All Forum Posts by: Lloyd Segal

Thank you!

Economic Update
(Monday, December 7, 2020)

Everyone keeps asking when will Congress pass a new stimulus package that our economy so desperately needs? The good news is that Congress is once again considering several stimulus proposals, including a Democrat $908 billion package and a Republican $550 billion package. And now there is renewed hope of a bi-partisan compromise. The vote could be any day now. But time is quickly running out on this “lame duck” session. Unless something is passed before Congress adjourns this Friday, December 15th (for the holidays), nothing will happen until next year. If that happens, it appears likely that Congress will wait for the outcome of the two senate races in Georgia before passing a new stimulus bill. In Georgia, its Republican Senator David Perdue versus Democrat challenger Jon Ossoff, and Republican Senator Kelly Loeffler versus Democrat challenger Rev. Raphael Warnock. Reliable polls have both races “too close to call.” If Republicans win at least one of those two seats, they will control the Senate and the stimulus will likely be closer to $550 billion. If Democrats win both seats, they will control the Senate and their stimulus package could be as much as $1-2 trillion. In other words, on January 5, Georgia will conduct a trillion dollar Senate election, the most expensive state election in American history! That’s why all eyes are on Georgia, and donations are pouring in. So with “Georgia on My Mind,” let’s wash our hands, put on our face masks, social distance, and get down in the weeds…

Employment Report. Nonfarm payrolls increased by just 245,000 in November, well below Wall Street estimates as rising coronavirus cases coincided with a considerable slowdown in hiring. Overall, the Bureau of Labor Statistics report is very disappointing. The November gain represents a pronounced slowdown from the 610,000 jobs added in October. In all, our economy has brought back 12.3 million of the 22 million jobs lost in the first two months of the crisis. That means there are still over 10.7 million Americans unemployed (compared with 5.8 million in February). At the pace added in November, the economy would not be back to pre-pandemic employment levels until 2024, which is dreadful. The November job gains would be considered strong under normal circumstances, but the pandemic has left millions of Americans out of work from jobs lost in the early stages of the crisis. The total represents the slowest job growth since the employment recovery began in May as the number of workers unemployed for at least 25 weeks surged 11% to nearly 4 million. With COVID cases surging again and policies being put in place to try and slow the spread, hiring has clearly slowed down. Also, worker availability is a significant limiting factor as well, with many unable to go to work due to COVID concerns or family care obligations. Plus, the spike in coronavirus cases threatens to push the U.S. health-care system to the brink. Though the U.S. is coming off its fastest growth quarter ever, economists worry that the next quarter or two could see flat or even negative growth before rebounding. The unemployment rate (“C-2”) decreased to 6.7% in November from 6.9% in October, but don’t get too excited. I say this because the .02% drop was simply many Americans who gave up looking for work. A more accurate measure of joblessness (“C-6”) is still at 12%, while the number of Americans outside the labor force remains just above 100 million.

Retail Rental Market Shows Life. It’s no secret that Covid-19 has affected the retail environment, with a rapid shift to ecommerce reshaping the shopping experience for consumers (and businesses). These dramatic changes, in turn, are having a ripple effect on the retail real estate market, where rents have slipped, and vacancies have climbed during the pandemic. In the third quarter, the average asking rental for retail properties decreased 15 cents to $2.86 a square foot on a triple-net basis quarter over quarter, according to CBRE Group Inc. Vacancy rates, meanwhile, have jumped to 6.2%, up from 5.8% last year. There are signs of improvement, though. Commercial real estate agents say leasing activity is slowly starting to pick up after months of challenges. As you would expect, fitness tenants and full-service restaurants may not be chomping at the bit to sign leases, but daily-needs tenants (like pharmacies and grocery stores) are doing deals. While rental rates are down in some areas, so is the volume of new leases, which means there are fewer properties to use as comps. Although many landlords are stubbornly keeping rents high, tenants are seeing greater concessions in the form of free rent or tenant improvements (“TI”) to keep those coupon rates high. It’s not uncommon for landlords to offer concessions, including shorter lease terms, instead of rent reductions, especially if building owners are thinking of selling at some point. This is because many lenders require certain rental rates to be met. Further, tenants are interested in space that has already been built out that they will not have to spend money. Plain, vanilla space is a lot more challenging unless landlords can provide the concessions to get a tenant over the issues that they are now facing. More troubling, once Los Angeles County’s eviction moratorium ends, you can expect an increase in vacancies as tenants who haven’t paid their rent are evicted. Both landlords and tenants expect to see more concessions and lower rents going forward. Realistically, lower rents could last through the second quarter of next year. And if workers do not return to office buildings, some areas could see rents drop dramatically. Right now, it’s clearly a tenant’s market.

Home Prices Rise Again. Southern California home prices jumped 14% in November compared with a year earlier, according to DQ News. The six-county region’s median price of $605,000 was down slightly from a record $610,000 in October, although it’s not unusual for prices to fluctuate month to month. The median is up 14.2% from a year earlier. Economists and real estate agents say the housing market has been red hot because of the COVID-19 pandemic. People who still have jobs want more space, and federal policy aimed at spurring economic growth has helped drive average interest rates on a 30-year fixed mortgage below 3%. That’s bringing more people into the market and allowing them to pay more than they otherwise could. Another big part of the demand surge has come from millennials who are entering their 30s and have accelerated plans to buy because of the pandemic. But here’s the challenge, as people venture into the market, they are finding fewer homes for sale than last year and are bidding up prices. Though the six-county median price last month was slightly below October’s record, prices in Los Angeles and San Bernardino counties still set all-time highs in November, while San Diego matched a record. The regional median was up by double digits compared with last year — the third consecutive month of such sizable increases. And you can expect continued “strong price growth” given the mismatch of supply and demand. Because the median is the point at which half the homes sold for more and half for less, it also reflects a change in the types of homes sold. One thing that has made the median price rise so much in recent months is that higher-income households are less likely to have lost their jobs in the pandemic, leading a greater share of home sales to be in the luxury segment now than at the same time last year. In Los Angeles County, the median home price rose 15.3% from a year earlier to $715,000, while sales climbed 11.2%. In Ventura County, the median price rose 12.9% to $655,000, while sales climbed 12.4%.

Rise in Purchase Mortgages. ATTOM Data Solutions released its third-quarter 2020 Residential Mortgage Origination Report, which shows that 3.25 million mortgages secured by residential property (1 to 4 units) were originated in the third quarter of 2020 in the United States. That figure was up 17 percent from the prior quarter and up 45 percent from the third quarter of 2019 (to the highest level in 13 years). With interest rates dipping below 3 percent for a 30-year fixed-rate loan, home mortgages originated in the third quarter of 2020 represented an estimated $974.1 billion in total dollar volume. That number was up 20 percent from the second quarter of 2020 and up 52 percent from a year ago (to the highest point since 2005). The increases came in part from a jump in purchase mortgages, which grew faster on a quarterly basis than the number of refinance loans for the first time in more than a year. As a result, the amount of money lent to buyers taking out new mortgages in the third quarter of 2020 represented 34.5 percent of all lending, up from 30.6 percent in the second quarter of 2020. The home-loan industry got even busier in the third quarter of 2020, with the housing market still operating as if the recession and pandemic don’t exist. Buyers, lured by low mortgage rates, kept lining up for loans at levels not seen in more than a decade. Metro areas with at least 1 million people and the biggest quarterly increases in purchase originations include Boston, MA (up 75.3 percent); Hartford, CT (up 52.6 percent); San Jose, CA (up 49.8 percent); and our very own Los Angeles, CA (up 43.3 percent). Among homes purchased in the third quarter of 2020, the median loan amount was $275,500 – a new high since 2000. The amount was up 10.3 percent from the prior quarter and up 24.2 percent from the third quarter of last year.

Mortgage Credit Availability Index. Mortgage standards are nothing like they were back in the 2004-2007 bubble. During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association released its "Mortgage Credit Availability Index" which indicates the availability of mortgage credit for borrowers at various points in time. The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows getting a mortgage is even more difficult than it was before the bubble.

Prices Slowly Rising in Opportunity Zones. If you’re an investor interested in Opportunity Zones, listen up. ATTOM Solutions released its third-quarter 2020 special report analyzing qualified Opportunity Zones (established by Congress). In this report, ATTOM looked at 1,737 zones with sufficient sales data to analyze, meaning they had at least five home sales in the third quarter of 2020. The report found that median home prices increased from the third quarter of 2019 to the third quarter of 2020 in 74 percent of the zones and rose by more than 10 percent in slightly more than half the zones. Those gains reveal that housing markets in Opportunity Zones continued improving in the third quarter of 2020, even as the Coronavirus pandemic spread throughout the nation. The COVID-19 impact generally hit hardest in lower-income communities that include most of the zones targeted for tax breaks designed to spur redevelopment. The report also shows that 76 percent of the Opportunity Zones analyzed had median home prices in the third quarter of 2020 that were less than the national median of $283,813 (roughly the same percentage that were below the national figure in the second quarter of 2020). About 36 percent of the zones still had median prices of less than $150,000, also about the same as in the prior quarter. Home prices in Opportunity Zones around the country continued riding the wave of a nationwide boom that has defied the economic damage from the widespread Coronavirus pandemic. The increases point towards the country’s most distressed communities having great potential for revival. At the same time, though, prices remain depressed in Opportunity Zones, and a notable number actually dropped in the third quarter (a potentially very troubling indicator). Those dueling trends will be important for investors to monitor in the coming months amid a highly uncertain economic outlook.

Federal Eviction Protections Expiring. With coronavirus cases surging all over the country and unemployment benefits about to expire, it couldn’t be worse timing for a lame-duck president and Congress. For the whopping 43 million Americans at risk of losing their homes due to the pandemic (and landlords looking for their rents), there’s a lot riding on this lame-duck period, when two provisions (that have thus far prevented the nationwide evictions tsunami) are set to expire. Federal eviction protections put in place during the pandemic will expire on December 31. The CDC’s nationwide moratorium on evictions will also expire before the New Year and those two rules have helped keep people in their homes. If Trump does let these provisions expire, the period between January 1 and inauguration could be housing chaos. Evictions don’t take that long (i.e. weeks, not months) and with the CDC moratorium expired, landlords would have one less roadblock to executing an eviction order in situations where a court has already rendered a verdict. Even with the patchwork of local, state, and federal protections, 109,811 evictions have been filed since March, in the 26 major cities, according to Eviction Lab who is tracking. Many of those cases would be able to move forward in the first weeks of January, and thousands of new eviction proceedings could be filed as well. The situation could potentially create enough momentum that the feared eviction tidal wave would finally force thousands of Americans out onto the streets. Either that, or laid at the lap of newly inaugurated President Biden another catastrophic mess to figure out, and quickly, on January 20th.

Nithya Raman, Our Newest City Council Member. Nithya Raman hasn’t even been sworn in as a Los Angeles city councilmember, but her election on November 3rd has already had ripple effects. Raman’s Fourth District splays back and forth over the Hollywood Hills, a series of irregular polygons delineating a handful of L.A.’s wealthiest neighborhoods. In November, Raman, who is 39, pulled off something virtually unheard of in L.A. politics: having never held office, she beat a well-funded incumbent, David Ryu, by staging a grassroots get-out-the-vote movement despite a pandemic. LA went from having 24,000 people typically vote in a city council race to having over 130,000 people vote — which is a staggering increase in turnout. In fact, she received more votes then any L.A. councilmember in history! For all the concerns about being outspent, Raman outraised Ryu in one jaw-dropping aspect: according to campaign filings, she brought in over $200,000 in small-dollar donations. Winning the district has traditionally meant pandering to some of the city’s most vocal NIMBYs (“Not-In-My-Backyard” voters), who have slowed or stopped the construction of homeless shelters, apartment buildings, and transit projects. For a city that has struggled to manifest even the most basic elements of urban infrastructure — smooth and useful sidewalks, a thriving tree canopy, new housing developments — it’s promising and beguiling that Raman, an urban planner with degrees from Harvard and MIT, might ascend to office at this moment. But what Raman, who has worked as a consultant and started multiple nonprofits, thinks she brings to the table is a realistic assessment of how bureaucrats can work effectively with city departments to get things done! Raman, who lives in Silver Lake with her husband (a TV producer) and their twins, co-founded a neighborhood nonprofit that provides showers and meals for the homeless. When she officially starts work on December 12, she will be able to activate her campaign slogan, “It’s our time to lead.”

HGTV shows changed homebuying trends. Known as the “HGTV-effect,” today’s homebuyers are influenced by these binge-worthy TV shows more than ever. With this growing interest in real estate, TV programs have inspired more people to complete their own renovations or buy houses that need rehabbing (and compete with investors). Like shiplap walls and refurbished planks (often painted white), many trendy home features are dictated—then popularized—by home improvement TV shows. Popular rehab shows, often seen on the HGTV, DIY Network and TLC channels, have recently led the way in popularizing home features. For example, there has been a movement from darker, cherry wood kitchens to lighter and brighter ones, often with a modern-farmhouse twist. Tuxedo cabinets, which are two-tone, are also popular right now. Other features creating a buzz with the help of TV exposure are rattan fixtures, subway tiles, stainless steel appliances, pale grey paint colors, and the resurgence of mid-century modern furniture— just to name a few. Design trends are looking a bit more mid-century modern coupled with Scandinavian, with the idea that “less is more.” Rehab TV shows have encouraged buyers that taking on a fixer-upper property is, in fact, possible. This is likely caused by the satisfaction of seeing a before-and-after reveal as a house goes from uninhabitable to beautiful in a half hour (on the screen only, of course). Without these scenes, it’s hard to visualize a beautiful home when standing in front of a dilapidated structure. But with the process laid out in half-hour segments, home renovations seem less daunting. Of course, the timeline seen on TV is often a much quicker turnaround than in reality. Many buyers inspired by DIY shows may be in for a shock when materials are on backorder and timelines get pushed out. Nevertheless, reality TV shows have raised interest in our industry as a whole, increasing buyers’ awareness and understanding of real estate. Viewers watch these shows as a source of entertainment, but ultimately retain information and apply it to their own buying, selling, and rehabbing journeys.

You Never Know What You'll Find When Rehabbing. When Nick Drummond and Patrick Bakker, were told their newly-purchased 100-year-old house in Ames, New York (one-hour west of Albany) was built by a notorious bootlegger, they passed it off as “urban legend.” But during a recent rehab, the New York couple discovered something that revealed the legend was indeed true! In early October, they found more than 66 bottles of whiskey (from the Prohibition-era) hidden within the walls and floorboards of the house, which was built in 1915. "Our walls are filled with bundles of booze!" Drummond, who documented the unexpected discovery in a series on social media, drunkenly wrote on his Instagram. "I can't believe the rumors are true! He was actually a bootlegger! " Drummond, a designer, historic preservationist, and neophyte rehabber, told CNN he was removing outside skirting along the bottom of the mudroom attached to the house when a mysterious package fell out. Drummond went on to find more crates of smuggled whiskey under the floorboards after entering the mudroom through an uncovered hatch inside the floor. He said the couple continues to find more bottles. Initially they found seven bundles of six in the wall and then at that point they found four more bundles and less than a week ago they found still more. The liquor is a brand of Scottish whiskey labeled “Old Smuggler Gaelic Whiskey,” which is still made today. Each bottle was carefully wrapped in tissue paper and straw, and bundled in packages of six. The original owner of the house was a German man known as Count Adolph Humpfner. After researching newspaper articles and various legal websites, Drummond found out that Humpfner was known to be a man of mystery in the town and took part in many scandals. He died a sudden and mysterious death and left behind the smuggled liquor ( as well as a heavily disputed fortune). The couple plans to leave the bottles they found empty or evaporated preserved in the house -- and sell the bottles they found full. After all, the full bottles are valued at around $1,000 each! But the couple said they will keep at least one of the full bottles of whiskey to enjoy themselves. Smart idea!

The Mighty Voting Muscle of LA County. Consider this: Los Angeles has no electoral votes, but it cast more ballots than 38 states. Generally overlooked is Los Angeles’s outsized role in the electoral process. Although candidates of both parties flock here to raise money, its impact in votes is even greater. Examining data from the Trump-Biden battle reveals that residents of Los Angeles County alone cast more ballots than were tabulated in 38 states and District of Columbia. As of last Friday, 4,261,742 votes had been cast and processed in our county, according to the Los Angeles County Registrar-Recorder/County Clerk Dean Logan. That is more votes than had been tabulated in the battleground state of Arizona (11 electoral votes, 3,381,446 ballots processed). It is also more than three times the number of ballots cast in the battleground state of Nevada (6 electoral votes, approximately 1.34 million total votes). Los Angeles County, with approximately 10 million residents, has 5.8 million registered voters, according to Logan’s office. Despite concerns about the reliability of the United States Postal Service, nearly 80% of voters in our county participated by mail. That participation level in Los Angeles County surpasses the 67.5% turnout in the 2016 presidential election and the 68% recorded in 2012. President-elect Biden garnered 71.2% of the votes in our county, while Trump had 26.77% (a small portion was divided among a quartet of fringe candidates). Even more impressive, Los Angeles County accounts for more than 25% of all the votes cast in California this month! The local figures pose an interesting question: How many electoral college votes might Los Angeles County hold if it were its own entity? Examining the sheer numbers can be instructive. The county’s vote total was slightly higher than the 4,024,253 ballots that had been tabulated in the state of Washington, which has 12 electoral college votes. Of only 11 states with more votes cast than Los Angeles County, the closest is Virginia, where 4.4 million ballots had been tabulated. Virginia has 13 electoral college votes. 

This week. Looking ahead, investors will continue watching COVID-19 case counts, progress on FDA approval of vaccines, and negotiations for additional government stimulus. Beyond that, JOLTS is released on Wednesday (12/09). The Consumer Price Index (CPI) will come out on Thursday (12/10). 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 also will take place on Thursday (12/10).

Calendar:

Wednesday, 12/09: JOLTS
Thursday, 12/10: CPI
Thursday, 12/10: ECB Meeting


Weekly Changes:
10-year Treasury: Rose 0.10 points
Dow Jones: Rose 300 points
NASDAQ: Rose 200 points

                                                     Economic Update
                                           (Monday, November 30, 2021)

The shortened Thanksgiving week was a relatively quiet period for our economy. A large batch of economic reports last Wednesday had little impact, and mortgage rates remained near record low levels. Sales of new homes continued at a blistering pace in October. Builders say that they are putting up new homes as quickly as possible, but that a lack of land, labor, and materials is severely limiting the pace of construction. Existing home sales are also continuing at historic levels. The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In October, the core PCE price index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month. Core PCE is the inflation indicator favored by Fed officials, and their stated target is 2.0%. With Thanksgiving in the rear view mirror, let’s wash our hands, put on our face masks (yes you!), social distance, and get under the hood…

Weekly Jobless Claims. As I’ve often said, if you want an immediate snapshot of our economy, pay close attention to the weekly jobless claims. And the snapshot is not good. The pace of first-time filings for jobless claims picked up last week, with the jobs market showing increasing vulnerability to the coronavirus spread. Claims totaled 778,000 for the week ended Nov. 21, up from 742,000 the previous week, the Labor Department reports. The news comes amid an ongoing rise in coronavirus cases and worries that the national health system is severely stressed. New daily cases have averaged 174,225 over the past week, and health officials worry that post-Thanksgiving could send that level higher as families across the country return from holiday travel. Though weekly claims have been below 800,000 for the past six weeks, they are still well above the pre-pandemic record as governments impose restrictions on activity. The hospitality industry has been particularly hard-hit with restrictions on capacity and the likelihood that many will have to go back to take-out only operations or close completely as winter settles in and cases continue to accelerate. Worse, many displaced workers have been seeing their benefits expire. Enrollment in the Pandemic Unemployment Assistance program, which provides benefits to those not normally eligible, decreased by 8,019 over the past week to 311,675. However, people on the PUA emergency program, which helps those who have lost their benefits with 13 more weeks of compensation, surged by 466,106 to 9.15 million (though that data is two weeks behind). The total receiving benefits rose to 20.45 million for the week ended Nov. 7, up 135,297 from the week before. That compares with just under 1.5 million a year ago, underscoring how much damage remains in the labor market. The data reflects a two-speed recovery where the jobs market continues to struggle but other parts of the economy are performing well. Bottom line: over 20 million American s are still out of work!

New Home Sales. New single-family home sales declined 0.3% in October to a 0.999 million annual rate, but up 41.5% from a year ago. Don't let the negative headline number fool you, new home sales continue to impress. Let me tell the sneaky reason why. The drop of 0.3% was due to an upward revision of 43,000 to September's sales pace, putting that month at the highest level since 2006. Without that upward revision, October would have posted a gain of 4.2% versus the sales figure for October reported a month ago. New home sales are now 29.1% above the January pre-pandemic high! A couple of factors should continue to keep the fast pace of new home sales going in the months ahead. First, affordability; near zero interest rates from the Federal Reserve have helped reduce 30-year fixed mortgage to record lows. Second, due to the pandemic, closures, and urban unrest, buyers' preferences have shifted away from units in denser urban environments, toward more spacious options in the suburbs (where most new single-family homes are built). That said, a lack of finished new homes waiting for buyers remains a headwind for sales going forward. The inventory of unsold homes that are either under construction or finished is dramatically down from a year ago. Given the downward pressure that social distancing regulations, shortages of labor, and supply chain issues continue to exert on new construction, do not expect an oversupply of homes anytime soon. This is reflected in the months' supply (how long it would take to sell today's inventory at the current sales pace) of new homes for sale, which has collapsed from 6.8 in April during the height of the pandemic to only 3.3 in October, the lowest level on record going back to 1963. New home sales normally run around 70% of single-family housing starts, but have now exceeded that threshold for each of the past six months. This has occurred despite housing starts rising in October to the fastest pace since 2007. In other words, even though new home construction has accelerated rapidly during the pandemic, it still needs to pick up more to keep pace with consumers' demand for new homes.

Home Prices Surge. According to the S&P CoreLogic Case-Shiller Price Index, a measure of home prices in 20 large cities, rose at a 6.6% yearly pace in October. That’s up from 5.3% in the prior month. A broader measure by Case-Shiller that covers the entire country showed a similarly large 7% increase in home prices over the past year, marking the fastest 12-month gain since 2014. Ironically, home prices have actually risen faster during the worst pandemic in a century instead of getting cheaper. Rock-bottom mortgage rates and a flush of people leaving cities during the pandemic for more space in the suburbs has boosted demand at a time when the supply of homes for sale is near historic lows. Prices rose in 19 of the 20 large cities tracked by Case-Shiller. (The lone exception, Detroit, likely registered higher prices as well, but Case-Shiller could not collect enough data because of rising COVID-19 cases in the area.) The biggest increases took place in Phoenix, Seattle and San Diego. The smallest were in New York and Dallas. New York has seen a particularly large outflow of residents after suffering a huge number of COVID-19 cases early in the pandemic. Dallas was another hard-hit area. Going forward, home sales may slow a bit in the face of a record surge in coronavirus cases and a softer economy. But don’t expect demand — or prices — to taper off all that much, especially if the pending vaccines turn out to be effective and widely available. Sales are at the highest level in years and likely to stay that way if the economic rebound picks up the pace.

Want to Buy Trump’s D.C. Hotel? The Trump Organization is reportedly trying to sell its flagship Trump Hotel in Washington, D.C., a renovated post office that has become uncannily, suspiciously popular among foreign government visitors since Donald Trump assumed the presidency in 2017. But after shopping the hotel with a $500 million asking price (and a requirement that any buyer has to keep the Trump name), the firm received bids that were less than half of that price, according to CNBC, While the toxicity of Trump’s brand undoubtedly is playing a role, it’s probably more important that it’s simply a hotel in 2020. The COVID-19 pandemic has brought business and leisure travel alike to a near halt. While it’s rebounded from April lows, hotel occupancy remains down 32.7 percent year-over-year. Next year won’t be much better, judging by the rise in infection rates and the many months between now and a fully rolled-out vaccine. It is a bad time to sell any hotel, let alone a Trump hotel. The D.C. hotel had been one of the few bright spots in Trump’s uneven hotel business. Others have faltered as Trump wrecked his brand, but the D.C. hotel, down the street from the White House, pulled in $40.5 million in revenue in 2019. But even this high-performing asset could be problematic soon. The Trump Organization took a $100 million loan from Deutsche Bank to renovate it (part of $400 million in debt that according to the New York Times’ exhaustive report in September on Trump’s finances is soon coming due). The hotel’s income, which has likely taken a hit since the pandemic, was widely seen to have been propped up by political actors, foreign and domestic, trying to “curry” favor with the President. Some of whom have reportedly booked rooms at the hotel without even staying in them. And that source of “you-can’t-technically-call-it-a-bribe” cash flow will stop the moment Trump’s no longer in the White House.

Fannie Mae and Freddie Mac Increase Loan Limits. ​ ​The Federal Housing Finance Agency (“FHFA”) announced the new maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2021. In most of the U.S., the 2021 maximum conforming loan limit (“CLL”) for one-unit properties will be $548,250, an increase from $510,400 in 2020. The Housing and Economic Recovery Act (“Recovery Act”) requires that the baseline loan limits be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. Earlier today, FHFA published its third quarter 2020 FHFA House Price Index (“HPI Index”) report, which includes estimates for the increase in the average U.S. home value over the last four quarters. According to the seasonally adjusted, expanded-data HPI Index, house prices increased 7.42 percent, on average, between the third quarters of 2019 and 2020. Therefore, the loan limits in 2021 will increase by the same percentage. For areas in which 115% of the local median home value exceeds the baseline loan limits (i.e. California), the maximum loan limits will be higher than the baseline loan limit. The Recovery Act establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling" on that limit of 150% of the baseline loan limit. Median home values generally increased in high-cost areas in 2020, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 (150 percent of $548,250). As a result of rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum limits will be higher in 2021 in all but 18 counties in the U.S. 

Scott Disick Sells Hidden Hills Farmhouse. Scott Disick, star of “Flip it Like Disick,” regular on “Keeping Up With the Kardashians,” and best of all, LAREIC Gold Member, has flipped another! Scott just sold a remodeled farmhouse in Hidden Hills for $5.6 million. That’s $1.29 million less than he was originally asking, but still $2.7 million more than he paid for it last year. The sale is a flip for Scott, who transformed the home from a traditional-style space into a modern farmhouse during his short stay. Completely remodeled, the 5,663-square-foot retreat includes a massive open floor plan, two primary suites, a reclaimed wood pavilion and pool. Hidden Hills is known for its large lots, and this one comes in at 1.33 acres. White panels and rustic wood cover the exterior, and a 10-foot glass pivoting door opens to the 5,663-square-foot floor plan. Inside, a vast open floor plan lined with hardwood combines a marble kitchen, indoor-outdoor dining area, living room with a fireplace and wine closet. There are primary suites on both levels; the lower-level suite opens directly to the backyard, and the upper-level suite boasts a sitting room and spa bathroom (with a steam shower). A reclaimed wood pavilion connects the house to the private backyard, where grassy lawns surround a zero-edge pool, spa and gas fire pit. Scott is best known for his former relationship with Kourtney Kardashian. He previously appeared in his own series called “Lord Disick: Lifestyles of a Lord.”

Demand Heats Up for Hot Tubs. Investors, how about installing a hot tub in your next house? It is cheaper, takes up less room and is easier to install than a pool. Besides, buyers like them! Hot tub sales nationally are up about 25% during the pandemic, according to the Pool & Hot Tub Alliance. Hot tub manufacturers and dealers in the Los Angeles area say they are experiencing a surge in demand, with one local dealer reporting that sales in 2020 have tripled compared to 2019. But with the jump in demand has come longer-than-usual wait times for customers and a nationwide shortage. At the same time, manufacturers of hot tubs are battling a shortage of labor and materials. Jacuzzi Corporation, which is headquartered in Chino Hills, has seen orders bubble over! Sales picked up in April and have stayed hot, hot, hot! Suppliers have also had trouble hiring workers to catch up with the demand. And as you go down the supply chain for materials, the problem becomes compounded. There’s a significant demand and an inability to supply the demand. People are likely choosing hot tubs for their homes because they’re not as big of an investment as a pool (although pool sales have also increased during the pandemic). Understandably, COVID-19, the fear of travel, the need for a more controlled environment, wanting to get out of the house and escape into the backyard, and having something to relax in, are some of the reasons consumers are increasingly choosing hot tubs. Aside from the social entertainment hot tubs provide, they also offer physiological benefits as many people are paying more attention to their physical and mental wellness during this pandemic. The warm water helps relax muscles from sitting through endless Zoom calls, or just the stress of life. Being submerged in water can also have a calming effect on one’s nervous system and help avoid killing your home-schooled kids. Hot tubs have been a symbol of California leisure since the late 1960s when Jacuzzi created the world’s first integrated jet whirlpool bath. And the water has bubbled ever since.

George Clooney Gave $14 Million Cash to His 14 Friends. Uber-star George Clooney has finally revealed the backstory behind the memorable surprise gift of $1 million in cash he gave 14 of his best friends. The great cash-gifting day happened in September 2013, right before his film "Gravity" premiered. The movie wound up being a "very good deal" for Clooney because he was paid based on a percentage of box-office revenue, which was a big box office hit. The actor had already met his future wife, Amal Alamuddin, but the two weren't dating. So he had no immediate family to dote upon. "And I thought, what I do have are these guys who've all, over a period of 35 years, helped me in one way or another," Clooney remembers. “I've slept on their couches when I was broke. They loaned me money when I was broke. They helped me when I needed help over the years. And I thought, you know, without them I don't have any of this. And we're all really close, and I just thought basically if I get hit by a bus, they're all in my will. So why the f--- am I waiting to get hit by a bus?" Clooney came up with the suitcase-of-cash idea, but then he needed to figure out how to get $14 million in cash all at once. No banks would help. But Clooney's research led him to "an undisclosed location" in downtown Los Angeles where pallets of cash are held for sale. Clooney got an old beat-up van that said “Florist” on it (like he was in a heist movie), and drove downtown. He got in an elevator with the florist's van, took the van down to the vault, and loaded it up with cash. He told no one but his assistant and a couple of security guards who couldn’t believe what they were watching. On September 27, 2013, Clooney called each of his 14 friends and announced a dinner party at his house. When they arrived, there were 14 Tumi luggage bags waiting for them. Clooney gave a speech about how much they meant to him and said he wanted to give back. They opened the suitcases, and each of them had $1 million in $20 bills. Needless to say, they were in shock. After all, when was the last time you received a suitcase overflowing with a million dollars in cash? Exactly one year later, on September 27, 2014, Clooney married Amal. Hey George, would you consider another friend?

Netflix Purchases Egyptian Theatre. More than a year and a half after it was initially reported, Netflix has finally closed escrow and purchased the historic Egyptian Theatre in Hollywood. Under the terms of the arrangement, Netflix will own the building but use it only during the week for screenings, premieres, and special events. Operations will remain in the hands of the nonprofit film preservation group American Cinematheque, who will continue to use the theater for public events on weekends under the new ownership. Netflix has also committed to invest in renovating the facility, which requires around $6 million in basic structural upgrades alone–funds that the Cinematheque simply did not have (even before the prolonged shutdown of in-person events caused by the pandemic). American Cinematheque, who previously owned the theater, said in an email to members and patrons, “The Cinematheque was honored to bring the Egyptian Theatre back to life with an extensive renovation in 1998. We are now incredibly excited to announce a collaboration with Netflix to continue to preserve this space as a movie palace and to restore it once again for a new generation of film fans to experience movies on the big screen.” Scott Stuber, head of Netflix films, says, “The Egyptian Theatre is an incredible part of Hollywood history and has been treasured by the Los Angeles film community for nearly a century. We’re honored to partner with American Cinematheque to preserve the theater’s storied legacy and continue providing remarkable film experiences for audiences. We look forward to expanding programming at the theater in ways that will benefit both cinema lovers and the community.” American Cinematheque will continue to own and operate the Aero Theatre in Santa Monica.

Diamond-Encrusted Face Mask. Taking the place of statement sunglasses, facial hair, or a bold lipstick, a face mask is now the first thing a person sees when they look at you (not to mention that masks are massively important to slowing the spread of a virus that’s currently out of control). In response, some Angelenos have started spending big bucks to invest in unique styles they like. But one unnamed L.A. businessman has taken this to the extreme, commissioning a custom mask worth $1.5 million from an Israeli jewelry company called Yvel. Designed by Isaac Levy, Yvel’s founder, and touted as the most expensive face mask in existence, the over-the-top, one-of-a-kind creation features 250 grams of pure 18k gold, and features 3,608 natural black and white diamonds, with a total weight of 210 carats. According to its creators, the mask is designed to be 100 percent wearable, with a slot to insert a disposable N-99 mask, which provides necessary protection from the coronavirus. The anonymous L.A. businessman apparently commissioned the mask as a means of supporting Israeli industry and Yvel’s 150 employees (in both Israel and the U.S.) in the midst of a pandemic that’s put many people out of work. Twenty five of Yvel’s top artisans and diamond setters were carefully chosen to carry out the unique assignment. The ostentatious mask will be handed off to its owner at the end of November, just in time for Hanukkah or Christmas, as the case may be. Meanwhile, it’s traveling around the U.S. with Levy, and will be on display in Palm Beach, Florida, before making the trip to L.A.

Wayne Gretzky selling Thousand Oaks Estate. Hockey legend Wayne Gretzky is looking to score a huge goal in Thousand Oaks! His Colonial-style mansion on nearly 7 acres has just listed on the market for $22.9 million. It’s actually Gretzky’s SECOND time selling the home. The NHL Hall of Famer was the compound’s original owner after building it in 2002. But five years later, he sold it to former baseball star Lenny Dykstra for $18.5 million. The sale kicked off a dramatic saga that saw Dykstra lose the property to foreclosure after declaring bankruptcy. At the trustee’s sale on the steps of the Ventura County Courthouse, it was auctioned for $760,712 (with the winning bidder taking on about $12 million in debt owed on the property). Then, two years ago, Gretzky re-united with the home, shelling out $13.5 million for the promontory estate. That’s $5 million less than the price at which he had sold it to Dykstra roughly a decade earlier. If he gets his price this time around, he stands to make $9.4 million in profit. Tucked behind gates in the Sherwood Country Club, the grounds include an elegant Colonial-style home designed by Richard Landry, two guesthouses, a swimming pool, tennis court and entertainment area surrounded by rolling lawns and manicured gardens, but no ice rink. In total, the homes combine for six bedrooms and 7.5 bathrooms across 13,300 square feet. Gretzky, 59, spent 20 seasons in the NHL, and his record for most goals and assists in league history earned him the nickname “the Great One.” The Canada native spent time with our Kings, Oilers, Blues and Rangers and held 61 NHL records at the time of his retirement. After he hung up his skates in 1999, the league retired his number, 99 — the only time that’s happened in NHL history. Perhaps, more importantly, he is the father of social media diva and model Paulina Gretzky. 

This Week. Looking ahead, investors will continue watching COVID-19 case counts, progress on vaccines, and government stimulus measures. The ISM Manufacturing index will be released tomorrow (12/01) and construction will also be released tomorrow (12/01). Beyond that, the monthly Employment Report will be released on Friday (12/04), 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.

Calendar:
Tuesday, 12/01:   ISM Manufacturing
Tuesday, 12/01:   Construction
Friday, 12/04:      Employment

Weekly Changes:
10-year Treasury:   Rose 0.02 points
Dow Jones:            Rose 600 points
NASDAQ:                Rose 200 points

...and thank you for reading it!

Economic Update
(Monday, November 23, 2020)

When COVID-19 arrived, all of us were confronted with an unexpected pandemic that upended the plans we had for 2020. But the pandemic is only part of our story. When an event occurs (a negative event, generally, like a pandemic), it doesn’t necessarily dictate a certain, preordained outcome. Rather, your response to the pandemic is just as important, and probably more so, in determining your outcome. This simple but impactful concept is especially crucial this year. So much of what’s happening is beyond our control and we’re hit with challenges from every direction. But, as author Jack Canfield reminds us, these events don’t drive our outcomes. We do that ourselves, through our responses. Emotional maturity (connected closely to emotional intelligence) enables us to make better decisions or, in the case of a pandemic, respond to events in a more constructive way. Emotional maturity gives us the courage to adjust our mindset, adapt to the changing landscape, and help others who are counting on us. This summer, it kept our industry moving forward, albeit slowing for a time, while we all shifted to a socially distanced, more virtual approach. Each of us has made thousands of choices since COVID arrived. Did you learn a new skill or binge Tiger King? Eat more salad or more potato chips? Reach out and connect or stay in bed and isolate? Help others or complain about everything? Emotional maturity leads to better choices, and better choices generate better outcomes. And, of course, better choices includes washing our hands, wearing our masks, and social distancing…

Existing Home Sales. Existing home sales increased 4.3% in October to a 6.850 million annual rate, up 26.6% versus a year ago (the fastest pace since 2005). From February (pre-pandemic) to the bottom in May, sales collapsed 32.1%, as lockdown measures and widespread economic uncertainty took hold across the country. Since then sales have risen five months in a row, blown past the previous February high, and are now up an amazing 18.9% from pre-pandemic levels. One major contributor to the recent recovery has been the Fed's liquidity policies, which have helped push the 30-year fixed mortgage rate to record lows, boosting affordability. It also looks like the pandemic and the resulting public health measures have given potential buyers a new sense of urgency. For example, demand for existing homes was so strong in October that 72% of the homes sold were on the market less than 30 days! That said, sales face a continued headwind from the low inventory of existing homes. In fact, today's report shows that inventories were lower than any other October on record and down 19.8% versus a year ago. This is reflected in the months' supply (how long it would take to sell today's inventory at the current sales pace) of existing homes for sale, which is now only 2.5 months, the lowest reading on record going back to 1999. While lower priced homes are in short supply, inventories have increased in the past year at the upper end of the spectrum. Meanwhile, sales of properties worth $1 million and over are up 102.2% in the past year, as wealthy urban dwellers purchase properties out in the suburbs to escape pandemic-related restrictions and social unrest. In addition, the shift in the mix of homes sold toward more expensive properties has put considerable upward pressure on median prices, which are now up 15.5% in the past year. As an investor, yu can look for continued robust sales in the months ahead, although sales will inevitably slow down due to a lack of supply.

New Home Starts. U.S. builders started construction on homes at a seasonally-adjusted annual rate of 1.53 million in October, representing a 4.9% increase from the previous month’s figure, the U.S. Census Bureau reports. In addition, permits for new homes occurred at a seasonally-adjusted annual rate of 1.545 million in October, unchanged from September. The upsurge in housing starts was driven by a 6.4% rise in single-family starts. (In stark contrast, multi-family construction activity dipped once again, this time by 3.2%.) All regions except the Northeast experienced an increase in housing starts despite rising coronavirus cases across many parts of our country, led by the 12.9% increase in the South. The housing starts report coincides with last week’s release of the November “Home Builder Confidence Index” from the National Association of Home Builders. The index inched higher for the fourth consecutive month, demonstrating the upbeat outlook in the construction industry. Indeed, virtually every home builder is seeing rising sales as Americans look to leave urban areas for larger homes in the suburbs (only to find very few existing homes for sale). Demand has also been boosted by record-low mortgage rates. But there simply has not been enough supply of existing homes to meet this demand, causing the accelerating demand for newly constructed homes. Meanwhile, builders face roadblocks of their own as they attempt to ramp up production. There’s only so much skilled labor to go around, and the limited availability of buildable lots and supplies also puts constraints on the speed with which they can construct new homes. Quite frankly, home builders are walking a tightrope between increasing costs of labor, materials and land, and eager buyers seeking larger homes in suburban neighborhoods.

Retail Sales. Retail sales rose 0.3% in October, the U.S. Census Bureau reports. Although it was the sixth monthly advance in a row, it was nevertheless the smallest gain since the economy reopened in May (and could shut down in December). In truth, the only reason sales rose at all was because of a pandemic-delayed gigantic Amazon Prime Day (they delayed their annual “Prime Day” sale to October from its usual spot in mid-July). But the already-fading momentum of retail sales is in danger of softening even further amid record coronavirus outbreaks. Sales rose the fastest among so-called non-store retailers, mainly online purveyors led by Amazon (receipts jumped 3.1%). Most rival retailers such as Walmart and Best Buy also held big online sales around the same time. In general, internet sales have soared during the pandemic. The virus accelerated a long-running shift toward online buying and away from on-premise shopping at brick-and-mortar locations. For example, department stores have been losing ground for years and the pandemic has caused some to go bankrupt. Department store sales sank 4.6% in October. Sales declined at grocers, bars, restaurants, pharmacies and stores that sell hobby items and home furnishings. Nevertheless, retail sales rebounded far faster than anyone would have expected six months ago and now exceed pre-pandemic levels. But the return of cold weather and record increase in coronavirus cases poses another stiff test. The viral surge has spurred growing numbers of cities and states to re-impose restrictions on indoor dining and attendance at theaters and other entertainment venues, among other things. And colder weather limits the ability to serve customers outdoors. If the situation gets any worse, retailers are likely to face the bleakest holiday shopping season since the Great Recession more than a decade ago.

Homeless Crisis. I believe as real estate investors, we have a special responsibility to help the homeless. I trust you agree. There are now over 66,000 homeless people in Los Angeles sleeping on sidewalks, doorways, in tents, and camps. If you’ve driven on or off, under or over a freeway lately, you’ve seen their tents. Their numbers have ballooned in recent years making L.A. the largest homeless population in the country! For years, homelessness loomed over the civic culture of Los Angeles as its most intractable problem, one that defines our city and its government officials. For some voters, it comes down to the city’s inability to keep streets clean and rights-of-way clear. On the other side of the political spectrum, it’s about the plight of our most vulnerable citizens — and how the city has essentially criminalized their very existence. The problem is our local government has failed to protect the public while simultaneously failing to provide adequate shelter for those living on the streets. And the pandemic has only exacerbated the situation. It has become a humanitarian crisis. Everyone agrees that responding to homelessness is the city council’s most important priority. But here’s the problem. Until now, Los Angeles has focused on “permanent supportive housing,” which means constructing big expensive buildings. The challenge with that approach is that it takes too long to build and costs too much. I believe its finally time for a different approach, a fresh perspective. I suggest we immediately start constructing “interim housing,” as opposed to permanent housing . Interim housing is the quickest and least expensive way to achieve visible progress and demonstrate that homelessness has abated. Even if people in temporary housing (such as temporary shelters), are technically still homeless, it’s still far better than what we have now. Let’s speed up solutions including rehabbing of empty motels and abandoned buildings that could house homeless people very quickly. Further, there are tons of vacant city-owned land, maintenance yards, and foreclosed properties that can be adapted to residential use. Unused factories and warehouses in industrial areas can also be re-vamped for housing. Another tentative solution could be our convention center, which is currently empty because of the pandemic. I can assure you it’s cheaper and faster to convert empty motels and warehouses than building a whole new state-of-the-art, multi-residential complex. If you’re in LA, please write your city council person and let them know we need more affordable temporary housing NOW, focusing on helping people off the streets through the construction of cheap and efficient temporary shelters as quickly as possible. Bottom line: we can’t kick people off the streets if we don’t have a place to put them.

2021 Foreclosure Crisis? Many investors seem convinced that this year’s economic downturn will lead to another foreclosure crisis in 2021, like the one we experienced after the housing crash a little over a decade ago. However, there’s one major difference this time: robust forbearance programs. During the housing crash of 2006-2008, most lenders felt homeowners should be forced to pay their mortgages despite the economic hardships they were experiencing. There was no empathy for the challenges those households were facing. What resulted from that lack of empathy? There was a tidal wave of foreclosures. But this time it’s different. This time there was an immediate understanding that homeowners were faced with a pandemic not of their own making. The government quickly jumped in with mortgage forbearance programs that relieved the financial burden placed on many households. The programs allow borrowers to suspend their monthly mortgage payments until their economic condition improves. It was the right thing to do. But some analysts are concerned homeowners will not be able to make up the back payments once their forbearance plans expire in 2021. They’re concerned the situation will lead to an onslaught of foreclosures. But I disagree. The banks and government learned from the mistakes experienced during the last housing crash. They don’t want a surge of foreclosures again. For that reason, they’ve put in place alternative ways homeowners can pay back the money owed over an extended period of time after the moratoriums end. Another major difference is that, unlike 2006-2008, today’s distressed homeowners are sitting on a record amount of equity (after all, prices are going up, not down). That equity will enable them to sell their houses (if they elect) and walk away with cash instead of going through foreclosure. Bottom line: 2021 will not be a repeat of the foreclosure crisis of 2008.

COVID-19 Affecting Real Estate Industry. The COVID-19 pandemic has made its mark on our real estate industry—from accelerating existing trends (like the reduction of retail footprints) to spawning new ones (such as a bigger focus on social justice and health and wellness). A new report from the Urban Land Institute draws on proprietary data and insights from more than 1,600 leading real estate industry experts to highlight these evolving trends. According to the “Emerging Trends in Real Estate 2021 Report” (“Report”), COVID-19 has made lower-density areas for both residential and commercial real estate more appealing and is accelerating suburban growth. Of course, growth in the suburbs has been a consistent trend in the report for the past five years, but new work-from-home policies and increased family formation among millennials are accelerating this shift. Home buyers are looking for suburban locales with low taxes, affordable housing, job opportunities, and auto-oriented transportation. The Report also predicts cost-conscious companies will gravitate toward suburbs that also are more affordable and business-friendly with growing workforces. Our suburbs will benefit from this new growth spurred by shifting demographics and changes to living and working patterns resulting from the COVID crisis. In response to suburban flight, our cities will have an opportunity to respond by reimagining their public realm, building more resiliently, and re-inventing retail (that was already struggling before the pandemic). As an industry we have the opportunity to strengthen by truly embracing diversity and tackling the challenges faced by our communities. Most professionals, according to the Report, anticipate that overall real estate prices will fall 5% to 10% as income is curtailed for several years. Retail and hospitality are the sectors predicted to have the largest declines. However, single-family homes, industrial properties, and data centers are expected to rise in value. But the long-term outlook in the real estate sector hinges on our country’s ability to reign in COVID-19. Now, more than ever, real estate investors have the chance to take the lead in planning, development skills, and investment capital to reshape our work and lifestyle environments.

How to Bribe Los Angeles Lawmakers. If you’re looking to bribe a city councilman for approval of your next real estate project, who better to learn from than disgraced former councilman Jose Huizar. Apparently, to get started you’ll need lots of paper bags. Federal agents arrested Huizar on the morning of June 23 at his home in Boyle Heights in connection with corruption at City Hall. The U.S. Attorney alleges Huizar led a ring of aides, lobbyists, and developers who arranged bribes in exchange for his help getting real estate projects approved. In one instance, Huizar accepted $600,000 cash in a paper bag from a developer (that Huizar used to settle a sexual harassment lawsuit against him in 2014). In a Federal courthouse on June 3, Justin Jangwoo Kim, a real-estate appraiser and former City Planning Commissioner, pleaded guilty to fixing a bribe for Huizar: $400,000 in cash, delivered in a paper bag. George Esparza, whom the Los Angeles Times has described as one of Huizar's closest aides , also agreed to plead guilty to racketeering as part of what the U.S. attorney described as a “Huizar’s pay-to-play bribery scheme.” The corruption probe proved, in sordid details, that Huizar was working for companies that can afford to withdraw hundreds of thousands of dollars in cash and hand it off in paper bags (like $15 takeout meals). The councilmember was available — for a price. In meetings that took place in cars, coffee shops, bowling alleys, hotels, and karaoke bars in 2016 and 2017, Kim helped negotiate the sum between Huizar and a local developer. Huizar’s aid initially demanded $1.4 million but finally agreed to $400,000. The $400,000 cash bribe was handed over to Huizar, in a paper bag, in February 2017. The condominium plans were approved two months later by Huizar’s Planning Department. Some of the details that investigators uncovered — escorts, Lakers-game tickets, clandestine meetings, and cover-ups — belong in the plot of a great noir (a genre that has fictionalized some of L.A.’s ugliest truths). According to the FBI, a guy named just Chiang connected Huizar to a Chinese developer, identified as Shenzhan Hazens. Together, Chiang and the developer arranged a trip to Hong Kong and China for Huizar and his family, secretly contributing $100,000 to his (or wife’s) election campaign in, what else, paper bags. In exchange, Huizar helped get the developer’s plans for a W Hotel and 435 condominiums near L.A. Live approved by the Huizar-chaired planning committee. Oh yeah, in addition to paper bags, it appears you’ll also need lots of cash.

McDonald’s Santa Inez Ranch. How about a 554-acre ranch in Santa Inez? A piece of fast-food history was just served up in Santa Ynez, where a ranch once owned by late McDonald’s owner Ray Kroc is listed for $29 million. That’s a lot of Big Macs! Kroc bought the property for $600,000 in the 1960s, and spent years turning the scenic land into a research and development facility and a vacation spot for himself and other McDonald’s executives. At the time, he dubbed the retreat “The J & R Double Arch Ranch,” which stood for Jane, his wife at the time, and Ray, himself. Thankfully, the garish golden arches that once framed the entry to the property are gone, but many of the structures remain. The most impressive building is the lodge, a massive 17,000-square-foot space designed by Glenn Marchbanks Jr. complete with a commercial kitchen, a dining room for 100 people, a 3,000-square-foot great room, and a 5,200-square-foot conference hall. The lodge itself holds 20-bedroom suites, and the property can host a total of 100 of your nearest and dearest friends. In the 1970s, a stylish circular house was added atop a knoll with 360-degree views of the surrounding valley. Elsewhere are four single-family homes, two bunkhouses, a gymnasium, resort-style pool, helicopter pad and two tennis courts. For equestrian activities, you can stable your string of horses in barns, paddocks, fenced corrals and multiple trails that wind through the dramatic landscape. Kroc franchised his first McDonald’s restaurant in 1955 and bought the original McDonald’s brothers out of the business six years later, rapidly expanding the fast-food chain into an empire in the following decades. He also owned the San Diego Padres for a decade and amassed a fortune of roughly $600 million by the time he died in 1984. If you’re interested, don’t call me! Contact Maria Temmel at Coldwell Banker in Santa Inez.

Tennis Clubs Struggle with Demand. Not everyone is suffering during this pandemic. Tennis clubs, clinics and coaches across L.A. County are experiencing a pandemic-fueled bounce in demand for court time and lessons. Business is way up as compared to pre-pandemic time. After all, tennis is already socially distanced and carries a low risk of coronavirus transmission, according to health experts. Add in L.A.’s year-round warm weather, and it’s not surprising the game is thriving here. Nevertheless, while tennis businesses in Los Angeles are struggling to keep pace, restrictions on lessons, group activities and court availability have dramatically curtailed revenues. At Mulholland Tennis Club, for instance, the nonprofit facility has seen revenue plummet to $1.4 million this year compared to $3 million in 2019. The club furloughed 30-40 workers in March due to the pandemic lockdown. Now, it has 70% of them back, working different roles due to pandemic-era adjustments. A check-in station is set up outside where staffers take members’ temperatures. Players also must complete a quick COVID-19 evaluation, answering a series of questions every time they enter the facility. Courts and other facilities are all reservation-based. Group lessons that used to accept 10 to 15 people are now limited to just four. In addition to courts and other facilities now available only by reservation, group activities are heavily restricted, and programs like summer camps and tournaments have adapted to regulations established during the pandemic by L.A. County. Still, players want to play. After all, people are craving relationships, connections, interactions, but need to do it at a distance. As such, tennis is perfect! The biggest challenge players face is finding available courts. There’s so many people wanting to play (and will even pay a higher price to play), but the courts are already occupied.

Bicycles in Demand. Another business enjoying increased demand during this pandemic are bike shops. The pandemic has been great for the bicycle business. Retail bike sales jumped 81% nationally between April and October, compared to the same period last year, according to the National Bicycle Dealers Association. In fact, bike sales surged 297% in the past four months! Demand for bikes, and for mechanics to work on them, continues to exceed supply. In Los Angeles, that surge has been acutely felt, given our city’s focus on fitness and recreation, as well as our open spaces and climate. And unlike other parts of the country, bike shops here have been deemed “essential businesses” because they provide transportation. Industry observers say consumers see bikes as an alternate means of exercise while gyms are closed, an antidote to “cabin fever” and a form of transportation that avoids mass transit crowds. Bicycle sales that had been experiencing flat or declining sales prior to the pandemic suddenly are seeing an immediate surge this summer. Bikes that sell as low as $100 to $500 as mass-market bikes (sold by such chains as Big 5 Sporting Goods, Dick’s Sporting Goods, and Walmart) have mostly sold out. Bikes for more serious riders can run $1,000 and up. But store owners say available bicycles priced above $1,000 are even harder to find. At the same time, it has been a bumpy ride for local bicycle businesses. Disruption in global inventory supply chains has left stores with long lists of unhappy customers waiting months for bikes and accessories. The industry had already entered 2020 with inventories at an all-time low, due largely to import tariffs imposed by the United States in 2018 and 2019 as part of that silly trade war with China (the source of 80% of U.S. bicycle imports). Then factories in Asia, which make the majority of the world’s bicycles and bicycle parts, shut down in January and February in response to the pandemic. Few facilities were functioning at capacity until April. So production is still running two to three months behind.

Mrs. Maisel’s Riverside Apartment. If you enjoy “The Marvelous Mrs. Maisel” on Amazon Prime, you probably ogle over her luxurious 10-room apartment. Well, that apartment is located at the Strathmore Apartments, 404 Riverside Drive, on the swanky westside of Manhattan. And now you too can live in one of those beautiful apartments at the Strathmore, which has just been listed for sale. The two-bedroom, two-bathroom unit sits high up in the Strathmore, whose classic prewar exterior and interiors are featured prominently on the TV series. It isn’t nearly as sprawling as the ten-room Maisel apartment, but it does still have a rather grand living room with three windows, two of which come with Hudson River views. Originally, each floor only had two Maisel-size apartments, but later some were split up into smaller units. Based on the original floor plan, the present-day E line, which is at the southwest corner of the building, was once a cluster of bedrooms with a dressing room. There’s a foyer big enough for a dining table, and both bedrooms are large with two closets each. Though the kitchen and two bathrooms are more dated, they both come with huge windows. The apartment has stayed in the same family since 1975 and comes at a rare price point for the Strathmore ($975,000), which hasn’t seen an under-$1 million listing in over a decade.

This week. Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and government stimulus measures. Beyond that, Wednesday (day before Thanksgiving) will be a very busy day for economic data. New Home Sales, Durable Orders, and the core PCE price index (the inflation indicator favored by the Fed), will all be released on Wednesday (11/25). Other than that, markets will be closed on Thursday for Thanksgiving, and probably Friday as well. So enjoy the holiday! 

Calendar:

Wednesday, 11/25: Core PCE
Wednesday, 11/25: New Home Sales
Wednesday, 11/25: Durable Goods

Weekly Changes:

10-year Treasuries: Fell 0.05 points
Dow Jones: Fell 200 points
NASDAQ: Fell 50 points

It will be live on December 10, 7:30 to 9:30 pm, only.  No recordings.

Please join us at the Los Angeles Real Estate Investors Club’s holiday meeting, Thursday night, December 10, 2020, 7:30 to 9:30 pm. This time of year we always try to bring a unique or unusual speaker, and I think this year we’ve outdone ourselves!

Guest Speaker. Our special featured speaker will be Armen Mardirousi, “The Real Estate Yogi.” Armen is the owner and broker at Raven’s Rock Real Estate Services (“R3ES”), located in Glendale California, where he is also a “Kundalini Yoga Teacher.” Armen began consulting and investing in tech startups and made quite a name for himself as someone who gets things done. Along the way, in the early 2000’s, Armen started studying and investing in real estate - primarily wholesaling - leading up to the 2008 crash.

Several years back, Armen began working on a startup focusing on technology geared towards real estate transactions. It was during this phase that he founded R3ES to test the technology being built by his new digital startup. After successfully raising over $8 million dollars and growing the startup to a valuation of $80 million dollars, Armen eventually exited from the tech world, and began focusing full-time on his real estate brokerage, his love of teaching, and his yoga practice.

Armen began his yoga practice to calm his mind and deal with the pressures of running several businesses simultaneously. He completed 200 hours of training and became a certified “Kundalini Yoga Teacher” in 2014. Kundalini Yoga has enabled Armen to clear his subconscious mind and operate from a “neutral mind.” It is this Zen-like approach to business that has made Armen the calming voice in the room, even during high-stakes, multi-million dollar real estate negotiations. He attributes much of his professional success to yoga and the positive results he has gained from his daily yoga discipline.

It is the intersection of real estate and yoga that earned Armen the title of “Real Estate Yogi.” Armen currently operates his brokerage and teaches yoga, while somehow managing to spend time with his wife and two grown children, ages 16 and 24.

The title of Armen’s presentation to LAREIC is “Become a Conscious Real Estate Investor.” During his presentation, Armen will cover these topics:

+ Gain mental clarity

+ Become a self-aware investor

+ Build a great consciousness team

+ Put aside your ego

+ Respect the dignity of others

+ Excel in real estate investing through “flexibility”

If you’re ready to take your investing to a higher level of consciousness, don’t miss Armen’s virtual presentation. Even if you don’t like yoga or don’t understand yoga, this is your opportunity to see how it works.

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

FREE PARKING: Free parking (in YOUR garage)!

FREE REFRESHMENTS: Unlimited free refreshments (in YOUR refrigerator)!

RSVP: please RSVP on at our special landing page so that you can receive a login and password:

VENDOR EXPO. Most importantly, don't miss our "Vendor Expo," 6:30 to 7:30 pm (right before the general meeting starts). We'll have over 40 vendor tables with opportunities for you to "meet and greet" with companies that you'll want to utilize in your real estate investing.

LAREIC. Founded in 1996, the Los Angeles Real Estate Investors Club is the oldest and largest investor group in California. Our Club helps people invest in real estate by offering; (1) education, (2) networking, and (3) mentoring. If you need help with any of these services, please contact us.

Economic Update
(Monday, November 16, 2020)

Last week, the stock market roared higher on the news that a highly effective Covid-19 vaccine appeared to be just on the horizon. That was great news, but there’s still plenty of economic damage the pandemic can cause between now and when a vaccine is distributed to a meaningful proportion of our population. Another day of record coronavirus cases and hospitalizations and several countries, states, and localities responding with activity restrictions seems to have served as a reminder of that. Chicago issued a stay-at-home advisory. New York is closing bars and restaurants at 10 p.m. and limiting gatherings. School districts across the country have gone online-only. Widescale lockdowns in Europe have been extended. And no one knows yet what California will do. Despite these efforts, experts worry that transmission of the virus is still likely to increase during the winter months, as more people spend time indoors, colleges across the country send students home, and families gather for the Thanksgiving and December holidays. The appreciation of the challenges facing our economic recovery with a resurgent pandemic recalls pre-election hopes for fiscal stimulus legislation. Remarks over the weekend from Federal Reserve Chairman Jerome Powell echoed his earlier pleas for Congress to pass a new stimulus bill as soon as possible. With this reality in mind, let’s wash our hands (again), put on our face masks (yes, you!), social distance, and get under the hood…

Consumer Price Index. The Consumer Price Index (“CPI”) was unchanged last month, the Bureau of Economic Analysis announced on Thursday. That means the cost of living (a/k/a “inflation”) leveled out in October, which in turn is a reflection of the ongoing stress on our economy caused by the accelerating coronavirus pandemic. If you recall, the cost of living had risen sharply over a fourth-month span from June to September, but it was mostly just catching up after a steep decline in prices early in the pandemic. Within the CPI, the cost of groceries and electricity rose slightly in October, but those increases were offset by price declines for gasoline, car insurance, clothing, home furnishings and medical care. Grocery prices, known as “food at home,” have risen 4% in the past year. Of course, food prices have climbed with so many people working from home, cooking more and avoiding restaurants. Yet households are spending less on gas, travel and other services they would purchase in normal times. Inflation has softened considerably during the pandemic and poses no threat to our economy for the time being. For example, the yearly rate of inflation slowed to 1.2% in October from 1.4% in the prior month. Before the pandemic, inflation was running at a much higher 2.3% clip. Some economists predict inflation will surge back to 2% by next year if a vaccine becomes available and our economy speeds up, but it’s still a ways off. The nation’s inflation watchdog, your friendly Federal Reserve, cut its key interest rate to near zero this year to aid our economy. Further, central bankers have indicated they won’t raise rates again until inflation tops 2% for an extended period, an outcome that’s unlikely in the next year or so.

New Foreclosure Rules. Investors listen up! Get ready for a well-intended but crazy new California law that effects properties you buy at trustee’s sales. The new law applies to one- to four-unit properties sold at foreclosure auctions. If you are the highest bidder at the auction and win one of these houses, people who want to live in it (i.e. owner-occupied), as well as any nonprofit organizations and government entities, get an additional 45 days to submit higher offers. You can’t, but they can. And if the house is a rental, the tenants living there can also buy it by submitting offers. But these would-be buyers must offer more than you, even if its only one dollar! In other words, if you’re the successful bidder, you must now wait 45 days after the trustee’s sale before you receive clear title. So get ready for this new source of post-sale competition. Known as SB 1079, the law takes effect January 1, 2021. State Senator Nancy Skinner (D-Berkeley), the bill’s author, said her goal is to make it easier for individuals and affordable-housing groups to compete with investors, just like you. But how will it work in practice?No one knows for sure. But it sounds like the trustee who conducted the auction is now required to maintain a website that details the highest bid at the auction and how other buyers can submit competing offers. But funding could be an issue. The new rules require all offers submitted must include the entire purchase price in cash or cashier’s check in full (just like you had to do at the trustee’s sale), which means potential buyers would need their lenders to hand over money to the trustee outside the typical escrow process. Personally, I don’t think a traditional mortgage lender would lend like this. In other words, the new law gives nonprofits a streamlined way to purchase such properties, if they have the money. But without additional revenue sources, nonprofits are going to be in the same position as during the last recession (when many owner-occupied houses were auctioned off and turned into rentals). Many nonprofits are already strapped for cash, and the new law doesn’t earmark any money for these house purchases. Besides, by requiring a 45-day window for competing offers, the new law could create additional costs for lenders that are foreclosing on properties, — costs they may pass along in the form of higher interest rates to the broader market. 

Reasons the Housing Market Will Stay Hot. While the overall economy will be directly affected by coronavirus-related and political developments in the coming months, recent trends suggest that our housing market (which has withstood every pandemic-related challenge), will continue its strong momentum in the months ahead. The housing market will remain strong for four primary reasons: 1. Demand Is Strong among Millennials. The nation’s largest generation, “Millennials,” long viewed as perennial home renters (who were reluctant or unable to buy), are now emerging as a driving force in the U.S. housing market’s recent recovery. 2. Mortgage Rates Are Historically Low. All-time low interest rates are also driving demand across all generations. Strong demand created by this rate drop has triumphed over other economic disruptions (e.g., pandemic, recession, record unemployment). In addition, Freddie Mac just forecasted mortgage rates to remain below 3% through next year. 3. Prices Continue to Appreciate. The continued lack of supply of existing homes for sale coupled with the surge in buyer demand has experts forecasting strong price appreciation over the next twelve months. 4. History Says So. History suggests that the slowdown is largely concentrated in the month of November (during and after the election). In fact, the year after a presidential election (i.e. 2021) is typically the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, but rather gets pushed out to the following year as long as the economy stays on track.

What Happened to Our Beloved Streetcar System? If you’ve lived in LA long enough, you probably remember fondly the red streetcars, rumbling through the city. It was one of the most elaborate rail systems in the country. But the Pacific Electric Red Car System was completely dismantled by the early 1960s. Why? Well, one of LA’s most enduring conspiracy theories is that an alliance of companies pushing an “auto-centric future” for Los Angeles schemed to bring down its sprawling rail network. In a nutshell, the theory goes that back in 1945, a sinister corporation called National City Lines took over the railway system. Then, over the course of the next two decades, LA’s extensive streetcar network was eliminated and the city’s iconic read and yellow trolleys were replaced with shiny new buses. The principal investors in National City Lines? None other than General Motors (a leading bus maker as well as an automobile retailer), and other giant oil companies. The streetcar system, as the theory goes, was deliberately destroyed by National City who stood to gain the most from its demise. Not only would this facilitate the sale of buses, it would induce greater demand for automobiles—along with tires and oil. But in truth, streetcars were already struggling to survive. By the 1930s, LA’s streetcars had become wildly unprofitable and were quickly losing riders. In "Transport of Delight," Jonathan Richmondpoints out that Pacific Electric managed to turn a profit in only one year between 1913 and the beginning of World War II. Cheaper to operate and requiring less maintenance, buses began phasing out the streetcars very early. In other words, by the time that National City Lines entered the picture, the dismantling of the streetcar system was well underway. Streetcars became increasingly unreliable as the automobile grew more popular. With more cars on the road, streetcars, which were bound to the same traffic rules as cars, slowed to a crawl. The number of residents of Los Angeles County exploded from under 200,000 in 1900 to more than 2 million in 1930, moving out into low-density suburbs, full of single-family homes. Buses became a more attractive choice for transit operators; they were much cheaper than streetcars and could be easily rerouted as new urban areas developed and rider demand shifted. Worse, local and state officials repeatedly failed to finance badly needed infrastructure that could have salvaged the streetcar system. Instead, local leaders eagerly gobbled up federal funding to build new roads and eventually freeways. These investments made automobiles even more appealing to Angelenos (who could afford them), further cutting into the streetcars’ ridership base. In the end, the demise of LA’s streetcar system was less a conspiracy against the public and more a public failure to anticipate the smoggy, traffic-jammed streets, and congested freeways we have now. Imagine how valuable that rail system would be today!

Office Market Slowdown. As expected, Covid-19 has taken its toll on the market for office buildings this year. As you know, the pandemic has prompted many businesses to turn to work-from-home models, which has created questions about the future of workplaces. Multi-tenant office buildings are now facing questions regarding leasing, leaving some investors in wait-and-see mode. Covid-19 has created a stagnant market for multi-tenant office buildings sales, and the majority of office buildings in Los Angeles are multi-tenant in nature. Total sales volume in L.A. this year is 58% of what it was last year, and will likely get worse in 2021. Still, there have been some big sales over the last six months. Production facilities, such as those in the Hudson Pacific deal, are still in high demand. Several studios changed ownership in the past few months, including Television Center in Hollywood, which Santa Monica-based BLT Enterprises added to its production portfolio for $64 million. There’s also demand for medical offices and life science buildings. That’s what’s driving the market. But in your traditional multi-tenant office buildings, there’s almost no sales since Covid hit. The only office buildings seeing interest have long-term leases with quality tenants in place. Despite a handful of big-dollar deals, owners are not looking to sell. Why should they? There’s no motivation from the owners today to sell their buildings. After all, sellers would have to take a substantial price discount, so owners are unwilling to list unless they absolutely need to sell. 

The Donut King. Few foods are as universally adored as fried dough. The United States alone is home to more than 25,000 donut shops and they generate more than 10 billion donuts each year. Nearly every independent donut shop in Southern California hides a story — a story that starts with an unlikely impresario, a Cambodian refugee named Ted Ngoy. In the early 1970s, Cambodia was in the midst of a brutal civil war that displaced two million people, more than a quarter of the country's population. Ted, his wife Christy and their two kids fled to Thailand and then the U.S. Along with thousands of other Cambodian refugees, the Ngoys ended up at Camp Pendleton. Peace Luthern Church in Tustin then sponsored the family, allowing them to live in the church where Ted worked as a janitor. He took two additional jobs, working almost 24 hours per day. One night, during his shift at a gas station, the scent of freshly baked goods wafted toward him. He ran to the shop across the street where he bought a donut. It was love at first bite. Ted soon got a job working at Winchell's, which was then the dominant donut chain on the West Coast. After completing the company's training program, they gave him the keys to a store in Newport Beach to manage. The entire family — Christy and the three kids — worked alongside him. Long hours. Hard work. No days off. By 1976, Ted had saved up enough money to buy his own shop, which he named Christy's. The family still had the Winchell's so now they had two stores to run. As word of Ted's success spread, Cambodian immigrants started seeking him out when they arrived in Southern California. Over the years, he sponsored more than 100 Cambodian families and paid for their airfare. When they arrived, "Uncle Ted" let them stay at his house while he taught them the donut business. Ted bought donut shop after donut shop, leasing them to these Cambodian immigrants, who ran the stores with their families, and taking a monthly cut of each store's profits. At the peak of his success, Ted owned 65 donut stores in Los Angeles and Orange counties, and was bringing in over $100,000 per month. All that money paid for expensive clothes, luxury cars, fancy trips and an opulent home in Mission Viejo. But with great riches come great temptations. On one of his Las Vegas trips, Ngoy took up gambling. It was small amounts at first, but he was soon blowing bigger figures and he couldn't seem to stop. Perpetually in need of cash, he'd ask the people running his donut shops for loans. Since many of them had gotten their start in the business — and the United States — thanks to Ngoy, they were happy to help. But when he couldn't pay them back because he had gambled the money away, Ted signed away his ownership stakes in those stores. One by one, Ted lost all of his donut shops. Broke, Ted and Christy returned to Cambodia, and shortly thereafter divorced. Ted now resides in Cambodia where he splits his time between Phnom Pen and Kep, a province in Southern Cambodia. He has slowly found his way into real estate development and is trying to build donut shops in Cambodia. After all, you can’t keep a goodman down. That’s his story; what’s yours? [Ted’s rages-to-riches-to-rages story is now the subject of a new documentary called “Mr. Donut King,” which is available on-demand.]

Mookie Betts to Encino. Fresh off a World Series victory, Dodgers star Mookie Betts is treating himself to a new house. The four-time All-Star purchased an Encino mansion owned by UCLA football coach Chip Kelly for $7.6 million. Earlier this year, the outfielder inked a massive 12-year extension with the team worth $365 million — the largest contract in Dodgers history and one that’ll keep him in Los Angeles until 2032. So Mookie can certainly afford the mansion and the costs that come with it. The house spans 9,300 square feet on a long, thin lot, with nine bedrooms and 10 bathrooms across two stories. A motor court with two garages approaches the crisp black-and-white exterior. The property includes a main house, guesthouse, swimming pool and sports court. But where will he place the batting cage? A two-story foyer with herringbone floors and a sweeping staircase sets a dramatic tone, while living spaces display a modern farmhouse style. Highlights include a chandelier-topped dining room, marble kitchen, indoor-outdoor living room, movie theater and walk-in wine closet with a candy machine outside. Upstairs, a striking black fireplace runs floor-to-ceiling in the owner’s suite, and an office expands to a balcony overlooking the grounds. Out back, a cabana with a TV adjoins a custom swimming pool with a spa and a conversation pit accessed by steppingstones. Betts, 28, was drafted by the Red Sox in 2011 and spent six seasons in Boston, including a historic 2018 campaign in which he became the first MLB player in history to win MVP, Gold Glove, Silver Slugger, the batting title and a World Series championship all in the same season. He was dealt to the Dodgers in 2020 and helped our boys win its first World Series title in 32 years (defeating the Rays in six games). Betts will have a bit of a commute to work though, as the property is about 20 miles from Dodger Stadium. Apparently, Mookie isn’t aware of our freeway traffic as yet. Meanwhile, it’s a nice profit for Kelly, who paid $7 million for the home two years ago. And Kelly may need it because he is rapidly becoming the worse coach in UCLA football history. Hired in 2017, the Bruins have gone 7-18 during his tenure.

Traffic Accidents. The decline in LA’s traffic accidents began in March, the month that Mayor Eric Garcetti ordered all nonessential businesses to close, leading to more people staying home due to the coronavirus pandemic. In March, there were 2,917 collisions, a 41% drop from the same month a year ago. The difference is most stark between April and July, when very few people were driving to work or to run errands. This year, the LAPD recorded between 1,723 and 2,159 collisions each month. The 2019 figures were all at least twice as high, bouncing between 4,487 and 4,858. As traffic began to start again, the number of collisions in August climbed to 2,983, a boost of more than 800 from July. September was a bit lower, with 2,662 collisions, according to the LAPD, but the figure is still well above March-July levels when the roads were all but empty. One thing that has not changed is where accidents happen. Downtown is still the top spot for collisions both this year and last. However, the 1,234 collisions from January through September downtown is down still 43% from the same time frame last year.

This Week. Looking ahead, investors will continue watching accelerating Covid case counts, progress on vaccines, and final election results. Beyond that, Retail Sales will be released tomorrow (11/17). 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. Two important indicators for real estate investors also come out this week. Housing Starts will come out on Wednesday (11/18), and Existing Home Sales will be released on Thursday (11/19). 

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Calendar:

Tuesday, 11/17: Retail Sales
Wednesday, 11/18: Housing Starts
Thursday, 11/19: Existing Home Sales

Weekly Changes:

10-year Treasuries: Rose 0.08 points
Dow Jones: Rose 900 points
NASDAQ: Fell 150 points

Yes, as of right now, December 31, 2020 is the end of the moratoriums.  However, depending on what's happening with our economy and the pandemic, I believe it is likely that the moratoriums will be extended.