Monday Morning Quarterback

(Monday, July 24, 2023)

As expected, foreclosures are slowly but surely increasing. Take for example ATTOM the real estate database, who released its midyear 2023 “U.S. Foreclosure Market Report.” Their report shows there were a total of 185,580 U.S. properties with foreclosure filings (i.e. default notices, scheduled auctions or bank repossessions) in the first six months of 2023. That figure is up 13 percent from the same time period a year ago and up 185 percent from the same time period two years ago! Foreclosure activity across the United States maintained its upward trajectory, gradually approaching pre-pandemic levels in the first half of 2023. The notable surge in foreclosure starts indicates that we may continue to see a rise in foreclosure activity in the coming years. States that saw the greatest increase in foreclosure activity compared to a year ago include Maryland (up 100 percent); Oregon (up 99 percent); Alaska (up 95 percent); West Virginia (up 83 percent); and Arkansas (up 72 percent). Illinois, New Jersey, and Maryland post the highest state foreclosure rates. Nationwide, 0.13 percent of all housing units (one in every 752) had a foreclosure filing in the first half of 2023. Among the 223 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in the first half of 2023 were Cleveland, Ohio (0.33 percent of housing units with foreclosure filings); Atlantic City, New Jersey (0.33 percent); Fayetteville, North Carolina (0.30 percent); Columbia, South Carolina (0.29 percent); and Lakeland, Florida (0.29 percent). A total of 135,065 U.S. properties started the foreclosure process in the first six months of 2023, up 15 percent from the first half of last year and up 36 percent from the first half of 2020. States that saw the greatest number of foreclosures starts in the first half of 2023 include our very own California (14,217 foreclosure starts); Florida (13,837 foreclosure starts); Texas (13,419 foreclosure starts); New York (8,772 foreclosure starts); and Illinois (7,995 foreclosure starts). In other real estate investor news, let’s get it on…

Housing Starts Declined in June. Housing starts declined 8.0% in June to a 1.434 million annualized rate. The drop in June was due to decrease in both single-family and multi-unit starts. In the past year, single-family starts are down 7.4% while multi-unit starts are down 9.4%. The problem is we need more houses, not less. Looking at the details, the slowdown in construction was broad-based with all four major regions and both single-family and multi-unit starts contributing. While the data has been choppy recently, it looks like construction activity has bottomed and begun to recover. Keep in mind that many owners of existing homes are hesitant to list their homes and give up fixed sub-3% mortgage rates, so many prospective buyers have no choice but to turn to newly built homes as their best option. This has boosted demand for new houses and should help construction activity going forward. While 30-year mortgage rates continue to hover near 7% it looks like some of the sticker shock from the rapid run-up in financing costs last year is wearing off. This is good news for overall starts because single-family construction has been largely responsible for the decline in activity throughout the past year. It’s also important to remember that lots of projects are already in the pipeline. At present, the number of homes under construction is hovering near the highest level on record dating back to 1970. These figures also demonstrate a slower construction process due to a lack of workers and supply-chain issues. Given that builders already have their hands full, it is not surprising to see permits for new projects fall 3.7% in June. While I don’t think housing is going to be a driver of economic growth in the year ahead, recent numbers are certainly not what you’d expect to see if there was a severe housing bust like the 2000s on the way, either.

Home Sales Fall In June As Listings Dwindle. Think about it. Why would a homeowner in their right mind sell their home right now when they have an incredibly low mortgage rate, there aren’t any houses to buy, and mortgage rates are around 7%? As a result, listings are at a time low. The total number of homes for sale in June fell by 13.6% from last June, to 1.08 million units. (Housing inventory, particularly of single-family homes, is at the lowest level for the month of June on record at 960,000 units.) Sales of previously owned homes fell by 3.3% to an annualized rate of 4.16 million in June, the National Association of Realtors reports. (That’s the number of homes that would be sold over an entire year if sales took place at the same rate every month as it did in June. The numbers are seasonally adjusted.) Additionally, the 4.16 million number is the slowest rate of homes sold for the month of June since 2009 (during the sub-prime lending crisis). Compared to June 2022, home sales are down by 18.9%. The number of homes on the market remained flat in June at 1.08 million units. Out of that number, 960,000 single-family homes were on the market. That is the lowest level for the month of June since the NAR began tracking the data in 1982. Homes listed for sale remained on the market for only 18 days on average, unchanged from the previous month. Last June, homes were only on the market for 14 days. All-cash buyers made up 26% of sales. The share of individual investors or second-home buyers was 18%. About 27% of homes were sold to first-time home buyers. As you can see, inventory at record lows. Home sellers continued to hold out on selling their homes amid mortgage rates that hover near 7%. There are simply not enough homes for sale.

Rent In This California City Exceeds San Francisco For First Time. Landlords listen up. Zillow reports that for the first time in history, San Diego has surpassed San Francisco for average rental rates, making the All-American City the nation’s third most expensive rental market. San Diego’s typical monthly rental rate in June was $3,175, exceeding San Francisco’s rent of $3,168. The rates represent a significant jump since February when San Francisco’s rents were 29% higher than San Diego’s, according to the online real estate site Zillow. Still, San Diego and San Francisco rents were not the highest. San Jose had the nation’s highest monthly rent with $3,411, followed by New York City’s at $3,405. Zillow’s monthly rental report for June includes single-family homes, apartments, condominiums and townhouses. Three other California cities were among the country’s 10 most expensive rental markets: our own Los Angeles had a typical rent of $2,983, while Riverside had a monthly rent of $2,573 and Sacramento’s was $2,319. Rents across the country increased 0.6% from May to June, according to the “Zillow Observed Rent Index,” bringing the nationwide average rent to $2,054 — 4.1% higher. As you know, rent in California is becoming increasingly difficult to afford, and low-rent units are harder to find. Sophia Wedeen, a research analyst at the Harvard Joint Center for Housing Studies, wrote in a blog post that the supply of rental units in California that are priced below $1,400 per month has gone down between 2011 and 2021. During that decade, California lost 152,000 units that rented for less than $600. It also lost 633,000 units renting for between $600 and $1,000 and 677,000 units renting for between $1,000 and $1,399 per month.

Frank Sinatra’s Estate in Palm Springs. Completed in 1947, this legendary estate on Wonder Palms Road served as the home for Sinatra and wife Nancy Barbato until their 1951 divorce, after which, actress Ava Gardner (who was married to Sinatra from 1951 to 1957) joined him in residence at the modern manse. This midcentury-modern home was the site of both star-studded parties as well as highly publicized domestic disputes between Sinatra and wife Ava Gardner. One notorious argument reportedly involved Sinatra discarding her possessions onto the driveway after Gardner’s attempt to catch the singer in a suspected affair with actress Lana Turner. The four-bedroom, seven-bathroom estate was constructed by architect E. Stewart Williams and dubbed “Twin Palms.” for two adjacent trees that lean together on the property. Legend has it that the “Fly Me to the Moon” singer would raise a Jack Daniels flag on the grounds to alert neighbors in the A-list enclave to head over to his for a cocktail party. Palm Springs’ The Grammy winner sought refuge in the desert dwelling in the mid-1950s, when he found himself desiring more distance from the hustle and bustle from the fashionable area in the city’s north section where Twin Palms stood. “Having secured privacy with a fence between his house and the golf course, he added a pair of two-bedroom cottages, one off either end of the pool. Each bedroom had its own separate his-and-her baths,” David McClintick wrote of Sinatra’s work on the property. “The her baths were equipped with Helene Curtis professional salon hair dryers. Frank also expanded the main house, adding a dining room for 24 and a restaurant-size kitchen with a commercial range, a walk-in refrigerator and freezer, and a wine closet.” The main house became known as “The House I Live In,” the name of a 1945 short film (and an accompanying song) starring Sinatra with the message of standing against anti-Semitism following WWII. When Sinatra wed Barbara Marx in 1976, she joined forces with Beverly Hills interior designer Bernice Korshak and architect Ted Grenzbach to open up the central areas of the house and flood the space with natural light, as well as adding a master suite with travertine floors, a hot tub, and an exercise room. 

Fox Village Theatre Up for Grabs. The Los Angeles Business Journal reports that the Fox Village Theatre in Westwood is up for sale. Coincidently, the property lease for Westwood’s iconic theatre (which was originally listed for sale on Jan. 17 by Newmark Group Inc.), is set to expire at the end of July and it is unclear whether it will be renewed. Built in 1929, the cinema was opened in 1931 by Fox Film Corp. founder William Fox and has remained an architectural classic. Over the years, the theater has become such a beloved piece of iconography within L.A. County that the city officially dubbed it a historic-cultural monument in 1988. The theater, which famously appeared in Quentin Tarantino’s “Once Upon a Time in Hollywood,” has a rich history within the L.A. film community. For decades, the Village has hosted hundreds of movie premieres, as well as critic screenings for major releases such as Paul Thomas Anderson’s “Licorice Pizza.” The theater has a 1,375-seat capacity and is a hot spot among UCLA students, as well as the affluent communities of Brentwood, Bel Air, Beverly Hills and Century City. The 24,099-square-foot property (which includes the theater itself, its distinguishable 170-foot art deco tower, as well as an adjacent Starbucks store) is on sale for an undetermined price. The investment highlights include: “a rare opportunity to acquire one of the most iconic assets in Westwood Village; tremendous film and entertainment history associated with the property; most prestigious property in a high barrier to entry submarket; rare on-site parking in a sub-market that has limited parking options.” Amenities include a corner lot, signage and signalized intersection. Regency Theatres, the company that actually operates the Village Theatre, took over operations in 2010. But it is unclear whether the land’s next owners will renew the lease with Regency.

Man Lost At Sea Rescued With His Dog After Three Months. As my readers know, I’m a sucker for a great survival story. And this one is a doozy! Tim Shaddock, 51, and his dog, Bella, spent three months drifting at sea after a storm wiped out the boat’s electronics. They survived on rainwater and raw fish. Shaddock and his dog, Bella, shoved off from La Paz, Mexico, three months ago before their journey took a near-deadly turn one month into it. A wicked storm struck his white catamaran, wiping out all electronics, the sailor says. Shaddock had charted a journey to French Polynesia before the storm sent them off course. The lost sailor said he avoided sunburn by taking cover under his boat’s canopy. They floated aimlessly in the Pacific for two months, seemingly with no hope for survival, before a crew of fishermen from Mexico came upon them. A helicopter, scouting on behalf of the tuna trawler, first spotted Shaddock, leading to their needle-in-a-haystack discovery and rescue. Shaddock and Bella were fished out of the water by the trawler and taken back to Mexico. Shaddock was about 1,000 miles off the Mexican coast when the fishing expedition found him. The Australian sailor who spent months drifting aimlessly in the Pacific Ocean thanked rescuers last Tuesday but vowed he'll be back on the water, despite his terrifying adventure. While 51-year-old Shaddock doesn’t have any high-seas adventures planned now, the fortunate sailor insisted that he'll never give up the pastime. "Look, I’ll always be in the water," he told reporters in Manzanillo, Mexico. “I just love nature.” Sporting a shaggy beard, Shaddock appeared on land for the first time in three months and expressed his gratitude to the fishermen who found him and his dog. “Look, to the captain and this fishing [crew] — [they] saved my life — what do you say?" Shaddock said. "I’m just so grateful. I'm alive."

Inside the Barbie Dreamhouse, a Fuchsia Fantasy Inspired by Palm Springs. Barbie's Dreamhouse is no place for the bashful. “There are no walls and no doors,” says Director Greta Gerwig. The live-action homage to the iconic Mattel doll opened in theaters this past weekend. To translate this “panopticon” play world to the screen, Gerwig enlisted production designer Sarah Greenwood and set decorator Katie Spencer. The two took inspiration from Palm Springs midcentury modernism, including Richard Neutra's 1946 Kaufmann House and other icons photographed by Slim Aarons. “Everything about that era was spot-on,” says Greenwood, who strove “to make Barbie real through this unreal world.” They ordered a Dreamhouse from Amazon to study. “The scale was quite strange,” recalls Spencer, explaining how they adjusted its rooms’ quirky proportions to 23 percent smaller than human size for the set. Says Gerwig: “The ceiling is actually quite close to one’s head, and it only takes a few paces to cross the room. It has the odd effect of making the actors seem big in the space but small overall.” Erected at the Warner Bros. Studios lot outside London, Barbie’s cinematic home reinterprets Neutra’s architecture as a three-story fuchsia fantasy, with a slide that coils into a kidney-shaped pool. “I wanted to capture what was so ridiculously fun about the Dreamhouses,” says Gerwig, alluding to past incarnations like the bohemian 1970s model (outfitted with trompe l’oeil Tiffany lamps) and the 2000 Queen Anne Victorian mansion, complete with Philippe Starck lounge chairs. “Why walk downstairs when you can slide into your pool? Why trudge upstairs when you take an elevator that matches your dress?” Her own references for the movie ranged from Pee-wee’s Big Adventure to Wayne Thiebaud's paintings of pies to Gene Kelly’s tiny painter’s garret in “An American in Paris.” And, of course, everything is pink, very pink!

^4rd Annual Los Angeles Real Estate Grand Expo. Our 4^rd Annual Los Angeles Real Estate Grand Expo returns on Saturday, October 21, 2022, 9:00 am to 6:00 pm. This year we’re taking over the entire Iman Cultural Center – it’s all ours for the day! The north hall, the south hall, and the parking lot in the middle (with tents and food trucks). One entire day celebrating real estate investing. The theme of this year’s Grand Expo is “Hedge Inflation - Buy Real Estate.” There will be 14 national speakers in breakout sessions, and 70+ vendors in the North Exhibition Hall. The Grand Expo is a joint presentation of the Los Angeles County Real Estate Investors Association, Sam’s Real Estate Club, Ventura County Real Estate Investors Association, and Realty 411. Best of all, the Grand Expo is FREE to attend. Street parking is free or metered, and valet parking will also be available. But please RSVP at www.LAGrandExpo.com.

Foreclosure Forum. How to find and buy foreclosure properties. Saturday, August 5, 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 July 29th. After July 29, the price increases to $1 million. (Gold Members and returning Forum students can attend for FREE.) So don't wait! Register now: www.LARealEstateInvestors.com.

Vendors Expo Returns! Our carbon-neutral, bio-degradable, gluten-free, super-duper "Vendors Expo" returns on Thursday night, August 10, 2023. 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 a successful investor. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, CA 90034 (Culver City adjacent). FREE Admission. Please RSVP at www.LARealEstateInvestors.com. 

Accessory Dwelling Units ("ADU"). Our monthly general meeting will be held on Thursday night, August 10, 2023, 6:30 to 9:30 pm. Our very special guest will be Seth Phillips, California’s leading authority on “Accessory Dwelling Units” (“ADU”) and the new laws regarding 2-3-4 units on a single-family zoned lot. If you want to build more units and increase your rental income, you must attend Seth’s presentation. Our meeting will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles 90034 (Culver City adjacent). FREE Admission. Please RSVP at www.LARealEstateInvestors.com.  

LARealEstateInvestors.com Podcast. Are you enjoying 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 Federal Open Market Committee meeting will take place on Wednesday (7/26). Investors anticipate there will be a 25-basis point increase in the federal funds rate, but there is a much wider split about what will happen later in the year. The next European Central Bank meeting will follow on Thursday (7/27). For economic reports, New Home Sales will be released on Wednesday (7/26) from the Census Bureau. Second quarter Gross Domestic Product (“GDP”), the broadest measure of economic activity, will come out on Thursday (7/27) from the Bureau of Economic Analysis. And finally, the Bureau of Economic Analysis will release the Personal Income and the PCE price index (the inflation indicator favored by the Fed) on Friday (7/28).

Weekly Changes:

10-year Treasuries:            Flat    000 bps

Dow Jones Average:          Rose  700 points

NASDAQ:                           Rose  100 points

Calendar:

Wednesday (7/26):              Fed Meeting

Thursday (7/27):                  Gross Domestic Product

Friday (7/28):                       PCE Inflation

For further information, comments, and questions,

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, LLC

www.LARealEstateInvestors.com

310-409-8310