Monday Morning Quarterback

Written by Lloyd Segal Posted On Monday, 05 August 2024 00:00

State: Alabama
SOLD: 2

Monday Morning Quarterback

(Monday, August 5, 2024)

Los Angeles Zoning Fight Heats Up. Should single-family homes be exempt from the city of L.A.'s plan to add nearly 457,000 new homes in the next five years? This is what the LA city planners must decide. Los Angeles city planners held a virtual meeting Thursday night to gather public feedback on their plans for meeting ambitious housing production goals. Dozens of speakers repeated the same refrain throughout the evening: allow new apartments in single-family neighborhoods. The L.A. Planning Department has outlined a blueprint for achieving a state-mandated housing goal of nearly 457,000 new homes by 2029. Officials say the city can get there by essentially doubling down on development in already dense areas by offering incentives to builders. Doing so would be critical under the current plan because it leaves out the 72% of residential land in L.A. zoned for single-family homes. As you can imagine that approach has pleased homeowner groups, but spurred criticism from renter advocates, homeless service providers and affordable housing developers. Thursday’s meeting was primarily focused on public input. Most speakers urged the city to reverse course and provide more opportunities to build in single-family neighborhoods. “We live in the second largest city in the country, with so much economic opportunity, and yet we are landlocking 75% of our residentially zoned land for exclusively wealthy people,” said Kiersten Stanley of Studio City. “One wealthy family can come in and build a mini-mansion that’s 4,000 square feet. But God forbid four families move into four 1,000 square foot places.” Many speakers described the decision to exempt single-family neighborhoods as an issue of racial and economic justice. Some pointed out that erecting barriers around areas that remain wealthy and exclusive today perpetuates the legacy of redlining and other zoning restrictions that had racist origins. In other investor news, let get down into the weeds…

All-Cash Offers Giving Mom and Pops Investors Edge in the Housing Market. Cash was king during the hypercompetitive pandemic years as investors swooped in on the housing market with wads of cash. Now, the tide is turning. The share of investors purchasing homes with cash fell to 64% in the first quarter of 2024, according to a recent Realtor.com report. That’s quite a difference from the fourth quarter of 2021 (when a whopping 69.7% of investors purchased with no mortgage contingency to help them win ultracompetitive bidding wars) and the lowest it’s been since 2008. This is good news for regular homebuyers, who won’t have to compete with as many investors plunking down cold, hard cash. One reason more investors are using financing, despite surging interest rates, is because the majority are now independent investors rather than big corporations. Small investors (defined as having purchased 10 or fewer homes since 2001) made up 62.6% of investor purchases from January to March 2024. That’s the highest small-investor share in this data’s history since 2001, according to the Realtor.com report. The rise of mom-and-pop investors is a good thing. “It’s better for everyone involved that institutional money is withdrawing from the single-family home space,” according to Realtor.com editors. “It creates less artificial demand among buyers, therefore reducing some upward pressure on prices. It also leaves room for mom-and-pop investors to operate.” Cash offers could also be fewer and farther between because of our economy. Of the 100 largest metros, the areas where the highest share of investors paying all cash in the first quarter of 2024 are Portland-South Portland, ME (81.3%), Albuquerque, NM (81.2%), Toledo, OH (80.5%), McAllen-Edinburg-Mission, TX (79.5%), and Ogden-Clearfield, UT (79.0%).

Eye-Popping Construction Costs Intensify Cal’s Chronic Housing Shortage. It’s not hyperbole to declare that California’s most serious economic, social and political issue is its chronic shortage of housing, particularly for families in the lower income brackets. As the yawning gap between demand and supply, especially in urban areas, pushes costs upward, it drags down our economy by discouraging investment in job-creating businesses; it drives employers and their workers to other states where they can afford housing; it fuels the nation’s highest level of functional poverty and it’s the major factor in California’s worst-in-the-nation homelessness. The state has pushed local governments to reduce impediments to housing construction, setting a goal of 2.5 million new units over the current eight-year planning cycle, or an average of more than 300,000 units a year, “and no less than one million of those homes must meet the needs of lower-income households.” At best, California’s private and public housing developers are meeting a third of that goal, and the recent trend is downward. The state budget notes that in 2023 residential permits declined by 2.9% from 2022 to about 110,000 permitted units, and it projects that while single-family housing construction will probably pick up this year, multifamily units are expected to contract 5.5%, the largest annual decline since 2020. The budget cites high interest rates, imposed by the Federal Reserve to combat inflation, as a major factor in the state’s stagnant housing picture. But inflation itself (the rising costs of building materials and construction labor) also is a problem, as is the tangle of red tape that projects must endure. California will never solve its housing crisis if it doesn’t get more, much more, bang for its bucks.

Will the Grants Pass Ruling On Homelessness Spur Cities To Shoo People Into L.A.? Last month, the U.S. Supreme Court issued its landmark ruling on anti-camping laws.” In the Grants Pass case, the Supreme Court took up a 9^th Circuit ruling. In that case, the 9th Circuit had overturned a set of local ordinances that barred homeless people from sleeping in certain public areas when there was an insufficient number of shelter beds. In a 6-3 decision, the high court reversed the appeals court decision. The ruling clears the way for cities to resume enforcing laws idled by the 9th Circuit or to toughen laws that were watered down in an effort to comply with it.The high court concluded that laws penalizing homeless people for sleeping or pitching tents in public spaces do not constitute “cruel and unusual punishment.” That means cities can clear homeless encampments from parks, sidewalks and other areas even when they lack sufficient shelter beds. Political leaders across Southern California have offered an array of reactions to the Supreme Court ruling, with some voicing relief and others sounding alarmed. Some have expressed gratitude that the justices clarified the legal standard for enforcement, which they say had been muddled by lower court rulings. Others are openly worried that neighboring cities will take a punitive approach, sending police to encampments to hand out citations and forcibly remove people while failing to build sufficient shelter and permanent housing. The issue is particularly sensitive in L.A., where enforcement of the city’s anti-camping law varies widely from neighborhood to neighborhood. That law, known as 41.18, targets key locations, such as schools and day-care centers, and is not a citywide ban. In other parts of the region, some expressed the same fear but in reverse — that L.A. would push its massive homeless population into their communities. City leaders are hopeful that cities have moved away from harsh enforcement policies in the six years since the 9th U.S. Circuit Court of Appeals ruled that the 8th Amendment’s cruel and unusual punishment clause prohibits criminal penalties for “sitting, sleeping, or lying outside on public property for homeless individuals who cannot obtain shelter.” Since the Supreme Court’s ruling, L.A. begun speaking with officials with South Bay cities about establishing a “good neighbor pledge.

For First Time Since 2018, Fewer Homeless Living On L.A. Streets. Speaking of encampments, after climbing for the last five years, overall homelessness leveled off in Los Angeles this year, with fewer people living on the streets, according to the annual count released last week. The 2024 count, representing a snapshot taken in January, appears to show the effects of city and county programs to clear out encampments by moving people from tents, makeshift shelters and vehicles into hotels, motels and other forms of temporary housing. LAHSA estimates that there are 75,312 homeless people across the county, including in the city of L.A., down 0.3% compared with the previous year. In the city, the number was 45,252, a reduction of 2.2%, the agency says. Neither change is enough to be considered statistically significant. But both broke steady upward trends that have seen homelessness grow by more than 40% since 2018. Reductions in the unsheltered homeless population are more dramatic. The county’s unsheltered population is estimated to be 55,365, down 5.1%. In the city, that number declined by 10.4%, falling to 29,275, according to LAHSA’s figures. Mayor Karen Bass hailed that progress, saying it shows that city and county leaders have “changed the trajectory” of the region’s homelessness crisis. Jennifer Hark Dietz, chief executive officer of the nonprofit homeless services provider known as PATH, called the results an unqualified “win for L.A.” The numbers show that when the city and county put money into the right programs, they can achieve a decrease in the number of “people sleeping outside and a decrease in homelessness in general.” LAHSA officials credited Bass’ Inside Safe initiative (and the close collaboration between city and county agencies) for the decreases in the numbers and percentages of people living on the street. The count took place shortly after the first year of Inside Safe, which targeted some of the city’s largest and most troublesome encampments. By mid-January, the initiative had gone to 34 encampments at locations stretching from Harbor City near the Port of Los Angeles to Chatsworth in the San Fernando Valley.

Unhoused in the Desert. In contrast the LA City’s progress, homelessness is way up in the Antelope Valley. Many unhoused people in the Antelope Valley live in RVs parked far into the Mojave Desert, miles from population centers. When the results of Los Angeles County’s most recent homeless count showed the number of unhoused people holding steady, elected leaders celebrated (see previous story). The news brought some relief after years of increases. Lost amid the cheers were the much more dire numbers coming out of the Antelope Valley, where homelessness rose 42% in the last year alone. Homelessness in L.A. County’s northern desert region has more than doubled since 2018, far outpacing other parts of the county. What’s causing the increase? Service providers and housing advocates say this once-affordable oasis has itself become too expensive. Antelope Valley residents hanging onto cheap housing are now competing with an influx of people fleeing high rents in central L.A. County. And in an area known for brutal summer heat, high winds and freezing winters, the vast majority of unhoused people in the Antelope Valley are unsheltered. Officials with the Los Angeles Homeless Services Authority (“LAHSA”) say this year’s dramatic increase may in part be the result of better data collection. This year, for the first time, they used drones to get a more precise count of unhoused people living way out in the Mojave Desert. Other local government leaders insist the numbers are going up because larger cities are pushing unhoused people beyond their borders and into Antelope Valley. This year’s count shows that 18% of people experiencing homeless-ness in the Antelope Valley are part of a family with children, compared with 15% of unhoused people countywide.

Inside a Century-Old LA Craftsman Nestled in an Arboreal Oasis. Among the mature palm, elm, and eucalyptus trees of LA’s Mount Washington neighborhood is a historic Craftsman aptly named “Treehaven.” Like dappled shade along the forest floor, a handful of the dwelling’s ground-level spaces are characterized by a moody darkness. Upstairs, pale green and deep-sage-walled rooms are flooded with sunlight, as if you’d scaled one of the mighty evergreens surrounding the house all the way up to the canopy. Treehaven’s lush natural habitat provided AD Pro Directory with a built-in brief for tackling the restoration of the circa-1915 dwelling for clients. About two years before the designer set foot on the estate, the house spoke to Heather Sperling and John Chaffetz. The couple was not at all in the market for a new home, having just wrapped extensive renovations on their midcentury Silver Lake address a year prior. Browsing Redfin just for fun proved to be a dangerous game. “I happened to find this open house and thought, Wouldn’t it be cool to pop into this historic property as a totally benign architectural visit?” Sperling, owner of the LA restaurant Botanica, tells AD. “I was holding our seven-month-old daughter when we walked in and I began weeping. I said, ‘Marina, do you like your new home?’” Compounding the challenge of the entire endeavor was the fact that the family toured the house on March 6, 2020, days before the world descended into COVID-19 chaos. “You don’t get to choose the timing,” says Chaffetz, who, as owner of the real-estate investment firm Timberlane Partners, is well acquainted with the ways of the market. “If you find one that speaks to you, you have to go [and] get it.” They found a buyer for their Silver Lake pad and did just that. While Chaffetz and Sperling were taken with the home’s charming original details and the verdant wonderland in which it was situated, Treehaven was as rundown as 100-year-old houses often can be. The couple managed to update the plumbing and electrical infrastructure, as well as overhaul the kitchen before they were, as Sperling puts it, “tapped out.” Enter Eisenberg, who had both the bandwidth to do the house justice and proper respect for the structure’s historic status—meaning lots of rules and regulations on what had to remain untouched.

Tom Petty’s Longtime SoCal Home Just Popped Up for Sale. Ever dream of owning a musically pedigreed SoCal home? Spare yourself a breakdown, because Tom Petty’s longtime main digs nestled within a gated enclave high above Malibu’s Pacific Coast Highway are yours for the taking! All you need is a cool $19 million, and you can happily claim the coveted keys to the legendary musician’s Mediterranean-style estate—barring a bidding war, of course. Before his death in 2017 at age 66, Petty paid $3.75 million in the spring of 1998 for the place, which includes a main home, a separate guesthouse, and another structure that served as a recording studio—for a total of seven bedrooms and 10 baths in roughly 10,000 square feet of living space. Originally built in the 1940s and retaining some of its original details, the gated structure rests on a 2.6-acre parcel and offers sweeping coastline views. As for the primary dwelling, the interiors are adorned throughout with dark hardwood floors, limestone accents, vintage light fixtures, and Spanish-tiled baths. Highlights include a spacious great room displaying a grand fireplace topped by hand-carved skylight covers (a personal touch from Petty). Also standing out is a gourmet kitchen with skylights, a central island, and an adjoining butler’s pantry, as well as a fireside dining room that seats up to 16, a wood-paneled library/TV area, and a music room where the rocker composed many of his popular tunes.

Vendors Expo Returns! Our world-famous, super-duper "Vendors Expo" returns on Thursday night, August 8, 2024. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Stick around after and enjoy our guest speaker. Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Los Angeles, CA 90034. FREE Admission. Metered and free street parking. Please RSVP at www.LARealEstateInvestors.com.

Shared Housing. Our August meeting features Jason Robert as our special guest speaker. Jason is an expert on “Shared Housing.” What is shared housing? How about taking your existing rentals and tripling your rental income and doubling the value of your properties. Every property is capable of converting to shared housing if you know what to do. This is truly the answer to our housing crisis. So don’t miss our August meeting, Thursday night, August 8, 2024, 6:30 pm to 9:30 pm. Iman Cultural Center, 3376 Motor Avenue, Los Angeles, CA 900334. Free admission. RSVP: www.LARealEstateInvestors.com.

Basic Training Investing Boot Camp. Saturday, August 24, 2024, 9:00 am to 6:00 pm, will be our semi-annual Basic Training Boot Camp. Everything you ever wanted to know about real estate investing but were afraid to ask. Iman Cultural Center, South Hall, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034.The cost of the Boot Camp is $149.00 per person if paid before August 17. After August 17, the price jumps to $249.00! So don’t wait to register. (Gold Members and former Boot Campers can attend for FREE, but still need to register.) Plus free parking. You can register at LARealEstateInvestors.com.

Cash Flow Chronicles Podcast. We are so very excited about our weekly podcast, "Cash Flow Chronicles" 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. Every Tuesday at 3:00 pm, and anytime thereafter on YouTube, Facebook, and Google.

The Timmelsjoch Experience. The photo at the top of this Quarterback is of the Timmelsjoch sculpture. The Timmelsjoch road, once a mule track, links the Passeiertal valley in Italy and the Ötztal valley in Austria. Over thousands of years, unique similarities between the two valleys evolved, triumphing over the natural boundary created by the mountains. Since 2010 architectural sculptures located at several stopping places along the road, enlighten travelers about the natural surroundings, the history, the culture, the communities and the economy of the region. All together there are 5 sculptures to be explored, two on the Austrian side called “walkway” and “smuggler” and two on the Italian side of the road named “telescope” and “garnets.” On the highest point of the pass one can find the pass museum. The dramatic concrete structure on the North Tyrolean side (pictured) juts out like an erratic boulder into the South Tyrolean side, underlining the cross-border nature of the Timmelsjoch Experience. The "Ice Cave” inside the museum pays tribute to the pioneers of the High Alpine Road and their remarkable accomplishments. It was designed by Werner Tscholl Architects.

This Week. Investors will continue to look for Fed officials to elaborate on their plans for future monetary policy in light of the significantly weaker data released since the meeting. Otherwise, it will be a light week for economic reports. The ISM national services sector index will come out today and the Trade Deficit on Tuesday. Investors also will be watching with concern for signs of escalation in the conflict in the Middle East.

Weekly Changes:

10-Year Treasuries: Fell 040 bps

Dow Jones Average: Fell 100 points

NASDAQ: Fell 700 points

Calendar:

Monday (8/5): ISM Services

Tuesday (8/6): Trade Deficit

Thursday (8/8): Jobless Claims

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, LLC