All Forum Posts by: Lloyd Segal

Mortgage rates have been on an upward climb this year, with stronger than expected economic data causing the trend to continue last week. In fact, long-term bond yields, including mortgage rates, have already climbed over 50 basis points in 2021 due to improving economic conditions. With the vaccine rollout and massive government stimulus, the outlook for economic activity looks extremely promising, which means that inflationary pressures could increase. In addition, Fed officials gave no indication that they intend to attempt to halt the recent rise in yields. On Thursday, Fed Chairman Jerome Powell acknowledged the economic strength but did not give any indication that the Fed intends to restrain long-term bond yields. As a result, mortgage rates ended the week at their highest levels in months. And they’re only going to get higher. So wash your hands, put on your face masks, social distance, and let’s talk…

Employment. According to the Labor Department, the U.S. created 379,000 new jobs in February — the biggest gain in four months — in what’s likely to be a preview of a surge in hiring in the months ahead as people get vaccinated and our economy reopens. Nearly all the job gains came from the battered leisure and hospitality sector, which saw an increase of 355,000 job amid a relaxation of dining restrictions in some areas. Bars and restaurants gained 286,000 jobs while hotel-related hiring totaled 36,000 and amusement, gambling and recreation businesses added 33,000. Health care jobs in February rose 46,000 while retail added 41,000. Manufacturing also posted a 21,000 increase. Despite the gains, we are still 3.5 million short of the employment level from a year ago, just before the worst of the pandemic. Friday’s report also shows that hiring was stronger in January than initially indicated, with that month’s tally revised up to 166,000 from 49,000. The official unemployment rate, meanwhile, slipped to 6.2% from 6.3% (although economists widely believe the real rate is much higher). Federal Reserve officials peg the jobless rate at closer to 11% after adjusting the data for distortions caused by the pandemic. The rebound in job creation in February is likely the start of a major new cycle of hiring. Warmer weather, falling coronavirus cases, rising vaccinations and another massive increase in federal stimulus are likely to act as jet fuel for our economy this spring and summer. So mark my words: we are poised to start growing by leaps and bounds again after a tough winter — if the coronavirus vaccines prove effective. An effective vaccine will allow states to remove all restrictions, let Americans go about their lives again (without fear for their safety) and give companies the incentive to hire. And the newly-passed government stimulus will certainly add to the budding momentum. I have never been more optimistic. Full steam ahead!

Mortgage Rates. The yield on 10-year U.S. Treasury notes jumped on Friday (after the February jobs report topped expectations), sending the benchmark yield to its highest level this year. The yield on the 10-year Treasury was trading at 1.617% and had an intraday high of 1.626%. The yield on the 30-year treasury bond rose to 2.34%. Yields move inversely to prices. Why do we care? Because the yield on the 10-year treasury is the basis for mortgage rates. In other words, we care because if yields go up, mortgage rates will follow. In fact, the benchmark yield has been climbing quickly in recent months after ending 2020 under the 1% level. It topped 1.5% last week for the first time in over a year, and also briefly flashed above 1.6%. Thursday’s jump for Treasury yields put the 10-year above that mark. The rise in bond yields comes as economists and Wall Street strategists are growing increasingly bullish on the U.S. economy as Covid-19 vaccines roll out. As a result, the prospect for strong economic growth, as well as budding concerns about inflation, have pushed down the prices for bonds. This climb in the Treasury yields has led some to speculate that the Federal Reserve may adjust its policy to hold down the yield curve or even ease up on its dovish stance. But so far the central bank has not publicly shown interest in altering its course.

Apartment Rents Jump in February. Rents for U.S. apartments climbed 0.6% in February, rising at the fastest single-month pace since the middle of 2019. The increase in pricing proved widespread, as 140 of the 150 metros tracked in RealPage’s data logged at least a little rent growth. Even the country’s gateway metros, where rents were slashed in 2020, experienced rent bumps in February. Rents climbed 0.6% to 0.7% during the past month in Los Angeles and San Jose, while smaller increases of 0.1% to 0.3% were seen in San Francisco, New York, Washington, DC and Seattle. Average monthly rent across the U.S. now stands at $1,422. Influencing results for the past month, leasing activity is still occurring at a time when seasonal weakness in demand is normal. Preliminary calculations show the nation’s occupied apartment count up by more than 30,000 units in February (whereas there typically is no or very little net demand when U.S. temperatures are at their lowest). Looking to the bigger picture, annual change in rents remains negative at -0.9%. Rents are off by 14% to 21% year-over-year in San Francisco, San Jose and New York, and by roughly 5% across Washington, DC and Chicago. At the other end of the performance spectrum, rents are up sharply year-over-year in some locations. Riverside/San Bernardino leads the way, registering 9% rent growth. Sacramento and Memphis also are doing quite well, as prices are up 6.7% and 6.5%, respectively, in those two spots. Other metros posting annual rent growth of at least 4% include Greensboro/Winston-Salem, Virginia Beach, Phoenix, Las Vegas, Detroit, Tampa and Atlanta. U.S. apartment occupancy has been hovering between 95% and 96% since late 2019.

Refinance Loans Increase. ATTOM Data Solutions released its fourth-quarter 2020 “U.S. Residential Property Mortgage Origination Report,” which is always entertaining. The Report shows that 3.51 million mortgages secured by residential property (1 to 4 units) were originated in the fourth quarter of 2020 in the United States. That figure is up 5.5 percent from the prior quarter and up 48 percent from the fourth quarter of 2019 – to the highest level in almost 14 years! With interest rates remaining below 3 percent for most purchase and refinance loans, lenders issued $1.06 trillion worth of mortgages in the fourth quarter of 2020 – up 6 percent from the third quarter of 2020 and up 55 percent from a year ago, to the largest quarterly amount since at least 2000. The quarterly rate of increase of loans and dollar volume represents the largest gains during any fourth-quarter period since 2011. The continued boost in lending activity during the fourth quarter of last year came mostly from another jump in refinance mortgages. But the overall figure also was prompted by relatively strong home-purchase lending and home equity lines of credit. Lenders refinanced 2.23 million home mortgages in the fourth quarter, which was 12 percent more than in the third quarter of 2020 and 71 percent above the fourth quarter of 2019. The dollar amount of refinance loans rose to $666.8 billion, an 11 percent increase from the prior quarter and a 67 percent increase from a year ago. Homeowners taking advantage of low rates to roll over old mortgages into new ones continued to account for the majority of home loans in the fourth quarter of 2020. The strong home-lending numbers during the fourth quarter came despite the Coronavirus pandemic that spread throughout the country, slowing or stalling major sectors of our economy and keeping unemployment high. Nevertheless, a rush of homeowners and home buyers taking out various kinds of loans continued amid a scenario of low-interest rates and a desire of many families unscathed by the pandemic to trade life in congested, virus-prone urban areas for more spacious homes and yards in the suburbs.

Judge Carter Forcing L.A. to Deal With Homelessness. Every city needs a David Carter. Who is David Carter? David O. Carter is a Federal District Judge in California that does not take “no” for an answer. Depending on your point of view, Judge Carter is either a fearless disruptor of slow-footed local governments — or a bully interfering with professionals dedicated to serving homeless people. In fact, he is both! Carter is overseeing a settlement agreement between Los Angeles city and county governments in a case brought by the L.A. Alliance for Human Rights, a group of downtown business owners and residents that sued to force the city to shelter homeless people. Judge Carter is requiring the city to find temporary shelter (with the county footing the bill) for thousands of homeless people — mostly those living under or near freeways (because the judge has decided that it’s unsafe to live near the toxic fumes from vehicles). The mandate has forced the city and county to spring into action, moving scores of homeless people from highway underpasses and overpasses to shelter beds and providing them with social services. Judge Carter has continued to hold officials accountable for the problems he has encountered on his frequent visits to L.A.'s skid row neighborhood. Yes, Judge Carter doesn’t just sit in his courtroom handing out judgments. He actually gets out of the courthouse and walks skid row! On a rainy morning last month, Judge Carter encountered a number of drenched homeless women near the Downtown Women’s Center. He erupted in anger and insisted that the Women’s Center cover its parking lot with a tent and offer it as a campground for the women. He also made city officials find shelter for a variety of women that night. Then he called an ex parte court hearing several days later — in that same parking lot — and demanded to know what city officials were doing about getting people sheltered or housed on skid row. No one blames Carter for being outraged by the sea of desperate humanity in skid row every day. It is outrageous! And homelessness has only gotten worse in L.A., even as the city moves thousands of people off the streets each year. Maybe the Judge could be a catalyst for a new, more urgent approach to homelessness. Judge Carter wants the parties to the lawsuit to agree to a settlement that sets enforceable goals. One way to achieve that would be a consent decree that lays out those goals and a deadline for the city and county to achieve them.

Parts of L.A. Barely Felt the Coronavirus Surge. The winter surge of COVID-19 brutalized much of Los Angeles County (see LA County heat map below), sending case rates and deaths skyrocketing for weeks. But if you look closely, you will discover that in some neighborhoods, the pandemic’s wrath was barely felt at all. For example, in West Hollywood, Malibu and Playa del Rey, infection rates actually fell, according to a Times data analysis of more than 300 neighborhoods and cities across our county. Here is why they were spared. Those communities’ relative good fortune can be explained by some obvious demographic factors, such as Malibu’s low housing density and West Hollywood’s large population of singles able to work from home. But residents and city officials also point to other factors they believe helped keep the pandemic under control: sea breezes, easy access to open space for exercising, a strong culture of mask compliance and, crucially, limited contact with other people. The data analysis underscores the wrenching inequities unveiled by the pandemic in L.A. County and beyond. As you can see on the heat map, some areas — the Eastside, eastern San Fernando Valley, South L.A. and southeastern part of our county — have been devastated by the coronavirus. Many of these are low-income communities with a high number of residents who are “essential workers,” putting their lives at risk at supermarkets, manufacturing firms and other businesses. They are far more likely to live in overcrowded conditions, bringing the coronavirus home from work, or to work from home, and spreading it among families and fellow workers. Lifelong, systemic lack of access to primary healthcare and nutrition, as well as environmental factors like pollution, can contribute to a higher likelihood of illness and death from the virus, according to the Center for Disease Control and Prevention. Many of these factors have long plagued the poorer, denser and more diverse parts of our county that were hit hardest during the surge. After all, hard-hit areas lack the assets — vast recreational open space and a population with the economic means to stay home, get goods delivered, and work remotely — of affluent communities that fared better. It was not just living in sprawling single-family homes rather than denser apartments that made the difference, but these additional economic and lifestyle factors. When taken as a whole, these factors paint a tale of two surges — showing that the luxuries of location and privilege play an important role in one’s ability to avoid the coronavirus.

Housing Costs Increase in the Inland Empire. An increase in real estate prices and demand in Riverside and San Bernardino counties is largely being caused by people moving from L.A. California’s Inland Empire–the region including San Bernardino and Riverside Counties–has become one of the hottest real estate markets in the United States. But just as Inland Empire home prices rise, the region’s job growth has dropped, and longtime residents are worried they may be priced out by remote workers from Los Angeles and elsewhere who have swooped in during the pandemic. According to data released this month by CoreLogic, home prices in the Inland Empire rose nearly 12 percent during 2020. Rental inventory, too, has significantly tightened, and prices have risen by 6.9 percent in Riverside County and 9.1 percent in San Bernardino county. In both cases, a significant amount of interest in the market is coming from people moving into the region from other, more expensive parts of the state. The bulk of out-of-market buyers and renters looking for homes in Riverside and the surrounding areas are coming from Los Angeles, followed by Orange County and San Diego. That trend, they say, is linked to the pandemic inspiring a major shift toward long-term “work-from-home” scenarios. Meanwhile, local job growth in the Inland Empire dropped by 7 percent in 2020, and unemployment remains over 9 percent. Even before the pandemic, many of the region’s jobs were concentrated in warehousing, construction, health care, agriculture, and the hospitality sector. In 2019, the Press-Enterprise reported that average wages in Riverside and San Bernardino counties were at that time not just among the lowest in California, but among the lowest of all urbanized counties in the U.S. Worse, retail and storefront real estate vacancies jumped 10 per cent in just the third quarter of last year, an indicator that shops and restaurants have gone out of business and not been replaced. These economic realities leave many Inland Empire workers vulnerable to even minor fluctuations in housing costs.

New Orleans’ Landmark Listed for Sale. One of the many joys of real estate investing is the appreciation of great architecture. And some of the finest residential architecture can be found in New Orleans, Louisiana. Which brings me to Nathaniel C. “Buster” Curtis Jr., one of New Orleans’ most famous 20th-century architects —he designed the Louisiana Superdome no less. In 1963, he built something for himself: a brick and glass two-story home on a quarter acre lot on an oak-filled Uptown street, with room for him, his wife, and their seven children. Yes, seven children! The property consists of 4 bedrooms and 4.5 bathrooms within 4,160 Sq ft. The property is hidden behind an eight-foot white brick wall with a cast-iron gate. This allowed Curtis to build an almost entirely glass façade, without worry that his family would be watched by passersby. (It also allowed anyone sitting in the living room or dining room to look out onto the property’s four separate courtyards.) A 70-foot central hallway connects three pavilion-like main spaces: One consists of a living area or music room; another holds the dining room, kitchen, and breakfast nook; the final “pavilion” in the original floor plan. Curtis passed away in 1997, and his wife, Frances, remained in the house until 2013, the year architect Lee Ledbetter and his husband, Douglas Meffert — the home’s second owners — purchased the estate. The biggest changes happened in the “sleeping quarters.” Originally, there was a cluster of seven small bedrooms for each of the seven Curtis children, and some of them were, in Ledbetter’s words, “like monastic cells … square and small.” By knocking down back-to-back closets from adjacent bedrooms, Ledbetter created four larger bedrooms, each with a sitting room and a private bathroom. Outside in the courtyards, Ledbetter and Meffert planted staghorn ferns, palm trees, giant elephant’s ear plants, and yaupon holly (an evergreen shrub meant to attract birds). Ledbetter says he’s sad to leave but feels it’s just too much house for only two people. His loss is your gain for only $1,850,000.

Hammer Splits Hancock Home. Ever since DMZ released text messages where actor Armie Hammer details cannibalistic desires with drinking his ex-girlfriend’s blood and eating her ribs, the actor’s career has been in free fall. It culminated last week when Hammer moved out of his Hancock Park home in the middle of the night while his neighbors slept. Sources say that when Hammer finally quit the residence he did it under cloak of darkness. “Trucks and a gaggle of movers descended on the property, working well after midnight and lit only by flashlights,” a neighbor of the gated property told the New York Post.“ Hammer, 34, and his estranged wife, Elizabeth Chambers, 38, found a buyer for their three-story Tudor last month, though only after cutting their initial $5.8 million asking price by $800,000. Hammer and Chambers put the stately seven-bedroom, six-bathroom mansion up for sale in September, shortly after announcing they were breaking up after ten years of marriage. But failing to find a buyer, a month later they dropped their ask down to $5.3 million and then cut another $300,000 off that price tag in December. Since the scandal—in which women have accused Hammer of engaging in real-life “knife play”—he has been fired (or quit depending on who you ask) from starring roles opposite Jennifer Lopez in Lionsgate’s Shotgun Wedding and the Paramount + TV series The Offer, as well as being dropped by his agents at WME. Perhaps his new agent can get Hammer the lead in the sequel to Silence of the Lambs.

This Week: Looking ahead, investors will continue watching decreasing Covid case counts, increasing vaccine distribution, and the oscillating size of the government’s new stimulus package. Beyond that, the Consumer Price Index (CPI) will come out on Wednesday (3/10). CPI is the most widely followed monthly inflation report that looks at the price change for goods and services. The next European Central Bank meeting will take place on Thursday (3/11), as well as JOLTS (3/11).

Weekly Change:

10-year Treasuries: Rose 0.15 bps

Dow Jones: Fell 100 points

NASDAQ: Fell 700 points

For further information, comments, and questions:

Lloyd Segal

2 Votes

0 Votes

Economic Update
(Monday, February 22, 2021)

The minutes from the Federal Open Market Committee’s Jan. 26-27 meeting, released last week (after their customary three-week delay), show that members of the Committee are committed to using the full range of tools to support our economy. Federal Reserve officials, citing the uncertain course of the pandemic and a late-year economic slowdown, said they expect to keep short-term interest rates near zero and maintain $120 billion in monthly bond purchases until they conclude employment and inflation achieve their objectives. The Committee aims to allow inflation to run moderately above 2% for some time so that inflation averages 2% overall, according to their minutes. The minutes also disclosed that most members expect that the stimulus late last year, the likelihood of additional fiscal support in March, and continued progress in vaccinations will lead to a sizable boost in economic activity. Fortunately for investors, yields on the 10-year Treasury note, at 1.291%, remained steady after the minutes were released. So with vaccinations increasing and a second round of stimulus nearing, let’s wash our hands, put on our face masks (yes, you!), social distance, and get down into the weeds…

Retail Sales Higher in January. Consumers flocked to spend their stimulus checks in January, sending retail sales for the month up 5.3%, a good start to 2021, according to the U.S. Census Bureau. Excluding autos, sales rose 5.9%, also far ahead of the 1% estimate in a display of unexpected strength from consumers. A month after Congress approved a $900 billion additional stimulus package on top of the $2.2 trillion approved earlier in 2020 to counteract the Covid-19 impact, shoppers were armed with $600 checks they used to buy a variety of goods (that they probably really didn’t need). The jump in consumer spending came at a time when expectations for growth in the early part of 2021 were muted as our economy continues to shake off the pandemic-induced slowdown. Spending gains were broad-based, with every major category showing increases. Electronics and appliances saw the biggest increase, up 14.7% for the month, while furniture and home furnishing stores were up 12%, and online spending at non-store retailers jumped 11%. Even food and drinking places, which suffered the worst during the pandemic, saw a 6.9% rise. However, bars continued to see damage, with sales down 16.6%. Clothing and accessories were also off 11.1% while electronics and appliances saw a 3.5% decline. While most economists see the year is off to a slow start, they nevertheless expect the pace to pick up later in the year as vaccination efforts spread and the Covid-19 albatross fades.

Housing Starts Decline. Following four straight gains (and a December reading that marked a fourteen-year high), housing starts took a breather in January, coming in 6.0% below the December mark and down 2.3% from a year ago. All of the decline in starts in January was due to a slowdown in single-family housing starts, while multi-family units increased. Worse, given the hard winter freeze currently enveloping much of our country (our prayers are with you Houston!), look for a further decline in housing starts when we get the February data a month from now. However, as we look towards the spring, anticipate a return to the upward trend in housing starts, led by single-family homes. Why the confidence? Just look at housing permits to build single-family homes. They are up 29.9% from a year ago and the highest since 2006! This is important because each single-family unit adds much more to economic activity than each multi-family unit. Accordingly, look for both overall and single-family starts to post even higher numbers in 2021. My positive outlook is reinforced by yesterday's NAHB index, a gauge of homebuilder sentiment, which rose to 84 in February from 83 in January, remaining within throwing distance of its record high of 90. These signs all suggest housing will provide a substantive tailwind to our economic recovery in the foreseeable future.

Existing Home Sales Rise in January. U.S. existing home sales inched up 0.6% to a seasonally-adjusted annual rate of 6.69 million, the National Association of Realtors reports. Compared with a year ago, home sales are up a staggering 23.7%. Economists polled by The Wall Street Journal had forecast that existing home sales would fall to a median rate of 6.66 million. So what happened? Low inventory happened! In fact, low inventory continues to bedevil the sector. The inventory of homes for sale fell to a record low 1.04 million units by the end of January. That’s a 25.7% decline year-over-year! The market has only a 1.9-month supply of homes for sales. (A 6-month supply is considered a sign of a balanced market.) “Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market. Sales easily could have been 20% higher if there had been more inventory and more choices," said Lawrence Yun, NAR's hopelessly optimistic chief economist. Economists think that low mortgage rates will continue to boost housing demand in the coming months. The market is also fueled by Buyers looking for more room and more remote locations in the wake of the pandemic. Meanwhile, the national median existing-home price rose to $303,900 in January, up 14.1% from a year ago. In Los Angeles, the median price is just under $700,000.00.

Mortgage Rates Soar to Highest Level in Months. Mortgage rates lurched to the highest level since mid-November this week — a worrying sign for investors navigating a market defined by fast-rising house prices and low inventory. The 30-year fixed-rate mortgage averaged 2.81% for the week ending Feb. 18, up eight basis points from the week prior, Freddie Mac reports. The increase comes after three weeks where the 30-year mortgage rate stayed at 2.73%. The 15-year fixed-rate mortgage rose two basis points to an average of 2.21%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage dipped two basis points to 2.77%. The rise in mortgage rates was probably inevitable because mortgage rates had not risen in tandem with Treasury yields. Historically, mortgage rates have tracked the direction of long-term bond yields, specifically the 10-year Treasury (currently 1.291%). But throughout the pandemic that relationship has weakened somewhat — with mortgage rates falling to record lows well above the levels bond yields fell to. That gap has given mortgage lenders some latitude when it comes to adjusting interest rates. But this week, lenders followed suit. Nonetheless, mortgage rates remain very low by historic standards. This shift in the market’s outlook seems to suggest that the days of all-time low rates may be a thing of the past. However, as rates do rise, “affordability” is going to become an issue for some buyers. Already, a decline in the number of mortgage applications suggests that some Americans have been priced out of the market, as a record-low supply of homes for sale has pushed prices higher.

What the Pandemic Has Really Done to Our Economy. A new report issued by the Los Angeles County Economic Development Corporation delves into the job losses, industry contractions, and economic hardships that have hit our county during the pandemic. The report also attempts to lay out policy recommendations that might help create a recovery that is both good for business and mindful of improving equity. The report, titled “” is full of bleak statistics that will lull you to sleep within minutes. It finds that, as of late 2020, overall employment in the county was down 9.8 percent compared to the same point in 2019 (and that 9.8 percent was not distributed evenly across the population). Individuals filing for unemployment were more likely to be people of color, women, and those without college degrees. These people have borne the brunt of the economic pain of this pandemic. Between February and November of last year, LAEDC reports 20,000 more people in Los Angeles County became homeless. Even in 2021, with commerce reopening, our county is projected to have 354,000 fewer “living wage jobs” than before the pandemic, and will need to add a total of 738,672 jobs at that wage level for everyone in the county’s eligible workforce to be able to earn a sustainable living. The study also lays out the industries that were hardest hit by job losses in 2020: hospitality (125,900 jobs lost); arts, entertainment, and recreation (37,300 jobs lost); motion picture and sound recording (36,500 jobs lost); non-essential retail (23,400 jobs lost); and personal care and laundry services (20,400 jobs lost). Businesses, particularly small businesses, have struggled as well. The report finds that 62 percent of businesses in our county say they have less than two months of operating cash on hand, and already 15,000 local businesses have permanently closed due to the pandemic.

Consumer Sentiment Sags to Six-Month Low. Pessimism about financial security, especially among middle- and lower-income Americans, grew in early February and fewer expect our economy to show much improvement by the summer, a new survey shows. The first of two readings of consumer sentiment this month fell 3.5 points to 76.2 in early February and touched a six-month low, according to an index produced by the University of Michigan. The index registered 79 in January. In other words, the attitude of Americans right now about their own personal finances and the broader economy was basically negative. The so-called “Index of Current Conditions” edged down to 86.2 from 86.7 in January. Hopes for a stronger economy later in the year also dimmed. A forward-looking gauge on what consumers expect six months from now sank to 69.8 from 74 last month. That’s also the weakest reading in six months. The biggest decline in optimism occurred among households with incomes below $75,000 a year. Fewer than a quarter of families in the bottom third of incomes said their financial situation has improved. A brief lapse in extended federal unemployment benefits and fresh layoffs at restaurants and other businesses toward the end of 2020 added more financial stress on working Americans. By contrast, more than half of the households in the top third of incomes said their finances have actually improved, likely reflecting large gains in the U.S. stock market and their real estate holdings. Most upper-income Americans are also able to work from home and have not suffered as many job losses. Nevertheless, the overall consumer sentiment index is still 25 points below its pre-crisis peak.

Housing Crisis Made The Pandemic Worse. The vast majority of L.A. renters are spending too much on housing — and the region’s affordability crisis provided opportunities for the COVID-19 pandemic to spin out of control. That's according to the researchers behind a new survey published last week that measures how much Angelenos spent on housing and other essential needs last year. "High rates of housing insecurity make L.A. more vulnerable to the impact of the pandemic on public health," said USC sociologist Kyla Thomas, director of the USC Dornsife-Union Bank LABarometer survey. The survey collected responses from 1,326 L.A. County residents during the fall of 2020, finding that nearly two-thirds (65%) of renters could be considered "cost-burdened," meaning they spend more than 30% of their income on rent alone. More than 40% of L.A. residents live in overcrowded homes. That means that when low-income workers who interact with the public get sick, they're often bringing the virus back into their homes where it has ample opportunity to spread. These problems affect some L.A. residents more than others. Latinos are most likely to be rent-burdened (70%) and to live in overcrowded housing (55%). Rent burden is also high for Black residents (67%). And while Asians have the lowest rate of rent burden among all ethnic groups included in the survey, they also face high rates of over-crowding (40%). The survey reveals widespread housing instability across L.A., with one-in-three Angelenos saying they worried about losing their homes last year. Researchers say crushing housing costs have forced L.A. residents to cut back on other necessary expenses. For example, the survey found that one-in-three Angelenos postponed medical care because it cost too much, and 11% worried about not having enough food to eat.

“Biden Blue” Comes to the White House. Among the great ceremonial elements of the presidency are the design and furnishing of the White House, a working office building that is also a museum and a home. Although much of the interior of 1600 Pennsylvania Avenue is managed by curators, First Families certainly impart their sensibility in subtle — and sometimes dramatic — ways. All of which leads me to the question, What is the Bidens’ taste, and how will they display it at the White House? We do know that Joe Biden’s personal taste steers toward the conventional. Biden’s a politician who plays by the rules, and that’s probably a good thing here because the White House has lots of rules when it comes to interior design. The building is divided into the P (the ground floor that tour groups see, where dignitaries and heads of state are received and which leads to the Oval Office and the administrative spaces in the East and West Wings), and “the Residence” (comprising the First Family’s private living quarters on the second and third floors). Which brings me back to the Bidens. The White House interiors will change. But so far, the Oval Office is the only room the public has seen in the new administration. And the few changes that have occurred so far are already reinforcing Biden’s promise on the campaign trail: “to be a president who will unify the country.” The Bidens don’t project an image of worldliness like the Kennedys did, Hollywood glamour like the Reagans, or modernity like the Obamas. With this First Family, it’s about rolling up your sleeves and getting to work. After Biden’s inauguration, the White House staff quickly switched out a few of the furnishings in the Oval Office. For example, like most presidents since JFK, Biden is using the desk, a gift from Queen Victoria to President Rutherford Hayes in 1880. The newly placed bust of Cesar Chavez on a table behind the desk has received the most attention. The gold draperies and beige damask wallpaper are still around. But the most visible differences from his predecessor’s décor is the deep-blue rug. Although Biden’s Oval Office rug wasn’t custom-made for him, its color speaks to his personal taste. It isn’t just any blue — it’s a vibrant, almost inky shade reminiscent of twilight according to Biden’s interior designer, Victoria Hagan, who has nicknamed the shade “Biden Blue.”

Man Joyrides in Real-Life Baywatch Boat. Forget televised freeway chase - we’re now going to watch “ocean chases” on TV. A David Hasselhoff want-a-be stole a moored boat in Santa Monica Bay last week, before brazenly leading police on a high-seas chase into the Pacific Ocean. According to the Los Angeles County Sheriff’s Department (LASD), the thief made off with the lifeguard vessel on January 26 while it was moored in Malibu. Lifeguards, the Coast Guard, and a LASD’s Air 5 helicopter all participated in the slow-speed chase, which took place somewhere out in the Pacific. The boat crews responded offshore to locate some lunatic looking for his 15 minutes of fame, by playing lifeguard and stealing a boat named “Baywatch Malibu” (seriously, that’s its name – you can’t make this stuff up) from its moorings. Where was Pamela Anderson in all of this? A helicopter pilot on the Santa Monica Airport Tower frequency cautioned he was heading out over the water to chase a stolen lifeguard boat. Another pilot noted, “It was humorous to listen to the coordination between Baywatch Del Rey, LASD Air 5 & Marina Del Rey’s boat crews all chasing a stolen boat! The world keeps getting crazier by the day!” The suspect was soon apprehended by members of the LASD Marina del Rey Boat Operations team and the boat was recovered with no major damage. Never a dull moment in LA…

This Week: Looking ahead, investors will continue watching Covid case counts, vaccine distribution, and the size of the government stimulus spending bill. Beyond that, it will be a light week for economic data. Consumer Confidence will be released tomorrow (2/23). Personal Income and the Core PCE price index (the inflation indicator favored by the Fed), will be released on Friday (2/26).

Quote of the Week. “This morning I saw a neighbor talking to her dog. It was obvious she thought the dog understood her. I came into my home and told my cat. We had a good laugh!”

Weekly Change:
10-year Treasuries: Rose 0.15 bps
Dow Jones: Rose 100 points
NASDAQ: Fell 100 points

Calendar:
Tuesday, 2/23: Consumer Confidence
Friday, 2/26: Core PCE
Friday, 2/26: Personal Income

3 Votes

March General Meeting. Please join the Los Angeles Real Estate Investors Club and Ventura Real Estate Investors Association for our joint March 11th (7:30 to 9:30 pm) virtual meeting:

Guest Speaker: In 2012, Jennifer Maldonado decided to take a leap of faith and changed her career trajectory to become a real estate investor. After her first year in real estate investing, Jen found her passion was raising capital. Since then, Jen successfully raised capital to fund real estate equity projects, acquisition of non-performing notes, rehabs, extended-stay hotels, development of residential multi-residential properties, and other private loans, that have totaled over $90 million!

In 2015, the Huffington Post recognized Jen as an inspirational and revolutionary real estate investor, consulting business owners and entrepreneurs to reach their full potential by tapping into owning their power and create wealth through real estate. Her influence as a capital-raising strategist, while mentoring women to develop high-performance skills in real estate, earned her two consecutive nominations as “Corporate Advocate” and “Rising Star” at the 2016-17 Women’s Summit lead by Los Angeles Business Journal. She’s a co-author of the 2019 book "You Got This! - Tips for Women Who Want to Rock at Real Estate Investing”, which was ranked a “#1 New Release” on Amazon. In 2020, Jen has been honored with the National Association of Female Executives (NAFE) award "Women who Rock in Los Angeles."

Jen says that the #1 challenge for most real estate investors is “Money.” Money is the tool that assists us in closing more deals faster. According to Jen, not having access to money stops many real estate investors from achieving their goals. As she observed successful real estate investors, Jen had the surprising discovery that finding money in and of itself is not the issue. In fact, finding private money can be simple. The real problem is getting private money “into” your real estate deals.

The title of Jen’s presentation is “How to Find the Money for Your Next Deal.” During Jen’s presentation, you will learn:

* Learn the secret formula to become a money magnet.

* Discover the 5 Top Strategies to Find Private Investors

* Do's and Don'ts when working with Private Money

* What you should offer to private investors?

Free Admission: Admission to our monthly meetings is always FREE (COMPLIMENTARY), but reservations are required.

RSVP: Please RSVP at our website: www.LAREIC.com so that you can receive your Zoom login and password.

We are fortunate to have Jennifer Maldonado with us virtually on Thursday night, March 11th. Be sure to RSVP because these virtual meetings sell out (because of limited capacity). Join us at this special event!

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Basic Training Real Estate Boot Camp

"Everything you ever needed to know about
real estate investing…but were afraid to ask”

Everyone dreams of becoming a real estate investor, but very few actually do it. Why is that? Investing is fun and challenging, and the profits are enormous. Plus, compared to other investments, you receive your profits in days (wholesaling), months (fix & flip), or years (rentals). So why don’t more people do it? The answer is simple; people don’t know how to get started. They don’t know what to do, where to turn, or who to trust. Well, if this is your predicament, our upcoming virtual Basic Training Real Estate Boot Camp is for you! At the Boot Camp you will learn everything you need to know to get started as a real estate investor.

Our virtual Boot Camp is scheduled for Saturday, March 13, 2021, 9:00 am to 6:00 pm. If you've been dreaming of becoming a real estate investor, but didn't know how to get started, this Basic Training Boot Camp is for you! This Boot Camp is hosted by the Los Angeles Real Estate Investors Club and Women Real Estate Network, and will be taught by Lloyd Segal and Deborah Razo.

In this intensive 8-hour Boot Camp, you will learn how to find deals, how to evaluate the market value of the property, how to submit offers, find the financing, and deal with escrow, title insurance, due diligence, and inspections, as well as the following:.

* How to find deals
* Foreclosure
* How to wholesale (Assignments)
* Deeds
* Title Insurance
* Promissory notes
* How to finance your deals
* Deeds of trust
* Mortgages
* Easements
* Purchase contracts
* Probate
* Escrow
* Structuring deals
* Realtors
* Submitting Offers
* Lease-options
* Leases
* Trusts

* And much much more!

there has NEVER been a more exciting time to become a real estate investor (either full-time or part-time). So your time is NOW!

COST: The Boot Camp costs $149.00 per person if paid before March 6th. Thereafter the cost increases to $259.00. Plus, because it is virtual, you will receive ten modules that you’ll be able to watch again and again.

REGISTRATION: If you want to attend this Boot Camp, don't RSVP here. Please register (and pay) at www.RealEstateBasicTraining.com. The registration process is very simple. Let's get started!

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Economic Update
(Monday, February 15, 2021)

I was never a big believer in “Herd Immunity” until now. The term “herd immunity” represents a hypothetical threshold of our population that needs immunity to the coronavirus in order for transmissions to stop and the pandemic end. The scientific consensus for this threshold seems to be about 70%. So how close are we to herd immunity? So far roughly 34 million Americans, or 10% of our population (332 million people) have received at least one dose of the vaccine. So from a vaccine based measure we are about 1/7th of the way there. But let’s look at a different measurement. First, let’s include the people who have already had COVID-19 in the U.S.? The official count of positive tests is currently 26.9 million according to the COVID Tracking Project. Second, the CDC estimates that we only test about one out of every four infected people, meaning north of 100 million Americans have likely been infected at some point in the past year and now have antibodies from the virus. By my calculations, including official positive tests (26.9 million), estimated additional infections (75 million), and vaccine doses (34 million), roughly 40% of the US population currently has antibodies. That means we are currently over halfway to the 70% goal. Plus, about 1.5 million Americans are being vaccinated a day, putting us on pace to easily beat the Biden Administration's original goal of 100 million doses in 100 days. Projecting vaccinations forward we should reach 70% herd immunity by mid-April as vaccines continue to do the heavy lifting. In fact, with recent COVID data showing daily cases and hospitalizations down by 57% and 36% respectively since the peak, immunity may already be playing a role in driving down infections. This is positive news for our economy because it means we will be able to roll back the pandemic restrictions (that remain the biggest impediment to a further recovery) sooner than expected. So stay positive and stay invested because immunity to COVID-19 is closer than you think.

Consumer Price Index Rose in January. The cost of U.S. consumer goods and services rose in January at the fastest pace in five months, largely because of higher gasoline prices. But fortunately, inflation more broadly was still quite mild. The Consumer Price Index climbed 0.3% last month, the U.S. Bureau of Labor Statistics reports. The rate of inflation over the past year was unchanged at 1.4%. (Before the pandemic erupted, consumer inflation was running at a higher 2.3% clip.) Most of the increase in consumer inflation last month stemmed from higher oil and gas prices. For example, the cost of gasoline rose 7.4%. Energy costs have risen in the past few months, but they are still much lower than they were a year ago. As we are all aware, the pandemic crushed travel and reduced how much people drive. The cost of food, another household staple, edged up a scant 0.1% last month. The prices of groceries and food purchased from restaurants (i.e. “to go” and “delivery”) have both risen close to 4% over the past year, reflecting shortages of certain foods and higher costs tied to coping with the pandemic. As you’ve probably experienced, Postmates and GrubHub are making out like bandits! Last month prices also rose for clothing, medical care, rent and car insurance, but those increases were offset by lower costs of new and used cars, passenger fares and recreation. Nonetheless, talk of inflation is suddenly back in the news again after a nearly year-long absence. What’s the worry? Some economists [not me] fret that a stronger economic recovery (fueled by trillions in fresh coronavirus stimulus) could push the rate of inflation above the Federal Reserve’s 2% to 2.5% baseline later this year or next. The rate of inflation is likely to top 2% this spring simply because a pair of unusually negative readings from last March (-0.3%) and April (-0.7%) will drop out of the yearly average. Yet for now there’s little evidence to suggest rapidly building inflationary pressures in the guts of our economy.

Slumping Retail Market. The retail real estate market has been especially hard hit by Covid-19. Nevertheless, the industry still managed to log some big sales in Los Angeles County during the second half of 2020. At the beginning of 2020 (if anyone can remember back that far), it was looking to be a bright year for retail and a robust year for food and beverage, the movie industry, and the gym industry (even I joined). But last year those sectors ended-up being the hardest hit, and many tenants within that sector are now struggling for survival. Most of last year’s highlights in sales activity for the retail category came from “daily-need” tenant properties, such as grocery stores, and grocery-anchored shopping centers. As you can imagine, some grocery stores have seen double-digit sales growth during the pandemic! As a result, 1031 exchange buyers and institutional capital are both intensely interested in grocery-anchored centers, thereby increasing demand. In addition to grocery stores and grocery-anchored centers, restaurants like Starbucks or Chick-Fil-A that offer drive-thru service are of special interest now. Investors are in the hunt for value-added opportunities. Other commercial investors are showing more interest in suburban assets. After all, as we’ve all been working from home, there’s been a lot more interest in sub-markets. Most shopping centers with multiple tenants are having issues with at least one tenant (if not more) right now. But owners having tenant issues don’t want to sell and accept a discounted price versus the value they would have received pre-pandemic. At least not yet! Properties that did sell were for “redevelopment opportunities,” transitioning to other uses. Indeed, most of the top 10 retail sales since June were redevelopment opportunities. Looking ahead, industry experts don’t see a bright future for the retail category in the near term. After a year like we had in 2020, expectations are low for 2021. Most investors are fearing that only by third quarter 2021 we will start seeing things turn around. Restaurants could take even longer to bounce back, but single-tenant net investments of drive-through properties and sale leasebacks are likely to be favored investments. In fact, single-tenant net leased properties are seen as a relatively safe asset class. With these properties, the tenant has a triple-net lease where they are responsible for everything at the property, including taxes, insurance, and maintenance. It’s a reliable monthly check for the landlord.

February Housing Trends. The median listing prices grew at 13.5 percent last year, notching 25 consecutive weeks of double-digit price growth, according to the National Association of Realtors. With home shoppers active and sellers standing on the sidelines (fear of the pandemic), this trajectory seems unlikely to change in the near term. In 2020, lower mortgage rates helped offset the sting of higher prices. But with mortgage rates expected to rise, affordability is likely to become a bigger challenge in 2021. Additionally, even if lower mortgage rates help blunt the effects of higher home prices on monthly payments, they don’t offset the need for larger down payments as home prices rise. New listings continue to fall behind last year’s pace–registering 21 percent lower for the second week in a row. After the upswing in new listings at the end of 2020, new listings have tread a different path in 2021. New listings are a smaller sample and thus the trends are noisier than for active inventory. But the persistent listing declines observed so far in 2021 indicate that potential sellers aren’t in a hurry to sell so early in the year. Fortunately for would-be homebuyers, we expect sellers to return to the market as we see improvement in our economy and vaccine progress against the pandemic. Further, new construction, which has risen at a year-over-year pace of 20% for the last few months, will provide some additional relief. Total active inventory continues to decline, dropping 45 percent. With buyers active in the market and seller participation lagging, homes are selling quickly and the total number of houses available for sale continues to drop lower. In January as a whole, the number of for sale homes dropped below 600,000. More shocking, time on market was 10 days faster than last year meaning that buyers have to make a very quick decision and pull the trigger, if they want to buy a house.

Foreclosures Continue to Hit Historic Lows. A total of only 9,702 U.S. properties received foreclosure filings in January 2021 (i.e. default notices, scheduled auctions, and bank repossessions). According to ATTOM’s “U.S. Foreclosure Market Report” released last week, the filings were down 11 percent from a month ago and 80 percent from a year ago. January foreclosure activity declined at least in part due to the Biden Administration’s decision to continue the foreclosure moratorium on government-backed loans through the end of February. The moratorium and mortgage forbearance programs have effectively prevented millions of seriously delinquent loans from entering the foreclosure process. Lenders repossessed only 1,428 U.S. properties through completed foreclosures (REOs) in January 2021, down 28 percent from last month and down 86 percent from last year (thirteenth consecutive annual decline in completed foreclosures). States that saw an annual decrease in REOs in January 2021 included: Illinois (down 86 percent); Florida (down 83 percent); Maryland (down 83 percent); California (down 82 percent); and Texas (down 82 percent). Among the 220 metropolitan statistical areas with a population of at least 200,000 and at least 100 or more foreclosure starts in January 2021, those that saw double digit annual declines, included: Chicago, IL (down 87 percent); New York, NY (down 85 percent); and of course, our very own Los Angeles, CA (down 80 percent).

The Vessel. The eight “Wonder of the World” has been built. It’s called “The Vessel” and it is a free-standing observation structure in the middle of Manhattan’s Hudson Yards. At its essence, the Vessel is a giant staircase, but so much more architecturally. It’s like an Escher painting come to life. There is only one problem – people go there to commit suicide! On January 11, a young man ended his life by jumping off the staircase. It was the Vessel’s THIRD suicide and it is now closed to visitors pending a safety review. Not an outcome you would have envisioned at extravagant multimedia unveiling when it first opened. While the Vessel is marketed to out-of-towners, it’s also a lure for office workers and residents at Hudson Yards who might occasionally trade a Stairmaster session at Equinox for a workout with a billion-dollar view. But unlike parks, plazas, and sidewalks that accommodate different ages, fitness levels, and degrees of mobility, the Vessel’s one-note program requires stair-climbing. Lots and lots of stair-climbing! The apparent ambivalence towards how different bodies — including bodies in crisis — might relate to the Vessel are the consequence of the structure’s design and construction. The problem is that the Vessel is just too open. The most alarming example is the height of the railings along the 2,500 stairs and connecting walkways, with only chest-high railings. As the recent fatalities have unfortunately demonstrated, a severely distressed person with decent upper body strength can clear the railings with ease. The most obvious straightforward harm-prevention tactic — raising the railings above eye level — may have saved lives, but it would also obstruct the view, the Vessel’s key selling point. And the New York building codes do not account for its unobstructed 150-foot-high drop to the ground below. A higher railing might seem like an ineffective deterrent. But the latest research on suicide prevention and architecture (especially for vulnerable youth), shows it would make a big difference.

Airport Passenger Traffic Plunged in 2020. Final passenger counts are in for 2020, wrapping up the worst year since World War II for the four commercial airports serving Los Angeles County. Just 34.4 million passengers went through the gates at Los Angeles International, Ontario, Hollywood Burbank and Long Beach airports last year as the Covid-19 pandemic took hold. That represented a plunge of exactly two-thirds — 66.7% — from 103.2 million passengers for 2019. Passenger traffic at LAX tumbled 67.3% last year while Hollywood Burbank Airport saw a drop of 66.6%. Long Beach traffic plunged even further, by 70.9%, while Ontario’s decline came in at 54.5%. Keep in mind, the full-year results include two months of “normal” travel in January and February before the coronavirus shutdown in mid-March. For all local airports, the initial Covid hit was brutal. Passenger traffic plunged nearly 96% in April at the four airports compared to April 2019. At LAX, 300,000 passengers went through the gates in April, the lowest monthly total since 1955. Long Beach Airport saw a mere 6,300 passengers during the month. The next six months saw slow but steady improvement in passenger counts. But progress stalled in November, then reversed course in December as a surge of Covid cases and hospitalizations triggered a new wave of shutdowns. December’s cumulative passenger count of 2.31 million for the region’s airports represented a drop of 5% from November and a 74% decline from December 2019 (the largest year-over-year drop for a given month in history). One major reason for our region’s lagging performance was its higher proportion of international travel, particularly at LAX. That airport saw a 75% drop in international travelers in 2020 compared to 2019. So far, 2021 has not been much better! The reality is that we are now in a new “air transportation world,” not just a wounded pre-2020 system. Consumer patterns have changed, and now capacity decisions on the part of airlines are the main driver of passenger levels.

Chemosphere. If you haven’t seen it, it is worth a drive by. If you have, then you know what I’m talking about. This ultra-modern home clings to the slope of the Hollywood Hills on one precarious stilt. To some, the Chemosphere is a well known Los Angeles landmark thanks to its numerous appearances in film and television. But many are unaware that the UFO-shaped abode actually comes from much humbler beginnings. The precarious saucer home was constructed when an aerospace engineer, Leonard Malin, was gifted the severely sloped plot of land from his father-in-law (see, this is what fathers-in-law gift unwanted sons-in-law). Despite his meager engineer’s income, Malin was determined to build something special on the steep hillside property. To this end, he wooed sponsors to help him build an innovative design that would allow the home to jut out from the hillside, supported by one thick stilt. Technically the home was known as the Malin House, but one of these sponsors was a chemical manufacturer whose resins and polymers were used in building the home, hence its nickname, “Chemosphere.” After Malin moved from the home, it was leased for parties, events, and a number of film shoots appearing in such films as Charlie’s Angels and Body Double, securing a place in our popular consciousness. In recent years, looking the worse for wear after years of parties, the interior was finally refurbished. It is now owned and maintained by Benedikt Taschen, owner of the publishing house which shares his name. Despite the private ownership, the Chemosphere still manages to maintain a reputation for wild parties that are literally “on the edge.”

Lookout Mountain Movie Studio? Los Angeles is the epicenter of the movie-making industry, so it should come as no surprise that the US military had its own secrete movie studio in LA. It was known as “Lookout Mountain Air Force Station,” or “Lookout Mountain Laboratory.” But what made this studio special is that the films produced there were all classified. For over twenty-two years, the military operated this secret studio on Wonderland Avenue in Laurel Canyon, the former home of the 1960’s folk-rock scene that included The Doors, Joni Mitchell, the Mamas and the Papas, as well as filmmakers like Steven Spielberg and George Lucas. Like any other film-making compound in Hollywood, the 100,000 square foot, fully-operational studio featured soundstages, screening rooms, film-processing labs, and even an animation department. But as a military compound, it also featured a bomb shelter, a helicopter landing pad, 17 climate-controlled vaults and two underground parking garages. The studio was secretly established in 1947, though the Air Force has since stressed that the facility was used solely for the Atomic Energy Commission. During this time, cameramen, who referred to themselves as “atomic” cinematographers, were hired to shoot footage of atomic bomb tests in Nevada, Utah, New Mexico and the South Pacific. While the Air Force contends that these atomic features were the only movies made, it is believed that some 19,000 “films” were produced on Lookout Mountain between 1947-1969. The studio was finally decommissioned in 1969. Though the studio employed over 250 people, its existence remained unknown to the general public until the 1990s. Today the 2.5-acre studio is a private residence and belongs to actor/musician Jared Leto, who is known for throwing parties with his own type of “atomic” energy. If you want to see it for yourself, go north on Laurel Canyon Blvd, turn left onto Lookout Mountain Blvd, and then slight right on Wonderland Ave.

This Week. While there is broad agreement that government spending will provide needed assistance to individuals and businesses harmed by the pandemic, increased government spending is negative for mortgage rates since additional Treasury bonds must be issued to fund the spending, which causes a rise in yields (and ultimately mortgage rates). Looking ahead, investors will continue watching Covid case counts, vaccine distribution, and the size of the government stimulus spending bill. Beyond that, Retail Sales will be released on Wednesday (2/17). Since consumer spending accounts for over two-thirds of all economic activity in the US, the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday (2/18) and Existing Home Sales on Friday (2/19).

Weekly Changes:
10-year Treas: Rose 0.02 bps
Dow Jones Avg: Rose 200 points
NASDAQ: Rose 100 points

Calendar:
Monday, 2/17: Retail Sales
Wednesday, 2/18 Housing Starts
Friday, 2/19: Existing Home Sales

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Economic Update
(Monday, February 8, 2021)

Have you ever wondered who originally handed out area codes? For example, why did Vermont get 802 and Southern California 213? Listen closely because the answer will assure you of winning your family’s next virtual trivia contest. The answer is in the word “dial.” Did you know that in the dark ages, we used to dial numbers on rotary telephones to make a call? I know, I know, that’s really hard to believe, but its true! “cht-cht-cht” was the sound of the rotary dial spinning back into place after you dialed each number. So, the lower the digits in a phone number, the less time it took for the dial to spin back before you could dial the next number. Back in 1947 (the area code’s launch year), AT&T decided arbitrarily that big cities with large populations (i.e. Manhattan, Los Angeles, Chicago, Philadelphia) should get low-digit area codes that were faster to dial, 212, 213, 312, 215. Less populated states were assigned higher numbers. That’s why in Vermont and Hawaii, the locals love wearing hoodies and caps printed with the states’ only area codes, 802 and 808, like they were graduates of some area-code college. So enjoy our lower area codes, wash our hands, put on our facemasks, social distance, and let's shake the tree…

Maria Rita Valdez Villa. In honor of Black History Month, let’s spotlight Maria Rita Valdez Villa Quintero, the African-Mexican “Foremother of Beverly Hills.” In the 1838, Maria Rita, the formidable granddaughter of Luis and Maria Quintero and great-granddaughter of an enslaved African, was granted the 4,539-acre “El Rancho Rodeo de las Aguas” (which we now know as Beverly Hills). From her adobe at what is now Alpine Drive and Sunset Boulevard, Maria Rita ran cattle ranching, farming, and gardening operations. She was also well known for holding a yearly celebratory rodeo under a famous eucalyptus tree at what is now Pico and Robertson boulevards. Rancho Rodeo de las Aguas was named for the streams that emptied into the area out of the canyons of the Santa Monica Mountains above it. The two main north-south arteries running through the canyons were the Cañada de las Aguas Frias (Glen of the Cold Waters, now Coldwater Canyon) and Cañada de los Encinos (Glen of the Green Oaks, now Benedict Canyon). In 1852, three Native Californian outlaws attacked the rancho, culminating in a shootout amongst a grove of walnut trees at what is now Benedict Canyon and Chevy Chase drives. Done with the dangers of rancho living, in 1854 Maria Rita sold the rancho to investors Henry Hancock and Benjamin D. Wilson for a whopping $4,000. The rest, as we say, is history…

Employment Report (January). According to the Department of Labor, the U.S. gained a meager 49,000 jobs in January. As you can see, our economy is still struggling to recover after a record coronavirus surge induced more layoffs at the end of last year. The weak employment report adds fuel to Democratic passage of another large dose of federal aid to help our economy. The Biden administration is seeking almost $2 trillion from Congress, including $1,400 payments for most families. The U.S. lost jobs in December for the first time since the onset of the pandemic after coronavirus cases soared again. Many states re-imposed business restrictions to combat the pandemic and restaurants and hotels had to lay off workers (some for the second or third time). But here’s the good news; with Covid-19 cases declining again in February, restrictions are being lifted and more people are slowly returning to work or finding new jobs. Yet the winter coronavirus case spike sapped our economy of momentum and left millions of people on the unemployment rolls. Some 10 million jobs that vanished in the early stages of the pandemic still haven’t returned. The U.S. unemployment rate, meanwhile, fell to 6.3% in January from 6.7% and hit a new pandemic low. But the decline stemmed largely from people abandoning job searches and thereby dropping out of the labor force (not because more people were hired). Economists say the true level of joblessness is several points higher. A big reason is that several million people who dropped out of the labor force (because they couldn’t find work) aren’t counted in the main unemployment rate. The small increase in jobs in January was exaggerated by a reported rise in employment at K-12 schools and public colleges. Professional firms in technology, science and so forth added 93,000 employees last month to lead the way in hiring. Government jobs rose by 43,000, but it was largely a statistical mirage tied to seasonal adjustments that have been distorted by the pandemic. The private sector created just 6,000 new jobs overall. Wholesalers and energy producers also filled more jobs. Nevertheless, the longer the recovery takes, economists warn, the greater the risk that many jobs will never return.

Mortgage Rates Remain Low. The average 30-year mortgage stayed flat from last week — still near historic lows. It may be a new year and a new presidential administration, but mortgage rates are continuing to hover near all-time lows indicating our economy continues to struggle. According to Freddie Mac, the average 30-year fixed-rate mortgage rose 0.10 points this week to 2.73 percent. The 15-year fixed-rate mortgage averaged 2.21 percent, up slightly from last week’s 2.20 average (and down significantly from the 2.97 percent average the same week in 2020). This rate environment is advantageous for those of you looking to refinance in order to strengthen your financial position. Freddie Mac’s data indicates that upper-income homeowners have taken advantage of the opportunity more so than lower-income homeowners who could stand to benefit the most by lowering their monthly mortgage payment.

What is the Most Over-Valued Housing Market in America. Spoiler Alert: it’s not in California! The breakneck pace of home price growth nationwide has caused more markets nationwide to become over-valued, according to a new report from Fitch Ratings. Fitch analysts estimate that home prices are 5.5% overvalued nationally as of the fourth quarter of 2020. Through December, national home prices were up some 8.9% since the start of the year, driving the overvaluation in the marketplace. Even though home price growth accelerated in 2020 due to low mortgage rates and demand/supply imbalance, the economy has not caught up. As previously reported, the demand among home buyers has far exceeded the inventory of homes for sale. To some extent, this is a reflection of the fact that many homeowners are reluctant to list their homes for sale amid the pandemic. The imbalance between supply and demand is also the result of homebuilding activity remaining muted following the Great Recession and the preceding housing bubble. Looking more locally, some housing markets are far more overvalued than others. Fitch estimates that around 25% of metropolitan statistical areas (meaning major cities) around the U.S. are more than 10% over-valued. Among the 20 largest metro areas nationwide the most overvalued city is (drum roll!)…Las Vegas, with Fitch estimating that home prices are over-valued approximately 28%. Dallas-Ft. Worth was next, with Fitch projecting prices overinflated between 20% and 24%. Fitch also examined which states had the most overvalued housing markets. Idaho led this list, with Fitch projecting home prices there overly elevated between 30% and 34%. Idaho has become a popular destination for transplants from California, particularly from San Francisco and Silicon Valley. The rise of remote working amid the pandemic has helped boost demand for homes in Boise, such that home prices have risen upwards of 10% in recent years. Other states whose housing markets were found to be over-valued (in excess of 10%) included Nevada, Arizona, Texas, Kansas, North Dakota and Washington.

First Tiny Home Community Opens. L.A. County's first "tiny home community" (for people needing shelter – not tiny people!) welcomed its first residents on Monday. The Chandler Street Tiny Home Village in North Hollywood was built by the Hope of the Valley rescue mission, in partnership with Councilman Paul Krekorian. It has 40 homes and 75 beds. Each tiny home is 64-square-feet, with heating and air-conditioning, two beds, windows, a small desk, and a locking front door. Ken Craft, Hope of the Valley founder and CEO, says the locking door is what sets the tiny home model apart from traditional shelters. Residents will also have access to onsite meals, WiFi, toilets, showers, mental health/housing support, job training/placement, and a small dog run. The pallet shelter structures are made by a Seattle-based company. The rescue says it costs about $3,000 to build each tiny home. They are both inexpensive and easy to assemble [written by the guy who can’t assemble anything that comes in a box from IKEA if my life depended on it]. They're also a great fit for this kind of housing set-up because they're standalone structures, each placed six-feet apart, which allows some privacy and independence for residents. The two-bed setup allows couples to be together, or a parent and adult-child. There's also an emphasis on security. The complex has video surveillance, a nine-foot fence surrounding the property, and a single, guarded entry point. To qualify, individuals must be homeless and live within a three-mile radius of the site. The property is already full and has a waitlist. Hope of the Valley also plans to open another tiny home village in North Hollywood, with 103 homes (200 beds total). The organization operates nine shelters in the area, each of them slightly different. Tiny homes are “interim” housing. The idea behind the project is to provide unhoused Angelenos with a safe, warm place to sleep now, while the organization helps them find a more "permanent" housing.

The Valley is Important to Los Angeles. There’s only “the Valley.” You don’t need to say San Fernando Valley; just say “the Valley." The Valley for way too long was the Rodney Dangerfield stepchild of Los Angeles. Anywhere else, the Valley — with its million and a half people in its 250-ish square miles — would be the massive star at the center of its own civic solar system. But most of the Valley lies within Los Angeles city limits — in fact, about half the acreage of L.A. (and 1/3 of the population), when you add it up. And so the Valley sometimes finds itself playing extra to Hollywood, and chasing the tires of City Hall’s official vehicles that occasionally come over the hill. Starting in 1797, the San Fernando Mission became the first intrusion into seventy centuries of Native American life in the Valley. But the Valley, chopped down and cut up from the Mexican land-grant kingdoms, slowly became pleasant little farms with pleasant little groves of walnuts, peaches, and oranges. About 10 years after the Civil War, men with the legendary names of Lankershim and Van Nuys commenced vast “dry farming” of wheat and barley. You probably know the Valley’s history from movies, like "Chinatown" for example. In 1905, the city of L.A. won a lawsuit forbidding Valley farmers and ranchers from tapping into the water under their own feet. In fact, L.A. stuck water meters in the ground just to ram the point home. The city would soon stick a 233-mile-long concrete straw into Owens Lake and suck up that water too. Meanwhile, the farmers were being “droughted out,” and a clandestine downtown consortium was busy buying up Valley land on the cheap and sometimes on the sly. When the vast Valley was finally annexed by L.A. in 1915, historian Kevin Starr called it the “Louisiana Purchase of Los Angeles.” The Valley kept on subdividing itself into ranches and ranchettes, and then housing tracts, followed by more housing tracts. On November 4, 2002, the Valley’s disaffection peaked: It tried by the ballot to secede from L.A., and damn near succeeded. Fortunately, the Valley has outlasted many of its stereotypes. The big citrus groves are mostly gone now. The white middle-class suburbia of restrictive covenants is now as diverse as the core of L.A. itself. The "Boogie Nights" Hollywood-adjacent factory for porn movies was run off by condom regs and online X-cess. The addled Valley girl of irritating vocals (“Fer SHUR, TO-tally) and her natural habitat, the Sherman Oaks. Galleria, are long gone. Two decades ago, when Kevin Roderick wrote his book “The San Fernando Valley: America’s Suburb,” the title was already outdated. But it’s even more outdated today, because now the Valley has its own suburbs, and has become an integral part of Los Angeles in terms of culture and demographics, and who lives there and what goes on there. Drive around the Valley today and you’ll see lots of blue “community signs’” proudly designating dreamed up names for sub-neighborhoods that want to distinguish themselves from Los Angeles’s older established neighborhoods.

Downtown’s Infamous Cecil Hotel. Cecil Hotel is considered by many to be among the most haunted buildings in Los Angeles, if not the world. The hotel started in 1924 as a ritzy destination, but fell into disrepair over a century of massive changes in Downtown L.A., and most recently served as affordable lodging for Skid Row residents. Now known as “Stay on Main,” the creepy downtown hotel reportedly served as a base of operations for serial killers Richard Ramirez (the infamous “Night Stalker”) and Jack Unterweger (murderer), and has been the site of multiple unsolved murders and numerous suicides. The hotel is even linked to the murder of Elizabeth Short (better known as the “Black Dahlia”). But what might be the most famous—and chilling—incident of all, is the death of Elisa Lam. In early 2013, Lam’s body was discovered in a water tower on the hotel’s roof. Lam's case became a global sensation due to disturbing surveillance video of her alone in one of the hotel’s elevators having some type of episode–one that has been explained as everything from a bipolar episode to demonic possession–shortly before her death. The elevator video of Elisa Lam went viral and legions of amateur detectives used the internet to try to solve the mystery of what happened to her, a 21-year-old Canadian tourist on her first trip to Los Angeles. The fact that Elisa disappeared in a location that has a multi-decade history of crimes is what makes her case so fascinating. Amy Price was the hotel’s general manager in 2013 and for over a decade. When asked, Price said she saw over 80 deaths at the hotel during her ten years at the hotel. Which begs the question; what role does a particular property play in creating an environment in which multiple crimes seemingly take place over and over again? I raise this question because a new documentary about the Cecil Hotel lands on Netflix this week. Created by Joe Berlinger, the Emmy-winning director of The Ted Bundy Tapes and Jeffrey Epstein: Filthy Rich, Crime Scene, "The Vanishing at the Cecil Hotel" arrives this Wednesday, February 10. The four-episode docuseries examines the eerie past of the Cecil Hotel, before centering its attention on the mysterious death of Elisa Lam.

Matt Damon Says Goodbye to Pacific Palisades. Matt is switching coasts. After shelling out $16.7 million for a New York penthouse, the Oscar-winning actor has listed his Pacific Palisades retreat for $21 million. The “Ford v Ferrari” star has owned the home for nearly a decade. Records show he paid $15 million for the half-acre estate in 2012 and spruced up the place during his stay. Designed by Los Angeles architect Grant Kirkpatrick, the architectural residence covers more than 13,500 square feet and reflects its coastal setting with a lively mix of warm wood, natural stone and Asahi glass. The atrium serves as the centerpiece, a voluminous, light-filled space set under a 35-foot mahogany vaulted ceiling. There’s also a living room with a fireplace, an indoor-outdoor dining room and a center-island kitchen done in mahogany and bluestone. The estate has plenty of room for amenities including a game room, bar, office, gym, media room, wine cellar and tasting room. Upstairs, the primary bedroom suite (notice we're not allowed to say "master suite" anymore) adds extras such as a massage room and private terrace. It’s one of seven bedrooms and 10 bathrooms. Outside, palm trees surround a resort-style backyard with a swimming pool, spa, waterfall, koi pond and Hawaiian-inspired lanai with a lounge and dining terrace. Damon, 50, ranks as one of the highest-grossing actors of all time. He has appeared regularly in films since his 1988 debut in “Mystic Pizza” with standout roles in “Saving Private Ryan,” “The Departed,” the “Bourne” franchise and “Good Will Hunting,” for which he won an Academy Award for best original screenplay. If you’re interested, don’t call me! Eric Haskell of the Agency holds the listing.

Buy A Town? After all, why buy a house when you can buy an entire city! If yes, boom-and-bust Nipton California could be yours. The 80-acre patch in the Mojave Desert with one hotel, one restaurant, five eco-cabins, 10 teepees and an RV park is up for sale... again. Located on the eastern edge of San Bernardino County, where it bumps up against Nevada, Nipton feels far away from everything. But it's only a one-hour drive from Las Vegas and three hours from L.A., off the busy I-15 corridor on Nipton Road. Surrounded by flat valleys and mountain vistas, the landscape of creosote and yucca is broken only by the occasional road or the glare from the Ivanpah solar plant, whose mirrors reflect light into the sky. Some 20 rent-paying residents call Nipton home. Most of them are here to get away from it all. Imagine a small, friendly town with a slow, very slow, eco-friendly lifestyle, even if it is in the shadow of rare earth mines and solar towers. This vision is in line with that of Jerry Freeman, who bought Nipton in 1984 and whose widow, Roxanne Lang, has put it up for sale. Nipton is a place out of time, a tiny desert outpost caught in a long cycle of flashy booms and extended busts, waiting for a new dream. In 2017, Nipton made headlines when cannabis technology company American Green bought the town for $5 million with Freeman and Lang providing partial “owner financing.” The company planned to transform it into "the country's first energy-independent, cannabis-friendly hospitality destination." But then San Bernardino County passed a resolution banning commercial cannabis activity, including growhouses and dispensaries, in unincorporated parts of the county, such as Nipton. In other words, American Green was now banned from growing and selling marijuana in the town it bought for that very purpose. The ban remains in effect to this day. Soon American stopped making mortgage payments. In late 2019, previous owner Roxanne Lang foreclosed and is now the mayor, so to speak. Lang is asking $3 million for the 80 acres that comprise the town, a figure that seems both completely reasonable to those who love the place and ridiculous to those who couldn't imagine living there. Regardless, the last couple of months haven't yielded a buyer, as yet. Nevertheless, the locals dream a buyer will appear and transform Nipton into a sustainable eco-village and tourist outpost for the Mojave National Preserve. They pray a new owner with utopian idealism and deep pockets will ride into town. If intrigued, call Roxanne….

Southern Californians are Obsessed with Area Codes. Long ago, when the world was young and there were only landlines, one area code (213) ruled Southern California, from the Mexican border to Bakersfield. Then it began to divide and multiply. 714 was born, and 805, and then shockingly L.A. became the first city in the U.S. with THREE area codes within city limits (310, 213 & 323). Now, nearly 75 years after the birth of 213, Los Angeles County has 10 area codes, eight rooted in geography and two floating atop (“overlay”) heavily used 310 and 818. Does your area code mean anything to you? Of course it does! To the mystification of newcomers, we are consumed with which area code we have. Why is that? A sociologist named James Katz, who studies the social effect of telephone technology, says that Californians are pricklier about their area-code identities than people anywhere else in the world! These three digits are like compass points on our mental map, and thus, when they take away your number, in a certain sense, they’re erasing our identity. Since the “big bang” from the original 213 spalled off so many area codes, what have those identities become? In 1994, a numerologist in a Times op-ed explained (perhaps tongue-in-cheek) that 213, the original hardcore heart of L.A., is the area code of the working class, “without pretensions.” The telephones of 310 occupy a more “highbrow, ritualized environment,” and the folks of 818 — reaching from valley to valley then, the San Fernando to the San Gabriel — are “old-fashioned stand-up values” incarnate. According to Katz, our area codes still lend themselves to stereotypes:

310: Enviably rich, and the plastic surgeons who enable them.

661: Cowboy boonies and Edwards Air Force Base.

818: Valley Girl boonies and Bing Crosby’s R-1 paradise.

626: Tournament of Roses parade, and that other valley.

213: Staples Center and LAPD headquarters.

323: Hollywood & vintage-bungalows expelled from 213.

562: Queen Mary and L.A. County’s only off-leash dog beach.

This week. Looking ahead, investors will continue watching Covid case counts decrease, vaccine distribution increase, and the size of the government's stimulus bill go through the roof. Beyond that, it will be a very light week for economic reports. Of note, the Consumer Price Index (CPI) will come out on Wednesday (2/10). CPI is a widely followed monthly inflation report that looks at the price change for goods and services. And on Friday (2/12) the Consumer Sentiment Index will be released.

Weekly Changes:

10-year Treas: Rose 0.10 points

Dow Jones Avg: Rose 1,200 points

NASDAQ: Rose 600 points

Calendar:

Tuesday, 2/9: JOLTS

Wednesday, 2/10: Consumer Price Index

Friday, 2/12: Consumer Sentiment Index

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And thank you!! Keep it clean...

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Economic Update
(Monday, February 1, 2021)

I’m starting to really like these Executive Orders. Consider this; in less than eleven days, President Biden issued over 50 Executive Orders, including; rejoining the World Health Organization, rejoining the Paris Accords (on climate control), ordering the Federal government on a “war-time” commitment to expand vaccinations, restoring collective bargaining rights, promoting $15 per hour for all federal employees, ordering all infrastructure contracts go to American companies, lifting the ban on transgenders in the military, dissolving the Muslim ban on travelers to the United States, classifying Vladimar Putin’s Russia as a “hostile foreign power,” extending the U.S.-Russia Nuclear Arms Treaty, repealing the “Global Gag Rule” (so that the U.S. can once again fund international organizations that provide abortions), and re-imposing the ban on oil and gas drilling in the Artic wildlife preserve. And that was in just eleven days! Of course, executive orders are not ideal in a 3-branch democratic form of government, but with Congress a partisan dumpster fire, is there really any other way to get things done? Speaking of getting things done, let’s wash our hands, put on our facemask, social distance, and get under the hood…

Gross Domestic Product. The U.S. economy grew at a lackluster annual pace in the final three months of 2020 as a record wave of coronavirus cases stunted our recovery, pushing out the timetable for a broader rebound until later this year. The Commerce Department’s initial estimate of Gross Domestic Product (the sum of all goods and services produced in our country) increased at only 4% in the fourth quarter (the biggest contraction since 1946). The largest positive contributions to the GDP growth rate in Q4 were personal consumption, residential investment, and business fixed investment. The weakest component was net exports. As you can see, the pandemic dealt a crushing blow to our economy as the year ended. GDP was expected to ebb in the final three months of 2020 after a record 33%-plus annualized gain in the third quarter, tied to the reopening of our economy in the summer after business lockdowns (to combat the pandemic) in the spring. However, the surge in coronavirus cases in the early winter made the slowdown more pronounced. Governments reimposed restrictions on businesses and customers stayed away in the fourth quarter, leading to more layoffs and the first decline in employment since the onset of the pandemic last spring. But clearly, the worst of the damage took place in December. Yet in many ways our economy has held up better than expected as individuals and companies adapted to the crisis better than they did earlier in the year. Consumer spending and business investment both rose, and as you already know, the housing market boom shows no letup. Our economy still has lots of ground to make up, however, and a full recovery can’t take place until vaccines become more widespread and the coronavirus pandemic peters out. The Federal Reserve is likely to use the underperformance of our economy to justify continuing to keep short-term interest rates near zero.

New Home Sales. New home sales (which represents roughly 10% of the overall housing market) rose 1.6% for December and closed out a very strong year for this segment of our housing market. In fact, new single-family home sales in 2020 were the best in fourteen years, as the pandemic and urban unrest helped shift buyer preferences toward safer and more spacious options in the suburbs. Moreover, sales rose 18.7% for the entire year (the largest annual gain since 2012). But the most likely culprit for the slowdown in sales since this Summer is the lack of finished new homes waiting for buyers, which has been a headwind for the market. The inventory of unsold homes that are either under construction or finished is down from a year ago. Overall, the inventory of completed new homes available for sale is down 45.5%, illustrating once again just how strong demand has been. Given the downward pressure that social distancing regulations, shortages of labor, supply chain issues, and now cold weather continue to exert on new construction, it will be difficult to satisfy demand in the short run. However, as the pandemic ebbs in 2021 (due to widespread vaccine distribution and warmer weather as we enter the Spring), many of these impediments should slowly fade. And with more inventory available, you can expect demand will remain strong and push sales higher in 2021. Why? First, affordability; near zero interest rates from the Federal Reserve have helped reduce the 30-year fixed mortgage to record lows. Second, due to the pandemic, closures, and urban unrest, buyers' preferences have shifted away from denser urban environments, toward more spacious homes in the suburbs (where most new single-family homes are built).

Consumer Confidence Index. U.S. consumer confidence bounced back slightly in January as Americans looked past the high number of coronavirus cases and deaths toward greater availability of vaccines and an improving economy. The Consumer Confidence Index rose to 89.3 in January from a revised 87.1 in December, the Conference Board reports. Last month’s reading was the lowest in five months. Other measures of confidence, including the consumer-sentiment survey and daily reports by Morning Consult, also recovered in January. The Morning Consult poll is part of my friends over at the MarketWatch Coronavirus Recovery Tracker, and they always tell it like it is. Consumer confidence is still far below pre-pandemic levels, however. For example, the index stood at 132.6 before the viral outbreak last February. The record spike in coronavirus cases over the winter dampened confidence and hurt our economy after more states reinstituted restrictions on individuals and companies. However, another gauge that assesses how Americans view the next six months —the so-called “Future Expectations Index” — rose strongly. It jumped to 92.5 from 87 and hit the highest level in three months. But the next few months are likely to be dicey before our economy fully turns the corner. Americans are as worried as ever about the coronavirus, but they are more hopeful the worst of the pandemic is behind us. The number of coronavirus cases is on the decline again and vaccines are being delivered in ever-rising amounts. Now if we can just control the covid variants.

Foreclosure Moratorium (February 28). The Federal Housing Finance Agency ("FHFA") announced they are extending their moratorium on foreclosures on single-family foreclosures through February 28 (but will likely be extended once again). The foreclosure moratorium applies to single-family mortgages FHFA-backed (i.e. Fannie Mae & Freddie Mac and the 11 Federal Home Loan Banks). The current moratorium was set to expire at the end of January. Currently, FHFA projects additional expenses of $1.4 to $2 billion will be lost by the FHFA due to the foreclosure moratorium and its extensions. FHFA says it continues to monitor the effect of the moratorium on borrowers, the FHFA, the mortgage markets, and whether to extend or sunset its policies based on the data and health risks. Nevertheless, FHFA continues to offer comprehensive loss mitigation programs for borrowers with eligible hardships. These programs, which were established pre-pandemic and have enabled more than 4.5 million families to stay in their homes, will remain available even when COVID-19 forbearance flexibilities end. As you know, the FHFA regulates Fannie Mae, Freddie Mac, and the eleven Federal banks, and provides more than $6.7 trillion in funding for the U.S. mortgage markets and financial institutions.

Eviction Moratorium Extended to June. I know, I know. I’m a landlord too. Some of my tenants haven’t paid rent either. But we are in a pandemic. We all must do our part. I say this because on Friday, Governor Newsom signed an emergency bill that extends the eviction moratorium through June for California tenants suffering financial hardship because of the COVID-19 pandemic. The moratorium is aimed at heading off what many state officials warn will be mass evictions and a surge in homelessness as Californians (struggling with lost income during the pandemic) can’t pay their rent. The measure prevents landlords (like you and me) from evicting tenants who pay at least 25% of their rent through June and attest that they face financial hardship because of COVID-19 and its effect on the economy. About 90,000 California households are behind on their rent by a collective total of $400 million, according to an estimate last week by the independent Legislative Analyst’s Office (although other estimates have been much higher). Under the new bill and the measure approved last year, tenants cannot be evicted as long as they pay 25% of their rent each month (or in a lump-sum payment by June 30). Unpaid rent converts to debt that landlords can pursue through the courts, but it can’t be used to seek an eviction. But the good news is that the bill also provides $2.6 billion in federal funds to landlords as rent subsidies that will help pay for most past-due rent by tenants dating back to last April. By tapping $2.6 billion approved by Congress during the Trump administration, the Legislature is, in essence, offering a rent subsidy that will pay landlords 80% of the total amount of rent in arrears between April 2020 and March 2021, as long as landlords agree to forgive the remaining 20% and not pursue evictions. But caution, if you (as the landlord) do NOT agree to forgive the 20% unpaid rent, the state will pay only 25% of the rent in arrears. So you’re between a rock and a hard place. “Getting dollars to landlords is imperative,” said Debra Carlton, executive vice president of the California Apartment Assn., which represents rental housing owners. “Many landlords have not received rent in over a year and some owners are on the brink of losing their properties.”

Eminent Domain Clearing the Lane for Clippers Arena. Eminent domain is in essence the “slam dunk” of real estate. Why? Because once it starts it’s almost impossible to stop. I reference this analogy because the city of Inglewood is using eminent domain to acquire property for the NBA Los Angeles Clippers basketball team. The Inglewood City Council is using eminent domain to acquire eleven holdout properties to clear space for the Clippers’ future Arena. Once the properties, all located along Century Boulevard near Prairie Avenue, are acquired by the city, officials plan to transfer the plots over to the private developers who are working on the arena project. Even though the arena is a fully private project, attorneys for the city say it qualifies as “public use” because it offers “access to amusement, enjoyment, and recreation.” Using eminent domain to clear a path for the arena has been on the table for several years, but city leaders were under pressure not to displace people from homes or churches if they could avoid it. It is not yet clear how much the city will have to pay property owners for the 11 plots. Under California’s eminent domain law, if an owner rejects the city’s offer, it will go to a jury to decide on the price. But the Uplift Inglewood Coalition doesn’t agree, “Inglewood lacks affordable housing and this project would exacerbate the housing crisis, displace families, and promote gentrification. It simply does not make sense to prioritize an NBA arena over the needs of Inglewood residents. Public land should be used for the public good and access to housing is central to building strong communities.” Sorry Mr. Ballmer…

Boston Brownstone atop Underground Railroad. This 1827-built brownstone is an impeccably preserved Federal-style townhouse in Boston's historic Beacon Hill. But what makes it truly unique is it contains a secret bunker in the basement that was once a regular stop on the Underground Railroad. For those of you sleeping during your high school history class, the Underground Railroad was a network of secret routes and safe houses during the early 19th century used by enslaved African-Americans to escape north into free states (i.e. Massachusetts) and Canada. You can have this classic for only $10.75 million. The property at 28 Chestnut Street was built by a “housewright” (what we now call an architect) named Jesse Shaw, who was reportedly a relative of Colonel Robert Gould Shaw (the Union army officer who led the first all-Black regiment in the Civil War, the 54th Massachusetts Infantry). The Shaw family was known in Boston as a prominent abolitionist family. The five-bedroom, six-bathroom townhouse includes a two-car garage nestled beside a private deck, all just a few blocks from Boston Common and the Boston Public Garden, places I frequented during my wild and crazy college days. Although fireplaces are scattered throughout the house, the listing description notes that the hearth in the master bedroom will be especially welcome “for those chilly New England winters” (the understatement of the year). In addition to its storied past as a stop on the Underground Railroad, the property also has another clandestine touchstone to its history: the home’s first-floor living room was used as a “speakeasy” during prohibition (complete with a secret entrance out onto bustling Chestnut Street). What fun!

Pandemic Detours Tour Companies. In a typical year, the Hollywood Walk of Fame would be flooded with visitors from around the world. Crews might be rolling out a red carpet in front of the Dolby Theatre while crowds of people snap photos from the top deck of a passing tour bus. But these days, Hollywood Boulevard is eerily quiet, and there’s scarcely a tour bus in sight. Unlike real estate, tour companies have really stalled out during this pandemic. Kami Farhadi, chairman of Starline Tours, said the sightseeing company was operating more than 150 buses at the beginning of 2020, and was on track to pull in more than $20 million in revenue. Now, to limit the spread of Covid-19, Starline only runs tours for private groups and has no more than ten buses in service on any given day. The company’s revenue dropped to less than 5% of normal levels, and over a hundred drivers, maintenance crews, and clerical staff have been laid off. California’s larger tourism industry, a key piece of our state’s economy, is also stopped at a red light. According to Los Angeles Tourism and Convention Board, Los Angeles lost more than $14 billion in direct visitor spending in 2020 due to the pandemic. Jobs in the tourism industry have fallen by roughly 75% over the last year. Tour companies have been especially hard-hit because they typically cram a large group of strangers together aboard a bus or a van, a service that’s difficult to adapt to public health guidelines. With little alternatives, some tour companies have brought their business into the virtual sphere. For example, Esotouric, a small company operated by husband-and-wife duo Kim Cooper and Richard Schave, adapted its tours (focusing on Los Angeles history) to a webinar format. Recent offerings include a “Guide to the Lost Cafeterias of Old Los Angeles” and a “History of Downtown’s Angels Flight Railway.” The ticketed webinars cost $10 to attend. Cooper and Schave say the webinars may become more than just a temporary alternative to in-person tours. Local museums and tourist attractions have also developed virtual content for remote visitors, from podcasts to livestreamed panel discussions and performances.

Laundromats Clean Up Amid Covid. Ok, let's talk dirty. Dirty laundry that is. Industry publisher IBISWorld estimates that revenue for the laundromat industry dropped 6.6% in 2020. But Los Angeles laundromat owners and investors have a more optimistic view of the industry’s outlook, with many investing in remodels and machine upgrades. Some are even expanding their businesses. After all, laundromats are an “essential” service (not just deemed by the state or the county government). Clean laundry is considered a necessity of life, along with food and shelter. And you can’t use Amazon to clean your clothes. As a result, business has remained stable amid the pandemic, and laundromats are cleaning up! The demand for laundromats continues both from the customer base, (those who use laundromats), and also from the investor base (those who buy and sell laundromats). In fact, LAREIC has several members who own laudnromats and are doing quite well during the pandemic. Similarly, PWS, which distributes commercial laundry equipment and develops and sells laundromats, announced plans to develop 30 to 50 laundromat locations across the United States to sell to independent operators. In December, the company announced plans for five new California-based laundromats under the name “SpinCycle Laundry Lounge,” which is either a laundromat, a SoulCycle studio, a cocktail lounge (or perhaps all three)! The industry is strong because of several factors; (1) the increasing number of renters who primarily use laundromats, (2) the increasing availability of retail real estate in prime neighborhoods, and (3) the sudden flexibility of landlords who gladly cover the cost of buildouts (“Tenant Improvements”). In the past, there was a common misconception that laundromats are unclean, outdated and unsafe. But in recent years, many laundromats have upgraded their machines, offered amenities, and increased staffing. Plus, some owners are using the pandemic to remodel stores, install flat-screen TVs, and add free Wi-Fi in stores. Along with wash and fold services, laundromats are also increasingly offering curbside pickup during the pandemic. They are also limiting in-store capacity and ensuring machines are sanitized in between each use. Now you can be confident that when you walk into your local laundromat, it will likely be fully staffed around the clock, with a service counter, modern amenities, and be clean and secure. As you can see, laundromats are “Covid-resistant, Amazon-resistant, and recession-resistant.”

World’s Most Expensive Home is in Bel-Air. Nearly a decade ago, mega-mansion developer Nile Niami set out to build “the most expensive house in the world.” What he came up with is an outrageous 105,000-square-foot spec mansion perched on a five-acre parcel in Bel-Air with panoramic views of the Beverly Hills “slums” below. The property stretches a full quarter-mile along Stradella Road. Its $340 million price tag matches its magnitude, although it falls short of the $500 million Niami had reportedly hoped to reel in for the property. Designed by architect Paul McClean and interior designer Kathryn Rotondi, the mansion is set to become the third largest home in America, landing between Oheka Castle in New York (109,000 square feet) and Winterthur in Delaware (96,000 square feet). By comparison, Mar-a-Lago clocks in at a downright cramped 62,500 square feet. The White House? Glad you asked. Just 55,000 square feet. The sheer size is impressive, but the list of amenities is really something (grab a snack; this will take a while) and includes: 42 bathrooms, 21 bedrooms, a 5,500-square-foot master suite, a 30-car garage with two car-display turntables, a mote, a 400-foot jogging track, 360-degree views of L.A., 26-foot ceilings, a four-lane bowling alley, a spa level, a movie theater, a 200-cap “philanthropy wing” for charity galas (with floating pods overlooking Los Angeles), a 10,000-square-foot sky deck with a putting green, FIVE swimming pools, a juice bar, a cigar lounge, a custom tequila bar, a hair salon, and a gallery with custom-curated artworks by Creative Art Partners. The only question I have is why does anyone need 42 bathrooms? As expected, the mansion’s protracted construction timeline and outsize footprint has riled neighbors, inspiring them to form an association and raise $750,000 to enact stricter limits on home sizes.

Quote of the Week: “For the first time in Super Bowl history, the game will be played in the home field of one of the two teams. Which means that during a pandemic, even the Super Bowl needs to stay home.”

This Week. Looking ahead, Investors will continue watching Covid case counts and vaccine distribution. The ISM national manufacturing index will be released today (2/1) and the ISM national services index on Wednesday (2/3). The monthly Employment report will be released on Friday (2/5), and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month.

Weekly Changes:
10-year Treas: Flat 0.00
Dow Jones Avg: Fell 500 points
NASDAQ: Fell 250 points

Calendar:
Monday, 2/1: ISM Manufacturing Index
Wednesday, 2/3: ISM Services Index
Friday, 2/5: Employment

For further information, comments, and questions:

Lloyd Segal
President

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Please join us at the Los Angeles Real Estate Investors Club’s February virtual meeting, Thursday night, February 11, 2021, 7:30 to 9:30 pm.

GUEST SPEAKER: Guest speaker will be Brad Sumrok, joining us virtually from Dallas, Texas. Brad is one of America's leading experts on multi-residential apartment buildings. Brad is an author, speaker, and investor. Brad will be speaking on “How to Find, Finance, Calculate Value, and Manage Multi-Residential Properties.” Last year, Brad's presentation was the largest attended meeting of the year. As a result, several of our members purchased apartment buildings on their own and/or in partnerships. You can too! Don't miss Brad's presentation!

FREE ADMISSION: Admission to our monthly meetings is always COMPLIMENTARY (free!), but reservations are required.

RSVP: Please RSVP at our website: www.LAREIC.com, so that you can receive your login and password.

LAREIC. Founded in 1996, the Los Angeles Real Estate Investors Club is the oldest and largest investor group in California. The Club helps people invest in real estate by offering education, networking, and mentoring. If you need help with any of these, please let us know.

Brad Sumrok

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All Forum Posts by: Lloyd Segal

Lloyd Segal has started 216 posts and replied 247 times.

Post: Economic Update (Monday, March 8, 2021)

Post: Economic Update (Monday, March 8, 2021)

Post: Economic Update (Monday, February 22, 2021)

Post: "How to Find the Money for Your Next Deal"

Post: Real Estate Basic Training Boot Camp

Post: Economic Update (Monday, February 15, 2021)

Post: Economic Update (Monday, February 8, 2021)

Post: Economic Update (Monday, February 1, 2021)

Post: Economic Update (Monday, February 1, 2021)

Post: "How to Find, Buy, and Manage Multi-Residential Properties"

Lloyd Segal has started 216 posts and replied 247 times.

Biggerpockets Logo Post: Economic Update (Monday, March 8, 2021)

Biggerpockets Logo Post: Economic Update (Monday, March 8, 2021)

Biggerpockets Logo Post: Economic Update (Monday, February 22, 2021)

Biggerpockets Logo Post: "How to Find the Money for Your Next Deal"

Biggerpockets Logo Post: Real Estate Basic Training Boot Camp

Biggerpockets Logo Post: Economic Update (Monday, February 15, 2021)

Biggerpockets Logo Post: Economic Update (Monday, February 8, 2021)

Biggerpockets Logo Post: Economic Update (Monday, February 1, 2021)

Biggerpockets Logo Post: Economic Update (Monday, February 1, 2021)

Biggerpockets Logo Post: "How to Find, Buy, and Manage Multi-Residential Properties"

Post: Economic Update (Monday, March 8, 2021)

Post: Economic Update (Monday, March 8, 2021)

Post: Economic Update (Monday, February 22, 2021)

Post: "How to Find the Money for Your Next Deal"

Post: Real Estate Basic Training Boot Camp

Post: Economic Update (Monday, February 15, 2021)

Post: Economic Update (Monday, February 8, 2021)

Post: Economic Update (Monday, February 1, 2021)

Post: Economic Update (Monday, February 1, 2021)

Post: "How to Find, Buy, and Manage Multi-Residential Properties"