estimate the tax savings to AV businesses over the past decade at $100M.  The zone consists of 61 square miles and essentially includes all of the commercial and industrial land in Lancaster and Palmdale.  Led by Gov. Brown, the state is refusing to take applications to renew all EZ’s in the state.  Enterprise Zones all over California (42) will eventually expire too.  Gov. Brown says, that since their inception, EZ’s have cost the state $3.6B in tax revenues.  The Gov. has also won State Supreme Court case that upholds a law passed in 2010 to eliminate all (400) Redevelopment Agencies in local cities in California.  Again, this move is a pure state money grab. Comment- The state of California, which is looking for money under every rock, is doing all it can to find revenue to avoid cutting social programs, the democratic base.  This is two more examples of how bad leadership, both in this state and on the national level, treat the business community with disdain, forgetting that without a healthy business environment, there would be no social programs.  This is like putting the “goose that lays golden eggs” in the oven.
===============================================================================
                                                                            
Antelope Valley Land Market
  
Supply- November 
active land listings,  1,716
Dec vs. prior month, - 51 listings
mo over mo % change, -2.88%
yr. over yr. % change, + 5.92% (+96 listings)

Comments & Summary
- supply remains range bound in 1,600 to 1,800 area
- on Jan 1st, over 200 land listings expired.  With the land market so slow, many of those 200 + may not elect to relist.  The Jan 1st expirations put us down to the 1,489 number, going below my long term forecast of 1,500 made back in 2007.
- some of these 200 + expirations will come back on the market, but many will not as most sellers are very discouraged and will give up.
- I believe that before this Bear market is over we could go below 1,000 on supply. With supply 500 listings below today’s levels, it will be even more difficult to find quality pieces.  It’s tough to find good parcels now even 1,500 or so listings.
- remember, land can only recover after the housing market has recovered, and even then it will not be immediate, land will lag the housing recovery
- land prices will stay cheap even as housing recovers, giving the astute and attentive investor a great “tell” on the land market

-------------------------------------------------
Supply at end of Dec 2011: 1,716
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)

Sell Side Information
 The following information is reviewed and updated each month as needed.  Remarks in bold black have been added for this month.

- in areas with few “comps”, accurate pricing at market value is very difficult
- 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
- the second half of the year has been so slow, it reminds me of 2009, a very low volume period
------------------------------------------------------------------------------------------------------------
Demand- November
land sales this month, 16
Dec vs. prior mo., down - 4 land sales
mo. over mo. % change, -20%
2011 vs. 2010, -1.3% (down 5 sales)

Land- Median Listed Prices

Median price this month     =    $35,000
Median price last month     =    $34,950
Median price one year ago  =    $42,000
Median Price vs. 12 months ago: - 16.66%     
Average days on the market 2011- 455
Average days on the market 2010- 413
Average days on the market 2009- 391
Average days on the market 2008- 330
Average days on the market 2007- 214
Average days on the market 2006- 176

Comments & Summary
- November land sales (16) was - 4 sales below October and the matches Jan and Dec of 2001 which also had just 16 sales in each month. 
- to be more simplistic, Dec was the slowest month in land sales in ten years (2001)
- as 2001 rolled over into 2002, the market was on the verge of a major turn-around.  That will not be the case now, as foreclosures & short sales still dominate the market. 
- note the new stats above regarding average days on the market.  These numbers paint a good picture of how the land market has been grinding down, slower and slower as the years have passed.
- year over year land prices are still negative, not good, and ……………………
- average days on the market are still climbing, also not good
- as long as avg days on the market keep rising and the median price of land is negative (vs. last year),   we have a confirmed Bear market.
- if we start trending at below 20 land sales per month, I would consider that another, and the last leg down, in the land market.  If this happens, it would certainly put downward pressures on prices, even from today’s depressed levels.  It’s too early to go there now, but it bears watching.  If Feb and March come in below 20 sales each month, I would get concerned.

Demand numbers in perspective:   
Land sales in all of 2011------- 366    
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

 


- Frank Donato, Fourth 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.