Monday Morning Quarterback

Written by Posted On Monday, 01 May 2023 09:18
 

Monday Morning Quarterback

(Monday, May 1, 2023)

While we’re concerned with our real estate, maybe we should also consider our air. I mention this because San Bernardino, Riverside and Los Angeles have the worst ozone pollution in the nation, according to a new report by the American Lung Association. The large metropolitan statistical areas also include Long Beach and Anaheim. These areas also received failing grades for high particulate matter. Ozone is a gas found in the earth’s atmosphere. High above us, it is beneficial, but ozone pollution (which happens when emissions react under heat and sunlight) is very harmful to humans. Ozone can damage the respiratory tract and lungs, resulting in symptoms such as coughing, chest tightness and worsening of asthma symptoms. The “State of the Air” report shows the number of days of “very unhealthy” or “hazardous” air in the Los Angeles-Long Beach metropolitan area actually improved compared to last year’s report. However, Los Angeles-Long Beach still ranks as the most ozone-polluted metro area in the U.S. Heat is a major contributor to ozone pollution. Natural disasters like wildfires also release hazardous fine particles into the air in California and other western states. Transportation, including diesel trucks, trains and planes coupled with cars, refineries and power plants were the main culprits. Statewide, more than 98% of Californians live in a community earning a failing grade for unhealthy ozone pollution days, unhealthy particle pollution days and unhealthy annual particle pollution levels. More than 15 million people live in the combined statistical areas, but some people are more vulnerable to illness and death from their exposure. With that being said, let’s breathe easier with the latest real estate news…

First-Quarter GDP Climbs Lackluster 1.1% Pace. The U.S. economy grew at a lackluster 1.1% annualized pace in the first three months of this year, as declining business investment offset strong consumer spending and pointed to slowing growth. Gross Domestic Product had expanded 2.6% in the fourth quarter of 2022. Consumer spending, the main engine of U.S. growth, drove our economy forward in the first quarter. Outlays jumped at a 3.7% clip, the Bureau of Economic Analysis reports, the biggest increase in almost two years. Households got little help from businesses, however, and probably can’t expect much in the near future. Companies cut investment and reduced production, shaving 2.3 percentage points off headline GDP. Rising interest rates and stress in the banking system have hurt business investment while softening sales has forced some companies to lay off workers. Many economists believe the combination of rising interest rates and still-high inflation will plunge the U.S. into a recession later this year. Supported by rising incomes, households boosted spending on durable goods (products meant to last a long time) by a whopping 17% annual pace. Much of the increase reflects a surge in auto sales. Spending on services such as travel, recreation and health care grew at a modest 2.3% pace. But businesses were more cautious. They increased spending on structures such as oil rigs and plants, but cut back on equipment. The result was a small 0.4% decline in business fixed investment. Housing was another sore spot. Higher mortgage rates have choked off sales and construction and caused investment in new housing to fall for eight quarters in a row. Yet the biggest drag on GDP was from slower growth in inventories or unsold products. The growth in inventories shrank by a whopping $138 billion, the sharpest reversal in two years.

 
 

 
 

New Single-Family Home Sales Increased in March. New single-family home sales increased 9.6% in March to a 0.683 million annualized rate. Sales are down 3.4% from a year ago. New home sales continued to recover in March, signaling that activity may have hit at least a temporary bottom back in mid-2022. While sales are on an upward trend recently and are now up 25.8% from the low in July of last year, they still remain well below the pandemic highs of 2020. The main issue with the US housing market has been declining affordability, with potential buyers getting squeezed by both higher prices and rapidly rising mortgage rates. Assuming a 20% down payment, the change in mortgage rates and home prices in just the past year amounts to a 27% increase in monthly payments on a new 30-year mortgage for the median new home. No wonder sales have slowed down! With 30-year mortgage rates currently sitting near 7.0%, financing costs remain a stubborn headwind. On top of this, given the recent instability in the banking system there is likely more volatility ahead for the housing market as lending standards have tightened further. A piece of good news is that while a lack of inventory has contributed to price gains in the past couple of years, in general, inventories have made substantial gains recently. The months’ supply of new homes (how long it would take to sell the current inventory at today’s sales pace) is now 7.6 months, up significantly from 3.3 months early in the pandemic. Most importantly, the supply of completed single-family homes has more than doubled versus a year ago. BTW, the median price of new homes sold was $449,800 in March, up 3.2% from a year ago. 

Investors Losing Money Flipping Houses (Particularly in the West). As home prices fall, some investors are losing money on their real estate, according to Redfin. Roughly one in five homes sold by flippers (investors who buy homes in a poor state of repair and fix them up for resale within a short time span) were sold at a loss, which is higher than the overall share of losses borne by all investors, according to a new report by Redfin. The report from Redfin, which looked at investor home purchases on a county level and combed through data across 40 of the most populous U.S. metropolitan areas between 2000 and 2022, found that 13.5% of homes sold in the U.S. by an investor in the month of March 2023 were sold at a loss. In other words, one in seven homes in the U.S. that were sold by an investor were sold for less than what they had initially bought it for. The share of homes sold at a loss is at the highest level since 2016. To be clear, the losses aren’t at all-time highs — the share of homes sold at a loss was far higher during the so-called Great Recession, as seen in the chart below. Holding on to homes that aren’t producing income can be expensive because the owner is on the hook for property taxes, along with operating costs and monthly mortgage payments in some cases. Many short-term investors are also opting to sell because they know prices may have more room to fall and want to cut their losses. In Phoenix, about 31% of homes sold by investors went under contract at a loss. Las Vegas followed in second place, with 28% of homes sold at a loss, and Sacramento, Calif., was in fourth place, with 20.2%. Jacksonville, Fla., and Charlotte, N.C., also made the top five among metro areas where investors were seeing losses. Most of the investors selling homes are small individual investors, Redfin said. On the other hand, large investment companies are still waiting for the market to improve, the report said.

 
 

 
 

Landlord Arrested in a Murder-For-Hire Plot Now Accused of Arson. In a story that sounds like an episode of Dateline, there is the saga of Arthur Aslanian. A real estate landlord previously charged in a murder-for-hire plot, Aslanian is now facing additional criminal charges in federal court. In a new federal indictment, prosecutors paint a vicious picture of Aslanian, who prosecutors allege resorts to arson and hit men to settle business disputes and avoid paying millions of dollars in debt. In September, federal prosecutors accused Aslanian of hiring an assassin to kill a banker to whom he owed $3 million. Agents with the Bureau of Alcohol, Tobacco, Firearms and Explosives also believe Aslanian set a plan in motion to kill his former lawyer to avoid paying more than $250,000 in legal fees. But the plot began to unravel when (with the help of cooperating witnesses), federal agents concocted a plan that included creating a fake crime scene. To fool the real estate developer into thinking that the killing had happened, ATF agents had Aslanian’s employee show his boss a photo of what was supposed to be the dead banker. Instead, the photo had been staged by authorities and the employee was equipped with recording devices to build the criminal case against his boss. Now in a new court filing Wednesday, the Department of Justice alleges Aslanian paid $2,000 to a co-conspirator to set fire to one of his properties in North Hollywood, where tenants had accused Aslanian of being a slumlord and using harassment and threats, among other tactics, to try to illegally evict them. Prosecutors allege that in February 2022, Aslanian hired this arsonist to set fire to one of his rental properties on the 11000 block of Hartsook Street in North Hollywood. Using a borrowed gas canister and a hotplate, the co-conspirator started a fire at the property on Feb. 5, but only the outside of the building was scorched. A second fire was started by another co-conspirator on March 18, 2022, burning two vacant units of the building. A real estate landlord and developer from La Cañada Flintridge with a portfolio of apartment buildings, and enormous debt, Aslanian is named in more than two dozen lawsuits and has faced troubles continuously with local government agencies over violations of building permits, labor codes, and failing to pay workers. Aslanian was arrested last September and has been in custody since January on the murder-for-hire plot and now arson allegations. We’ll keep you updated.

 
 

 
 

Uninhabited Scottish Island Could Be Yours for $190,000. If you’ve ever fancied escaping the grind of daily life and heading to a remote island with no other inhabitants, now could be your chance. Situated just off the southern coast of Scotland, Barlocco Island (you can change the name) is up for sale, priced at £150,000 ($190,000). With lush green grass and rocky outcrops stretching to the sea, the island covers an area of approximately 25 acres, but there are no buildings on it, only a flood pond providing water for livestock and wildlife in the winter months. At low tide, the island can be reached on foot, by tractor or quadbike. As for the rest of the time, there is a pebble beach where boats can be anchored. It is situated in a Site of Special Scientific Interest (an area in the UK defined as of particular interest due to the rare species of fauna or flora it contains) and is a haven for all types of wildlife, including great black-backed gulls, and rare plants such as rock sea lavender and fragrant orchid. There’s still a very romantic sentiment attached to owning your very own Scottish private island, where you can escape the hustle and bustle of everyday life and enjoy peace and tranquility in the most beautiful Scottish scenery. The buyer is unlikely to be a commuter. The nearest town is about six miles away, and the closest train station is Dumfries, an hour’s bus ride from the town. London and Edinburgh are more than 350 and 100 miles away, respectively.

 
 

 
 

Supreme Court Hears Grandmother’s Property Rights Dispute. Compared to other legal disciplines, real estate law is mostly state law, not federal law. So when the U.S. Supreme Court hears a case it is rare and really big news. Which is why I mention the Supreme Court heard its last scheduled argument of the term last week. The case was brought by a 94-year-old widowed grandmother in Minneapolis whose condominium was seized for failure to pay property taxes. Geraldine Tyler bought her condo in 1999 and lived there until 2010 when, at age 81, she moved to a senior living center at the urging of her children. It is undisputed that she failed to pay property taxes on the condo for five years, despite being repeatedly notified that she risked losing it if she didn't pay up. By 2015, she owed $15,000 in unpaid taxes, interest and fees. Finally, Hennepin County, after offering her a tax payment plan for seniors and other options, seized the condo and sold it at public auction for $40,000 ($25,000 surplus). After the sale, the County kept the surplus funds and did not give the money to Tyler. Tyler sued. At the Supreme Court hearing on Wednesday, Tyler's lawyer argued that the county unconstitutionally took the property by keeping the $25,000 surplus over the amount owed in back taxes. Lawyer Christina Martin said that amounts to a taking without just compensation, something the U.S. Constitution explicitly forbids. The case is important because Minnesota is one of 20 states that handle the sale of such defaulted properties without sharing the surplus proceeds with the previous owner when the property is sold. The Court reserved its increasingly overt hostility for lawyer Neal Katyal, representing Minneapolis' Hennepin County. Katyal spent a good deal of time trying to persuade the court that Tyler had no legal standing to sue because, at the time her condo was auctioned, she had no equity in the house. Under state law, the seizure automatically cancelled her debts on it (debts totaling $59,000 in mortgage payments and unpaid condo fees). But Katyal got nowhere and only seemed to irritate the court, even when he referred to states that had laws like Minnesota's at the time of the founding. But justices, both conservative and liberal, didn't seem to be buying his argument. Liberal Justice Ketanji Brown Jackson noted that while 19 states may have laws like Minnesota's, the majority do not. "Most states allow for some sort of surplus or have some sort of mechanism to give the money back to homeowners," Jackson said. A decision is expected by the end of the current Supreme Court term this summer.

Bear Refuses to Drink Diet Soda. Last week a Canadian woman woke up to find a furry intruder drinking dozens of cans of her soda. Sharon Rosel told the Canadian Broadcasting Company that the bear broke the glass of her truck and got inside. She then watched for an hour and a half as it used its teeth to break open the cans. The bear first drank the orange soda, then the cola, and finally, root beer, CBC reports. From her balcony in British Columbia, Rosel watched as a black bear guzzled down 69 cans of soda, only stopping at the final three cans which were diet. "He was drinking massive amounts of soda," said Rosel. But when the bear finally had no alternative but to drink the three diet sodas, the bear refused. No diet soda for this bear. Was it the taste? The color? The smell? The viscosity? Perhaps the bear knows something about diet soda we don’t? Perhaps we’ll never know. Rosel owns the food truck and told the CBC she normally encounters bears in her remote area. Despite being diligent in never leaving food in the truck overnight, she never imagined a bear would develop a sweet tooth for soda. "I've been around bears since I was knee-high to a grasshopper, but I have never seen them go after pop," Rosel told CBC. Rosel's efforts to reason with the bear to leave her truck were futile. The bear's soda rush caused soda to be spilled all over the interior and into the gearshift. The bear also ripped the car's leather interior and broke the window roller handle from standing on it. But the diet soda remained untouched.

 
 

 
 

Foreclosure Forum. How to find and buy foreclosure properties. Saturday, May 20, 2023, 9:00 am to 5:00 pm. Iman Cultural Center, 3376 Motor Avenue, Los Angeles, CA 90034. Iman Cultural Center, 3376 Motor Avenue, L.A., CA 90034. The cost of the Forum is $149.00 per person if paid before May 13th. After May 13th, the price increases to $1 million. (Gold Members of LAC-REIA can attend for free.) So don't wait! Register now: www.LARealEstateInvestors.com.

 
 

 
 

Women Making Moves (& Money) in Real Estate.  Join us on Thursday night, May 11, 2022, when we have a very special panel on women investors. Our moderator will be Deborah Razo, President of the Women’s Real Estate Network (“WREN”). Deborah is an all-star investor, including fixing and flipping houses, residential construction, and multi-residential properties in the U.S. and Puerto Rico. The panel will feature Cindy Coleman discussing note investing, Courtney Jones discussing wholesaling and creative financing techniques, and Jen Maldonado discussing raising capital for your projects. The women will be discussing how they started investing and challenges they confronted along the way. If you’re a woman investor, DO NOT miss these talented women! (If you’re a man, you can attend, but at your own risk!) Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034 (Culver City adjacent). FREE Admission. Metered street parking. RSVP at www.LARealEstateInvestors.com.

 
 

 
 

Vendors Expo Returns! Attend our super-duper world-famous "Real Estate Vendors Expo." Thursday night, May 11, 2022. The Vendor Expo opens at 6:30 pm. We'll have 40+ of the finest vendors featuring real estate products and services you will want to utilize as you invest in real estate. And stick around after for our WREN panel discussion. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, CA 90034. FREE Admission. (Parking: see below.) Please RSVP at www.LARealEstateInvestors.com.

 
 

 
 

Parking (Iman Cultural Center). Recently attendees have complained about the lack of parking. But fear not. If there is no available street parking when you arrive, there are two FREE parking structures just two blocks away. The first structure is at the northeast corner of Motor and Palms. The second structure is at the northeast corner of Motor and National. From either lot it is short two block walk to the Iman.

LARealEstateInvestors.com Podcast. We are very excited about our weekly podcast, "LARealEstateInvestors.com" (cleverly named after our domain) hosted by our very own Bill Gross. Bill has been a Realtor, broker and real estate investor since the Ice Age! No one is more experienced in local Southern California real estate than Bill Gross. Each week Bill interviews real estate professionals sharing their insights and advice for real estate investors. Every Tuesday live at 3:00 pm, and anytime thereafter on YouTube, Facebook, Zoom, and Google.

This Week. The next Fed meeting will take place on Wednesday and most people anticipate another 25 basis point increase in the federal funds rate. Investors are hoping that Fed officials will elaborate on their plans for future monetary policy. The Institute of Supply Manufacturers has two sector indexes; manufacturing and services. The ISM National Manufacturing Sector Index will come out today and the ISM National Services Sector Index on Wednesday. The next European Central Bank meeting will take place on Thursday. The key Employment report will be released on Friday b the Department of Labor, and these figures on the number of jobs, the unemployment rate, and wage inflation will be some of the most highly anticipated economic data of the month.

Weekly Changes:

10-year Treasuries:             Fell    010 bps

Dow Jones Average:           Fell    100 points

NASDAQ:                            Fell    100 points

Calendar:

Wednesday (5/3):                Fed Meeting

Wednesday (5/3):                ISM Services Index

Friday (5/5):                         Employment

 
 

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, LLC

www.LARealEstateInvestors.com

310-409-8310

 
 

 
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