Monday Morning Quarterback

Written by Lloyd Segal Posted On Monday, 10 October 2022 00:00

State: Alabama
SOLD: 2

Monday Morning Quarterback

(Happy Columbus Day)

Hurricane Ian, one of the costliest and deadliest storms in U.S. history, displayed the ever-worsening threat of the climate crisis on Florida. But it isn't likely to kick-start a real estate reversal anytime soon. After all, natural disasters and weather upheavals have always been a part of Florida. Nevertheless, there’ll always be the allure of great weather, favorable taxes, endless land to develop, and the newly-discovered ability to work from home. These positives (resulting in Florida's population explosion) have created a real estate gold rush. For example, an extra 200,000 people moved to the state between 2020 and 2021, according to census data. To serve them, there have been a swarm of businesses both expanding and launching in the Sunshine State. More than 600,000 new businesses were launched in Florida last year and real estate values quadrupled. That figure was nearly 30% higher than the previous year and twice as high as in New York state. In other words, Hurricane Ian, which has done an estimated $47 billion worth of damage and resulted in a death toll that is already at 130 and climbing, is unlikely to deter anyone who sees Florida as a great place to do real estate deals, my Florida sources assure me. If it’s anything like what happened after Hurricane Irma and Charlie, the phones are probably already ringing from investors hoping they can swoop in for a “discount.” Florida is still Florida, and they’ve got some really big positive factors going for them. The weather (notwithstanding hurricanes) is a huge asset and folks are still moving to Florida. The fallout from the storm could actually work to the benefit of owners of properties in the affected area. South Florida experienced enormous rent increases in the last two years (apartment rents jumped by nearly 25% between July 2021 and 2022) and will now accelerate even more with buildings still standing and in surrounding counties. The momentum of people moving to the Sun Belt is too powerful to reverse the effects of a “silly little hurricane” (as Floridians like to say). But on a hyper-local level, storms like Ian could change people's preference for location. For example, people will probably be more reticent to live on the water, preferring instead to live inland. In other real estate news this week, let’s get under the hood…

U.S. Adds 263,000 Jobs in September. You would think thousands of new jobs would be good news – but it’s not really. Why? Because the increase in new jobs in September fell to a 17-month low of 263,000 due to labor shortages and waning demand for workers as talk of recession grows. But it was still too strong for a Federal Reserve bent on slowing the economy and tackling high inflation. The increase in hiring, while still strong historically, was the smallest since April 2021. The unemployment rate, meanwhile, dropped to 3.5% from 3.7%, the Bureau of Labor Statistics reports. That puts it back at a pre-pandemic low and marks one of the lowest rates since the late 1960s. Nevertheless, the slowdown in hiring is not taking place fast enough to deter the Fed from continuing raising interest rates to try to quench the worst outbreak of inflation in 40 years. Higher interest rates are expected to reduce economic growth and raise unemployment. So get ready for higher unemployment. Many economists predict a recession will take place next year and Fed officials won’t rule one out. One of the Fed’s big worries is rising wages spurred on by the tightest labor market in modern times. Higher wages could feed into inflation and make it harder to rein in. In reality, the Fed is expected to keep raising rates until inflation starts to fall rapidly and the mismatch between too few workers and too many open jobs ease up. The September employment report showed little progress on that front. The so-called participation rate (the share of working-age people in the labor force) fell a tick to 62.3%. By the way, job openings sank to the lowest level since last fall and layoffs, while still quite low, rose to an 18-month high in August. New unemployment filings also rose last week to a five-week high. Hotel, restaurants and other companies in the hospitality business created 83,000 new jobs, reflecting strong demand for services such as travel and recreation as Americans get out more. Hiring also rose sharply in health care and professional businesses. Manufacturers also added 22,000 jobs and construction firms hired 19,000 people. Employment fell slightly in finance, transportation and government.

Economists See U.S. Turning Into A Buyer’s Housing Market in 2023. Housing experts say they’re expecting the market to tip back into the buyers’ court by 2023, according to a new report. The housing market will shift in favor of home buyers by the end of 2023, according to 44% of 107 economists and housing experts polled by real estate company Zillow for its newly published “Home Price Expectations” Survey. And 12% of these experts believed that shift will happen sooner — that is, this year! But yet roughly 45% of experts surveyed by Zillow say buyers will have to wait and expect the market to shift in buyers’ favor in 2024, and beyond. All survey respondents said to expect home-price deceleration in 2023. And you’re already seeing signs of price pressures manifesting: The median price of an existing home in the U.S. dropped to $389,500 in September, down from $403,800 the previous month, according to the National Association of Realtors. Most of the housing experts surveyed noted that the markets most likely to see home prices decline over the next year include pandemic boomtowns like Boise, Austin, and Raleigh. If you recall, these cities saw a huge jump in sales amid the earliest days of the pandemic. The markets least likely to see home prices decline over the next year include Midwestern cities like Columbus, Indianapolis, and Minneapolis, the survey indicates. Only 36% of respondents expect home prices to decline in these areas over the next 12 months. Some markets in the south are also expected to see demand hold strong, including Atlanta, Nashville, and Charlotte.

Typical Homes Now Sell For Less Than Asking Price. The average American house sold for less than its list price for the first time in over 17 months during the four-week period ending August 28, as the housing market cool-down continues. Every month since March of 2021 has seen an average sale-to-list ratio of over 100%, meaning that the average home sold for more than its final asking price. This comes as the share of listings with a price drop has increased. Despite the easing in home prices, demand from homebuyers is still chilled (mortgage purchase applications and pending sales both saw large declines from a year ago) thanks in large part to spikes in mortgage rates (which rose to 5.66%). Home sellers are also reluctant to step into the market: new listings and total inventory of homes for sale saw large declines as well. Redfin Chief Economist Daryl Fairweather says “the post-Labor Day slowdown will likely be a little more intense this year than in previous years when the market was super tight. Expect homes to linger on the market, which may lead to another uptick in the share of sellers lowering their prices. Homebuyers’ budgets are increasingly stretched thin by rising rates and ongoing inflation, so sellers need to make their homes and their prices attractive to get buyers’ attention during the remainder of the year.”

72% of Recent Homebuyers Have Regrets About Their Purchases. As the housing market cools, feverish competition for homes in the past couple of years has left 72% of recent buyers having regrets about their home purchases, according to a recent survey from Clever Real Estate. The number-one reason for the buyer’s remorse: they spent too much money! The second most common regret was rushing the home-buying process, with 30% saying their purchase decision was rushed and 26% indicating they bought too quickly. The online survey was conducted this summer and included about 1,000 individuals who bought a home in 2021 or 2022. It was commissioned by Anytime Estimate (which is owned by Clever Real Estate). As you fondly remember, the hot seller’s market in recent years prompted buyers to go above and beyond to seal the deals on their prospective homes — which contributed to regrets. To that point, 31% of buyers said they paid over the asking price. The median amount paid over the listing price was $65,000. Notably, tight competition led 36% of buyers to make an offer on a home without even seeing it in person first. Even so, the competition was fierce, with 80% of buyers saying they made more than one offer, with 41% making five offers or more! About one in three buyers said they searched for three months for their homes, while one in eight took six months or more.

Los Angeles County Settling Lawsuit Over Homeless Crisis. Los Angeles County leaders announced last Monday a lawsuit settlement that commits millions of dollars to expand outreach and supportive services for homeless residents. This marks the potential end of two years of litigation over the crisis of people living on the streets. The deal puts LA County, operator of the local public health system, in direct partnership with the city of Los Angeles, which has committed to sheltering thousands of homeless residents as part of its settlement in the lawsuit reached earlier this year. As you may recall, the suit was brought in 2020 by the LA Alliance for Human Rights, a coalition that includes businesses, residents, landlords, homeless people and others who allege that inaction by the city and county has created a dangerous environment. Supervisor Holly Mitchell said the county will commit an estimated $236 million in new funding to address homelessness through 2027, with an emphasis on expanding street outreach teams to make sure people who need help get it. That's on top of more than $530 million in homelessness funding created by a sales tax approved by voters in 2017. Mitchell said the new money will also go toward a “comprehensive suite of services” for eligible residents for 10,200 permanent housing units and 3,100 interim shelter beds that the city of LA has committed to build under its agreement. Services will include case management, medical and mental health support, benefits advocacy, family reunification, childcare and addiction treatment. The county’s settlement requires the approval of U.S. District Judge David O. Carter, who is overseeing the case and will supervise the settlement’s implementation through 2027. Under the city’s settlement, announced in April and approved by the judge in June, Los Angeles will create shelter or housing for 60% of homeless people in the city who do not have a serious mental illness, substance abuse disorder or chronic physical illness. But my only question is this: If the city and county officials have continuously said over the past years that they are doing “everything possible” to address the homeless crisis, how can they now suddenly commit hundreds of millions of additional dollars to deal with the crisis? Where was the money before and why wasn’t it used? This hypocrisy is what I hate about local government.

Paul R. Williams Gem Listed for Sale In Little Holmby. If you love real estate, you love great architecture. And if you love great architecture, then you already know and love Paul Williams. Few architects have left a larger mark on Southern California’s architectural landscape than Paul R. Williams. The prolific designer worked on thousands of projects during his decades-long career, including a healthy mix of public landmarks and private residences. One of the latter just surfaced for sale in the Westside neighborhood of Little Holmby (just east of UCLA), where a Colonial Revival-style estate is up for grabs at $5.25 million. It’s the first time the house has hit the market in half a century. Built in 1937 for $19,800, the Colonial Revival-style home showcases bright colors and a classic Williams-style staircase. Williams, who made history as the first Black member of the American Institute of Architects, built the home in 1937 for Watterson Rothacker, the owner of a film processing lab. At the time, it cost $19,800 to build — which seems cheap, but was actually relatively expensive for the era. The estate traded hands a few more times over the years before selling to the current owner, interior designer and businesswoman Ann Ascher, for $176,000 in 1971. Stone, shutters and dormer windows bring colonial style to the exterior. Inside, the grand foyer showcases a Paul R. Williams trademark: the spiral staircase. The dramatic, swirling steps boast gold carpet and wrap around a crystal chandelier overhead. Elsewhere are five bedrooms and six bathrooms in 5,250 square feet, including a blast from the past in one of the guest bedrooms complete with bright floral wallpaper surrounding lime green carpet.

Sandra Bullock Asking $6 Million for San Diego Ranch. My favorite real estate investor, Sandra Bullock, has amassed a country-spanning collection of real estate over the years. Now, she’s starting to sell -- in case you’re interested in buying. The actress unloaded a Hollywood Hills home in 2018 and a West Hollywood condo earlier this year, and over in Malibu, she put a beach house up for rent at $30,000 per month. Her latest listing is in the hills outside San Diego, where she’s shopping her 91-acre ranch for $6 million. Dubbed “the Farm,” the compound combines three different lots near the foothills of Palomar Mountain. It’s reached by a long, gated driveway that winds its way past eucalyptus trees, avocado groves and rose gardens, eventually arriving at a single-story ranch house wrapped in adobe walls and flower-adorned verandas. Whitewashed beams hang above wide-plank floors inside. There’s a skylit kitchen, rounded dining area with built-in booth seating, and primary suite with a fireplace (one of nine on the property). When not real estate investing, Bullock, 58, won a lead actress Oscar for her role in the 2009 drama “The Blind Side.” Her scores of film credits also include “Speed,” “Miss Congeniality” and “Gravity,” in addition to more recent roles in “Ocean’s 8,” “Bird Box” and “The Lost City.”

California Man First to Kayak Solo From Monterey to Hawaii. When I visit my rentals in Hawaii, I fly. But not Cyril Derreumaux. Cyril kayaks. Alone and unsupported with nothing but the ocean currents and his own fortitude, Cyril last week became the first person to kayak from California to Hawaii powered entirely by human strength. For 91 days and 9 hours, he occupied the “Valentine,” his 23-foot vessel, retrofitted with all the food, gear, and communication devices he could carry on his mission. Derreumaux left Monterey on June 21, spending nine hours a day paddling (and consuming 6,000 calories) as he chipped away at the 2,400 nautical miles that stretched into the infinite blue before him. He arrived in Hilo last Tuesday (having turned 46 during his lonely voyage), where he was welcomed by his girlfriend, his parents, brother, and a psychiatrist (likely there to examine him for insanity), who had all flown out for the occasion. To me the idea of being alone in the middle of the Pacific, 40 days behind you, with 52 to go, is incomprehensible. However, for Cyril, the ocean became familiar territory—an impressive feat of mental prowess to find comfort in such vastness. Although he was alone, he was thoroughly supported by his team on land. Among others, Michel Meulnet provided weather updates and planning and Dave Loustalot assisted with the logistics. “I had an amazing land support team,” he explained. Other troubles awaited him, however. On his 46^th day, the water desalination machine broke, and he was left to hand pump his water twice a day, 45 minutes in the morning and one hour at night, using up precious rest time. When Hurricane Estelle (downgraded to a tropical depression) caused swells to pummel his boat less than a month into his trip, he hunkered down in his tiny cabin. For Derreumaux, it was all about having a positive attitude. In his blog, he mentioned the joy of watching a flying fish leap out of the water, and the time he was trailed by Mahi-Mahi. He even spent time scraping the barnacles off his boat while he floated in the middle of nowhere. On days when he needed inspiration, he embodied the strength of good friends or athletes that he admired. Congratulations to Cyril Derreumaux!

3^rd Annual Los Angeles Real Estate Grand Expo. Our 3^rd Annual Grand Expo returns on Saturday, October 22, 2022, 9:00 am to 6:00 pm. This year we’ve taken 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 “How to Invest in a Pre-Recessionary Market.” There will be 12 national speakers in breakout sessions, and over 70+ vendors in the North Exhibition Hall. Keynote speaker will be Rick Sharga, the number #1 authority on real estate economics. 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 and metered, and valet parking will also be available. But please RSVP at www.LAGrandExpo.com.

Basic Training Boot Camp. Saturday, October 29, 2022, 9:00 am to 6:00 pm, will be our semi-annual Real Estate Basic Training Boot Camp. Everything you ever wanted to know about real estate investing but were afraid to ask. Location: Iman Cultural Center, South Hall, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034 (it’s really Culver City, but don’t tell anyone). The cost of the Boot Camp is $149.00 per person, if paid before October 21. Thereafter, the price jumps to $1 million per person. So don’t wait to register. Gold Members (and former Boot Campers) can attend for FREE. You can register at LARealEstateInvestors.com.

New “LARealEstateInvestors.com” Podcast. We are so very excited to announce our new podcast, "LARealEstateInvestors.com" (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. Plus he is an expert on probates and so many other strategies. Each week, Bill interviews real estate professionals sharing their insights and advice. Every Tuesday at 3:00 pm, and anytime thereafter on YouTube, Facebook, and Google. Because of the Jewish high holidays, Bill's podcast will return tomorrow, Tuesday, October 11th.

This Week. Going forward, investors are hoping for more specific guidance from the Fed on the pace of future rate hikes and bond portfolio reduction. The Consumer Price Index (CPI) will be released by the Bureau of Labor Statistics on Thursday (10/13). CPI is the most widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will be released by the Census Bureau on Friday (10/14). Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of our economy. Import Prices also will be released on Friday (10/14).

Weekly Changes:

10-year Treasuries: Rose 050 bps

Dow Jones Average: Rose 700 points

NASDAQ: Rose 200 points

Calendar:

Thursday (10/13): Consumer Price Index

Friday (10/14): Retail Sales

Friday (1014): Import Prices