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Equal Housing Opportunity |
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!
Second Quarter 2005
AV News Briefs:
April May
June
|
| Antelope Valley News – April 2005 |
| Mar 4th- Congressman Buck McKeon announces that Palmdale will get part of the $16M of federal highway funding approved for 25th Congressional District. Rancho Vista Blvd, from Fairway Dr to 30th St East, will be widened from 4 lanes to 6 lanes. Rancho Vista Blvd, formerly Ave P, is a major artery that serves the aerospace contractors at Plant 42. In addition to the widening, an overpass is also planned where Rancho Vista Blvd crosses the RRX, near Sierra Hwy. |
| Mar 7th- Jack Kyser, senior economist for the Los Angeles County Economic Development Corp., says that during 2004, the five county area of southern Cal had 348 major commercial-industrial expansions, which was up 10.5% vs 2003. Turning to the AV, Kyser said, "We are seeing more business people thinking about the AV. Business expansions have also increased in the AV as more business people realize the AV has lots of land, a wonderful attitude, and a great work force." |
| Mar 9th- The AV chapter of the Building Industry Association, says that the weather, since the first of the year, has cost builders 20 construction days. One day or rain costs an additional 3 days of waiting......waiting for the ground to dry up and the cleaning up of mud etc. The 100 year stormSo. Cal. has had, accounts for the drop off of AV building permits, inJanuary 2005 vs 2004, which were down about 13%. The BIA, on a statewidebasis, is actively supporting legislation to increase the supply of housing.It is the goal of the BIA to make housing more affordable and more available. |
| The BIA's goals are: remove regulatory barriers to housing production, see to it that all communities have well planned land use policies to maximize housing, streamline the approval process, and require local govts to provide more justification for the fees they charge, which ultimately are paid by the home buyer. |
| Mar 10th- The first phase of the new Fox Field Business Park is underway, with it's first occupants expected to be in by July. The 24 acre site is being developed at 45th St West & Ave G and will offer the land and buildings for sale. Phase 1 will have 9 buildings on 6.5 acre lots (each building). When completed, the site will have 24 business facilities on 24 acres. Buildings will range in size from 6,400 to 29,000 sq feet, with the total square footage of all of the buildings at 220,000. The phase one buildings will be 6,000 to 16,000 sq feet. Key features of the park include: tilt up concrete walls,18-20 ft clearance (ceilings), parking, ground level loading, 400-800 amp,480 volt power, and the tax advantages of locating in the AV Enterprise Zone. The commercial arm of Larwin & Co, a long time AV home builder, is the developer. |
March 15th- The annual UCLA Anderson Forecast California Report is released.The report draws the following conclusions re: the California economy: * The Cal recovery may be leaning too hard on the
housing sector, and could * While the housing sector has maintained the Cal economy, it's current growth path, both in building and prices is clearly unsustainable. * To illustrate this point, Cal's housing stock during the boom has risen 1.66 Trillion dollars, with median prices rising from $225,000 to $400,000 during this time frame. For some perspective, the combined annual income of Californians is 4.7 trillion dollars. * In the AV, with median home prices still below $300,000, the AV is still a strong magnate to home buyers * A major decline in home prices is not expected, but prices could remain flat for many years * Other areas of strength in the Cal recovery- increased LAX traffic, higher hotel occupancy rates, and taxable sales are growing at double digit rates. Also, record amounts of goods are traveling through ports/harbors. |
| March 17th- Los Angeles County announces they have hired a environmental consulting firm to develop a broad water management plan for the AV's groundwater basin. Kennedy/Jenks Consultants will help put together an Urban Water Management Plan for the AV. Interested parties, i.e., local water districts, farmers, and land owners are invited to participate. The Urban Plan will look at the reliability of water for the AV over the next 20 years. The next public meeting will be Wednesday, April 6th, from 8am to 10am, at the Palmdale Cultural Center. |
| March 21st- SunCal Companies, the new owner of the west Palmdale's master planned community, Ranch, announces they will host a public ceremony on April 5th, which will mark the restarting of work on this massive housing project. The ceremony will be held at the "bridge to nowhere" along Elizabeth Lake Rd, at 40th St West. The stone facade bridge, which was completed in 1996, is to serve as the primary entrance to Ritter Ranch. Of the 10,625 acre master planned community, SunCal official said, "Our goal is to create a premium master-planned community that will offer a superior lifestyle." Construction of the first homes should begin in the first half of this year and be ready for occupancy by year's end. Ritter Ranch, at it's completion, will include 7,200 homes, a golf course, an equestrian center, two lakes, 100 acres of improved parkland, 6 schools, and an amphitheater. |
March 23rd- The
Lancaster City Council has given their approval for a general
plan amendment that would change the zoning at the NW corner of
60th St Eest & Ave K. The present land use is R 7,000,
with the Gen Plan amendment calling for the new use to be commercial.
In early February, the City announced it would start a review of
it's present General Plan. Presently, there are 12 other Gen Plan
amendments pending. In response to the approval of the above zone
change, the City said, "It is our responsibility as a council
to make sure we have enough open space versus developed land, a
proper balance between rural and urban development, and a proper
balance between residential and commercial development." From
the subject parcel, there is no commercial development to the west,
north, or south, just to the east, 4 miles away at 20th St West.
The area of 30th |
March 24th- An economist
from the Cal Assoc. of Realtors speaks at a Greater AV Assoc. of
Realtors luncheon. Following are the main points he discussed "The B word, for real estate bubble, we don't use that word nor do we see a pending real estate bubble in Cal" Solid GDP growth, strong consumer spending, renewed business spending, and strong consumer confidence will keep the real estate market healthy. More support for Cal real estate is coming from a labor force that is growing faster than previously thought. Despite the price of gasoline, inflation is in check; when inflation is · below 3%, real estate does well. Inflation is below 3% now and should stay below 3%. There is no reason to believe that home prices are going to go down, however, with the strong growth in prices over the past 3 years, a correction in prices should not be unexpected. CAR is concerned about entry level buyers; home prices have moved up so· much, that many first time buyers, in most areas of the state, cannot afford a home. The high desert areas of Cal are one of the few areas left where entry· level buyers can find a home, but even in the AV, affordability has fallen over the past 3 years, dropping from 60% to 40% of families that live in the AV and can afford to buy a home. Risks to the home market are rising interest rates, rising oil prices, the US deficit, and home affordability sales in the upper price ranges will suffer, but entry level and mid-range home sales should be strong in 2005. |
| March 30th- Now that Kohl's Dept store and Sam's Club have been opened for one year, other businesses are popping up along 10th St West, north of the Fwy 14, at Ave O-8. Coming soon, and under construction, north of Sam's Club, is a Super Wal Mart which will be 214,000 sq feet. Along with the Wal Mart, another 128k sq feet of building pads are being constructed, but no word yet on tenants. Other businesses already open and doing business at Destination O-8 are: Office Depot, Game Stop, Subway, T-Mobil, Starbucks, and Wells Fargo Bank. To the south, along the AV Mall's restaurant row, Famous Dave's barbeque and Johnny Carino's Country Italian will be added, the former by June and Carino's in about one year. |
| National Housing Market- The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend in sales activity. |
| January pending home sales (Natl Asso of Realtors), which is a new indicator being released by the NAR, revealed in January that pending sales of existing homes fell -2.1%. A pending sale is one that has gone into escrow, but not yet closed escrow. The reading of 120.6 on this new indicator was the lowest since May 2004. This indicator is based on contracts for single family homes, condos, and co-ops. A NAR official said, "Home sales activity, in the near term, is expected to be historically high, but trending off of the peak levels recorded in 2004." |
| February housing starts
(Commerce Dept), after a weak November and a powerful December and January, rose to a 21 year high. Feb housing starts were up +.5% at an 2.195M annualized rate. Economists had been looking for housing starts to fade a bit, to 2.08M, but were astounded by the markets strength. In 2004, a total of 1.956M units were started. Both the construction and real estate industries are forecasting another banner year for housing in 2005. "With the prime home buying season just around the corner, and mortgage rates still hanging in and around the 6% area, the outlook is positive," said one housing analyst. Wells Fargo says that their national housing index remains steady, with strong demand for new homes. |
| February existing home sales (NAR), released March 23rd, were down .4%, falling to an annual rate of 6.79M units. The pull back in sales was not as deep as expected. Year over year, median sales prices rose 11% to $191,000. Also on a year over year basis, existing home sales are up 6.1%. Chief economist for the National Association of Realtors says that the housing market appears to be in the early stages of a cooling period, but that the market would still be fairly strong and favor sellers. The NAR also says that the prospect of higher interest rates could cause sales to weaken gradually later this year. Inventory stands at 2.38M units, which represents a 4.2-month supply. This is up from January's record low of 3.8 months. |
| February building permits (Census Bureau), released March 24th, up +5.2% vs January. Good solid performance, builders are confident. |
| February new home sales (Commerce Dept.), released March 24th, came in very strong at + 9.4%, the strongest percentage increase in four years, and the 2nd strongest month on record. The increase was at an annualized rate of 1.226M units per year, handily beating economist's expectations which was 1.14M units. Supply of new homes rose to a record 444,000 which represents a 4 month supply at February sales pace. Neither rain, nor snow, nor rising interest rates hurt the new home market in February. |
| AV Home Market Rosamond Update........Growth in Palmdale and Lancaster is now spilling over into the Rosamond market. Rosamond, which had population figures of 7,430 and 14,349 in 1990 and 2000, respectively, is seeing both it's new and resale markets doing well. In 2002, 22 new home building permits were issued, while in 2003, that number grew to 72. In 2004, 105 new building permits were issued. |
| Residential agents in the new home market expect 2005 to be better than 2004, with "new home inventories really low." Over the past several years, a new home has gone from just over $100,000 to the mid $200's." For comparison purposes, a 1,500 sq ft home is now offered at $259,000. |
| Buyer's are coming from both within and
from outside the AV, with two primary goals: get into their first
home, or trade up from a smaller home, from nearby (10-18 miles) Lancaster or Palmdale. |
| DataQuick Information services, says that
despite the February rain, buying activity and appreciation rates were particularly strong in So Cal's affordable neighborhoods, like the Antelope Valley. The median price for a southern Cal home is now $425,000, up 21% vs Feb of last year. For southern Cal, year over year appreciation rates have now been over 20% for 13 months in a row. DataQuick also says, that indicators of market distress, are largely absent. "The strength of this market does surprise us, but we still think appreciation rates will come down," said a DataQuick official. Statistically, Feb of 2004 was the strongest month that DataQuick has on record (since they had been collecting data in 1988). |
| AV New Home
Sales Data (source: The New Housing Monitor, Fidelity
Title Co. by Frank Donato) As of Dec 31, 2004 2004 - total of all new homes sold- 2,503 New home builders in the AV- 25 |
| New Home builders in the AV: Forecast Homes, Pulte, Standard Pacific, Eliopoulos Ent., First Pacifica, Western Pacific, DR Horton, KB Homes, Trimark, Stratham Group, Pacific Communities, Richmond American, Larwin Co, American Premier, John Laing Homes, Beazer Homes, Frontier Homes, Rancho Vista Development, Fieldstone Communities, New West Builders, US Home Corp, Empire Homes, K Hovnanian Co, Harris Homes. |
| AV Housing
Market Outlook: Although interest rates are bouncing
around, they are doing so in a mild way, with not too much upside
volatility. While supply in the resale market has risen dramatically
since mid year of 2004, sales are still good, and good enough to still
have prices inching up. Most sales do not have bidding wars or multiple
offers, but that still can and does happen. Over the past 12 months,
depending on the area, market values of AV homes have risen 25% to
50%. The median price of an AV home is still below $300,000. With
mortgage rates still around 6%, the monetary environment for buying
a new or existing home is still very good. In the housing market,
the cost of money drives everything, and that cost is still consumer friendly. Residential agents tell me that, in the resale market, lack of inventory is still a major problem, that placing buyers in a home of their first choice is still very difficult. Supply is a problem and it is still leading to offers being written over full price. |
| Land Market Supply closed out March at 1,813, the highest level this year, albeit just three months, and the highest levels since last December's 1,902. March's supply number is 29 listings higher than February, which is not significant. Supply rose in March even in the face of record high sales, at 304 for the month. This means that property is coming onto the market faster than it is being sold. In Q 4 of last year, we saw supply fall some 11%. This year, so far, supply is just inching up, nothing dramatic. In the face of strong demand, I do not see anything meaningful in the supply numbers; to me this means that this market is capable of giving us more of the same- strong sales performance. I do see a strong market, but not one that has overheated or become excessively speculative. Supply looks fairly stable here, which means, that for the most part, supply and demand are in equilibrium. In the current supply numbers, and the magnitude of it's movement,I do not see any meaningful message or warning signals. |
| Supply numbers
in perspective: Supply at end of March- February: 1,813 Supply change from last month: + 1.6% Supply at the end of 2004: 1,902 Supply change, year to date: - 4.67% Supply in March 05 vs March 04: + 6.1 % |
Why is
the supply number important? The market value of
all things, eventually, comes down to the basic principle of supply
and demand. The supply number helps to tell us the psychological
condition of buyers and sellers, by it's change and it's rate of
change. 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 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. The value in following supply, is not in the number itself, or what any one number might mean. The value comes from when it changes; how much it changes and how fast it changes. |
| Demand: March demand, at 304 land sales, was off the charts and set a new cycle high for monthly land sales. By cycle high, I mean a new high since the end of the last bull market, the 1988-90 period. In all probabilities, it may have broke any records from that time frame as well, I just cannot confirm that since I was not tracking this statistic at that time. We have now had 4 consecutive months of over 200 land sales. April thru July of last year also gave us 4 consecutive months of 200 + land sales. Land inventory fell to a new cycle low, at just 5.9 months. This means, that at March's sales pace, all land MLS listings could be sold in just 5.9 months. Land buyers fall into 3 major categories: buying to develop or build something, buying to hold for investment, or the dealers, who buy to sell to someone else- quickly. The majority of land buying is still being done by investors and land dealers. I see a lot of sales in very speculative, low quality areas, which is where dealers like to buy. And of course, we still have a very strong builder market as new homes are going up in numerous locals. Industrial and commercial development is also active. From a demand and cyclical standpoint, the land market is now in the mature stage of the cycle. |
Demand
numbers in perspective: The Beginning: Land sales volume began to increase dramatically
in April of 2002. For this reason, I am calling April 2002 the beginning
of this bull market in AV land. This means that this bull market
in AV land, by April of 2005, will be 36 months (3 years) old. |
| Supply & Demand Dynamics Through out 2004, supply rose, month by month, ending the year 18% higher. Then in the span of just two months, Dec 04 and Jan of 05, supply fell 13%, which is dramatic for just a two month period. In February, supply began to flatten out, with this carrying through March. With supply stabilizing in the face of record land sales, the two appear to be in equilibrium. If this were a tug of war on a rope, neither side would be winning. Strong demand is not drawing down supply, nor is supply increasing at an alarming rate. Over the past two months, from the end of January until the end of March, supply has risen barely 2%. Supply and demand numbers have their greatest value when they move to levels that are historically extreme. When these numbers, in tandem, move to historic extremes, they can be helpful in determining market bottoms and tops- i.e. major turning points. Presently, as a pair, they are not at extreme levels, so I see no pending warning signs re: this market. |
| -
Frank Donato, April 2005 |
| Information
presented above has been compiled from reputable sources, and is
deemed reliable but not guaranteed. All opinions expressed are those
of the Author. |
| Antelope Valley News – May 2005 |
| April 5th- Member of the AV Board of Trade visit the Washington DC offices of the Big 3 aerospace companies, Boeing, Lockheed Martin, and Northrop Grumman, to hear their concerns re: the Cal business climate. Once concern was that tough Federal budget decisions may lead to cuts that will harm their work force. Lockheed Martin expressed the concern, that short term cutbacks could hurt their F-22 Raptor, F-35 JSF, and modification program for the stealth Fighter, over the long run, losing workers that will be hard to replace, if needed in later years. Boeing, who has 33,000 employees in Cal, said they are concerned about Cal's overall difficult business climate, citing a lack of cooperation among Cal's Congressmen and women. While Northrop Grumman expressed many of the same concerns, they also said, "We see nothing but growth in the AV." Northrop's plan to keep their Plant 42 site competitive is to share workers tooling, and technologies among their different programs. AVBOT members were also back in Washington DC to state their case to Cal's legislative leaders on the importance of Edwards Air Force Base, and why it should not be cut back or closed. As I told you last month, another round of military base closures is under way. The discussion and debate will go on for the next year or so, then more bases will be closed. This time around, State and local govts have formed a special task force and have produced a major report that outlines the importance of Cal's bases to national security. The report inventories the state's military installations and gives their unique contributions to national security. The report also stresses Cal's long coast line on the Pacific, where over the next century, security threats are more likely to originate. Cal's weather and terrain allow troops to train all year long, in locales that simulate war zones around the world. In this round of closures, Cal will defend it's bases in a unified way, hoping to avoid a repeat of the last round base closures, when Cal lost 29 bases,almost 30% of the national total that was closed. It is projected, that nationwide, another 24% of all bases will be closed in the upcoming round. |
| April 5th- Grading begins on the 2nd coming of the masterplanned Ritter Ranch development. A ground breaking ceremony, headed by Palmdale Mayor Jim Ledford and Frank Faye, SunCal's CEO, (developers of Ritter Ranch) kicked off the day, with Faye giving his vision of Ritter Ranch. "Ritter Ranch is going to be much more than just a place to live. The community will include a swim club, equestrian center, golf course, schools, commercial property, 6,000 acres of conservancy, as well as 7,200 homes. It will be second to none, not just in the AV, but in all of So Cal." Ritter Ranch was first brought to the City of Palmdale in 1989, but a weakening economy and housing market, pushed it back years. Some of the builders that have shown interest in building homes in Ritter Ranch are Forecast Homes, Harris Homes, Pulte Homes, and KB Homes, with others sure to seek a piece of the action. |
| April 13- Empire Commercial Real Estate is in the early stages of obtaining a general plan amendment from the City of Palmdale to change the land use at the NE and NW corners of Tierra Subida and Ave S. The land use change would be from residential to commercial. The City has agreed to participate with Empire in acquiring an environmental impact report, a process that could take 9-12 months. Ave S is the major (only) street that leads to Empire's masterplanned community of Anaverde, at 25th St West & Ave S. When completed over the next decade, Anaverde will be 5,000 residences of varying sizes. The size of Anaverde is roughly 2,000 acres. Empire is planning 186,000 of commercial and restaurant space at the two corners. The NW corner is 12 acres and the NE corner is 14 acres. |
| April 17th- Residents just north of the AV Mall have dropped their fight against the construction of a movie theater at 15th St West & Ave O-8. The homeowners meet with developers and compromises were reached. Commonsense prevailed as the homeowners came away with 1/2 a loaf, but avoided expensive attorney's fees which would of had to be paid to continue their resistance. 100 large pine trees will help camouflage the theater and 700 feet of block and wrought iron fencing will help direct traffic. At the site will be a Cinemark Theatre with stadium seating, 3 new restaurants, and a Hilton Garden hotel. Eventually, the theater inside the mall will be closed down and be renovated to provide 34,000 sq feet of new retail space. When all the improvements are done, the AV Mall will have 1.35M sq feet. |
| April 19th- The City of Lancaster and SYGMA Network, which is owned by SYSCO Foods, announced the construction of a 110,000 sq ft distribution facility in the Fox Field area, near 47th St West & Ave G. SYGMA distributes to restaurants such as Wendy's, Panda Express, Subway, Panera Bread, Olive Garden and delivers everything from fresh meat to cleaning supplies. One third of the facility will be for cold storage. SYMGA has a weekly fleet of more than 1,400 vehicles that provide more than 20,000 multiple deliveries per week, which services 11,200 different restaurant sites. The parent company, SYSCO, is ranked 60th on the Fortune 500. The 20 acre site will be built on Barnes Ave and Ave G. The site plan allows for future expansion of up to 230,000 sq feet. Employees, after 25 years, can accumulate up to 5,000 shares of SYSCO stock. Initially, the site will employ 163. |
April 28th- Mike Bazdarich, senior economist at UCLA Anderson Forecast, speaks at the North Los Angeles County 2005 Real Estate & Economic Outlook Conference. The event was held at the Essex House hotel in Lancaster. Here is a summary of his major statements and conclusions: - The AV economy is right where it ought to be; not too hot, not too cold, and has healthy room for growth - the national economy is neither "too hot nor too cold; it's just purring along in the middle" - the US economy will be hard pressed to grow from this point because taxes and spending are gobbling up the average workers paycheck - Los Angeles and the bay area are in recovery, but the rest of Cal is growing very rapidly - AV growth hinges on two basic factors: affordable housing and the necessary dirt on which to build them - available affordable housing will keep the AV growing, the savings for an AV home are staggering, the affordability component cannot be beat! - the AV has 25,000 homes approved, but only a fraction of those are under construction - housing in Cal is in fair shape as because the population keeps on growing and families are demanding product - statewide, economist expect to see Cal grow by 350,000 per year, with inland areas, like the AV, ripe to take advantage of this growth. - to keep up with this growth, the AV will need to build 3,500 new homes per year, and create 2,000 to 3,000 new jobs per year. Last year, in 2004, AV builders sold 2,503 new homes. |
| May 1st- Gov Arnold Schwarzenegger
makes a surprise visit to the AV, stopping in at Crazy Otto's restaurant
on a Sunday morning. The goal was to "press the flesh" and
pitch his 3 proposed ballot initiatives that are in the signature
gathering phase. The initiatives deal with the following issues: overhaul
of the state budget process, change the way legislative districts are drawn, and reform of the Cal teacher tenure system. The governor visited every table, which totaled about 150 people, answering questions and signing autographs. |
| May 3rd- new estimates,
released by the State Dept of Finance, indicates that Palmdale and
Lancaster are near the top of Los Angeles County's fastest growing
cities. The new stats indicate that Palmdale grew by 4.1% and Lancaster
3.5% last year. This would now give Palmdale a population of 136,734
and Lancaster a population of 133,703. Lancaster and Palmdale are two of the 63 cities in Cal that have populations between 100,000 and 200,000 people. |
May 9th- Credit Suisse First Boston today increased pricing across the board on its $275 million first- and second-lien loan for SunCal, a developer of master-planned communities in California, sources said. The first-lien term loan, now priced at L+300, was circled by late-morning. The second-lien loan, now priced at L+700, was roughly two-thirds filled at that time. Books close tomorrow. The loan is split between a $200 million, five-year first-lien term loan and a $75 million, six-year second-lien tranche. The first-lien was launched at L+275 and the second-lien was launched at L+600, with call premiums of L+103,102 and 101, sources said. The loan backs the development of SunCal's Ritter Ranch community in California. Ritter Ranch is an 18-square-mile master-planned community in Los Angeles County. The project will entail 7,200 residential units planned in five phases. The deal drew some initial resistance from the lack of presales on the project, sources explained. SunCal specializes in large-scale mixed-use and re-use development projects, creating places for living, working and recreation. Last week, the company closed on a $120 million purchase of 470 acres in Chino, Calif., from the State of California. Lehman Brothers, through its $1.6 billion Real Estate Fund, partnered with SunCal for the acquisition. - Chris Donnelly/Savita Iyer |
| National Housing Market- The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend in sales activity. |
| March housing starts (Commerce Dept), released April 19th, fell dramatically, - 17.6%, the strongest decline in 14 years. The drop was much larger than expected. Analysts disagree as to whether or not this signals a coming problem in the new home market. With interest rates falling again, I doubt the new home market will have any sustainable problems. |
March existing home sales (Natl Asso of Realtors), released April 25th, rose 1%, to a seasonal adjusted rate of 6.89M, the third highest level on record. The rise was unexpected as economists had forecast an actual decline. Supply fell to the 4 month level, near the all-time low of 3.8 months.Year over year the median sales price rose 11.4%, the biggest year over year gain in 25 years. Here are some comments from various housing analysts: "The housing market remains very active." "The trend in sales remains remarkably steady at a very high level, though no further movement is likely." "Gains in the labor market and economic growth appear to have lifted the confidence of home buyers." "We are seeing great upward pressure
on prices." |
| March building permits (Census Bureau), released April 19th, were down 4% to the lowest level since last August. |
| March new home sales (Commerce Dept.),
released April 26th, set a new record, totally wiping out the old
record set last October. April new home sales were up 12%, the largest
monthly percentage gain in 12 years. The increase far outpaced the
forecasted decline by economists. Inventory of new homes is at 3.6
months (at the March sales pace). The median price of a new home actually
fell, some 9%, to $212,300. As is reflected in both existing and new
home sales, a weakening economy, and the resulting falling interest rates, have been a "gift for the housing market". Needless to say, builders remain very upbeat on the housing market's prospects. |
AV & Southland Home Markets Dataquick, a real estate information firm, says that the median
home price in southern California is up 18.6% vs March of last year.
Dataquick also says that the rate of appreciation has slowed to
it's lowest level in more than a year. The median price of a southern
Cal home is now $439,000, a new record, which was up 3.3% from February.
The March over March gain of 18.6% is the first time in 16 months
that year over year price increases were below 20%. Dataquick says
that indicators of market distress are still largely absent. My
comment: mortgage interest rates have |
U. S. Census Bureau data shows that the largest population shift in the nation is occurring in LA County. Los Angeles County residents are leaving, going to nearby counties and states. The reason: demographers say it is soaring home prices, crowded traffic, and new jobs in outlying areas, that is luring them away. Comment: this is exacting the same trend
that has fed AV growth over the past 30 years, and will continue
to do so for years on end. |
| AV New Home
Sales Data (source: The New Housing Monitor, a Hanley Report) As of April 3, 2005 -New Homes sold year to date - 1,215 -New homes sold since last month- n/a -New homes selling per day - 13 -New homes projected to sell for all of 2005- 4,745 2004 - total of all new homes sold- 2,503 2003 - total of all new homes sold- 1,820 2002- total of all new homes sold- 1,162 1990- total of all new homes sold- 5,000 Number of new home builders in the AV- 30 Open subdivisions with sales in 2005- 53 |
| New Home
builders in the AV: Forecast Homes John Laing Homes Pulte Homes Beazer Homes Standard Pacific Frontier Homes Eliopoulos Enterprises Rancho Vista Development First Pacifica Fieldstone Communities Western Pacific New West Builders DR Horton US Home Corp. KB Homes Empire Homes Trimark K. Hovnanian Co. Stratham Group Harris Homes Pacific Communities Pacific Gateway Homes Richmond American Hearthside Homes Larwin Co Pinnacle Communities American Premier Gibraltar Homes Sun Cal Communities Tandis Homes |
| AV Housing Market News: Although interest rates are bouncing around, they are doing so in a mild way, with not too much upside volatility. While supply in the resale market has risen dramatically since mid year of 2004, sales are still good, and good enough to still have prices inching up. The interest rate market is still friendly to borrowers, and as long as that is the case, expect AV housing to do just fine. Residential agents tell me that, in the resale market, lack of inventory is still a major problem, that placing buyers in a home of their first choice is still very difficult. Supply is a problem and it is still leading to offers being written over full price. |
| The various home builders that are building homes in the master planned community of Anaverde, say that they have 600 homes under contract. Anaverde's first move-in is a married couple from the Escondido area, near San Diego. Being the first to move in, they joyfully received their keys from Palmdale Mayor Jim Ledford. During the second week of May, 40 new homes will be handed over to their new owners. The couple sold their home in Escondido 6 months ago and have been living with family and hotels, while they waited for their new home to be completed. Their new KB home costs $357,000 with 3 BR, 2 1/2 baths, a den and a loft. The husband will commute to Santa Paula to work, a 70 minute drive one way. Most of the homes in Anaverde are in the $350,000 price range. Phase 1 at Anaverde is 1,417 homes and is expected to be completed in 18-24 months. Phase two will be 700 homes. Developers say that by the time Phase 1 is done, a new school could also be ready. Presently, the 600 homes that are under contract, are in various stages of completion. Other builders at Anaverde include; Empire Land (one of the owners), Richmond American, and John Laing Homes. |
The new home market in the AV,
if it stays on the same pace as Q 1 of 2005, could build $1B worth
of new homes in 2005. Q 1 saw AV new home builders put
up $228M worth of new homes. Multiply that number by 4 and you get
a figure over $1B. Maintaining Q 1's pace all year is a tall order,
but when you consider that Ritter Ranch, and the houses they will
sell, have not yet, but will come on line later this year, *In east Lancaster, average home prices are $50,000 higher in April of 2005 vs April of 2004. Last April the average price of an east Lancaster homes was $200,000. This year that figure is up to $250,000. *In west Lancaster, using the same time frame, the average price of home there is up $7,000, to $290,000. *In east Palmdale, the average price of a resale homes there has skyrocketed, going from $216,000 in April of 2004 to $304,000 last month. *In west Palmdale, during the April 04 to April 05 time period, the average price has moved up from $340,000 to $375,000. *In Quartz Hill, during the same time frame, average sale prices have moved up to $350,000 from $300,000. On the resale market, Quartz Hill homes are getting prices of over $170 per sq foot. *In the Rosamond area, the average selling price has gone from
$170,000 to $224,000. One year ago, a resale home was bringing $111
per sq foot, but now commands $150,000 per sq ft. While these are
healthy price moves, the AV still remains, on a comparative basis,
one of the most affordable markets in California. Nationally, 25
of the top 43 least affordable housing markets are found * Data source for this information came from the Greater AV Board of Realtors. |
Land Market Supply closed out April at 1,757, down just - 3.1% from last month. That breaks a 3 month streak in which it had risen, just as mildly. The reason I follow the supply numbers is to watch for any meaningful changes, which could signal a change of the present trend. In Q 4 of last year, we saw supply fall 11%. In 2005, supply has been rising, but ever so slowly, meaning nothing
dramatic. In the face of strong demand, I do not see anything meaningful
in the supply numbers; to me this means that this market is capable
of giving us more of the same- strong sales performance. I do see
a strong market, but not one that has overheated or become excessively
speculative. Supply looks fairly stable here, which means, that
for the most part, supply and demand are in equilibrium. In summation,
the current supply numbers, and the magnitude of their movement,
are not giving off any meaningful messages or warning signals. |
| Why is the
supply number important? The market value of all things,
eventually, comes down to the basic principle of supply and demand.
The supply number helps to tell us the psychological condition of
buyers and sellers, by it's change and it's rate of change. 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. The value in following supply, is not in the number itself, or what any one number might mean. The value comes from when it changes; how much it changes and how fast it changes. |
| Demand: April
demand, at 281 land sales, as reported through our MLS, are down a
bit from last month's record of 304 land sales. April was the 5th
month in a row of land sales exceeding 200 (Dec through April). This
matches the March thru July period of last year, which also did 5
months in a row of plus 200 sales. That time period totaled 1,104
land sales, while our current five month streak totaled 1,271, a bit stronger overall. At the current sales pace, the total number of land listings represents a 6.2 month supply, just above March's record low of 5.9 months. |
| Demand numbers
in perspective: Land sales year to date- 1,058 April 2005 vs April 2004- + 6.8 % Land sales projected for this year- 3,174 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 |
| Average land sales
(in 2005) per month- 264 Average land sales (in 2004) per month- 198 Average land sales (in 2003) per month- 103 Average land sales (in 2002) per month- 56 Average land sales (in 2001) per month- 34 Average land sales (in 2000) per month- 26 |
| The Beginning:
Land sales volume began to increase dramatically in April of
2002. For this reason, I am calling April 2002 the beginning of this
bull market in AV land. This means that the bull market in AV land,
is now 37 months old (3 years and 1 month). It has been a great ride,
with no overt indications that it is about to end anytime soon. |
Supply & Demand Dynamics: No major changes here, so I am repeating last month's assessment. With supply stabilizing in the face of record land sales, the two appear to be in equilibrium. If this were a tug of war on a rope, neither side would be winning. Strong demand is not drawing down supply, nor is supply increasing at an alarming rate. Supply and demand numbers have their greatest value when they move to historically extreme levels. When these numbers, in tandem, move to historic extremes, they can be helpful in determining market bottoms and tops- i.e. major turning points. Presently, as a pair, they are not at extreme levels, nor anywhere near extreme levels, so I see no pending warning signs re: this market. |
| -
Frank Donato, May 2005 |
| Information
presented above has been compiled from reputable sources, and is
deemed reliable but not guaranteed. All opinions expressed are those
of the Author. |
| Antelope Valley News – June 2005 |
| Defense & Aerospace News |
| Great news for the AV as they came in mostly unscathed by the Base Realignment & Closure process. All of the key AV bases and military support facilities escaped being on the list of bases to be scaled back or closed. Edwards Air Force Base and Plant 42 were the two bigger, and most important targets, that were potentially at risk. Statewide, 12 bases were on BRAC list, most of them for realignment vs all out closure. Statewide, five bases are recommended for closure, with four of those being in northern Cal, and one in Riverside County, the Naval Surface Warfare Center in Corona. The Corona site has been open since 1951, employs 1,100, and is the areas 3rd largest employer. The 1,100 jobs would be moved to the Point Magu Naval Air Base in Ventura County. Collectively, California stands to lose 2,018 military and civilian jobs. AV bases will actually grow from closures in other parts of the country. If the list is approved of by Congress, Edwards AF Base will get 51 new personnel from the electronic warfare testing division at Elgin Air Force Base in Florida. The facility in Ridgecrest, China Lake Naval Weapons station would receive 2,469 new personnel. The 9 member BRAC Commission will began public hearings on May 15th as affected states lobby to get some of their bases off of the list. Bases can be added to the list if 7 of the 9 commission members vote to do so. After the hearings, and by Sept 8th, the BRAC Commission will submit their recommendations to the President. The President will have until Sept 23rd to approve or reject the list. If revisions are necessary, BRAC would have until Oct 20th to submit them. The President then has until Nov 7th to submit the revised list to Congress. From that point, the Congress would have 45 days to reject the entire list, or it becomes law. |
| What happens to military facilities when they close? No doubt, the immediate effect is economic dislocation and pain for any community. The degree of pain depends upon the economic diversity of the area affected. In 1993, El Toro Marine Base made the list, and was eventually closed down. The El Toro base, on 4,700 acres, along the Pacific Ocean, in southern Orange County, is no doubt, prime real estate. Several years later, voters turned down an effort, at the ballot box, to convert El Toro into a regional airport. What voters did approve, was a mixed use of residential, office buildings, and a huge park. Miami based Lennar Corp., a well known national home builder, is getting ready to close escrow on 540 +/- acres to build 3,400 homes. Lennar won the bidding war for this prime real estate. Price paid? A total of $649.5M which comes out to $1.2M per acre! Lennar will close escrow in July, with home construction coming in 2007 after runways are broken up and other cleanup work is completed. |
| Antelope Valley News |
| May 9th- The Palmdale city council votes their approval of $369,600 for Granite construction to begin street improvements in the area of the new hospital. The work will be done at Tierra Subida & Ave Q-8, the main entrance to the hospital. Universal Health Services of Pennsylvania is ticketed to build a 250 bed hospital at the site. Universal is still working on state approvals. |
| May 10th- Palmdale City Manager announces Palmdale's proposed budget for the upcoming fiscal year. Calling his city's growth an "E ticket ride" (an expression from the old way Disneyland used to price rides, with the better rides being an E ticket) Toone also said, that with several major projects nearing completion, the city's budget will actually fall vs the previous year. The city's growth though, is prompting Dept heads to request 11 more full time employees, which would bring the total to 310. The projects nearing completion are the Oasis Park aquatic facility on the east side, the Marie Kerr Park amphitheater and softball complex on the west side, and the new sheriff's station at Sierra Hwy and Ave Q. New projects include a 250 bed hospital on Tierra Subida & Ave Q-8 and the start of 1,000's of new homes by Ritter Ranch. Funding for law enforcement will increase from $12.9M to $14.7M. If adopted, the budget also spends $13M street improvements, $4.1M on 14 new traffic signals, $4.3M on park and library upgrades, $5.6M on improving public facilities which includes two new fire stations, and $3.8M on improving drainage. The total budget would be $158.5M, which would be a decrease of $70.8M from last year due to the completion of the above mentioned projects. |
| May 17th- Frank Faye, The CEO of SunCal Companies, the new owner and developer of Ritter Ranch, gave a "captivating" presentation to the AV Chapter of the Building Industry Asso. at the Cascades restaurant at the Rancho Vista golf course. Many of the attendees were home builders and are hoping to purchase some of the lots for their product line. SunCal is hopeful to be able to deliver the first finished lots to builders by early next year. SunCal acquired the Ritter Ranch project last year, through a trustee's sale, when they submitted the winning bid of $57M. Within 7 months of purchase, SunCal was excavating and moving dirt. While much of the terrain is difficult, being on hillsides, the new lots will offer some great views. Phase 1 will be 1,100 homes, an elementary school, and recreation facilities. Phase two will include a Greg Norman Signature golf course and horse properties which will include another 1,109 residences. Phase three will be primary housing and an "active adult component" which will be a 1,000 units for senior housing. This will allow senior's to live near their kids and grandkids if they so choose. |
| May 18th- The new super Wal-Mart in west Palmdale should be ready to open by August. The massive 208,000 sq ft facility will be a combination of a Dept store and a grocery store. While the weather has only been a minor hindrance, pushing back completion about 3-4 weeks, unlike in other cities, law suits have not. Also planned for the center are two 50,000 sq ft pads located between Wal-Mart and the already open Sam's Club. Interviews to fill the 450 jobs this store will create began May 23rd. The new super Wal-Mart is part of the shopping complex called Destination O-8, named so as it is on 10th St West & Ave O-8, just north of the Fwy 14. Meanwhile back in Lancaster, the old Costco site, now abandoned, will be razed to make way for Lancaster's own super Wal-Mart. The site is in the Lancaster Power Center, along the Fwy 14, north of Ave J. The west Lancaster super Wal-Mart will be 218,475 sq feet, as Wal-Mart will eventually vacate their present, much smaller location on Lancaster Blvd, just north of the new site. The 99 Cent store, presently just south of the current Wal-Mart site, is having their new facility put up, which is going in at the old location of Home Base, which later became House 2 Home, before being razed itself. The west Lancaster super Wal-Mart should be open by late 2006. The 99 Cent store should be open by later this fall. With Costco's move to their present Fwy 14 and Ave L site, Lancaster officials believe that something bold was needed to bring retail back to the Power Center. The addition of a super Wal-Mart, a new site for the 99 Cent store, and a complete reshaping the center to attract new retail business and their shoppers, appears to be the ticket. |
| May 19th- The election of Villaraigosa as Mayor of Los Angeles has AV officials hopeful that he will turn his attention to Palmdale as a solution to the overcrowded area around LAX. In the past, Villaraigosa has come out against James Hahn's plan to "modernize" LAX, and in favor of spreading out air and ground traffic by expanding airports in outlying areas. Palmdale Mayor Jim Ledford said, "We are looking forward to working with him, because he is a strong supporter of regional airports." It is anticipated, that under Villaraigosa, the LAX masterplan could change to reflect more regional airport growth. County supervisor Michael Antonovich also feels that Villaraigosa may be more aggressive in getting more airlines to choose Palmdale, which is ready, willing, and able to add routes. |
| May 20th- McGarrey Development has underway a group of industrial condos in the Lancaster Business Park, which is located at Division & K-4. The $17M project is being built on 10.4 acres on Capital Dr. In total, the project will be 138,000 sq feet and total 21 units ranging in size from 1,800 to 4,620. McGarrey's marketing agent says that they already have nearly a third of the units in escrow. Marketing data indicates that the AV industrial vacancy rate is down around 1%. Officials say that demand from small business for these type of facilities is very strong. |
May 21st- AV Hospital, located at the SWC of 15th St West & Ave J, and a non-profit entity, announces they have acquired a $300M line of credit from Deutsche Bank, a German bank that is well known and has an international reputation. AV Hospital board members say the line of credit will be used to explore the possibilities of opening a Palmdale facility. The line of credit, say hospital officials, would be like an unsecured line of credit, with the ability to float a bond issue behind it. Presently, the hospital owns 22 acres in the east Palmdale area, near 40th St East and Palmdale Blvd. AV Hospital officials have not ruled out building their hospital on the west side of Palmdale. As things stand right now, Universal Health Services is set to build a new hospital at Tierra Subida (10th St West) and Ave Q-8, in the foothills overlooking Palmdale. AV Hospital has not ruled out an eminent domain action to block Universal and acquire the site for themselves. Presently, both sides are involved in a media public relations campaign to win over the public to their side. As far as planning goes, Universal is way ahead of AV Hospital, as Universal has submitted plans to the state for approval, a process that can take months to years. AV Hospital has not submitted anything to the state, nor do they even have a definite site. Universal Health Services is a for-profit, publicly traded company, a fact that AV Hospital is using to argue against allowing Universal to go forward with the site at Q-8. AV Hospital is arguing that a for-profit hospital is not in the best interests of the public good. AV Hospital showed no serious public interest in the Palmdale site UNTIL Universal Health showed up on the scene. Universal's hospital, whose plans are now public, will include: 36 emergency room beds, 40 intensive care beds, 36 telemetry beds, and 99 medical/surgical/ and pediatric beds, or which 25 will be for maternity care. Universal says that the new emergency room will be the largest in the AV. When warranted, expansion plans call for an additional 40 beds for intensive care and another 40 medical/surgical beds. The hospital will include administration, dietary, linen, clinical labs, radiology, surgical, and pediatric services. Universal Health Services has owned Lancaster Community Hospital, a 117 bed site located on 10th St West & Ave J-10, since January of 2002. Since that time,Universal has invested $15M in the building and equipment. UPDATE: On June 1st, AV Hospital sends a $9.3M
offer to the City of Palmdale to buy the site at Tierra Subida &
Ave Q-8. The offer was approved of by the board of directors of
AV Hospital. The offer was submitted to Palmdale one day before
the official ground breaking for the hospital that Palmdale has
under contract with Universal Health. Palmdale officials say that
the contract will be discussed by the city council in closed session.
The consensus opinion here is, that even if Palmdale wanted to accept
AV Hospital's offer (which they probably don't), they can't, they
are under contract with Universal Health and have been so since
November 1st, 2001. |
| June 1st the City of Palmdale and Universal Health hold a ground breaking ceremony for their new hospital at the Tierra Subida & Ave Q-8 site. It will be the first new hospital built in the AV since the 1960's. Two hundred city and local officials were on hand for the ceremony. Universal health official said that this will bring full service, acute care hospital to Palmdale and the AV at no cost to the taxpayers. Also to be built on the site will be two medical office buildings, 60,000 sq feet each. Medical offices on 5.5 acres at 10th St West & Auto Center Dr, and 108,000 sq feet of medical office space at 5th St West and Palmdale Bl are in the planning stages by private developers. Universal Health and Palmdale officials say that they are hopeful that the hospital will be completed in 18 months. As a private entity, the hospital will contribute (pay taxes) millions of dollars to local tax rolls, not extract them. |
| May 21st- Anaverde, the masterplanned community in west Palmdale, west of Fwy 14, on Ave S, held their grand opening. Home builders in Anaverde say that 1,800 people showed up to tour the new homes and area. Phase 1 is 1,418 homes, with 700 of those under contract and in some form of development. 47 homes are ready now for occupancy. Over the weekend event, 300 new names were added to the "interest list". |
| May 24th- Tom Barnett of Newport Beach based, Inland Energy Corp, speaks before the AV Board of Trade. Inland Energy is a power plant developer, and has already finished one facility in Victorville. Barnett told the Board of Trade attendees that the next place for Los Angeles county industry to go, if they want to expand, is the Antelope Valley. Barnett said he feels "Los Angeles basin area business is going to agree, that the AV is the place to go." Why does Barnett believe this? The AV is near the Los Angeles area and the ports of Long Beach and Los Angeles. LA industry is losing their competitive edge due to congestion, high costs, space constraints, and pollution regulatory pressures. Throw in the fact that AV leaders are pro-growth and business friendly, and Barnett believes, LA business will eventually opt to move to the Antelope Valley. Barnett even floated the often repeated idea of an "inland port" for distribution of goods around the nation. This would relieve some of the congestion on the coastal ports. Barnett said he believes it is only a matter of time until the high desert areas of southern Cal become targeted for an industrial invasion, and that he wanted to be on the leading edge of that invasion. |
| May 24th- Los Angeles County supervisors approve of a new fee structure for new home construction to hook up to LA County Waterworks District. Most of the area in the AV is served by LA County Waterworks District 40. The basic connection fee has been hiked 74% to $2,000 per new home, with an additional "water reliability charge" of $5,700 per new home. In total, the new higher fees add $8,000 to the cost of a new home. The higher fees were passed after several meetings with major home builders and city officials. It was the first fee hike on developers in 20 years by LA Waterworks. The new "water reliability charge" will help ensure future supplies by investing in infrastructure and water banking, something not done now. City leaders and developers understand the need for increasing the water infrastructure and do not oppose the new charges as long as the fees are used to effectively improve the area's water supply. |
| May 27th- Work begins on the remodeling of the old K-Mart site at the NEC or 10th St West & Rancho Vista Blvd. Portions of the old K-Mart are torn down to make way for a 43,000 sq ft Wickes Furniture store and three more yet to be named tenants. Mimi's Cafe, which will be 7,000 sq feet, is planned for the front corner. |
| National Housing Market- The following housing data is subject to large sampling and other statistical errors. Substantial revisions in this data are common. It can take up to 6 months to firmly establish a new trend in sales activity. |
| April housing starts (Commerce Dept), released May 16th, came back strong after a slow March, up 11% to an annual rate of 2.04M. April's increase was larger than expected. Analysts say that continued low mortgage rates and wage gains get much of the credit for this strong showing. |
| April building permits were up as well, +5.3%, to an annual rate of 2.13M, the strongest monthly gain for building permits since Dec of 2002. Building permits are considered a leading indicator. |
| April existing home sales (Natl Asso of Realtors), released May 24th, rose 4.5%, to a seasonal adjusted rate of 7.18M, a new record high. Economists had expected the existing home sales to be flat or unchanged. The old record was 7.02M which was set in June of 2004. One logical explanation for the unexpected record strength, might be interest rates. Although the FED has raised short rates 200 basis points, from a 1$ Fed Funds level, to a 3% FF level, mortgage rates are actually lower today then they were in June of 2004 when the FED began raising rates. The national average for you plain vanilla 30 yr mortgage is around 5.71%. With inflation moderating (see above), interest rates should be soft for quite some time, which of course is helpful to the housing market. The median sales price also rose, + 15.1% since June of 2004, which as the largest yr over yr increase in 25 years. Home sales were up in the east, the south, and the mid-west, but were flat in the west. Go figure. |
| April new home sales (Commerce Dept.), released May 25th, rose +.2% to an annual rate of 1.31M. This is the second consecutive month that new home sales set a all time record high. The number of unsold new homes rose .2% to 440,000 which represents a 4.1 month supply. The median sales price of a new home is now $230,800, a rise of +3.8% vs 12 months ago. Analysts say that low interest rates, rising incomes, and a belief that real estate is the most attractive investment class, are fueling this rise in sales and prices. Over the last 6 months, new home sales are rising at an annual rate of 1.25M. In all of 2004, 1.203M new homes were sold. |
| AV Home Market |
| With home prices on the rise, rents
on houses and apartments have also gone up. Demand for apartments
has far outstripped any new supply. As one might expect,
occupancy rates are at all-time highs. The supply of rental units,
county wide, is only rising by 1% per year, while rents have gone
up 15% between 2001 and 2004. In the AV, a two bedroom apartment rents
in the range of $760 to $995 (www.apartmentguide.com). Most of the
new projects are senior housing or affordable housing. Presently,
Palmdale has 1,271 units in the works, which includes apartments and
condos. Lancaster has 438 units, of which most are senior housing. The 438 units also includes a 150 unit mixed use project, which will include 8,500 sq feet of commercial space, on Sierra Hwy and Jackman St. |
| On May 20th, Alan Greenspan weighed in the "housing bubble" issue, saying, "We don't perceive that there is a national bubble, but it's hard not to see...........that there are a lot of local bubbles." Greenspan was speaking before the Economic Club of New York. AG also said that the rapid turnover of US homes was due in part to the purchase of second homes. Greenspan suggested that the current pattern of rising home prices was unsustainable, that the forces causing this were "not infinitely projectable." But in true AG fashion, he also said that "The number of occasions in which average level of home prices in the US have actually gone down are very rare." |
As of April 2005, here are median home prices in the Antelope Valley, and their percent change since April 2004. East Lancaster- $252,000 +
32.6% $171 per sq ft In the AV, the median price of an existing home is just north
of $200,000. Dataquick says that indicators of market distress,
i.e. foreclosures, are still largely absent from the market. The
Cal Building Industry estimates, that over the past 5 years, California
home owners has experienced $1 Trillion in rising market values.
Since 2000, most AV homes have doubled in value. |
| AV New Home
Sales Data (source: The New Housing Monitor, a Hanley
Report) As of May 1, 2005 (most recent data that is available) -New Homes sold year to date - 1,668 -New homes sold since last month- 453 -New homes selling per day - 14 -New homes projected to sell for all of 2005- 5,004 2004 - total of all new homes sold- 2,503 2003 - total of all new homes sold- 1,820 2002- total of all new homes sold- 1,162 1990- total of all new homes sold- 5,000 Number of new home builders in the AV- 32 Open subdivisions with sales in 2005- 59 |
| Home builders
in the AV (alphabetical order) American Premier Beazer Homes Capital Pacific Homes D R Horton Eliopoulos Enterprises Empire Homes (Anaverde) Fieldstone Communities First Pacifica Forecast Homes Frontier Homes Gibraltar Homes Harris Homes Hearthside Homes John Laing Homes KB Homes K. Hovnanian Co. Larwin Co Lennar Corp. New West Builders Pacific Communities Pacific Gateway Homes Pinnacle Communities Pulte Homes Rancho Vista Development Richmond American Standard Pacific Stratham Group Sun Cal Communities (Ritter Ranch) Tandis Homes Trimark US Home Corp. Western Pacific |
| Land Market
Supply closed out May at 1,793, up just 2% from last month. The reason I follow the supply numbers is to watch for any meaningful changes, which could signal a trend change. In Q 4 of last year, we saw supply fall 11%. In 2005, supply has been rising, but ever so slowly, meaning nothing dramatic. In the face of strong demand, I do not see anything meaningful in the supply numbers; to me this means that this market is capable of giving us more of the same- strong sales performance. I do see a strong market, but not one that has overheated or become excessively speculative. Supply looks fairly stable here, which means, that for the most part, supply and demand are in equilibrium. In summation, the current supply numbers, and the magnitude of their movement, are not giving off any warning signals. Supply numbers in perspective: Supply at end of May- 1,793 Supply change from last month: + 2% Supply at the end of 2004: 1,902 Supply change, year to date: - 5.7 % Supply in May 05 vs May 04: + 4.1 % |
| Why is the supply number important? The market value of all things, eventually, comes down to the basic principle of supply and demand. The supply number helps to tell us the psychological condition of buyers and sellers, by it's change and it's rate of change. 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. The value in following supply, is not in the number itself, or what any one number might mean. The value comes from when it changes; how much it changes and how fast it changes. |
Demand: May demand, at 320 land sales, as reported through our MLS, set a new monthly record. May was the 6th month in a row that land sales exceeded 200. Monthly land sales have exceeded 300 only one other month- March of 2005. Based on May's sales pace, the average length of time to sell a parcel of land is now down to 5 + months. Demand numbers in perspective: |
| The Beginning: Land sales volume began to increase dramatically in April of 2002. For this reason, I am calling April 2002 the beginning of this bull market in AV land. This means that the bull market in AV land, is now 38 months old (3 years and 2 months). |
| Supply & Demand Dynamics No major changes here. The character of this market has been unchanged for many months. Inventory, or supply, has been in a fairly narrow band of 1,750 to 2,000. Demand has been strong with sales making new volume highs in two of the last 3 months. With supply stabilizing in the face of record land sales, the two appear to be in equilibrium. Strong demand is not drawing down supply, nor is supply increasing at an alarming rate. Supply and demand numbers have their greatest value when they move to historical extremes. When these numbers, in tandem, move to historic extremes, they can be helpful in determining market bottoms and tops- i.e. major turning points. Presently, as a pair, they are not at extreme levels, nor anywhere near extreme levels, so I see no pending warning signs re: this market. That said, it should also be known that prices in many areas have made big moves. While the market is strong and liquid, it also has more than it's share of risk. This is not a market where one can throw money at it indiscrimately and expect to make a profit within 1-2 years. |
| |
| -
Frank Donato, June 2005 |
| Information
presented above has been compiled from reputable sources, and is
deemed reliable but not guaranteed. All opinions expressed are those
of the Author. |