Monday Morning Quarterback

(Monday, February 10, 2025)

Tales of the miraculous have always encircled the Self-Realization Fellowship Lake Shrine. The story?of its 1950 founding goes that the spiritual guru Paramahansa Yogananda purchased the 10-acre Pacific Palisades property from an oil company president, after the oilman had a vivid dream in which his land became a “church of all religions.” Yogananda then established the grounds as a place of peace, solace and sanctuary for people of all faiths. The spring-fed lake in the center of the compound is its defining feature. Swans glide across its surface, new mothers push strollers around its perimeter, and people of many faiths and backgrounds meditate quietly along its shores. Last month the lake also played a key role in the shrine’s unlikely escape from the Palisades fire, as a family of three devotees used its waters to extinguish threatening flames. It was the soot-covered swans, so dark they almost looked black, that first struck Gabriella Asad when she arrived at the Lake Shrine on the second day of the fire. Then, the lack of other animal life. No koi fish rose to the surface to greet her. The turtles that usually sun themselves on the scattered rocks were gone. Looking around the smoldering grounds where she was baptized as a baby and now volunteers in the gardening department, Gabriella, 20, resisted the urge to fall to her knees in despair. Instead, she grabbed four fire extinguishers and, through her tears, set to work alongside her father, Billy, 54, and brother Nicky, 19. As embers the size of golf balls pelted the property, she put out spot fires and hosed down the wood-shingled roofs of the Lake Shrine’s historic buildings. “Just the way the sky was, all the smoke, the way the swans were covered,” she said with emotion in her voice. “It took everything in me to do the best I could.” The Lake Shrine was in serious danger. Along with Gabriella and Nicky, the crew loaded up the pumps with lake water and shrouded the buildings with water all night! The rest, as they say, is Palisades history. The shrine was saved while the surrounding homes were destroyed. Perhaps it was it divine intervention (and lake water)? In other real estate news, let’s get down into the weeds…

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Governor Newsom Extends Rental Price Gouging Protections. Gov. Gavin Newsom extended price gouging protections on rental housing last month, while the state’s top law enforcement official vowed to crack down on landlords who are ignoring the rules, jacking up rent in the wake of Los Angeles County’s devastating fires. Under California law, price gouging protections kick in during a state of emergency and generally bar landlords, hotel and motels from charging more than 10% more than what they were charging or advertising before the crisis. The protections were set to expire at the end of February, but Newsom issued an executive order Thursday that extends them in L.A. County until March 8. According to the state attorney general, those protections will be in place elsewhere as well if the fires create additional housing demand outside the county. Since flames broke out last month, a wave of L.A. County landlords?have raised rent on their properties well beyond what the rules allow, including increases of more than 50%, according to online listings. The listings have been widely shared on social media and have sparked calls from tenant organizations and even some landlord groups for authorities to prosecute. “The actions of a few bad actors tarnish our entire industry and exploit vulnerable families struggling to rebuild,” Tom Bannon, chief executive officer of the California Apartment Assn., said in a statement Wednesday. “We support efforts to strengthen penalties for violators and encourage strict enforcement of the law.” In a press conference last week, California Atty. General Rob Bonta said his office is actively investigating numerous price gouging complaints and noted violators can face up to a year in jail and criminal fines of $10,000 per violation.

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Los Angeles Shouldn’t Rebuild the Same Way Again. The Los Angeles wildefires are likely over for this season. But it’s hard not to wonder what comes next. How will insurance companies, already hesitant to provide coverage in fire-prone neighborhoods, respond to the multibillion-dollar disaster? Is it even possible to lessen the inherent risk of building in the hills surrounding Los Angeles? What can L.A.’s (and the rest of California’s) politicians do as they prepare to deal with a hostile presidential administration? To help understand how the city got here and where it might be going, Intelligencer Magazine spoke with Char Miller, a professor of environmental history at Pomona College. Miller is the author of?Burn Scars, a history of wildfire suppression in the United States [apropos that with a first name “Char” Miller has written a book entitled Burn Scar, don’t ya think.] According to Miller, more than a hundred years ago, well-enough-off Angelenos started moving into Pasadena and its low foothills and what would become Altadena. Because they had cars, they could move into landscapes that we now know were fire zones. If you take that path forward in time, every time Los Angeles expanded outward, its periphery extended from one valley to another. Each expansion included another set of foothills, canyons, and ridgelines that began to be occupied. And every time people moved further up into the hills, fire erupted. That’s essentially because we bring fire with us. That includes cigarettes, charcoal briquettes, and even more, cars backfiring. Cars are the engine of mobility but also one of the most dangerous ingredients in terms of fire ignition. Later, the fires came through electricity sparking from the wires. Where we build produces the conditions for where fires erupt. We’ve had Santa Ana winds for millennia. The dilemma is that that climatic condition combined with drought (which we always have) collides with the human geography of people living in fire zones. The outward surge of population, which is now a century long, has led to these very dangerous large fires that are essentially structure fires, not wildfires.

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Has The L.A.-to-NYC Migration Begun? While many Angelenos are staying in, or at least close to, the city right now, some have taken the massive destruction as a sign that it’s time to move on — a reversal of the longstanding New Yorker dream of moving west. With tens of thousands of Californians still under evacuation orders, some ten thousand of structures destroyed (along with a lot of the infrastructure needed to supply them with basic utilities), and experts saying that, optimistically, rebuilding will take two to three years, it’s clear that thousands of people will need to find semi-permanent housing in the immediate future. And that’s likely to prove difficult in L.A., where the sudden housing crunch has resulted in price gouging which, despite being illegal, is widespread. And then, of course, there are the wildfires themselves, and fire season in L.A. seems to expand every year. That’s why more and more victims have decided to permanently relocate to New York (among other cities). “Certainly it’s not any better rent-wise,” Michael Yarinsky says, “but my fiancée’s family lives in New York, and we can stay in their spare room.” Michael Yarinsky, a partner at the design studio Office of Tangible Space, recently offered up the studio’s North Fork home for free on Instagram as temporary housing for a displaced family. “It was available for the next month or so, and the vibe there is very similar to Altadena, very creative, a lot of working artists,” says Yarinsky.?He says he’s currently in conversation with a couple of people who are interested, but it seems to him that people who’ve lost a lot are not looking to get out: “They want to stay local, monitor the situation — some of them haven’t even gotten access to their home’s site. I think it will probably happen that some of them end up moving to the East Coast, but a lot of people are just trying to get a sense of where the ground is right now.”

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New Single-Family Home Sales Increased in December. New home sales continued to rebound in December from hurricane-related weakness in prior months, rising for the second month in a row to finish 2024 on a healthy note.?Looking at the big picture, buyers purchased 682,000 new homes, up 2.4% from 2023. That is the second calendar year gain in a row, but sales still remain well below the highs of the pandemic. Though economists expect the upward trend in sales to continue in 2025, the housing market continues to face challenges. While thirty-year fixed mortgage rates were falling in the lead up to the initial Fed rate cut announcement in September, that has reversed with rates back above 7%. One piece of good news for investors is that, even though prices are up in the past year, the median sales price of new homes is down 7.2% from the peak in October 2022. Meanwhile, the Census Bureau reports that from Q3 2022 to Q3 2024 (the most recent data available) the median square footage for new single-family homes built fell 6.0%. So, it does look like a small part of this decline reflects a lower price per square foot as developers cut prices. While that decline is modest, it represents a stark reversal from the 45% gain in the price per square foot from 2019 to 2022.?That said, most of the drop in median prices is likely due to the mix of homes on the market including more lower-priced options as developers complete smaller properties. Supply has also put more downward pressure on median prices for new homes than existing homes.?The supply of completed single-family homes is up over 280% versus the bottom in 2022. This contrasts with the market for existing homes (see below) which continues to struggle with an inventory problem, often due to the difficulty of convincing current homeowners to give up the low fixed-rate mortgages they locked-in during the pandemic.?While the future cost of financing remains a question, lower prices and an abundance of inventories are giving potential buyers a wider array of options will help fuel new home sales in 2025.

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Existing Home Sales Increased in December. In spite of hitting a full year total that was the lowest in nearly 30 years, existing home sales finished out 2024 on a healthy note. Notably, sales were up 9.3% in the past year, the fastest 12-month gain since 2021. While the recent recovery is positive news, sales activity still has a long way to go.?The 4.240 million pace of December is well below the roughly 5.250 million annualized pace that existed pre-COVID, let alone the 6.500 million pace during COVID.?One problem recently is that although the Federal Reserve began cutting interest rates in September 2024, 30-year fixed mortgage rates have risen back above 7%. So at least so far, the widely anticipated shot in the arm to the housing market from improved affordability hasn’t happened and most buyers continue to sit on the fence. Meanwhile, home prices are rising again with the median price of an existing home up 6.0% from a year ago. Speaking of price, it looks like the housing market has bifurcated.?While the sales of homes worth $250,000 and above are up at double-digit percent rates in the past year, sales for homes below this threshold have continued to fall. On a positive note this demonstrates that, at least at the higher end of the market, both buyers and sellers are beginning to adjust to the new reality of higher rates. However, it also suggests that inventory at the lower end of the price spectrum has all but disappeared after the inflation of the past few years, pricing whole swaths of potential buyers out of the market. Moreover, many existing homeowners remain reluctant to sell due to a “mortgage lock-in” phenomenon, after buying or refinancing at much lower rates before 2022.?This remains a major impediment to activity by limiting future existing sales (and inventories).?However, there are signs of progress with inventories rising 16.2% in the past year.?That has helped push the months’ supply of homes (how long it would take to sell existing inventory at the current sales pace) to 3.3 in December, a considerable improvement versus the past few years, but still below the benchmark of 5.0 that the National Association of Realtors uses to denote a normal market.?A tight inventory of existing homes means that while the pace of sales looks like 2008, we aren’t seeing that translate to a big decline in prices.?

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Foreclosure Filings for All 50 States in December 2024. In December 2024, the U.S. housing market experienced a slight decline in foreclosure activity?with 28,632 U.S. properties with foreclosure filings (marking a 3% decline from the previous month and 6% decline from a year ago). The U.S. housing market recorded foreclosure filings on one in every 4,922 properties, reflecting a slight easing in foreclosure activity. Foreclosure starts totaled 19,376 properties, down 4% from the previous month and 5% from December 2023, while completed foreclosures decreased by 4% monthly and 16% annually. These trends highlight modest changes in foreclosure activity that may be shaped by evolving economic conditions. The continued decline in foreclosure activity throughout 2024 suggests a housing market that may be stabilizing, despite persistent economic uncertainties. He noted that this year’s data indicates foreclosure trends potentially returning to more predictable levels, offering some clarity for industry professionals, investors, and homeowners. While foreclosure filings remain an essential metric for assessing market health, current trends reflect a more balanced landscape, influenced by prudent lending practices and resilient homeowners. As you would expect if you read this Quarterback regularly, California led the nation with 3,772 foreclosure filings in December 2024, resulting in a foreclosure rate of one in every 3,824 housing units. Of the state’s counties, the top five for foreclosure activity were Los Angeles (898 foreclosure filings), Riverside (361), San Bernardino (332), Sacramento (187), and San Diego (186).

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This Desert Town Near Joshua Tree is Brimming With New Energy. LA Times reports that in the high desert region of Joshua Tree and Yucca Valley, there’s a new hot spot on the map, better known as Twentynine Palms. Located just 20 minutes from downtown Joshua Tree, the town of 29,000 boasts its own, less crowded entrance to the national park and a brand new visitor’s center that opened in 2023. It also has the luxuriously rustic Twentynine Palms Inn, which opened in 1928, and a few culinary gems like Rib Co. for barbecue and the Jelly Donut for pho. But Twentynine Palms is both a few degrees warmer than Joshua Tree and a longer drive from L.A. It also lies outside the natural range of the spiky Joshua trees that lend its better-known neighbors so much of their otherworldly ambiance (not to mention their Instagram appeal). And then there’s Twentynine Palms’ noticeably high concentration of barbershops, fast food restaurants and tattoo parlors, which makes sense for the 20,000 active-duty Marines and sailors and their families stationed at the local Marine Corps base, but may be less enticing for weekend tourists. “We used to call it Twentynine pizza parlors,” one longtime Yucca Valley resident lament. And yet, after spending several days in Twentynine Palms, you can become a believer. There’s a new energy in town and a bunch of folks who have put their life savings into starting creative small businesses that appeal to both tourists and the local community. Many of these new business owners, like Sara Lyons of the craft beverage store Scorpion Lollipop and Francoise Lazard of the fashionable Desert General, are longtime desert lovers who moved to Twentynine Palms permanently during the upheaval of the pandemic. And after the L.A. fires, there may be an even greater influx of visitors?to the desert as some relocate and others seek cleaner air.

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Out-Of-State Investing Summit. Why buy one house for $800,000 in Los Angeles (with negative cash flow) when you can buy eight houses (or more) in another state for the same amount of money, and enjoy positive cash flow without any of the landlord headaches? If you appreciate the significance of this question, you must attend our 6th Annual “Out-of-State Investing Summit.” Each year, the Los Angeles County Real Estate Investors Association evaluates the strongest cities in the United States for dynamic job and population growth, along with affordability, landlord-friendly laws, renter desirability, low prices, and positive cash flow. We then identified the most respected turnkey operations in each of these cities. Companies that buy distressed properties at substantial discounts, renovates the properties efficiently, makes them rent-ready, finds qualified tenants, sells them to investors like you, and then manages the properties for you professionally. The marvelous thing about turnkey companies is that they do all the work and then send you a check every month. This is why the theme of this year’s Summit is “Be an Investor – Not a Landlord.” Saturday, February 22, 2025, 9:00 am to 2:00 pm. Iman Cultural Center, 3376 Motor Avenue, Culver City, CA. $49.00 if paid before February 15. After February 15, the price increases to $99.00 per person. Don’t miss it.?This is the ultimate cashflow strategy. RSVP: www.LARealEstateInvestors.com.

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Vendors Expo Returns!?Our world-famous "Vendors Expo"?returns in 2025, on Thursday night,?February 13, 2025. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA.?FREE Admission.?Please RSVP at our website, LARealEstateInvestors.com.

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February LAC-REIA Meeting. Our special guest for February will be investor Jeremy Beland. Jeremy Beland is a real estate investor with extensive knowledge in investing, wholesaling and acquiring off-market properties. In 2017, at 40 years old, he sold his townhouse and downsized to a tiny apartment, using the equity to invest in a beginner’s coaching program and start his wholesaling journey. Since then, he has completed over?450 off-market acquisitions, utilizing various exit strategies like wholesaling, flipping, and rentals. His efforts have generated?$10 million?in total gross profits, transforming multiple markets into million-dollar successes. Now he is passionate about showing others how to achieve the same financial freedom and success. We are fortunate having Jeremy visiting us from New Hampshire.?Thursday night, February 13, 2025, 6:30 to 9:30 pm, Iman Cultural Center, 3376 Motor Avenue, Culver City, CA 90034. Free admission. RSVP: www.LARealEstateInvestors.com.

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This Week. Investors will continue to look for additional guidance from Fed officials on their plans regarding future monetary policy. For economic reports, the main event will be CPI on Wednesday from the Bureau of Labor Statistics. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will be released on Friday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of our economy.?

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Weekly Changes:

10-Year Treasuries:???????????? Fell????005 bps

Dow Jones average:??????????? Rose??200 points

NASDAQ:?????????????????????????????Rose??200 points

Calendar:

Wednesday (2/12):?????????????? Consumer Price Index

Friday (2/14):????????????????????????Retail sales

Friday (2/14):????????????????????????Import Prices

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For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, LLC

[email protected]

310-792-6404

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