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Dow slid nearly 400 points on high oil prices

AV– Growth Path of Population Center Hedges & Surpasses Inflation

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May’s High Lites:

·        AV News

·        AV Real Estate in May

·        Author’s Corner– Longer Term View

May 20^th-  Population Update- The Greater AV Economic Alliance is projecting that the present population of the entire Antelope Valley, now at 462,272, will grow to 509,727 by the year 2012, a 10% gain.  Since 2000, GAVEA estimates that the AV has grown 16%.  A study by the Southern California Association of Governments

shows the AV growing to 780,500 by 2020 and to 968,200 by the year 2030.  In 2007 average annual income in Lancasterwas $63,525.  In Palmdale it was $68,548.

June 2- The long awaited AV Veterans Home, located in Lancaster at the NWC of 30^th St West & Ave I, looks like it will be completed in early 2009.  Presently, the facility, located on 22 acres, is in the framing stage.  Sixty veterans will make this their new home, in 2 and 3 bedroom suites.  The facility is designed for veterans that are generally active, but need help with two or more of their daily activities.  The facility will also offer adult day health care for those vets that live in their own home.  No veteran is denied admission due to lack of income. Residency will cost veterans 47.5% of their income or $1,200, whichever is less.  This project was first originated in 1991 and has been a “political football”, until 2002 when a compromise was reached that allowed Veteran’s

homes to be built in Los Angeles, Lancaster, and in Ventura County all at the same time.  Seventy veterans have  filed “statements of intent to apply” for residency at the new Vets Home. 

June 10- The Palmdale city would earmark $28.8 million for drainage projects, including $24 million for the Anaverde Creek dam project; $14.6 million for parks projects, including $7.8 million for Marie Kerr Park improvements; and $13 million for street improvements and repairs.

Among other things, the city would spend:

-         $5.4 million to widen Tierra Subida Avenue from Rayburn Road to Avenue Q-8.

-         $4.3 million to improve the intersection of Rancho Vista Boulevard and Sierra Highway.

-         $2.2 million on a system to supply reclaimed water to a planned electric power plant.

-         $1.5 million on a project to recharge the Antelope Valley’s aquifer.

This year, the city began dipping into its reserve fund, reducing it from about $28 million in fiscal 2006-07 to about $20 million at the end of fiscal 2007-08. For next year, the city expects to use another $14.1 million, leaving $5.9 million in reserve, or roughly 7.8% of its operating expenditures. Like Palmdale, Lancaster also is looking to decrease spending to cope with revenue reductions stemming from a sluggish economy.

The Lancaster City Council will consider adopting a $266.5 million spending plan for fiscal 2008-09 – $52.1 million, or 16.4% less, than the $318.6 million budgeted for the current fiscal year.

Defense & Aerospace News

The B-1 bomber, at Edwards Air Force Base, has been involved in a new technology that will allow the bomber to more accurately target bomb sites.  Called the “sniper pod”, the pod is mounted under the plane and allows  the bombardier to cross check coordinates and visually determine and correlate the target they want to strike. The sniper pod will also significantly decrease the amount of time from a request for a bomb run, to the actual dropping of a weapon, creating the desired lethal effect, and then being able to do bomb damage assessment to re-attack if necessary.  The new technology allows for the B-1 to be used for close support to help ground troops.  In weapons delivery in Iraq and Afghanistan, the B-1 has been the workhorse.  The sniper pod will allow targets to be hit that previously made not have been accessible due to “rules of engagement”.  The sniper

pod improves target identification capability & provides the level of confidence needed to accurately strike targets.    

Antelope Valley Housing News

IN THE AV, your deep pocket builders are still building.  Why?  They have bought finished lots from failing builders & banks, at such low prices, even in this market they can make money.  I am told that the prices being paid for finished lots is down near the 2001 level, a period in time when the building boom was still 1 year + away.  By Q 1 of 2009, there is a good chance that all of the vacant finished lots created by builders that have failed, will have been snapped up by the surviving builders.  When they have been built out and sold, which could take another 2 years, the home builders will go back to mapping raw acreage they already hold.  Builders not holding acreage, will be forced to go back into the market to buy raw acreage for mapping.  To the extent this happens, that could mark the beginning of the next bull market in land.  Before you get too excited though, remember that many builders have a lot of land banked away, putting off its development until the market improves and the numbers work.

April housing data, as reported by DataQuick Information Services, reveals that existing home sales in the southern California area are finally improving.  DataQuick says that the improving sales are due to more homes under the $500,000 level selling.  The Inland Empire and the high desert areas have the preponderance of those type of homes.

In the Antelope Valley, existing home sales were up 28% vs April of 2007 In the AV, the homes are being bought by either investors to be used as rentals, or by long time renters.  Perhaps we can build a “price floor” in this price range, from which, eventually, higher prices will come.

AV Existing Home Sales Data - As of  May.  30, 2008  

(source:  AV MLS)

- Existing Homes sold year to date:  1568

- Existing homes projected to sell this year based on current sales pace: 3,100

- Existing median home price in 2008 : $ 245,836

- Existing median home price increase in 2008  vs. 2007 :  - 19%

2007 - Existing homes sold from 1/1/07 to 12/31/067: 3,362

2007 – Existing median home price in 2007: $$ 304,000

2006 - Existing homes sold from 1/1/06 to 12/31/06 : 6,839

2006 – Existing median home price in 2006 : $330,000

2005 - Existing homes sold from 1/1/05 to 12/31/05 : 7,554

2005 – Existing median home price in 2005  : $293,000

Antelope Valley New Home Sales Data - as of May 18th, 2008 

(source:  The New Housing Monitor, a Hanley Report)

-New homes sold year to date-  514                                                         

-New homes sold since last month, 91

-New homes selling per day in 2007-  3.69  (vs last month’s 3.52)

-New homes projected to sell this year at current sales pace- 1,346

-New home  sales, year to date vs. same period last year (- 49%)

-Number of open subdivisions with sales in 2008- 60

2007 - total of all new homes sold- 1,720

2006 - total of all new homes sold- 2,584

2005 - total of all new homes sold- 4,579

2004 - total of all new homes sold- 2,503

2003 - total of all new homes sold- 1,820  

2002-  total of all new homes sold- 1,162

1990-  total of all new homes sold- 4,900 +    

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Antelope Valley Land Market

“Supply and demand, in the end, determines the value of all things.” 

      – Adam Smith, “Wealth of Nations” 18th century Scottish economist

Supply in May 38 new land listings in AV MSL.  In keeping with this part of the cycle, supply has now fallen 5 consecutive months, albeit slowly.  This trend of falling supply will go on for years and will eventually accelerate as the market worsens

and sellers “throw in the towel”.  Presently, we are now where near the “throwing in of

the towel.”  The next strong market in AV real estate is still years away; at the least, 5

years away, and that would be the beginning of the beginning and would probably not

be recognized as such.  Bull markets arise from the ashes in markets with lean supply.

Before we arrive at that point in time, I suspect that supply will have fallen below 1,500,

perhaps even approach the 1,000 level.  The 1500 level would roughly represent a 50%

contraction in supply from its bull market top.  For now, as we progress through this

bear market, supply will continue to work its way lower.  While watching the monthly

supply number will be important, more important will be watching it’s velocity, how

fast the decline accelerates.  One percent per month declines tells me that there are still

way too many believers out there; sellers still hoping for an immediate market comeback.

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Demand- May land sales, at 45, show improvement from last month, but remain well below the  monthly 200 + sales we were doing in the bull market years of 2005 and 2006.  In May, land sales improved by 6 sales versus April’s 35.  From the market peak of the summer of 2005, monthly land sales are down – 90%.  This contraction in volume essentially completes the first leg down in the Bear market.  The second leg down will be in price, which also has begun.  In 2002-2006, we had our first Bull Market in land

in the age of the internet.  Even in 2007, I had some clients taking profits.  That Bull Market had real legs, last 5 to 6 years.  The last Bull Market was 1988-90, a total of 3 years.  We are now in our first Bear Market in the age of the internet.  What effect, if any, will the internet have on this Bear Market?  Will it shorten it?  Will it lengthen it?  These are questions, over the coming months, that I will seek to answer by  observing the market’s behavior.     

In May:

- the mean (average) selling price on a piece of land was….. $217,017

- the median (middle) price on a piece of land was…….….. $59,000

- the average days on the market………………………..……..230 

Demand numbers in perspective:   

Land sales year to date-    230                                                           

Land sales projected for 2008- 552  

Land sales in all of 2007- 1,637              

Land sales in all of 2006- 2,648 

Land sales in all of 2005- 3,376

Land sales in all of 2004- 2,372   

Land sales in all of 2003- 1,240

Land sales in all of 2002-  679

Land sales in all of 2001-  407

Land sales in all of 2000-  307

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Average land sales (in 2008) per month-  46

Average land sales (in 2007) per month- 129

Average land sales (in 2006) per month- 221

Average land sales (in 2005) per month- 281

Average land sales (in 2004) per month- 198

Average land sales (in 2003) per month- 103

Average land sales (in 2002) per month-  56 

Average land sales (in 2001) per month-  34

Average land sales (in 2000) per month-  26

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Author’s Corner – Longer Term View

AV is the only real place of substantial size that Los Angeles County has left for growth, and unlike many  locales around southern California, growth in the AV is welcome.  Granted, with a temporary over supply of housing, that immediate growth rate is going to slow down.  The AV today, regardless of where we are in the economic / real estate cycle, still has a great growth story and a great future.  Anyone who bought land, at market value now and hold for a long team will make very good profits. Better values will arise over time.  Your challenge, as an investor, is to be patient, and to wait for the right time to sell your properties The bull markets we have had in land, have one thing in common:  the old price highs of the previous bull market have been exceeded by the next bull market.  In between, there are price pull backs, which creates value and opportunity.  This is when one should build their inventory and get prepared for the next bull market.  

This is how big money is made in AV land. 

LAND SALES ACTIVITY- By Antelope Valley Multiple Listing

                    Land Sales                                                                        Land         

                      Escrows                                                                         Escrows    

                      Opened                                                              closed         

2000 Total    307                                                                                     260                         

2001 Total    407                                                                                     315

2002 Total    679                                                                                     482

2003 Total  1,240                                                                                    890

2004 Total 2, 372                                                                                   1,658

2005 Total 3,376                                                                                    2,572

2006 Total 2,989                                                                                   2,118

2007 Total 1,773                                                                                     1,401  

2008 5 Months total   235                                                                         225