Is Homelessness More Business than Crisis?

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We have been programmed to believe that homelessness is a problem that needs more money and government programs, but it has recently become obvious that its really just a business that the government uses to employ more government bureaucrats and spend more money. While we suffer with encampments in our neighborhoods, our government officials apparently feel that its not really that bad.

Before we go into that, let's take a look at the market and see where we're at.

I always say there's two parts to an economy and this is actually just standard economic theory. There's demand and supply. Demand is measured probably or at least driven by interest rates in the housing market and supply is how many houses are for sale.

Let's take a look at the latest demand, driven by mortgage rates. Last week they JUMPED up by 0.33%, and this week continued up another 0.1% to close at 6.62%. These increases erase all the reductions in rates enjoyed this summer.

Now, on the supply side, inventory continues to drop while staying near to historic lows.

The inventory, while still about 15% higher than last year, is declining while last year it was rising slightly, and either way both years are dramatically below the historic pre-COVID averages by 30-40%. As long as inventory remains at these levels, housing prices cannot crash or decline significantly absent some dramatic change to the economy. All that said, these numbers may change in reaction to the jump in mortgage rates these past 2 weeks.

Now, real estate is a local market here in Los Angeles, my primary market. Our overall market rating is at 36, down slightly from last week's 37 and continuing its move from a seller's market to a more normal market.

This is the 5th week in a row, as the market has moved from a strong seller's market to its current seller's market. Again, this is Los Angeles and within this large metro area some markets and some products are doing better than others.

So, the homelessness industry continues to pretend they are working to solve the problem. Here is an article in Stars and Stripes asking whether enough is being done.

Over one-third of of the nation’s homeless veterans live in California, based on a one-night yearly count conducted by the Department of Housing and Urban Development. The number of homeless veterans in California is estimated to be more than 10,000. More than half are 55 and older. Los Angeles is at the epicenter of the problem.

The state has a huge government effort to solve this problem. The state of California weebsite shows all the services and programs....

This is the state pretending to care about the problem, but really the real goal here is more government spending, more government employees, and more government control.

Oh, Bill, that's callous, how can you say that.

Well, lets go back to a news story I have covered, the scandalous UCLA squatting on veterans land with their baseball stadium. Last week, after nearly a decade of legal maneuvers, UCLA offered a settlement of cash and services that would keep the vets living on the street and allow UCLA's baseball team to have world-class facilities.

Let's refresh this issue and take a look at the real estate.

Donated in 1887 for housing and servicing veterans, the property has been poorly managed ever since. The part NOT being used is over 400 acres and HAS ITS OWN ZIP CODE!

Here is an overhead of the property, located where the Jackie Robinson baseball stadium is, just north of the intersection of Wilshire Blvd. and Sepulveda Blvd., some of the most valuable real estate in Los Angeles.

Notice how condos and homes around here are among the highest priced in Los Angeles.

Last week, after 12 years of litigating, and winning the appeal in federal court, the VA evicted the deadbeat UCLA tenant from the property. As a result, the UCLA baseball team has had to practice a local Birmingham High School. Oh, the humanity!

I will remind you, this is how our city provides encampments for homeless in comparison.

So, if the government has taken 12 years SO FAR to figure out how to use the property, why not move the tent people to the baseball field? Of ALL the property in Los Angeles to house such units, WHY NOT THE FIELD OWNED BY THE VETERANS ADMINISTRATION?

In other news,

Lets you think that deadbeat tenants are merely a nuisance and should be seen as a social justice issue only, in my business I have dealt with numerous owners of properties who themselves are destitute or extremely poor BECAUSE they cannot monetize property they own. Here is a recent story where a deadbeat tenant took over a property, and the result was after years of fighting the owner gave up and committed suicide.

In this case, the victim lost his property in 2018, and after fighting to get it back for 4 years he finally gave up and committed suicide.

Undated handout image of Robert Tascon.

I see so many cases of decent people who are merely attempting to use property they have earned or been gifted but cannot due to deadbeats.

In the past I have chronicled how the government has only taken the side of the deadbeat tenants, creating new government organizations to pay for legal expenses for these deadbeats. Not to be outdone, the Los Angeles Bar Association is piling on into this lucrative area of potential business fleecing landlords.

You will notice that the effort is to fight evictions, but default ALL evictions, and not wrongful evictions, because the last thing an attorney wants to do before they get paid is to determine if the tenant has a moral right to be in the property and the goal is to merely manipulate the never-ending laws and regulations to get paid and give their tenants more free rent.

The leading speaker is from an organization called the Debt Collective, which is basically advocating for the elimination of our capitalist system in favor of free college, free health care, free housing, and I am sure if they are successful there more free stuff.

To quote again from their website, "Market-based solutions cannot solve the problems that the markets created in the first place." Increasingly, the organizations of attorneys in our country are becoming the foot soldiers of efforts to destroy our economy and institutions that have in the past made our country great.

I saw this graph demonstrating the significance of what is called the "interted yield curve."

The inversion is that the interest rate offered by the bank or investor is HIGHER for short term than the long term, as normally, the longer you do not have access to your money the higher the return you would expect. that said, if you look at how rare this has been, how it has been a signal of economic troubles, and how long this condition has lasted compared to the past, it is a signal of a economic hurricane of some sort.

In the "you just don't hate these big companies enough," Inman news, which bills itself as "the industry’s leading source of real estate information" has an article titled "Zillow data says Showcase Agents win 20% more listings than similar non-Showcase agents."

You will notice the sufficiently diverse population of people looking at some piece of paper, presumably a printout of Zillow (?), smiling. But the article's headline really should be rewritten by Inman to read "Our HUGE advertiser, Zillow, says its product works for its customers." I mean, really, if Zillow's data did NOT show their Showcase Agents customers winning more listings would they disclose it? If they ran the data monthly 10 times, and 5 times it showed their product worked and 5 times it did not work, does anyone doubt they would only publicize the 5 months when it worked? How does this pass as news?

Finally, in another case of how the internet favors the destruction of real business by venture capital funded online monopolies aspiring to be the next evil Google or Facebook, professor Mike Delprete shows an example of Pacaso, an online service expand ownership of 2nd homes. Yes, 2nd homes, in a market where the biggest problem seems to be unaffordability of the American Dream, the Silicon Valley geniuses are funding an online company to expand their ability to have homes in ski resorts and beach towns and to do so funding some online monopoly to avoid any commission to be paid to a local service.

You will see that Pacaso announced their financials as though their sales were increasing and their profits also increasing, citing their "strong business momentum and expanding gross profit with the graph below:

Yet, these numbers are not annual numbers, as you would assume, but are cumulative numbers, with each year's numbers added to the previous numbers. When you look at the actual numbers, you see a different story:

So what this really shows is that from 2021 to 2023, Pacaso sales DECLINED from $277 million to $208 million and its profits declined from $29 million to only $12 million. That's a different story. Yet, they are still showing this misleading information on their website as they raise funds and seek to "displace" traditional real estate companies, while at the same time probably paying no federal taxes while seeking to destroy the business of local business persons who do.

So, what should YOU do about buying or selling real estate in today's market?

If you are looking to buy a home and live there for a while, real estate has always been a great long-term builder of wealth and there is nothing to suggest that is changing if you can afford the home.

If you want to move or downsize, it's still a great market to sell, but a bit more challenging than in the last few years.

Finally, if you can find a property that will give you cash flow, this is a great time to get solid cash flow and enjoy the tax benefits of real estate.

How can I help you? Call, text, or email me.

Bill

Bill Gross

Broker Associate, BRE 01022275

Certified Probate Expert

Direct: 310-210-0008 , [email protected]