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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First Quarter 2004 AV News Briefs: January February March
January 2004 - AV News Briefs:

NEW: The Lancaster Auto Group has announced they will build a 20,000 sq ft stand-alone Suzuki dealership in the Lancaster Auto Mall. The site is 4.3 acres, with the cost of the showroom, offices, and garages, at $2M. The decision to build was made as part of Suzuki's plans to expand into the US market. Suzuki is hopeful to triple it's US sales over the next five years. The Lancaster Auto Mall is located within the AV Enterprise Zone, which provides various tax benefits to both new & existing businesses in the EZ.

Scenic Airlines of Las Vegas, on March 1st of this year, will begin 12 round trip flights to Las Vegas from the Palmdale Regional Air Terminal. Scenic will offer 12 round trip flights per week to Las Vegas, with most of them offered in the Sunday thru Friday period. Saturday's will have one flight. After 8 round trip flights, Scenic will offer one round trip for free. Palmdale Regional will offer free parking, versus Burbank and LAX where it can cost up to $30 per day for parking. Scenic Airlines has been in business since 1967, and has had over 800,000 flights and 10M passengers.

FOLLOW UP: The City of Lancaster has given it's go-ahead for a new 165,500 sq ft Lowe's Home Improvement Center at the SE corner of 10th St West and Ave K. The site was the old location of Sears before they moved to the AV Mall in 1990. Walgreen's will also build a 13,569 sq ft store at the site as well. For Walgreen's, it will be their 5th store in the AV; for Lowe's, it will be their 2nd. No word yet on when construction will begin.
Kohl's Dept store has publicly confirmed that they will be locating their first AV store on 10th St West & Ave O-8, next door to Sam's Club. The store will be 88,000 sq ft and employ 150. Kohl's is scheduled to open in March of 2004.
Here is a story you may (or may not) hear a lot more of in the coming months... Los Angeles City Controller, Laura Chick, has released an audit of Los Angeles World Airports, covering the past 3 years, that is very critical of their business practices, or in this case, a lack of them. The audit found major problems with how LAWA awards it contracts, which are in the millions of dollars. Chick said, "The business practices of LAWA are ripe with abuse, fraud, and conflicts of interest." Chick recommended that State Attorney General, Bill Lockyer, and the US Dept of Transportation, investigate LAWA. "This is no way to run a public agency", said Chick.
The Terminal, a new film starring Tom Hanks, has just finished shooting many of it's scenes inside Hangar 703, Site 9, at Plant 42 in east Palmdale. You may recall that site 9 was the old site of SR Technics, an aircraft maintenance firm that failed 6 months after the 9-11 attack. Hanks plays an European immigrant that gets stranded at New York's JFK Airport. The dismantling of the set began in late Dec and will take 2 months to complete.
Housing Market:

Nationwide, housing starts are still very strong, which in November, posted the strongest numbers in 20 years. Oct housing starts were also revised upward. With home sales as well, on a record pace, homebuilders are very optimistic. Existing home sales, however, have now slowed two months in a row. Year over year, though, they are up 6.9%. The last five months, for the housing market, have been the strongest on record. In Cal, strong demographics continue soak up supply, create shortages, and drive up market values. In 2003, Cal builders put up the most new houses since 1989, and the most new apartments since 1990. State officials say that Cal needs 220k new homes per year, through the year 2020, just to keep up with population growth. In 2003, builders put up only 135k homes. Homebuilders last passed the 220k mark in 1989, when they built 237,747 homes. The state's new home construction record was in 1986 when 314,600 new homes were built.

Utilizing homes sales data published by Data Quick, AV resale home prices, in some areas, have risen more than 34% since Nov of 2002. Data Quick, in gathering real estate sales data, relies heavily on MLS sales information. Said one residential agent, "Home sales are going fast and there is not enough inventory to meet demand." With the average price of a home in LA County now at $445,000, an AV home, on a relative basis, is even a better bargain now than it was two years ago. Why? Home prices in our feeder markets, i.e. the Los Angeles, San Fernando Valley, and Santa Clarita Valley areas, have gone up faster than AV homes. The reason for this is fairly simple: the feeder markets have far greater populations, while at the same time, have a limited ability to create new supply. In the AV, our population base is far smaller than our feeder markets, and, we do have the ability to dramatically increase supply, via the new home market. Here are some median home prices: west Lancaster- $210,000; west Palmdale- $260,000; east Palmdale- $175,000; and east Lancaster- $165,000.

In the first 11 months of 2003, vs. 2002, building permits issued in the AV, were up 35%. Lancaster was the growth leader here, with their permits up 97% in 2003, vs. the first 11 months of 2002.
AV New Home Sales as of 12-14-03, year to date, stand at 1,788. This is an annual run rate of 1,858 for 2003. While much stronger than last year's total of 1,162, this is still a far cry from the record year of 1990, when 5,000 new homes were sold. Conclusion: on a historical basis, the new home market still has plenty of room to grow before challenging the all-time high volume numbers. Next month I will have the final sales numbers for 2003.
Land Market:
Supply closed out December at 1,607. Supply has dropped 9.2% since the end of Dec 2002. Supply numbers over the past 4 years (last four Decembers) look like this: Dec of 2000- 1,700; Dec 2001- 1,665; Dec 2002- 1,770; and Dec of 2003 at 1,607. Many sellers are in no hurry to sell because they believe that the value of their land has gone up, or is about to go up. Couple this with strong investment demand, and you get falling supply. I would expect supply to continue to fall in 2004, perhaps by another 10% to 15%. This assumes that the current strong investment demand will continue on in 2004. As of this writing, I see no signs of this market weakening. On the contrary, early indications are, that 2004 will be another strong year as more investors seek to get into our market. And why not? The AV has always had a great growth story, and now, the story is as good as ever. If supply were to fall 10% annually for the next 5 years, that would put it in the area of 948 (after 5 years). What would that mean? Probably it would mean we just had a very good 5-year period, but beyond that, it's just too far away to discern at this time. If getting rich were as easy as extrapolating a current trend, then everyone would be rich. But of course, not everyone is rich. Current status: Supply is being drawn down gradually, which is a sign of a strong and healthy market.

Why is the supply number is important? The market value of all things, eventually, comes down to the basic principle of supply and demand. The supply number tells us the mentality of buyers and sellers, by it's change and it's rate of change. Large drops in supply could be signaling speculative behavior as investors fight it out to get into our market. If supply were to increase rapidly, that could be telling us that buyer's are backing off, and/or, that numerous new seller's are coming into the market. In combining this data with the demand number below, we can assess the current status of the land market. When supply numbers approach historical highs and lows, they could also be useful in signaling major turning points in the market. Example: at the peak of the 1988-90 market, supply made a low in May of 1989 at 587. In hindsight, May 1989 was at or near the point of peak speculation in our market, as demand over-whelmed supply, drawing it down.
Demand: December (114) land sales, was very strong. This is an improvement of + 65% vs. Dec of 2002. Overall, 2003 was the strongest year of land sales since 1990. Versus 2002, land sales volume in 2003 was up 82%. Any way you slice it, it was a very strong year in AV real estate. Custom home building, like in any strong market, is all the rage, as custom home sites on the west side are bringing record prices. Ex: in Equestrian Estates, a subdivision of 1.25 acre finished lots in the area of 40th W & Ave N, the most recent sale was for $125,000 all cash, with the agent telling me they probably could have gotten $130k. In Los Hermanos, THE top gated community in the AV, I sold a finished lot in the flat area for $155k. And I considered it a good value for the buyer. For custom home sites, there is no price relief in sight. Demand is strong and supply is being drawn down, as no new custom lots are being developed for resale. Almost weekly, I am picking up new buyers seeking to invest in AV land, so future demand looks very good. Market wide, pricing continues to be a problem, as most listed parcels are over priced. With seller optimism at high levels, this should be a problem for quite some time. This means that experience and knowledge are very important components in placing investment dollars in our market. Current status: Demand for land, both for development and investment, remains very strong and gives every appearance that it will remain so in 2004. The Beginning: Land sales volume began to increase dramatically in April of 2002. For this reason, I am calling April 2002 as the beginning of this bull market in AV land.
- Frank Donato, January 2004
Information presented above has been compiled from reputable sources, and is deemed reliable but not guaranteed. All opinions expressed are those of the Author.

February 2004 - AV News Briefs:

NEW: Cal State Bakersfield has accepted an offer from the City of Lancaster to expand to the old AV Fairgrounds, at Division St & Ave I. The City will renovate the 20,000 + sq ft Challenger Memorial Center, at a cost of $3.1M, into a center the university can use. The site will be called Lancaster University Center and will be staffed and run by Cal State Bakersfield. When completed, the new center will have 13 classrooms and accommodate 2,000 students. Cal State Bakersfield has had a presence in Lancaster for several years, with a campus on the grounds of AV College, near 30th St West & Ave J-8. The center is expected to be ready by the fall semester and will operate in addition to the current site. In addition to the University Center, the City of Lancaster will build a 37-acre youth baseball-softball complex at the old Fairgrounds. CSUB officials are planning to add business administration degree program at the new site, which is the most requested program. This moves the AV one step closer to ultimate goal of having it's own 4 year university, long coveted by AV officials and residents.

President Bush's initiative to go back to the moon has AV aerospace followers and companies excited. The task would be accomplished by developing a new "crew exploration vehicle", which Bush wants tested by 2008. No word yet on who will develop/build the vehicle, but you can bet that the "big 3" of the aerospace industry (Lockheed Martin, Boeing, & Northrop Grumman) will be involved on some level. All three have manufacturing and design sites at Plant 42 in Palmdale. Long time observers of the space program say that the President's initiative is intended to inspire future generations of scientists and engineers, something badly needed with many of current crop nearing retirement. It also puts NASA back in the space exploration business. Observers say, that over the next 5 years, NASA will spend $12B on the Bush initiative to go back to the moon. Prior to the Bush proposal, Lockheed Martin already had 200 engineers working to design a orbital space plane. In early March, NASA will give contractors more information on the requirements of the new spaceship, i.e., how many crewmembers it will hold and what functions it must perform. This is a story that I will follow closely, as it has the potential to have a major economic impact on the AV.

The City of Palmdale is seeking to buy Una Lake, a small lake south of Ave S and east of Sierra Hwy. The city plans to make it part of a 200 acre nature preserve. Acquisition costs of the lake are estimated to be $1.1M. The lake will be combined with Tejon Park, which is 18 acres, as part of the nature preserve. The preserve would have trails, benches, directional signs, fences, and a parking area.
With the new county courthouse now open, at 5th West & Ave M, the Palmdale Courthouse, only a few years old itself now has available space. The City of Palmdale has leased, for $1 per year, two of the four empty courtrooms to the AERO Institute to set up programs to foster educational opportunities in space-related activities. The AERO Institute is an organization sponsored by the NASA-Dryden Flight Research Center and the University of Cal Space Grant Foundation. The ultimate goal of the AERO Institute is to establish college degree and aircraft certification programs via Internet classrooms.
FOLLOW UP: 
Rubio's Fresh Mexican Grill, a franchise that had humble beginnings in the San Diego area 30 years ago, has opened a new restaurant in the Amargosa Commons commercial center, on 10th St West, south of the AV Mall. Rubio's is well known through out Southern Cal for its fish tacos.
Over the years, we have heard a lot about a high-speed train linking San Diego and San Francisco, with the route running through the AV. The alternative route that is being considered, would parallel the Fwy 5, and continue north, versus breaking NE to the AV, in the Santa Clarita area. The Los Angeles County Supervisors have passed a resolution giving their backing to the AV route, citing superior economic impact for the county and a greater number of people being served. State officials are grappling with the problem of future population growth and the pending traffic it will produce. A high-speed train, routed through the AV, according to a rough draft report, is being touted as the most cost effective way to address future transportation needs in California. On the November 2004 ballot, is a bond measure that will provide funding for the first leg of the system, between LA and San Francisco. Reportedly, the train will travel in excess of 200 mph.

In late January, the Greater AV Economic Alliance released it annual Roundtable Report. Some of the more important findings and forecasts are:

  • 56,900 people commute daily from the AV, to work "down below", i.e., the San Fernando Valley, Santa Clarita Valley, and Los Angeles areas
  • Ethnic makeup is 52% white, 28% Hispanic, and 12% African-American, and 8% other
  • The average age of an AV resident is 31 yrs of age, with just about as many women as men
  • Median family income in the LA county portion of the AV is $65,513
  • Existing home sales in 2003, vs. 2002, were up 16%, to a total of 9,327 homes
  • Average price per sq foot for a resale home is now $108, vs. $87 psf. in 2002
  • The average price of a home in the Palmdale-Lancaster area is $187,108
  • The average price of a home in the Rosamond, Mojave, Cal City areas is $127,920
  • The average price of a new home went up 29% in 2003
  • The vacancy rate in commercial and industry space is only 1.59%, vs. 5% county wide
  • The cost of improved industrial land is between $3.50 and $4.50 per sq foot, which is drawing commercial enterprises to the AV
  • Edwards Air Force Base is the AV's largest employer, with Lockheed Martin 2nd, and the County of Los Angeles 3rd
  • The total work force in the AV is 183,735.
  • Forecasts, that by the year 2020, total AV population will be 720,000, which is slightly less than double the current population.This assumes 10,000 new residents a year moving to the AV.
The US Air Force, which provides security for the Plant 42 area, is raising security concerns over the return of commercial air service to Palmdale, which will begin again in March, when Las Vegas based Scenic Airlines opens up. Due to the small size of its planes and airports it serves, Scenic is not required by law to do physical screenings. Scenic, Los Angeles World Airports, and the Transportation Security Administration are in talks to resolve these concerns. With several production facilities on the Plant 42 grounds, the security issue will be addressed. Plant 42 is the birthplace of several, once top secret planes, i.e. the B-2 Bomber, F-117 stealth fighter, and the F-22 Raptor. Steadily, Plant 42 added employees throughout 2003. At year's end, Plant 42 employment (all contractors) was 6,561 with a total payroll of $435M.
The 1,985 acre, 5,200 home master-planned community of Anaverde, located on Ave S, 2 miles west of Fwy 14, held an open house for it's new visitor center. The center is located on Ave S, at the southbound on-ramp of Fwy 14. Anaverde is a partnership between Empire Land and many of Southern Cal’s most well known home builders: KB Homes, Beazer Homes, Richmond American Homes, John Laing Homes, and Forecast Homes. All the developers praised the "can do" atmosphere they found with the City of Palmdale. The first phase of Anaverde will be 1,418 residences. Project wide, Anaverde will also include 159 acres of parks, 634 acres of open space, and a Towncenter with shopping and dining amenities. The first elementary school is already under construction. Lots in phase 1 will range in size from 4,500 sq ft to 14,000 sq feet, with the smallest home at 1,600 sq feet. Lots in phase 2 will be at least 10,000 sq feet. The projects design makes use of the views of the surrounding hills and aqueduct. KB Homes has owned the land for this project since 1986, and a few years ago, invited Empire Land to join them as a partner. Serious money has been already invested, with $60M thus far put out for infrastructure alone. Another $70M is slated to be invested in the project for infrastructure. Said Palmdale Mayor Jim Ledford, "It will be a lifestyle not realized anywhere else in the AV."
Housing Market:

On a macro basis (nationally), housing is still very healthy. Released Jan 21, for Dec, housing starts were up + 1.7%, the strongest monthly performance since 1978. In 2003, versus 2002, housing starts were up 8.4%. Total housing starts in 2003 came in at 1.85M, a 25-year high. The all-time record for housing starts was in 1972 at 2.36M. Also in Dec, existing home sales (national) were very strong, up +6.9%. Homebuilders view this market as strong, and are confident re: the future. At 6.1M, existing homes set a new record in 2003, versus the old record in 2002 at 5.6M. While new home sales did fall 5% in Dec, they nonetheless set a new record in 2003. When the economy starts to produce jobs in earnest, this should also help the housing market as new job holders enter the housing market, adding to the demand side.

Median home prices from Dec 2003, and their percentage gains since Dec 2002.

  • West Palmdale - $266,000 + 19.3%
  • East Palmdale - $170,000 to $196,000 +20.6%
  • West Lancaster - $162,000 + 37.3%
  • East Lancaster - $171,000 +29.7%
  • West Lancaster / Quartz Hill - $224,000 + 24.4%
In the early part of this housing cycle, west Palmdale was the hot and strongest market, with west Lancaster lagging. But that lag, and its lower prices, has attracted money to
it, so now that part of our market is catching up. In the new home market, west Lancaster, has numerous new tracts from which to choose, some of which are not yet visible (broken ground). In Lancaster, the median price of the 301 homes that sold in December 2003, were up 24% to %37%, versus December of 2002. East Lancaster has many new home developments breaking ground and on the drawing board. For Palmdale in December of 2003, 324 homes sold, and their median price was up 19% to 40% versus Dec of 2002. Even so, on a relative basis, comparing AV home prices with our feeder markets of LA, the San Fernando Valley, and the Valencia areas, an AV home is even a better bargain today, than it was one and two years ago. Residential agents and brokers are still having the same problem they have been having over the past two years- low inventories of available homes, making it difficult to get buyers placed, which of course, has driven up prices.
Portifino Estates, a gated community by Forecast Homes located at 45th St West & Ave M-8, held the grand opening of their models on February 7th. The homes range in size from 2,693 to 3,396 sq feet, with prices starting in the high $300,000 range.
Homebuilders, perhaps to keep the buyers hungry, are selling homes a bit different now then in the 1988-90 market. Each phase of a new tract is now 8-12 homes, much smaller than in the 1988-90 market. This sells out each phase sooner, allowing the builders to raise prices sooner, on the next phase. It also creates a perceived shortage, as the buyers know full well, that if they don't buy the current phase, they will have to pay a higher price in the next. With demand strong, and prices moving up, this forces buyers to make quicker decisions. The shortage is not in overall supply, but the available supply in each phase, which is limited deliberately. This strategy, for the homebuilders, is working well, and increasing their profitability.
AV New Home Sales, for all of 2003, was 1,820. Homebuilders had a great year in 2003, improving new home sales by 56%, vs. 2002. However, this is still well below the record year of 1990, in which 5,000 new homes were sold. Conclusion: on a historical basis, the new home market still has plenty of room to grow, before challenging the 1990 all-time high volume numbers. With interest rates remaining at, or near, current levels for quite some time, I expect 2004 to be another big year for the home builders and AV real estate in general.
Land Market:
Supply closed out January 1,635, which is a slight gain from the previous month (1,607). In 2003, under pressure from strong buying, Supply dropped 9.2%. Jan 2004 supply
numbers are 8.6% lower than Jan of 2003. It is an economic principle that higher prices will always bring on new supply, as owners look to use market strength to take a profit or unload a position. Going forward, the question is, will new supply come onto the market at a faster rate then demand; or, will demand overtake new supply and continue to draw it down as it did in 2003? January's supply number does not provide the answer to this question. A break in the 2003 trend of only one month is not a reversal of that trend. I do expect to see supply resume it's 2003 trend by falling, but that resumption may take a few months to get going.

Current status: While January interrupted the trend of falling supply, it will not change it. I expect the trend of falling supply to resume, if not next month, then in the month or two to follow. Falling supply is a bullish indicator. It means that buying is strong. I will be watching closely the behavior of this indicator as a early warning sign that the market "may" be getting into the speculative phase. Presently, we are nowhere near that point.
Why is the supply number is important? The market value of all things, eventually, comes down to the basic principle of supply and demand. The supply number helps to tell us the psychological condition of buyers and sellers, by its change and its rate of change. Large drops in supply could be signaling speculative behavior as investors fight it out to get into our market. If supply were to increase rapidly, that could be telling us that buyer's are backing off, and/or, that numerous new seller's are coming into the market. In combining this data with the demand number below, we can assess the current status of the land market. When supply numbers approach historical highs and lows, they can also be useful in signaling major turning points in the market. Example: at the peak of the 1988-90 market, supply made a low in May of 1989 at 587. In hindsight, May 1989 was at or near the point of peak speculation in our market, as demand over-whelmed supply, drawing it down.
Demand: January (137) land sales, was THE strongest month since I have ever seen. If January is any indication of the up coming year, 2004 is going to be another very strong year in AV land sales. January 2004 land sales showed an improvement of + 104% vs. Jan of 2003. January's number of 137 land sales beats the previous high, 119 in June and Sept of 03, handily by 15%. Strong volume is pushing up prices, but not in all areas. If an area has active development, meaning building of some sort, then prices have moved up strongly over the past two years. Even at that, there are pockets of opportunity and special situations that do offer good profit potential. With prices having risen the past two years, property selection and pricing are more important than ever. Two years ago, if you made a mistake on location or pricing, the strong market may have bailed you out. Going forward from here that will be a tougher chore for the market to accomplish. If one is not experienced in our market, they must be smart enough to admit that they "don't know what they don't know" and seek experienced guidance. This is an exciting market, but most listed property is over priced due to optimistic sellers and the poor job that many agents and brokers do in educating and guiding their sellers.
Current status: Demand for land, both for development and investment, remains very strong and gives every appearance that it will remain so in 2004.
The Beginning: Land sales volume began to increase dramatically in April of 2002. For this reason, I am calling April 2002 as the beginning of this bull market in AV land.
- Frank Donato, February 2004
Information presented above has been compiled from reputable sources, and is deemed reliable but not guaranteed. All opinions expressed are those of the Author.

March 2004 - AV News Briefs:

NEW: The US Dept of Commerce has designated Mojave Airport into the AV's existing "foreign trade zone". TZ status helps to attract new business as well as help existing ones. No duties are paid on goods brought into the TZ and then re-exported. If goods are sold domestically, no duties are due until the goods leave the TZ. Planes refueling at Mojave will now save up to $.30 cents per gallon in taxes. Firms can also benefit from tax and duty savings on goods and parts imported or exported for use in commercial and military aircraft modifications and improvements.

Hampton Inn, which is part of the Hilton Hotel chain, has broken ground on a 85 room, 49,000 sq ft, three story hotel in west Palmdale, near 5th St West & Ave P-4. The hotel plans to gear towards business travelers. It will also be located next door to FunLand USA and is only a short walk to the Marketplace, anchored by Best Buy, Lowes, and others. This will move up the number of rooms available in Palmdale to almost 1,100. Completion is scheduled for July of this year.

Thermal Research & Development, which makes high performance auto exhaust systems, held it's grand opening in the Lancaster Business Park on Feb 24th. The owner moved his cramped Newbury Park site to Lancaster and now has 15,000 sq feet. Thermal Research & Development is located near Exchange St and Ave K-10, along with other after-market auto parts makers: PowerDyne Automotive Products, Advanced Clutch Technology, MGS Custom Bikes, and 2002 AD, a firm that stocks parts for vintage BMW's.

The AV Board of Trade held it's annual Business Outlook Conference on Feb 20th. Here are some hi-lights from the many speakers:

  • Jack Kyser, economist for LA County Economic Development Corp.:
    - Renewed defense spending and a strong housing market are driving the AV economy, and are so strong that they are responsible for reviving retail, commercial, and industrial growth as well
    - AV leaders need to get the message "over the hill" that the AV is a great place to grow a new business
    - The AV will benefit from increased defense spending thru the year 2010
    - The AV is doing great, but it can still do better Congressman Duncan Hunter (San Diego), House Armed Services Committee
    - Emphasized the need to maintain air superiority to save American lives on the ground in Iraq
    - Ground vehicles in Iraq need to be more heavily armored
    - Lauded AV's aerospace companies, saying, "you allow us to project power anywhere in the world"
    - Expressed a concern that nations participating in the Joint Strike Fighter Program may pass on some the sophisticated technology to rogue nations, i.e., communist China or North Korea
    - Under JFK, defense spending was 9% of GDP; under Reagan, 6%; today under Bush, it's only 3%
    - "If you don't have national security, you won't have social security."
  • John Fergione, chief test pilot, Lockheed Martin, the Raptor program
    - praised the outstanding performance features of the F-22, showing a dramatic video of what the aircraft can do
    - the F-22 Raptor, an air to air combat plane, is the first aircraft to combine super-sonic speed, stealth, extreme agility, and advanced avionics
    - the Raptor "rules the skies", passing all of it's tests with flying colors; it's 2nd generation stealth - so far, 25 have been built, with 19 more planned for production or modification this year
  • Everett Shine, Forest City Development Co, (owner of the AV Mall) - Announced that the 21 vacant acres of land on the north side of the Mall would be developed, with a hotel, three restaurants, some office buildings, and a 14 screen movie theatre. Johnny Carino's, an Italian restaurant, and Ginza Steak House have signed up for two of the sites. The existing Movies 10 inside the Mall will be vacated and replaced with retail space. Movies 14, a Cinemark theatre, will be open sometime in 2005.
    - Also announced that the south facing entrance to the Mall will be remodeled, with the fountain being removed, and a courtyard and palm trees taking it's place, with the work beginning after Easter and being completed before Christmas
  • Robert Riviniuu, California Building Industry Assoc.
    - with 600,000 new residents arriving in Cal every year, Cal will have a housing shortage for quite some time
    - while Cal will build 200k new homes in 2004, the state needs 230k to 250k a year to growing population
    - pent up demand has been created due to the fact that only 100k homes p/yr were built over a 10 yr period
    - speculation is NOT driving home prices, so there is no housing bubble; demand is solid
    - housing is the backbone of a healthy economy
    - the AV is a good example of a "commitment to affordable housing"
  • Gerald "Duke" Dufresne, Northrop Grumman
    - NG will add 1,000 jobs between now and 2010, which will revolve around the Joint Strike Fighter program, the Global Hawk, and constant upgrading of the B-2 bomber. Currently NG employs 1,500
    - at any given time, NG has 3 B-2 bombers on site going thru maintenance and upgrades
    - emphasized NG hi-tech manufacturing approach that shares technology among different programs, all under one roof
  • Frank Roberts, Mayor of Lancaster
    - discussed the expansion of Countrywide Credit, Lance Camper, Michael's
    distribution center, and the remodeling of the old Fairgrounds to open up a Cal State Bakersfield campus
    - over the past two years, Lancaster has added 2,000 new jobs Delta Scientific, security and road barriers, does business globally
    - showed a video demonstrating it's security product line
    - is building a new plant in the Fairway Business park, on Ave O, east of 10th St West
FOLLOW UP:  The County of Los Angeles has plans to earmark upwards of 200,000 acres in the AV as "environmentally sensitive". This is part of the process of updating the county's 1980 General Plan. In general, the affected area is north of Lancaster, into Kern County, then east into San Bernardino County. The purpose of the Significant Ecological Areas is to protect flora, fauna, and habitats. The plan to do this is still in the draft stage and the county is still taking public comment on the issue. Land within the city limits of Palmdale and Lancaster is not affected; they are not under the jurisdiction of the county. Maps that detail the SEA's are expected to be released in March. Local building and real estate officials are voicing strong opposition to the county's plan. These restrictions could affect residential, industrial, and commercial growth. If land is designated in a SEA, it does not mean that it cannot be developed, but it would require an extra layer of review. As one county representative said, "We want to balance development with the conservation of open space and natural resources." Comments: this new designation could breed a whole rash of lawsuits, centered around government regulation making ones property less valuable by restricting how it can be used and/or developed. We'll have to wait and see, but this does have the look of govt. over reaching.
If you have been in the east Palmdale area lately, then you know that the widening of Ave S, from the Fwy 14, east, to 20th St East is ongoing. Besides being widened from two lanes to four, new turn lanes and traffic signals will be installed at all major intersections, with streetlights, sidewalks, bus benches, drainage, and landscaping. A bike trail will also parallel Ave S. The work began in Oct of last year, with about 15% of it done.
2003 saw some impressive industrial growth in Lancaster. Countrywide Credit, of THE largest mortgage lenders in the country, expanded their Lancaster Business Park site by 100,000 sq feet, doubling it's square footage, Lancer Camper expanded by 40,000 sq ft, Deutrel Industries expanded by 30,000 sq ft, and the Rodio Building grew by 40,000 sq ft. Thermal Research and Development moved to Lancaster Business Park, from Canoga Park, and San Fernando Pallet moved into L.B.P. from the San Fernando Valley.

Kohl's Dept Store held it's grand opening on March 5th, at their new west Palmdale store, next door to Sam's Club. Hundreds of shoppers were lined up as early as 6AM to get into the store at its 8AM opening. The 88,000 sq ft store considers "a mom with children" as their core customer. Kohl's carries apparel, shoes, accessories, and house wares. With the opening of their Palmdale store, Kohl's will have 30 stores in California, and 560 nationwide. Kohl's selected Palmdale without any incentives from the City, and has already hired the 150 people needed to operate the store. Next up for the "O-8" center is a Super Wal-Mart, to be located just north of Sam's Club. Efforts to get Wal-Mart to convert the old K-Mart building, at the NEC of 10th W & P, failed.
As of March 5th, security plans were still under consideration for the return of commercial air service to Palmdale. Las Vegas based, Scenic Airlines, had been
planning to open up air service in March, but has run into security concerns. An Air Force Plant 42 commander, Col. Ronald Ortiz, says that they are "trying to fast track it", and is confident that security issues will be worked out so air service can return to Palmdale. The Palmdale Air Terminal is owned by Los Angeles World Airports, which also owns 17,000 + acres in the immediate area. LAWA and the Air Force have joint use agreement that runs through the year 2017. The Air Force also provides fire and crash rescue service for Plant 42. Security issues are being worked out by LAWA, Scenic Airlines, and the Federal Transportation Administration, with the Air Force having the final say on the plan.
Housing Market:

On a macro basis (nationally), Jan housing starts, Jan construction spending, Jan new home sales, and Jan existing home sales, were all down, as bad weather in many parts of the country kept buyers from going out and new work from beginning. Every time national housing stats show weakness, be it starts, new or existing homes sales, the media begins clamoring that it is the end of the housing boom. It may be in some parts of the country, but not in California, for in regard to real estate, there is the nation, and then there is California. Just ask anyone from outside of the state that moves here, and then tries to buy a home. They are astounded by the prices and competition.

Portifino Estates, a gated community being built by Forecast Homes, has sold out their first 4 phases, with 9 more phases to come. Prices realized at the end of phase 4 were: 2,693 sq feet- $146 per sq foot; 2,896 sq ft- $145 per sq ft; 3,002 sq ft-$142 psf; 3,222 sq ft- $137.50; 3,396 sq feet- $122.60, and the biggest floor plan of 4,153 sq feet brought $110 per sq ft. Portifino has 3 basic floor plans, with each one having options for bedrooms, bonus rooms etc. The above prices do not include upgrades.
Dennis Pursley of Mid-Valley Construction, the primary developer of Desert Rose, 1 acre custom home sites at 27th W and Ave M, is developing 50 more lots right next door. Pursley has a waiting list of over 200 people for these 50 lots. Pursley will also develop 52 1/2 acre lots at the SWC of 30th St West & Ave M.
A prominent residential agent says that it takes up to 2 months to find a home her buyers, and that if the prospective buyers are diligent, contacting the agent twice a day, they can get it down to 45 days. She also said that prices are going up, almost daily. In Jan, last month, the median price of a home that sold in west Palmdale, was $303,000, up a whopping 40% vs Jan of 2003. The annual median family income in all of Palmdale is $68,725. In west Palmdale it's $81,549 and in east Palmdale, $61,725.
Grading has begun at the SEC of 50th St West and Ave J, on a 77 net acre R 7,000 piece. Strathen Homes of Orange County will build near 300 homes here. This site is right across this intersection from the state prison, which has not seemed to bother home buyers one bit, with homes selling well on within just 1 mile of the prison.
AV New Home Sales, for all of 2003, was 1,820. Homebuilders had a great year in 2003, improving new home sales by 56%, vs 2002. However, this is still well below the record year of 1990, in which 5,000 new homes were sold. Conclusion: on a historical basis, the new home market still has plenty of room to grow, before challenging the 1990 all-time high volume numbers. With interest rates remaining at, or near, current levels for quite some time, I expect 2004 to be another big year for the homebuilders and AV real estate in general. Due to our larger population base now, versus 1990, it would not surprise me to see new home sales numbers exceed 5,000 per year in the coming years.
Land Market:
Supply closed out February at 1,622, down less than 1% versus last month. Versus one year ago, Feb 2003, supply has dropped 8.6%, which I consider an orderly decline. Supply in all of 2003, declined 9.2%. In a bull market, such as we have, we should see supply be gradually drawn down. There will be months when the supply could rise versus the previous month, but when we look at the supply numbers in the context of many months, we should see supply falling. Since this is exactly what is happening, this market is behaving in a very normal and healthy way.

Current status: In the context of the very strong demand that we currently have, falling supply is a very bullish indicator. If demand were weak, as in the mid 1990's, and supply were to fall, this would be a very negative indicator; it would mean that many sellers are giving up, and taking their property off of the market. But this is not the case now. As always, I will be watching this indicator closely for any early warning signs that the market "may" be getting into the speculative phase. Presently, with the supply falling off at a very leisurely pace of only 10% or so per year, we are nowhere near that point.

Why is the supply number is important? The market value of all things, eventually, comes down to the basic principle of supply and demand. The supply number helps to tell us the psychological condition of buyers and sellers, by its change and its rate of change. Large drops in supply could be signaling speculative behavior as investors fight it out to get into our market. If supply were to increase rapidly, that could be telling us that buyer's are backing off, and/or, that numerous new seller's are coming into the market. In combining this data with the demand number below, we can assess the current status of the land market. When supply numbers approach historical highs and lows, they can also be useful in signaling major turning points. Example: at the peak of the 1988-90 market, supply made a low in May of 1989 at 587. In hindsight, May 1989 was at or near the point of peak speculation in our market, as demand over-whelmed supply, drawing it down.

Demand: February (175) land sales set a new monthly record high, blowing away the previous record high 137 from month (Jan), by 28%. February land sales are particularly impressive, especially when you consider it had only 29 days, not 30 or 31 like all other months. Feb 2004 land sales, vs. one year ago, were also up 78%, an astounding number for just one year. At some point in time, this type of improvement, on a month over month basis, will not be possible. While land sales cannot possibly keep up this type of improvement, on a percentage basis, they can stay at very strong levels for quite some time. Do you have "bull market fever"? The other day I heard a great quote from an stock market portfolio manager as he appeared on CNBC. "Greed has no memory." Those of you that have been in this market for many years need to think about what this quote means in the context of this market, and the context of the 1988-90 markets. Many of the sellers I come across have a bad case of "bull market fever". The symptoms are as follows:

- afraid to sell because the price might go higher

- attempting to squeeze out the very last dollar of your investment

- fearing that if you sell, someone else will make a profit, and not you

- when you get a full price offer, you assume the listed price is just too low

- don't want to sell because you don't need the money right now

There are other symptoms, but they are just too numerous to list them all. Even the most experienced investors can get caught up in the "fever". Most investors feel, that whatever the current environment of the market, strong or weak, that environment will not change. This is why investors buy into strength and sell in despair, near market bottoms, i.e., the mid 1990's. This is also why many do not sell into strong markets, and why most do not buy into weak markets. Most investors are guided by the emotion of greed, not a well thought out plan based on common sense. If there is anything about investment markets that will never change, is that eventually, they always change. Markets never stay the same forever. The best way I know of to manage risk in this market is when warranted, to also be a seller, not just a buyer. There will always be another deal, next week, next month, etc. The excuse of "I don't need the money" is a terrible reason not to sell, for in all likelihood, when you do need the money, the market may no longer offer you a good selling opportunity. Markets rarely accommodate one's personal schedule. Do not try and tell the market when it is time to sell; let the market tell you. I say all of this with the benefit of 20 + years of experience in watching our market and talking with investors. It is not necessary to grab your nearest phone to call me to sell your property, but you should consider my words carefully.
Current status: Demand for land, both for development and investment, remains very strong and gives every appearance that it will remain so in 2004. Eventually, monthly sales will stop setting records; when this happens, do not fret, it does not mean the bull market is ending.
- Frank Donato, March 2004
Information presented above has been compiled from reputable sources, and is deemed reliable but not guaranteed. All opinions expressed are those of the Author.