Category Archives: Property

Economy General Property

The Firmest of Housing Market Recoveries

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By John Mulville, Regional Director – Metrostudy

Most people, especially those in the housing industry, can remember a few unbelievable anecdotes from the sub­prime era. One of the most memorable was the one about the Riverside County “investor” who owned 15 homes, all with “no doc” stated income loans (so called “liar loans”). Inevitably, the slightest hiccup in rent payments, taxes, dues and maintenance caused a shortfall in cash flow for this unfortunate inves­tor that ultimately led to a bankruptcy filing.

Compare the subprime era to 2018. Our thesis for 2018 is that the current recov­ery is experiencing conditions that are diametrically opposite of the subprime era. In fact, the conditions that typify the current housing market expansion have established one of the firmest hous­ing market recoveries in U.S. history.

Remember early in this recovery cycle when new home builders focused al­most exclusives on upper-end housing? Here is why.

Upper-income households don’t rely on wages from working as do lower income classifications. Affluent households have investments and business income that recovered much more quickly and with greater vigor than wage income. As a result, this cycle has many more home purchases being made by financially capable households than has been the case in past recoveries. Higher income groups are financially resilient, make larger down payments and have greater reserves in case of financial distress.


A second factor is immigration. In recent years immigration has been dominated by well-educated groups that earn higher wage levels than immigrants have historically. Additionally, current immigrants have a much greater propensity to buy and will spend more on housing, with larger down payments, than existing American citizens. It is important to note that the housing stock in many foreign countries is very unattractive. Immigrants considering a purchase have reported that U.S. housing, particularly new homes, are vastly more attractive and livable than housing in developing nations.


A third factor is household debt. The so-called Great Recession rebalanced the amount of household debt with overall income levels (shown next). While it is true that the reduction in household debt came about as the result of foreclosures and short sales, it is also true that many households rid themselves of debt that could not have been paid off or amortized away. As shown below, debt service payments have retreated to levels last seen in the 1980s.


The severe shortage of new and existing homes for sale has forced those interested in purchasing to improve their standing as potential purchasers. In general, it takes a degree of determination and persistence to be a successful purchaser in today’s market. Prospective home buyers have cleaned up their credit, made multiple offers, and written “sweetheart” letters to sellers, only to find there are dozens of other buyers. Some interested buyers opt for the new home market, where they hope there is less competition. However, builders recognize the deep undersupply of homes and will tend to cater to those parties that have the best chance to qualify for a loan and the determination to complete the purchase transaction.

The competition for homes can be viewed in terms of credit scores among those that have qualified for a loan (shown next). As shown below, for 2017 the FICO score (credit ratings for consumers) for successful mortgage applicants is at an all-time high. Public homebuilders that often originate their own loans report similar stellar credit scores among their applicants. A 720 FICO score is considered to be in the “good” range and highly creditworthy. Accordingly, current scores indicate a highly qualified and capable pool of purchasers is competing for the available homes.

Much has been made about the lack of entry-level and first-time buyer activity until recently, when this activity has finally picked up. The fact that buyers are much older and marry later in life has a profound impact on the home purchase equation. Intuitively, we recognize that getting married later in life offers more maturity to the relationship; in fact, divorce rates for those married at older ages are markedly lower.


The same can be said for older home­buyers, particularly in a market climate were the determination and persistence needed to purchase will tend to exclude the less-committed buyer that may be infatuated with the concept of owning. Over time the older homeowner will prove to be a better neighbor, a better owner and a better borrower than would be typical of a much younger age profile.


Another contributor to the quality and durability of the current recovery is the lack of new home construction. The recession depressed housing construction levels in a very severe manner. Housing starts were far below the totals needed to meet population growth. New home construction rebounded very slowly, especially in Southern California, even as the economic expansion took hold and then strengthened.

The chart on page four shows building permits in six Southern California counties going back to 1990. Normal population growth suggested the need for 83,000 apartments, condos and single-family-home permits annually (as shown by the dashed red line). Permits levels have been below 83,000 in nearly all years and far below that level in most years.


The magnitude of the undersupply is large enough that there is no practical way to build our way back to supply/de­mand equilibrium. This indicates that strong demand will persist and that the current recovery will enjoy positive de­mand characteristics for years to come.

Key Takeaways

It is widely recognized that housing, or more specifically, poor credit stan­dards and loan underwriting, led to the subprime debacle and the Great Reces­sion. Historically and statistically, it is very unlikely that real estate will be the cause of the next economic downturn or recession. Additionally, policy mak­ers and government officials have typi­cally taken steps to avoid a repeat of the conditions that caused the LAST reces­sion. The aforementioned factors indi­cate that housing will not be the cause of a similar disruption. Moreover, the factors suggest that the current housing market recovery may enjoy the firmest footing and the most positive alignment of conditions experienced by any hous­ing market recovery in U.S. history.

Please refer any comments or questions to:

John Mulville, Regional Director – Metrostudy
2211 Michelson Drive, Suite 810
Irvine, CA 92612

General Politics Property

Steady Property Value Gains in the High Desert

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By Bob Dutton, San Bernardino County Assessor-Recorder-Clerk

As businesses and residents continue to be priced out of Southern California’s coastal communities, San Bernardino County is experiencing strong eco­nomic growth. There is a slight uptick in commercial construction, residential construction, and new transfers in prop­erty ownership. Housing affordability is a key factor in the large number of people moving to the Inland Empire. According to the U.S. Census Bureau, from 2016-2017 San Bernardino County added 20,000 new residents. More peo­ple are buying homes in San Bernardino County or opening up a small business. With such increases, steady property value gains are being experienced in our region.

State law requires the office of the As­sessor to locate and identify all taxable properties to establish their assessed values. My goal as County Assessor is to ensure that property owners are not being over-assessed. Every year my of­fice works diligently to fairly and accu­rately appraise over 800,000 parcels in San Bernardino County.

2017’s Annual Property Assessment Roll showcased a number of positive attributes, some never before seen in our county. In 2017 the Roll contained 810,304 taxable parcels, valued at $206,576,804,207. The county’s total property valuation grew 6.1% as compared to the 2016 Assessment Roll. Notably, this is the first time in the county’s history that total assessed value of all property surpassed the $200 billion mark.


In some portions of the High Desert, there was much higher growth. Accord­ing to the 2017s Annual Property As­sessment Roll:

  • The City of Adelanto’s total property is valued at $1,941,513,249. The val­ue is a 6.4% increase from the 2016 Assessment Roll.
  • The City of Apple Valley’s total property is valued at $5,646,168,002. The value is a 5.3% increase from the 2016 Assessment Roll.
  • The City of Barstow’s total property is valued at $1,286,061,810. The val­ue is a 7.8% increase from the 2016 Assessment Roll.
  • The City of Hesperia’s total property is valued at $5,683,417,520. The val­ue is a 6.5% increase from the 2016 Assessment Roll.
  • The City of Victorville’s total prop­erty is valued at $8,259,259,319. The value is a 4.5% increase from the 2016 Assessment Roll.

Growing property values are a sign of a strong local economy. However, there are still many hurdles that our county faces. According to the Building Indus­try Association of Southern California, issues include a high poverty rate of 19.5%, an estimated housing shortage of 65,000 homes in San Bernardino County by 2019, and government road­blocks at the state and local levels.

Creating acces­sible, good-paying jobs is one step in addressing poverty. State lawmakers, however, continue to overtax Californians and businesses at some of the highest rates in the nation. Removing business tax burdens would help entice more employers to create good, local jobs in the Inland Empire. Another step would be to remove bur­densome local and state regulations and reforming the California Environmental Quality Act to mitigate lengthy envi­ronmental impact studies. Such actions would help boost the building process of new homes and commercial buildings to meet the increasing housing demands in San Bernardino County.

As San Bernardino County’s Assessor- Recorder-Clerk, and a member of the California Assessors’ Association Legislative Committee, I am committed to working with colleagues to develop and support legislation which encourages economic growth. If you have any questions or wish to see personal assessed values of your property, visit my website at: and click on the Online Services, Property Information Management System link. You can also call our toll-free number at 1-877-885-7654.

General Property

Housing Authority of the County of San Bernardino (HACSB) Questions & Answers

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What housing programs does HACSB administer?

HACSB owns and/or manages approximately 12,700 housing units through three main housing programs throughout San Bernardino County:

  • Housing Choice Voucher Program (commonly referred to as Section 8), serves 10,121 households. This total in­cludes families participating in the tra­ditional Housing Choice Voucher Pro­gram, Term-Limited Lease Assistance Program (term limited program), and special purpose programs such as vouch­ers exclusive for veterans. HACSB does not steer or designate where a family should move; families have the choice to find a home suitable for themselves/their families in any city. These units are privately owned, with rent subsidies paid directly to owners by the Housing Authority. These programs are man­aged by HACSB offices in Ontario, San Bernardino, Upland, and Victorville.
  • Public Housing Program, serves 646 households. In partnership with the U.S. Department of Housing and Urban De­velopment (HUD), these units are owned and managed by the Housing Authority through its offices in Barstow, Chino, Colton, Redlands, San Bernardino, and Upland.
  • HACSB’s Authority-Owned Portfo­lio serves 1,926 households that are a mix of affordable and market rate units. These units are owned by the Housing Authority and were either acquired or developed through a variety of part­nerships with the State of California, San Bernardino County Department of Community Development and Housing, various cities throughout the county, and Housing Partners I Inc., a nonprofit pub­lic housing corporation.

Why is HACSB different than other traditional Housing Authorities in other areas?

HACSB is not like a traditional Hous­ing Authority; they are Congressionally designated a Moving to Work agency for being a high performer and innova­ tive agency, which means they have the ability to develop, transform, and estab­lish local housing programs and servic­es that best meet the needs of the local communities. Currently, there are only 39 designated MTW agencies out of 3,200 housing authorities nationwide.

The name of the designation can be a bit confusing, but the three goals are to help families achieve economic inde­pendence, provide families with various housing options, and save taxpayer dol­lars through administrative efficiencies.

They have used this designation in a wide variety of ways, such as imple­menting term limits on new families assisted as part of the Housing Choice Voucher Program (non-elderly/non-disabled).

Is immediate housing assistance available? Does it really take years to receive help?

Unlike other health and human services programs, HACSB provides housing as­sistance based on the number of vouch­ers and public housing units in which they are authorized and funded through HUD. Unfortunately, they do not have the resources to provide immediate housing assistance.

There are approximately 51,574 appli­cant households on our various housing programs waitlists. The waiting lists are broken down and managed by housing programs, housing sites, and bedroom sizes.

The wait time varies in each of these waiting lists. As families move off any of our housing programs, families are pulled from the waiting lists to back­fill. Families wait years to get housed. In the recent decades it has taken some Housing Choice Voucher waiting list applicants 7-8 years to get housed.

How can an individual/family access the waiting list applications?

For current information on HACSB’s open waiting lists, please download an pre-application from the following web­ site:

Pre-applications are also available at any HACSB office location.

Does HACSB screen their housing applicants to make sure they are law- abiding program participants?

All applicants 18 years of age and older are subject to third party screening and verification of criminal history. We also require that all adult members adhere to a crime-free addendum. HACSB’s Voucher/Family Obligations Agree­ment also stipulates that they must not engage in any criminal offenses, or they may be subject to the termination of their assistance.

How have the federal budget cuts af­fected the Housing Authority and is anything being done to help program participants rely less on government assistance?

The ongoing budget reductions at the federal level have resulted in a loss to HACSB of approximately $39 million between calendar years 2008 – 2018. The majority of HACSB’s funding comes from the federal government to subsidize its two main affordable hous­ing programs: Housing Choice Voucher and Public Housing Programs.

HACSB only receives a certain allo­cation of vouchers and public housing units. Without an increase from HUD/Congress, we aren’t able to serve addi­tional families outside those allocations. Slight increases happen throughout the years, but primarily for the special purpose vouchers like those designated exclusively for veterans, but these are literally a few vouchers here and there. As families move off any of our housing programs, families are pulled from the waiting lists to backfill.

HACSB’s Career Development Initia­tives Team helps families with career mentoring; resume building; overcom­ing barriers to employment; financial literacy/capability skills such as budget­ ing and credit/asset building; and other employment development services. HACSB also partners with the San Ber­nardino County Workforce Develop­ment Department, which provides on-site Workforce Development Specialists who work exclusively with HACSB customers to assist them in job training and placement. These efforts and part­nerships help insure greater personal ac­countability for the families while pro­viding meaningful services to help them achieve economic self-sufficiency.

Is it true that there has been an influx of HACSB “Section 8” partici­pants in the High Desert cities?

Currently, approximately 3.85% of all HACSB Housing Choice Voucher program participants live in the High Desert (when considering the follow­ing cities only: Barstow, Adelanto, Vic­torville, Apple Valley, and Hesperia). This is down from the previous average of 4.3% living in the High Desert cities between 2013-2017.

Families/individuals participating in the Housing Choice Voucher Program (commonly referred to as Section 8), have the choice to live in any city of their preference. HACSB does not steer families to live in any one particular area.

Are there any resources in San Bernardino County for homeless individuals and families?

The Housing Authority doesn’t have the resources for immediate housing as­sistance or manage homeless shelters.

San Bernardino County has established a Coordinated Entry Systems (CES) to identify, assess and prioritize homeless individuals and families for housing and services based on their individual situations.

Therefore, all individuals/families in need of homeless housing assistance and resources should call, dialing the 3-digit calling code, 2-1-1. The caller is connected to a live, bilingual homeless-assistance call specialist who will help assess the caller’s situation and stream­line access to homeless assistance ser­vices, screen applicants for eligibility for these and other programs in a consistent and well-coordinated way, and assess needs to determine which interventions are the best fit for each individual and/ or family. A call can be made 24-hours a day, 7-days a week.

What is HACSB’s governing structure?

HACSB has two governing boards: the Governing Board of Commission­ers and the Housing Commission. The Governing Board of Commissioners is the County of San Bernardino’s five-member Board of Supervisors. The Board of Supervisors appoints the sev­en commissioners to serve this public agency and to act as its Housing Com­mission. These individuals provide strategic and policy direction.

For more information on the governing boards, please visit:

Who can a community member contact with issues regarding any HACSB program participants?

If a community resident believes a household may be a participant in any of HACSB’s affordable-housing programs and is causing disturbance in the com­munity, they may call (909) 332-6302 to report the situation. Whether the family is an HACSB-program participant can­not be disclosed. However, if the family is an HACSB-program participant, we will open an investigation and address any findings.

General Property

The IRS 170 Bargain Sale: The Appeal is Real

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By Kathryn Tong, Senior Aquisition Manager – CRE Western Region

Ever been forced to sell a stock in a sinking market or pressured to trade a car for less than it’s worth? Anyone who has experienced these disappointing fi­nancial transactions has felt the sting of sacrificing an asset for less than its true value. No one wants to sell at a loss; in­deed, everyone expects to gain from a sale. Yet “selling for less than full val­ue” is the very essence of a 170 bargain sale of real estate.

What is an IRS Section 170 Bargain Sale?

An IRS Section 170 Bargain Sale trans­action is also known as a Bargain Sale. It’s a combination of cash at closing from a buyer plus cash in the form of tax reduction or rebate from Federal and State governments. The cash portion of the IRS Section 170 Bargain Sale can be anywhere from 5-, 6- or even 7-figur­cash amounts at closing, depending on the transaction, with the rest of the cash benefit coming from tax savings. De­pending on the seller’s tax liability, it’s not uncommon to get the full tax benefit in as little as 30 days, but the seller has up to six years to fully utilize the deduc­tion.

First written into law back in 1917 as part of the War Revenue Act, and predating the 1031 Exchange, it uses the tax law to encourage philanthropy. It is estimated that there are over 20,000 of these real estate transactions done annually, with an estimated value of $8,000,000,000.

This transaction is regulated by the IRS Code Section 170 because it relates to charitable contributions of non-cash transactions. IRS Publication 526 and 561 are two additional IRS publication guidelines that further help explain the guidelines for this type of transaction.

This transaction is really the same as any other real estate transaction with a buyer or seller and real estate agent. However, with the IRS Section 170 Bargain Sale, the buyer is a tax-exempt entity and the seller is desiring to receive a tax de­duction on a portion of the transaction. Therefore, special rules apply to this transaction. Some of the unique transac­tion’s features are the following:

  1. The buyer must be a qualified tax- exempt nonprofit.
  2. The seller must obtain a qualified appraisal if the asset is valued over $5,000.
  3. The seller may deduct the differ­ence of the appraised value and the cash amount received as a charitable contri­bution. This charitable-contribution tax deduction is like any other cash chari­table contribution to a church, the Red Cross, etc., and is therefore governed by the standard rules and regulations of charitable contributions.
  4. The difference is that it’s not cash and therefore requires some sort of val­uation mechanism defined by the IRS for charitable-contribution purpose. The method valuing the specific assets are further defined in IRS Publication 561.
  5. Buyer, seller, and appraiser must sign IRS Form 8283, and seller must submit this form with seller’s tax re­turn.
  6. In order to qualify for the Federal and State tax benefits, the seller must have sufficient taxable income to utilize the charitable portion of the transaction. The seller is entitled to write off up to 50% of their annual Adjusted Gross In­come (AGI) for charitable purposes.
  7. When it comes to real estate, how­ever, there is a caveat. The seller can deduct up to 50% of their annual AGI only if they use their cost basis for the property (what they paid for it). In the vast majority of cases, however, it is in the sellers best interest to accept the 30% ceiling for allowable charitable tax deductions in a given year and use the current Fair Market value of the prop­erty based on an independent, certified appraisal.

How is this different from a donation?

Unlike a standard donation, the IRS Section 170 Bargain Sale is a combi­nation of cash from the buyer at clos­ing (or possibly over time, if terms are agreed to) and a cash benefit derived from tax savings in the form of reduc­tion or rebate, depending on the sellers specific tax liability. It is defined in IRC 170 of the IRS code as a “Bargain Sale” because it is in fact a sale but has a char­itable component to it.

A straight donation has no cash compo­nent and is often not valued for its full and fair market value, due to the seller either not being informed about IRS ap­proved valuation guidelines or not car­ing enough about the deduction.

In short, the IRS Section 170 Bargain Sale delivers the best of both worlds to a seller. They typically get cash at clos­ing or possibly the assumption of debt, PLUS they get a valuable tax deduction to reduce or eliminate other tax liabili­ties.

Property Appraisal for an IRS Section 170 Bargain Sale Transaction is a Game Changer

Why? Because the size of a tax deduc­tion from the Bargain Sale can be sig­nificant. The large deductions afford the right seller tax savings that could exceed the amount donated. The tax benefits from the transaction apply for up to 5 more years for the seller.

The true Fair Market Value assessment makes the Bargain Sale amazing!

The Fair Market Value is a significant contributing factor to why the Bargain Sale is an amazing opportunity. Before we look at this appraisal closely, let’s examine a few more appraisal types and compare them to the FMV.

  • Liquidation Value (aka the fire sale)
  • Tax Assessment Appraisal
  • Bank Appraisal (conservative mar­ket value)
  • Comparable Sales (excluding dis­tressed sales)
  • Income approach (based on optimal NOI)
  • Replacement Cost (insurance ap­praisal)

Now, let’s give a more concrete defini­tion of what this means and entails.

The Higher Value IRS 561 Appraisal differs from the Bank Appraisal and other types of appraisals. The 561 ap­praisal specifically evaluates donated property. The IRS defines Fair Market Value as a price that would be agreed on between a willing buyer and a willing seller. Neither party is under any com­pulsion to buy or sell. Both have reason­able knowledge of the relevant facts. Essentially, the Bargain Sale raises the Fair Market Value, while most other transactions decrease the value. Based on IRS Publication 561 appraisal guide­lines, the higher FMV attracts buyers. The value of donated property dictates the amount of the tax deduction the sell­er receives. The higher the property is appraised, the more tax deductions sell­ers receive.

What is the difference between a 1031 Exchange and a Bargain Sale?

The 1031 Exchange is an excellent ve­hicle to build up wealth in a tax-free environment. However, when you want to cash in your 1031 Exchange, the to­tal accumulated profits become taxable. That’s because the 1031 Exchange is a tax-deferment vehicle while the IRS Section 170 Bargain Sale is a tax-reduc­tion strategy.

With the Bargain Sale, the seller can en­joy immediate cash at closing PLUS an immediate tax deduction that in many cases can significantly reduce taxes due by the seller. In short, the IRS Sec­tion 170 Bargain Sale eliminates taxes, while the 1031 Exchange merely delays taxes, which may have to be paid at an even higher rate in the future, depending on prevailing tax law at the time.

Can I use a Bargain Sale to cash out of my 1031 Exchange tax free?

When you cash out of your 1031 Ex­change, there is typically a big tax bill due. You can offset some or all of that tax liability with IRS Section 170 Bar­gain Sale, which, in effect, absorbs the brunt of the tax liability with the charita­ble portion of IRS Section 170 Bargain Sale. You can accomplish this a couple ways:

  • Sell the property coming out of the 1031 Exchange using IRS Section 170 Bargain Sale. This assures that the bulk of the funds you ultimately receive will be tax free. It also greatly reduces taxes due on the cash portion of the transac­tion.
  • If you have already been cashed out of your 1031 Exchange and are facing a big tax bill, you can do IRS Section 170 Bargain Sale on a different piece of property and use those tax savings to offset some or all of your gains from the 1031 Exchange.

2018 vs 2017: The Real Estate Bargain Sale Got Better!

Before 2018 when you sold real estate, your state taxes for proceeds were de­ductible from your federal taxes; as of 2018, these taxes are no longer deduct­ible. Obviously, you should confirm your situation with your CPA, but this is the essence.

Subsequently, the proceeds from a tra­ditional cash transaction from a real estate sale are subject to that additional portion of taxes that were previously deductible from federal taxes (i.e. state taxes). Depending on where you live, that can vary from a couple of percent­age points up to 5 or 6% in states like California. Again, check with your CPA for your situation. The benefit here is that if you sell your asset via a Bargain Sale, you can still use the charitable deduction portion against your federal taxes, thereby avoiding state taxes and any lack of state tax “deductibility.”

For more information about 170 Bar­gain Sale real estate transactions, please contact Joseph Brady of the Bradco Companies at (760) 954-4567.

The posts focus on creating a win-win-win situation within the world of commercial real estate transactions. The content found on this page, however, is for educational purposes only and is not intended to constitute legal, financial, or tax advice. Please consult your attorney, accountant, tax or other adviser before acting on any information found here.

General Property

North San Bernardino Industrial Market Report

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Information provided in this report is based on data derived from CoStar.

North San Bernardino includes Adelan­to, Apple Valley, Barstow, Hesperia, Victorville and their surrounding cities, which encompasses ±19,507,908 Sq. Ft. of existing industrial space, accord­ing to CoStar. The City of Victorville makes up ±7,948,142 Sq. Ft. or ±40% of the existing industrial inventory, with ±4,466,746 Sq. Ft. located at Southern California Logistics Airport (SCLA) ,home to companies such as Dr. Pepper Snapple Group, Newell Rubbermaid, M & M Mars, Plastipak and other large na­tional industrial/manufacturing tenants.

According to CoStar, we ended the 1st quarter of 2018 with an industrial vacancy rate of 7.5%, down from the 4th quarter of 2017’s rate of 8%. This may appear high when compared to the 5.3% vacancy rate the Inland Empire is currently experiencing, but when you take into consideration that only five properties makeup ±1,135,545 Sq. Ft of the ±1,438,609 Sq. Ft. of vacant space currently available, and the fact that four out of these five properties are suited for very specific uses and are outdated, you are looking at an adjusted vacancy rate closer to 2%. This actually indicates that North San Bernardino has a critical need for more industrial space which is simply not being met.

The last significant industrial building constructed was delivered in June 2017. This project is known as Distribution Center 18 and is located in the California Logistics Center at SCLA; comprised of ±370,000 Sq. Ft. this facility was fully leased to Newell Brands and Plastipak Packaging.

Two major projects are presently underway in the Northern San Bernardino region that when completed will dramatically increase the total industrial square footage in the market but will not really change the landscape of the industrial market in regard to adjusted vacancy. Watson Land Company recently broke ground on a ±1.35 million Sq. Ft. distribution center for Big Lots in Apple Val­ley that is expected to be completed in 2019, and Industrial Integrity Solutions is currently developing a ±600 million Sq. Ft. Industrial Park in the City of Adelanto; known as the HDO Industrial Park, it is expected to be delivered in 2018. The HDO Industrial Park development has largely been spurred by the City of Adelanto’s pursuit of the nascent Medical Marijuana industry. The former project is likely to remain owner occupied for a long time coming, and the latter’s development is largely hinged on volatile market demand, projected profitability and what appears to be a dwindling supply of privately capitalized cannabis entrepreneurs.


Economy General Property

2016 Economic and Housing Market Outlook

Published by:

By Oscar Wei, Senior Economist


Economic Outlook

The U.S. economy ended last year with a lackluster performance of 1.4% annual­ized growth rate in the fourth quarter of 2015. While the annual increase in GDP in 2015 maintained the pace as that of 2014, it was a letdown for many econo­mists who predicted a stronger outlook for the nation last year. The subpar per­formance of the year was due to multiple factors including: 1) the sharp decline in oil and commodity prices; 2) the eco­nomic slowdowns in China, Europe, and Canada; and, 3) a strong dollar that makes American goods relatively expensive and weakens demand overseas. Despite the hiccups in recent quarters, the labor mar­ket continued to improve, with nonfarm employment averaging a gain of more than 233,000 new jobs per month in the last 12 months. The unemployment rate in March 2016 also reached a near-full employment level of 5% that we have not seen since 2007.

Meanwhile, the economy of California continued to grow at a faster pace than that of the nation as technology and tourism pushed the state economic growth ahead of much of the country. The strong per­formance in the labor market is an illustra­tion of how well the Golden State has been doing in recent years. The unemployment rate in California dropped to 5.5% in Feb­ruary, the lowest level observed since Au­gust 2007. Statewide job growth has been rising at or near 3% year-over-year since late 2012. While the unemployment rate in California remained above that of the U.S., the growth in the job market at the state level has been outpacing the nation since March 2012. Overall, the outlook for the economy remains positive with continued improvement in consumer, business, and state and local government spending in 2016.

California Housing Market Outlook

With the economic fundamentals remain­ing strong in California, the state housing market has had a solid performance since the beginning of this year. Through the first two months of 2016, sales of exist­ing single-family detached homes have surpassed the sales level at the same point of 2015 by 7.6%. When compared to the previous year, sales in February in­creased in most price segments except for those properties priced under $200K, between $300K and $400K, and homes over $2,000,000. Homes priced between $1,000,000 and $2,000,000 experienced the strongest growth—rising by 10.8% over February 2015.

Much of the growth in Southern Califor­nia in particular was driven by the Inland Empire as sales in Riverside and San Ber­nardino were 7.5% and 5.1% above last year. Orange County saw a 1.5% increase in sales last month. However, Los Ange­les, San Diego and Ventura all experi­enced negative growth in February. In the Bay Area, only Solano and Sonoma saw an increase in home sales, suggesting that tight inventories are beginning to nega­tively impact activity.

As for the statewide median home price, growth rate cooled to a 3.8% annual pace in February 2015 as the statewide median price increased to $446,460. This marks the slowest rate of growth for home price in six months and likely reflects the shift of sales activity toward the Central Valley which has lower home prices on average. As tight inventory in the Bay Area and Southern California drive a larger share of activity in more affordable areas, price growth should continue to normalize in the remainder of 2016.

The statewide housing supply remains an issue as the demand for housing contin­ues to outpace the growth in inventory. While it is a welcome sign to see steady improvement in housing demand, the lack of supply is definitely a concern. The im­balance between the two sides not only intensifies market competition and pushes home prices higher, but it also leads to housing affordability issues that will ulti­mately lower homeownership rates if the problem persists.

The supply constraint in the Bay Area is more pronounced and has led to fewer homes being sold in the high-cost region. On the other hand, demand in regions with more affordable housing continues to improve and more home sales will like­ly take place in the coming year. As such, a slow-down in home price appreciation at the state level is anticipated as the mix of sales changes in favor of lower-priced properties in 2016.

High Desert Regional Housing Market Outlook

Home sales activity continued to improve in the High Desert region at the beginning of 2016. The number of single-family detached homes sold in February 2016 increased 4.5% when compared to the same time last year. In fact, sales have been improving on a year-over-year basis for every month since March 2015. The year 2015 was also the first year since 2009 that the market experienced a year-over-year gain in sales. With the econo­my expected to improve in the upcoming year, sales in the regional housing market should continue to grow with a mid-single digit in 2016.

The median home price of the High Des­ert region remained on an upward trend in the most recent month. When com­pared to last year, the regional median price increased 8.5% to $203,600 in Feb­ruary. Over the last twelve months, the year-over-year gain in median price has an average of 9.6%, slightly higher than the statewide average of 6.0% for the same time frame. Home prices in the High Desert region have been improv­ing since 2012, with its annual median price increasing 24.5% in 2013, 16.6% in 2014, and 9.2% in 2015. Despite the upward trend in price in recent years, the regional median price in February 2016 remained 39.6% below the cyclical peak reached in June 2006 but was up 90.9% from the recent cyclical bottom reached in April 2009. For the rest of 2016, increase in housing demand in the region should put upward momentum on home prices as the economy continues to improve. The regional median price could increase year over year by a mid-to high-single digit in 2016.

Economic and Housing Market Forecast

Fig 1: Sales of single-family homes (High Desert)

Fig 1: Sales of single-family homes (High Desert)

Looking ahead, the state economy should continue to grow through 2016, as the high-tech sector remains in the driver seat. New product development may disrupt in­dustries across the globe, but it could also yield sizable revenue and have significant spillover effect in their respective local economies. The construction industry is an example that shows how the rapid ex­pansion of technology firms throughout Silicon Valley has helped to drive the con­struction payrolls to increase by double-digits over the past year. Improvement in the construction industry is expected in the upcoming year and will help to push the economy forward. The statewide non-farm job growth will increase by 2.3% in 2016, and the unemployment rate in Cali­fornia will fall from 6.2% in 2015 to 5.5% in 2016.

Meanwhile, the California housing market is expected to have a decent performance in 2016. The Federal Reserve will most likely raise the federal funds rate two to three times in 2016. Modestly higher in­terest rates, however, should not present much of a direct challenge to the hous­ing market. With the economy expected to grow, housing demand should continue its upward trend, with sales of existing single-family homes projected to increase 6.3% in 2016 to 432,570.

Fig 2: Median price of single-family homes (High Desert)

Fig 2: Median price of single-family homes (High Desert)

Inadequate supply in high-end areas such as the Bay Area will continue to exert up­ward pressure on prices, but home sales in those regions will simultaneously be constraint. The constraint in home sales in the Bay Area leads to a decline in the share of high-end homes sales to overall home sales, which could also lead to a slow-down in the appreciation in the state­wide median price. As such, the statewide median price is expected to increase at a moderate pace of 3.2% in 2016 as more homes in the affordably-priced Central Valley and Inland Empire are being sold.

Risks that Could Tip the Scales

Fig 1: California Housing Forecast

Fig 1: California Housing Forecast

Although the outlook for both the econo­my and the housing market remains posi­tive for 2016, there are uncertainties and wildcards in 2016 that could change the outcome and tip the scales the other way. Global economic issues, for example, could begin taking a toll on economic growth domestically in 2016. Slow eco­nomic growth in China and other Europe­an countries, coupled with stronger growth in the U.S., have paved the way for higher interest rates and led to a stronger dollar. As such, international trade will likely be a drag on growth with global economic slow-down and the stronger dollar cut demand for exports, while continued improvement in consumer spending will pull in more imports.

Robust increase in jobs in high-cost ar­eas could be another downside risk to the housing market. Due to the spillover ef­fect of growth in high-paying jobs, plenty of lower-paying jobs have been created, with many of these jobs being in the same geographic areas where the high paying jobs are being added. As such, income disparity in these areas could further com­plicate and deteriorate the housing afford­ability issue.

Policymakers continue to list the mortgage interest deduction (MID) as a potential tar­get in any movement toward tax reform. If MID were to be eliminated, home buy­ers would not have the tax savings benefit of homeownership, thus reducing their incentive to purchase a house, lowering the demand for housing, and thus reduc­ing affordable homeownership across the country and the State of California. The economic impact would stress the state’s already battered balance sheet and, if any of the proposed changes were to come to fruition, could amount to billions of dollars of economic output lost.

While the recent volatility of the stock market has been drawing attention in the news, it is more of a distraction rather than a disruption to the continual improvement in the housing market. The drop in values of equity in January reduces the overall wealth and may have a small negative ef­fect on the economy in general. Its impact to the housing market, however, should be minor, as solid employment conditions, anticipated increase in household forma­tions, and record-low interest rates contin­ue to provide support to the fundamentals of the housing market.


Economy General Property

Most High Desert Home Values Trending Up

Published by:

By Bob Dutton
Assessor-Recorder-County Clerk
San Bernardino County

As the newly elected Assessor for San Bernardino County, I am very interested in monitoring and taking action to stimu­late economic development in the region. One of the key indicators of the regional growth is the value of the various prop­erty types within the County.

Over the last several years, dating back to 2008, there have been some very dra­matic changes in assessed property val­ue. Before we discuss property value, it is important to distinguish the difference between market and assessed property value.

Market value: The lowest price a sell­er would be willing to receive while at the same time the highest price a buyer would be willing to accept on an open and competitive market.

Assessed value: Value utilized by the As­sessor as the basis for taxation of prop­erty. In California this is constrained by Proposition 13 enacted in 1978.

In the 2007-2008 timeframe, properties within San Bernardino County reached a peak point. However, with the down turn in the economy and the resulting reces­sion, many properties had a dramatic re­duction in value. Properties located in the High Desert area followed this same pat­tern. This region includes the incorporat­ed cities of Adelanto, Apple Valley, Bar­stow, Hesperia, and Victorville, as well as the unincorporated areas of Lucerne Valley, Pinon Hills/Phelan, Wrightwood, Helendale, Hinkley, Yermo/Daggett and Newberry Springs.

When looking at the difference in all High Desert secured property from the peak in 2008 until the low in 2012, there was an overall decrease of 35% in assessed value. The majority of the reduction was felt within residential property with a de­crease of 48.5%. This accounts for 93% (by number of properties) of all property. Commercial, industrial and agricultural property remained relatively the same during this time frame with only slight fluctuation in the assessed value.

Fig 1 Most High Desert Home Values Trending Up

To understand the current trend, we can look at what has occurred in assessed val­ue over the last three years, 2012 through 2014. As shown in Figure 1 (Residential Average Assessed Value), all of the in­corporated cities except Barstow have experienced positive growth in assessed value for residential properties:

  • Adelanto: 14.41%
  • Apple Valley: 11.50%
  • Barstow: (4.93%)
  • Hesperia: 11.80%
  • Victorville: 12.67%

Of the unincorporated areas, some of the residential properties have realized slight growth and others have declined in as­sessed value:

  • Lucerne Valley: 1.41%
  • Pinon Hills/Phelan: 6.89%
  • Wrightwood: 6.82%
  • Helendale: 4.81%
  • Hinkley: (47.75%)
  • Yermo/Daggett: (5.29%)
  • Newberry Springs: (5.18%)

Fig 2 Most High Desert Home Values Trending Up

For commercial properties (e.g., stores) in the incorporated cities, there is mini­mal growth, with the majority realizing a decline in average assessed value as shown in Figure 2 (Commercial Average Assessed Value):

  • Adelanto: (6.99%)
  • Apple Val­ley: (2.32%)
  • Barstow: (2.73%)
  • Hesperia: 5.27%
  • Victorville: 3.21%

Similarly, the unincorporat­ed areas have predominately seen a decrease in the commercial as­sessed average value:

  • Lucerne Valley: 6.46%
  • Pinon Hills/Phelan: (0.22%)
  • Wrightwood: (1.17%)
  • Helendale: (18.63%)
  • Hinkley: (33.41%)
  • Yermo/Daggett: (0.43%)
  • Newberry Springs: 1.71%

Fig 3 Most High Desert Home Values Trending Up

The last area of interest is the industrial properties (e.g., warehouses, manufac­turing, etc.). As shown in Figure 3 (In­dustrial Average Assessed Value, the values for the incorporated cities have stayed primarily the same or had a slight decrease:

  • Adelanto: 6.76%
  • Apple Valley: (0.06%)
  • Barstow: 3.64%
  • Hesperia: 4.62%
  • Victorville: (3.45%)

These trends are also seen in the unincor­porated areas as well:

  • Lucerne Valley: (1.51%)
  • Pinon Hills/Phelan: (4.01%)
  • Wrightwood: 2.47%
  • Helendale: (13.22%)
  • Hinkley: (4.90%)
  • Yermo/Daggett: (8.02%)
  • Newberry Springs: (5.35%)

In summary the outlook for residential property has been positive and shows strong growth, but we are still lagging in commercial and industrial properties. I have a strong interest in working toward economic growth in the High Desert region, as well as throughout all of San Bernardino County. If we can stimulate development in the commercial and in­dustrial properties, it will in turn create additional jobs and provide for even stronger future growth for the residential property values.

General Property

Hesperia’s Tapestry Master-Planned Community will be a Jewel of the High Desert

Published by:

By the Tapestry Development Team

Nearly 25 years after first being set into the plans at the founding of the City of Hesperia, a master-planned community is finally going to be a re­ality. The former Rancho Las Flores Specific Plan is now the Tapestry mas­ter-planned community. The project is being developed by Terra Verde Group, which has a successful history of build­ing master-planned communities in Southern California and throughout the United States.

Even though the property is already entitled for over 15,000 homes and is part of the City’s General Plan, the project will face additional review due to updates in its plans. In the next few months, Tapestry will go before the Hesperia Planning Commission and City Council for approval of a new En­vironmental Impact Report (EIR), Spe­cific Plan, and Phase I Tentative Tract Map. The project team has already held several public meetings and informa­tional sessions and expects to do more in the lead-up to approval.

The Tapestry master-planned communi­ty is located at the heart of what Hespe­ria Mayor Eric Schmidt and others dub the “Mojave River Basin”. The project lies north of the 138 and 173 Highways, east of Arrowhead Lake Rd, south of Ranchero Road, and extends west to the Hesperia city limits, about 2 miles short of Summit Valley Rd. When it is built out, in the next few decades, the Tap­estry community will feature 19,311 homes located on 9,365.5 acres, 4,000 acres (42%) of which will be preserved for open space and conservation.

Tapestry Site

Tapestry will be a very high quality community that will enhance the qual­ity of life in Hesperia. It is our hope that as this project moves forward, Hes­peria residents will come to see it as an asset to the community as they enjoy the open space and parks that will be an essential part of life in Tapestry.

Designed for Quality Living

Tapestry will provide a premier living experience by promoting upscale archi­tectural design and a special emphasis on quality living. The goal is to appeal to younger families looking to purchase their first homes. Tapestry will be built with active families in mind. Walkabil­ity is a major feature of the Tapestry Specific Plan, with 161 miles of trails and paths built throughout the commu­nity.

Master Planned Community

In addition to walkability, parks and open space will be a major component of living in this community. Not only will there be a mix of neighborhood and pocket parks placed throughout each neighborhood, but a major sports park is planned in the 6th phase of develop­ment. Utilizing their experience in pro­viding excellent amenities in master-planned communities throughout the United States, the development team plans to include recreational opportuni­ties for all the residents of Tapestry.

At the center of the project will be a premier town center to feature upscale restaurants, retail, grocery stores and other amenities. The Tapestry town center will exist not only as a benefit to Tapestry, but will be built as a destina­tion center for the entire Mojave River Basin.

Respecting and Protecting the Local Environment

One hallmark of life in Hesperia is liv­ing in a beautiful natural environment, and Tapestry will be designed to pro­tect that special quality of life. Tapestry preserves the Victor Valley’s unique desert environment in its plans and de­sign guidelines. Hesperia residents will be able to enjoy thousands of acres of new parks, pedestrian and equestrian trails, paths and open spaces. The proj­ect team has also worked with the San Manuel Band of Mission Indians to help preserve areas of importance to Native Americans, and also has plans for an interpretive center to honor the history and culture of this wonderful valley.

Master Planned Community 1

Tapestry is a state-of-the-art commu­nity. It is implementing energy and wa­ter saving techniques that could not be done on a smaller project. Water-wise planting techniques and state-of-the-art xeriscaping will be employed through­out the community. In addition to xeriscaping, recycled water will be used for irrigation purposes throughout the project to help reduce water consump­tion. Every home within Tapestry will be required to provide rooftop solar ca­pability, making it the first community of its kind in the High Desert to achieve the level of sustainability that is so im­portant for future generations.

Enough Water for 20 Years

In 2011, the city ap­proved an Urban Wa­ter Management Plan (UWMP) that detailed the city’s water needs, uses, and supply & demand, including its estimated popula­tion growth and water needs for the next 25 years. A Water Sup­ply Assessment was prepared in 2014 for the Tapestry project, by the same team who compiled that 2011 UWMP, which demonstrated wa­ter availability exists today for nearly 20 years. Tapestry will build all of the water supply and storage systems and give these improve­ments to the City.

Improving Mobil­ity for Residents

Traffic has been a concern among resi­dents adjacent to the project. Tapestry, in its planning is de­signed to help alle­viate problems that currently exist. Tap­estry will include multiple access points, especially to the north, that will help reduce conges­tion by providing millions of dollars in vital road expansions, new signals and other improvements. The developers have been in talks with both the City of Hesperia and Caltrans to find solu­tions to congestion on Ranchero Rd and Highway 138, respectively.

Master Planned Community 2

All of the costs of developing the Tap­estry project area will be carried by the project developer. The City of Hespe­ria is developing a phasing schedule for this work, which will be specifically ar­ticulated in the Tapestry Development Agreement between the city and the project developers.

Benefits of Long Term Land Use Planning

The project will be built in 10 phases, with the first phase of approximately 2,300 homes beginning in 2016. Since Tapestry is a master-planned communi­ty, it provides the City of Hesperia with an opportunity to plan long-term and create a community that will sustain it­self and serve as a catalyst for solutions to regional issues. Individual develop­ment projects cannot address traffic, water supply, wastewater treatment or other such improvements. They pay their development impact fees, but it is some time before enough fees are accu­mulated to actually construct improve­ments.

The Specific Plan process allows other public use issues, such as parks, schools and public safety, to be adequately an­ticipated and addressed. The parks dis­trict can identify their future park and recreation needs and identify specific parcels where these improvements can be constructed and can enter into financ­ing plans for these improvements. The same holds true for schools and public safety. The process also allows the city to exert more direct control over design than it can on individual projects.

Master Planned Community 3

The Tapestry Specific Plan includes plans for two mixed-use town centers, eight elementary schools, two middle schools, and two high schools. The project also includes multiple public and civic facilities (like a post office, library branch, fire and police station, etc). These vital parts of infrastructure could only be done within the scope of a master-planned community like Tap­estry.

Why Now is the Time for Tapestry to Succeed

Why now? Because the market is right for development in the High Desert. Prices in the LA basin and in the ar­eas down the hill have reached levels that put home owner­ship out of reach for young families. The population continues to grow and the High Desert is the logical place to go to find a high-quality, afford­able place to live. We firmly believe that if we can build Tapes­try, Hesperia will become a preferred location for the continued job growth that is taking place in Southern Califor­nia and that Tapestry will be a vibrant community for many years to come.

Economy General Property

Housing the Future: Availability = Affordability

Published by:

By Carlos Rodriguez
CEO of the BIA
Baldy View Chapter

The Inland Empire has a severe housing shortage, which if left unchecked will continue to negatively impact the economy by limiting housing affordability, job creation and local tax revenues.

On February 5, 2015, National Community Renaissance hosted a Symposium on the Affordability of Housing and published a study entitled “Housing the Future: The Inland Empire as Southern California’s Indispensable Geography.” Participating in the symposium were local elected officials, representatives from the California Realtors Association, California Apartment Association and the Building Industry Association Southern California, Baldy View Chapter (BIA).

“We need a government that understands that growth is important, that diversity of employment is important, and that housing is important,” said Joel Kotkin, researcher and author of the Housing the Future study. “We need to take care of the middle class, and the last place that’s going to happen in Southern California is the Inland Empire.”

The Inland Empire is home to more than 4 million residents, many of whom chose the area for moderately priced homes. However, that dynamic is quickly changing due to burdensome regulation that deters the development of new residential units. Many middle class families are being priced out of the market due to a drop in new development which has lowered the volume of housing stock below the growing market demand.

“There is a belief that housing is a drain on the local economy. Nothing could be further from the truth,” said Carlos Rodriguez, BIA Baldy View Chapter CEO.

Rodriguez cited research from the National Association of Homebuilders showing that over the course of 15 years, a 100-unit housing project will lead to $13 million in economic growth and $4 million in additional tax revenues for the community. Unfortunately, many cities and counties still regard housing as a detriment instead of recognizing it as a critical economic asset.

“Housing is an economic catalyst, and for Southern California, housing in the Inland Empire is critical to the region’s economic sustainability,” said Steve Pontell, President of the National Community Renaissance. “We (Inland Empire) have long been the place where the middle class could afford to live. As that goes away, so will our employment base.”

Rodriguez and Pontell both noted that California is 1 million housing units short of meeting the current population demand. Southern California alone, needs an additional 600,000 homes to meet the growing demand. With limited housing availability comes limited housing affordability.

In 2005, the Victor Valley pulled 6,408 residential permits, which attributed for over 43% of the total permits countywide. In 2014, the Victor Valley’s 271 permits accounted for only 14% of the total activity in the county. Likewise, construction industry jobs countywide declined 42%, with almost 19,000 construction-related jobs lost since 2006. In that same time period, unemployment in the Victor Valley has increased by 54%.

The “Housing the Future” report reveals several enlightening statistics about the Inland Empire’s market potential. The IE has the second highest concentration of children ages 5-14 in the nation and the most significant increase in Bachelor Degrees and College-educated residents in Southern California.

The study also reveals that California has the highest development impact fees per unit in the Nation (approximately $32,000/unit). That’s twice as high as the next two highest states, Maryland ($16,000/unit) and Oregon ($15,000/unit). A shortage in housing stock is also directly related to unemployment rates, home affordability and a broad tax/consumer base. This begs the question: How will we meet the employment and housing needs of the future if housing availability continues to be limited by increased regulation and dwindling incentives?

The BIA suggests that positive policy reform can be made through the San Bernardino Countywide Vision and Housing Collaborative Element Group. We commend Supervisor Robert Lovingood, the County Board of Supervisors and the San Bernardino County Associated Governments (SANBAG) for leading this timely effort. The goal of the element group is to improve the IE’s business environment and help California families achieve the American Dream of Homeownership.

BIA recently published a Best Recommended Practices Brochure to improve the efficiency in permitting and creating a more business friendly environment at the local municipal level. The brochure outlines five best practices to: 1) Increase Customer Service, 2) Have a Well-Defined Pre-Submittal Program, 3) Improve Information and Communications, 4) Engage Stakeholder in Policy-Making Decisions and 5) Maintain Fees at Reasonable Levels.

For more information and to find links to the “BIA Best Recommended Practices Brochure” and the “Housing the Future” study please, visit

-Carlos Rodriguez serves as CEO of the BIA, Baldy View Chapter, a non-profit trade association advocating to help meet the housing and building needs in Southern California.

General Property

Comparative Market analysis: Does CMA accurately Price Property to Meet Current Market Demands?

Published by:

By Bob Thompson

We collect our just due when a listed property closes. We want to tell all that our “Marketing Plan” will save the day. But properties fail in droves especially in times where there is an excess of supply over demand. This is part 1 of a multi-part essay to look into the scourge of expiration, cancellation and withdrawal. The concluding paper offers a new method to price and manage listed property that moves the CMA into the background where it belongs.

An unmistakable outbreak of joy occurs all around when a property is listed. The agent is happy. He looks forward to future income as does the broker. The title company looks forward to a new policy and all the other vendors sense higher times ahead. The seller anticipates moving to the next stage of his life, hopefully with the proceeds of a favorable sale. Let us therefore, at least for a time, pass all secondary and collateral questions and consider the main subject of the present question. Will the property actually close and monies be collected? After all, in real estate transactions, money resolves all problems.

The main subject, then, is whether the property is priced to meet the demands of the current market. In attempting to prove the price is correct and worthy, the aware agent utilizes the tried and true comparative market analysis (CMA) due to the absence of any other dependable method for assigning a value to the property. The principle of the system is that the CMA process is accurate and reasonable. This premise is mainly false. The CMA has evolved into a patchwork method in which the users have limited experience in application and continuously fail to achieve the expected outcome because of known, unknown, and unanticipated independent variables.

Our business is a theatre which exhibits, in full operation, two radically different systems: the one resting on the basis of what we think is happening, and the other which is really taking place. We are experts on the first and painfully aware of the second, while our knowledge of this alternative reality and its workings is shallow indeed. The aware agent has learned that all things: demand, supply, condition, location, fear, and greed are accounted for by the CMA methodology and a little time and luck.

Lamentably, our CMA methodology falls short in times where the market becomes testy for the seller. When the supply side overwhelms the demand side, the Realtor notes that his time on the market (DOM) is increasing and his spirits falling as old man time moves along. The tick tick tick of the clock passing is really the drip drip drip of potential income leaking from his bank account. Worse, the seller, certain that his home is special above all others, insists he have his way and holds his price or offers only a meager discount after much anguish.

Oh so subtly, lurking in the background unknown to the agent, a hidden force is at work. This force creeps in by a side door and undoes the agent’s well thought-out pricing strategy. As the bard says, “It is not in the stars to hold our destiny but in ourselves.” We failed to consider the important issue of property symmetry in our original CMA estimates, and now it is one of the forces that will undo our best laid plan. Watch for part 2 in the next issue.

1 This assumes our listing agent has not sold out to the concept of the marketing plan overcoming inaccurate pricing.

General Property

Countywide “Vision in Action” Can Help Victor Valley Economic Recovery

Published by:

By Carlos Rodriquez
BIA Baldy View Chapter

New single-family home construction has remained flat in the Victor Valley for the third consecutive year, with only 244 permits in 2013 – an increase of 80 permits over the past year. This is still a long way from the height of the housing market in 2005 when 6,408 permits were pulled or roughly 43% of the total permits in the entire county. Today, the Victor Valley permit activity only accounts for 13% of the total countywide permit activity.

This reduced permit activity has resulted in significant job loss and increased unemployment in San Bernardino County. From 2005 to 2012, construction industry jobs countywide declined 42% with almost 19,000 construction-related jobs lost. Likewise, unemployment in the Victor Valley has increased by 56% during that same time period.

The road to recovery for the Victor Valley housing market has been a rocky one, but there is a glimmer of light at the end of the tunnel and it can be found in the City of Hesperia. Once enjoying a thriving economy fueled by home construction in 2005, the City of Hesperia has faced economic challenges resulting in zero new home permits in 2011 and 2012 and the loss of the city’s Redevelopment Agency. However, the City of Hesperia has taken a bold approach of reducing development impact fees to bolster development and economic activity.

This approach was one of many ideas brought to the table on March 19, 2014, as the Building Industry Association, Baldy View Chapter (BIA), partnered with the County of San Bernardino and SANBAG to host a Countywide “Vision in Action” Housing Collaborative Workshop focused on identifying business friendly practices. The cooperative ideas shared during the workshop represent an important first step to ensuring a strong development industry. 80 attendees participated in the unprecedented event which paired representatives from 15 cities and 20 homebuilder companies to have meaningful discussions regarding the best-recommended practices for home development entitlements and permitting.

In attendance was Hesperia’s City Manager, Mike Podegracz, who participated in a discussion panel between city managers and building industry leaders. Mr. Podegracz highlighted the efforts being made by Hesperia including; reduction of development impact fees, interdepartmental training of staff and improved customer service efforts in communication and transparency of processes. The four cities of Adelanto, Apple Valley, Hesperia and Victorville have also established a partnership to market the Victor Valley as a whole and pool financial resources, thus reducing marketing budgets and saving taxpayer dollars.

Early results for the City of Hesperia’s fee reduction efforts have already been well-received. In 2013, single-familypermit totals increased, albeit modestly, from zero to thirty-five new homes. City staff has also received overwhelming positive feedback on their improved customer service and timely returning of phone calls and messages. During the Countywide Vision workshop, Mr. Podegracz shared the importance of creating a culture within the cities “where there is always room for improvement.”

As the Victor Valley continues to a face a long road to economic recovery, it is refreshing to see the bold leadership efforts on display by the Hesperia City Council. The home building industry has and always will be a cornerstone of Southern California’s economic prosperity. Moving forward, it is our hope to continue the Countywide “Vision in Action” dialogue with San Bernardino County and SANBAG. In the meantime, Victor Valley cities should follow the positive examples set by the City of Hesperia to encourage home building development.

Economy General Property

Homeownership Policy Priorities-A Federal Perspective

Published by:

By Carlos Rodriguez
Chief Executive Officer
Building Industry Association (BIA) Baldy View Chapter

Every new home built creates three jobs, as well as expands and increases the tax base that supports schools and our community.

Our homes are the foundation of strong communities, and it is imperative that we pay attention to the debate about housing policy occurring at the national level.

Thanks to national policy that has acknowledged the importance of the home in American family life for almost a century, generations of Americans have counted on their homes for their children’s education, their own retirement and a personal sense of accomplishment.

Despite the fact that most Americans want change that will mend the housing market, create jobs, and boost the overall economy, policymakers are proposing radical changes that threaten the dream of homeownership for millions of current and future Americans.

The policies that are being considered could negatively impact Americans’ ability to buy a first home, keep their current home, or enter into the move-up market.

Mortgage interest deduction

Eliminating or limiting the mortgage interest deduction would impose a huge tax increase on millions of middle-class homeowners and discourage prospective buyers.

Changing the deduction would cause after-tax housing costs to increase and housing demand to decrease.

Reduced demand would depress home prices – produce a sizable loss for existing homeowners – leave more homeowners underwater, and fuel even more foreclosures.

Such a change in home values could weaken the economic recovery and perhaps drive the nation’s economy back into recession.

Mandating 20 percent down payments

The national Qualified Residential Mortgage standard that is being proposed by federal agencies would require a minimum 20 percent down payment and other stricter qualifications, which would keep homeownership out of reach for most first-time home buyers and middle class households.

It would take 12 years for the typical family to save enough money for a 20 percent down payment on a median-priced single-family home, according to National Association of Home Builders estimates.

Other research has found it would take even longer.

Creditworthy borrowers denied homeownership opportunities

Even though there is pent up demand for homes in many parts of the country – the construction or sale of which would create jobs and support local economies – lenders are not making loans to qualified home buyers.

Overly restrictive lending standards prevent creditworthy borrowers from buying homes, which slows the housing recovery and hurts the economic recovery.

Restoring the flow of credit to qualified homebuyers will boost the housing market, help put America back to work and strengthen the economic health of communities across the country by providing tax revenues that local governments need to fund schools, police and firefighters.

Just as each home is important to the family that owns it, housing is vitally important to local, state, and national economies.

It is critical that homeownership remains attainable and that access to safe, decent and affordable housing remains a national priority.

General Politics Property

Assessed Values on the Increase

Published by:

By Dennis Draeger
Assessor-Recorder-County Clerk
County of San Bernardino

Proposition 13, overwhelmingly approved by California voters in June 1978, is the basis for property tax assessment today in California and all of its 58 counties. Prior to the passage of Proposition 13, property taxes could increase dramatically from year to year based on the market value of the property. The tenets of Proposition 13 limits the tax rate to 1 percent plus additional rates necessary to fund local voter-approved bonded indebtedness. It limits the assessed value increases to a maximum of 2% per year on properties that did not undergo a change in ownership nor had completion of new construction. Proposition 13 placed explicit limitations on the power of government to impose additional property taxes and it requires real property to be assessed at its current market value upon a change in ownership and new construction is to be reappraised at its current market value as of its date of completion. Proposition 13 has been amended numerous times since 1978, resulting in several change in ownership and new construction exclusions from reassessment.

When Proposition 13 was originally enacted in 1978, it did not provide the assessor the legal authority to reduce assessments resulting from a decline in market value. California real estate was appreciating at record levels in the late 1970s so the drafters of Proposition 13 did not have the foresight or envision a need to allow assessors the ability to reduce assessments resulting from economic conditions, depreciation, damage, obsolescence, or other factors causing a decline in value. Proposition 8 was approved by the voters in November 1978 to remedy this oversight in Proposition 13. Proposition 8 allows the assessor to make temporary reductions to assessed values when property has been damaged or its value has been reduced by other factors suchas economic conditions. The assessor can recognize declines in value if the market value of the property on lien date (January 1st) falls below its Proposition 13 value, or stated otherwise, the value to be enrolled in any year is the lower of a property’s Proposition 13 value or its current market value.

During the mid-2000s, San Bernardino County experienced unprecedented appreciation in real estate prices in all areas of the county which resulted in double-digit increases to the assessment roll for years 2004 through 2007. The 5 High Desert cities and adjoining unincorporated areas showed a particularly robust increase in real estate prices with a corresponding increase in their assessed values for years 2004 through 2007, then stabilizing in 2008. The peak of the real estate market in San Bernardino County occurred in 2007, stabilized in 2008, and then began its steep decline. During the late 2000s, the 5 High Desert cities and adjoining unincorporated areas were especially hard hit with decline of real estate values and substantial decreases to the assessment roll. Beginning in 2008, the County Assessor’s Office began reviewing thousands of decline in market value requests and also proactively reviewed assessed values county-wide. Overall, more than 200,000 county-wide property values were temporarily reduced under the provisions of Proposition 8 and approximately $32 billion of assessed value was removed from the assessment roll for years 2008 through 2012.

The real estate market is now recovering in San Bernardino County, but some areas are recovering at a greater rate than others. This is particularly true in the High Desert area of San Bernardino County where some areas are recovering at a much greater rate than others as indicated by a comparison of median home prices between 2012 and 2013. Apple Valley, Hesperia, Victorville, Phelan, and Wrightwood (I disregard Yermo due to a small number of real estate sales) are showing strong signs of recovering. Adelanto, Barstow, and Pinon Hills median home prices are increasing but at a lesser rate than the other High Desert areas. Lucerne Valley’s median home price is flat and I do not place a great deal of weight on Newberry Spring’s 73% decrease due to limited number of real estate sales in that area.

For property owners, an increase in the market value of their real estate holdings is generally a good thing except when it comes to property taxes. Many property owners who had received Proposition 8 reductions since 2008 may see an increase in their 2013 assessed value, which will result in a slight increase in their 2013 property tax bill which they will receive next September. Proposition 8 reductions are temporary reductions that recognize the fact that the current market value as of a particular January 1st lien date has fallen below it Proposition 13 value. Once a Proposition 8 value has been enrolled, it is reviewed annually as of the January 1st lien date to determine if its market value is less than its Proposition 13 value. These Proposition 8 values can and do change from year-to-year as the market fluctuates and if an increase is warranted, the increase is not limited to 2%. which only applies if the property is assessed at its Proposition 13 value. Now with the real estate market in a recovery mode and the Assessor’s Office in the process of reviewing approximately 160,000 parcels that are under Proposition 8 status, we anticipate a significant number of parcels will see an increase in their assessed value. Let’s say for examplea single family parcel located in Apple Valley has a Proposition 13 value of $142,800 as of 1-1-2013. Last year for 2012 the property owner requested a Proposition 8 review and it was reduced to $106,000 as of 1-1-2012. It is now being reviewed for the 1-1-2013 lien date and market value is determined to be $125,750. This is an 18.6% increase from the previous year but it is allowable because properties under Proposition 8 provisions are not subject to the 2% annual increase limitations that apply to those enrolled under Proposition 13 provisions. Continuing on with this example, next year the assessor reviews the assessed value for the 1-1-2014 lien date and market value is determined to be $160,000. The assessor will reinstate the Proposition 13 value of $145,656 ($142,800 plus 2%) because in no case may a value higher than a property’s Proposition 13 value be enrolled. Once the parcel’s Prop 13 value is restored it will now be limited to the 2% increase, unless it changes ownership or experiences new construction.