Category Archives: Property

Economy General Property

2016 Economic and Housing Market Outlook

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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

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Fig 1 Most High Desert Home Values Trending Up

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

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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?

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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.

Economy Property

Real Estate Market Outlook-Fall 2012

Published by:

By Alfred Gobar
Chairman, Alfred Gobar Associates

Over the past 50 years, increase in nonagricultural wage and salary employment as reported by public agencies has correlated closely with household formation and, therefore, housing occupancy. Employment growth is a good thing for real estate markets. An index of nonagricultural wage and salary employment for Southern California as a whole (Ventura, Los Angeles, Orange, Riverside, San Bernardino, and San Diego Counties) is illustrated in Exhibit A in comparison with a similar index based on the 1990 recession. As indicated, employment declined more in percentage terms in the current recession than it did two decades ago, and the recovery has been relatively feeble. Those of us interested in the High Desert real estate market, therefore, should have patience in order to identify attractive real estate market opportunities. From August 2007 until August 2009 (about the bottom of the decline in nonagricultural wage and salary employment), total job base in the six-County Southern California area decreased by about 800,000 jobs. Recovery since August 2009 through August 2012 has amounted to almost 200,000 jobs. Currently, therefore, the total employment base is about 600,000 jobs below the peak prior to the onset of the current recession. Theoretically this amounts to an improvement in demand from the low point of the cycle on the order of 135,000 dwelling units. Concurrently, however, despite modest new construction, approximately 140,000 new units have been added or are in the pipeline to be added to the total housing stock in Southern California; i.e., new development is at about the rate of demand growth.

Real Estate Outlook-Exhibit A

There may be a light at the end of the tunnel. It is likely, however, that we are looking into a fairly long tunnel.

During the twelve months ended August 2012, nonagricultural wage and salary employment as reported by the California Employment Development Department for the six-county area grew by approximately 158,000 jobs. This is a significant increase. Employment trends for California recently have been outperforming the general trends for the U.S. overall.

Employment growth over the twelve months ended August 2012 shows increases in most sectors including construction. Of significant interest is the increase in employment in the finance sector amounting to 9.2 percent of the overall job growth. Within that category, employment in real estate-related activities—rental and leasing, etc.—amounted to 4.9 percent of the 158,000 jobs increase. The finance sector represents less than 6.0 percent of Southern California’s employment base. The real estate portion of the finance sector amounts to about 2.0 percent of the total base. These categories of employment, therefore, are growing substantially faster than the general economy and faster than their overall role in the economy.

Employment in leisure and hospitality accounted for a substantial portion of job growth during the twelve months ended August 2012, amounting to 23.3 percent of the increase. This sector accounts for less than 12.0 percent of the total employment base in the six-county area.

Government employment grew little during the most recent twelve months for which data are available, accounting for 2.2 percent of the net increase. Overall, government employment is about 15.0 percent of the total employment base in Southern California. If government employment were to be increasing consistent with the other categories, total increase in nonagricultural wage and salary employment over the twelve-month interval would have been above the long-term average for Southern California as a whole and job growth would have exceeded the long-term average trend.

When Harry Truman was President, he was said to have pushed for “one-handed economists” so that economists could avoid tempering their projections by saying “on the other hand.” Similarly, we should point out that for the past several years, employment estimates from government agencies have been subject to revision and to rather erratic behavior on a month-to-month basis contributing to some queasiness regarding the validity of the data. Since the recent employment figures have been so positive, however, until they are revised, we will continue to act like we fully trust their validity. In the most recent twelve-month data, the most significant growth in nonagricultural wage and salary employment occurred in Los Angeles County, followed by San Diego County, Orange County, and the Inland Empire, in that order. The level of nonagricultural wage and salary employment in Ventura County declined slightly during the twelve-month interval.

The pattern of housing development in Southern California derivative of building permit activity for 2011 is fairly consistent with the relative growth in nonagricultural wage and salary employment among the five study areas (Riverside and San Bernardino Counties are grouped together as the “Inland Empire”). A comparison of the percent of nonagricultural wage and salary employment growth accounted for by each of the five areas relative to the percent of new units authorized by permit in each of the five areas is shown below:

Real Estate Outlook-County Comparison Chart

The specific data indicate that San Bernardino County represented 5.9 percent of the new units authorized during 2011 and Riverside County for 13.3 percent. Riverside County’s housing market benefits from its proximity to San Diego County, which experienced the recession sooner than the rest of Southern California and has been doing somewhat better than much of the rest of Southern California. In addition, Riverside County serves a national market for second homes and retirees.

The trend of building permit activity for residential development in Southern California since 1985 is illustrated in Exhibit B.

Real Estate Outlook-Exhibit B

There has been a modest increase in residential building permit activity since 2009. Actual numbers of new units authorized by permit since 1985 for Southern California overall are summarized in Exhibit C. Projections for full-year 2012 suggest building permit activity for Southern California will total about 29,000 units. Interestingly, this is roughly 14.0 percent of the level of building permit activity observed in 1986 when Southern California was emerging from the 1980 recession. It is also interesting to note that during 1985—at the end of the 1980’s recession—building permit activity in Southern California totaled nearly 150,000 new units, while currently in 2012, approximately three years after the bottom of the current recession, building permit activity is only 20.0 percent of that level at about 30,000 units a year.

Real Estate Outlook-Exhibit C

Although the 1980’s recession had the special features of extraordinarily high inflation and interest rates, the recovery from the current recession has been minimal, suggesting that economic growth that occurred during the 1980s supported a strengthening housing and real estate market, while the tepid economic growth observed currently has obviously not resulted in similar real estate sector activity.

Exhibit D shows the pattern of residential building permit activity on the High Desert. At the peak of activity, more than 8,000 units a year were being authorized by permit. Recently, as shown in Exhibit E, overall residential building permit activity has been on the order of less than 250 units per year in 2011 and likely to be substantially less than 1,000 new units for 2012.

The figures in Exhibit E are influenced substantially by 205 multi-family units authorized by permit in Victorville. Absent this atypical level of activity in multi-family housing construction, overall building permit activity on the High Desert would probably be on the order of 350 units for the full year, or less than 4.0 percent of the more than 8,000 new units authorized in 2005.

Real Estate Outlook-Exhibit E

Based on the average building permit value per unit, much of the new construction of single-family housing on the High Desert recently has apparently been custom homes. This is not a product that lends itself to high-volume activity. Much of the real estate activity observed recently has been of a qualitative nature—purchase of distressed assets that lend themselves to be reworked for enhanced value. The whole process of flipping foreclosures has attracted increasing levels of interest on the part of real estate professionals who have limited opportunities in tract developments, land entitlement, or other large-scale endeavors which typify opportunities in a strong market. Although interest rates are at record lows—a factor which should encourage real estate development or real estate investment—uncertainty associated with the tax environment, the risk of a double-dip recession, and general unease about an uncertain fiscal policy in light of the potentially inflationary impact of the current monetary policy contribute to anaura of uncertainty that makes real estate decisions particularly difficult, even for those intrepid individuals who somehow chose to make their living in this field.

One thing that makes this recession different from previous ones is that heretofore we generally relied on the housing market to lead the country into an economic recovery. Because of efforts through the Community Reinvestment Act and encouragement of Fanny Mae and Freddie Mac, we induced marginal buyers into real estate ownership prior to the recession. The reservoir of pent-up demand represented by potential first-time homebuyers was severely eroded and is not readily available to stimulate an economic recovery associated with lower interest rates and more moderate-priced housing. Significant portions of the housing market(which is the largest proportion of the real estate market) have been overexploited because of the interference of government policy, making this recession atypical relative to past experience. Basically, we have already shot that arrow and no longer have it in our quiver. This implies that the recovery is likely to continue to be slow, and that the real estate market will not begin to be vibrant for quite some time. Opportunities, therefore, will continue to be in rearranging real estate assets better to conform to the demand profile or exploiting market imperfections associated with limited understanding of the characteristics of demand and supply for real estate product. Raw demand is not likely to drive a strong real estate market for a number of years.

Economy Property

Some Encouraging Signs on the Home Front

Published by:

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

After years of cautious optimism, home building professionals are beginning to see signs of improvement in Southern California’s housing markets. While there is still a long road to a full recovery, the good news is Southern California home sales rose to their highest level in six years while prices hit a four-year high in August.

Data Quick reports that the number of homes sold increased more than 14 percent in August to more than 22,000 compared to the same period last year. The median price for new and existing houses and condos in the six-county region rose nearly 11 percent to $309,000 last month compared to August 2011. Last month’s median price was the highest since the median was $330,000 in August 2008. Experts say the housing market is fueled by low mortgage rates, more mid- to high-end deals, and near-record levels of investor and cash buying. Likewise, prices have been lifted partly by fewer sales of foreclosed homes.

Locally, communities located within the Victor Valley market have also experienced an estimated 4% increase in the median home pricing between July 2011 and July 2012 from approximately $112,400 to $117,100. If these figures continue to improve in the fourth quarter of this year and throughout 2013, then that’s great news for the outlook for a potential economic recovery.

The simple fact remains that an improved housing market will lead us out of economic recession. According to the report The Economic Benefits of Housing in California prepared by the Strategic Economic Research Center, in 2010 new home construction contributed over $13.8 billion per year and supported nearly 77,000 jobs in California in 2010. Over one-half of the economic output (about $7.8 billion) was directly the result of new housing construction and another $6.1 billion was generated by those sectors which supply goods and services to the residential construction industry “as well as the spending activities of the employees of the construction industry and its supplier sectors.”

The report went on to say that every dollar spent on new housing construction in California generated 80 cents in total economic activity while each job created through residential construction supported an additional 1.2 jobs in related businesses.

Because new homes have an assured longer life, appraisals are generally higher than on comparable resale homes and new homes are more likely to sell for a comparatively higher value in the future. This results in enhanced property tax revenue streams for our cities and county. That’s also good news for local and county government in desperate need of funding for quality of life services.

New home construction also funds new infrastructure such as streets, schools, parks, libraries along with fees for public safety such as police and fire services. These investments benefit everyone by keeping us safe and increasing the property values of existing homes and businesses surrounding new home communities.

There’s still a long road ahead to a full economic recovery. However, the recent signs of improvement in the housing market provide us with encouraging news about the prospects of increased local job creation and enhancements to local infrastructure improvements. While the market is still on the mend, the Building Industry Association Baldy View Chapter will remain steadfast in our efforts to work with elected leaders at every level of government to find public policy solutions to help us back on the pathway to prosperity.

The Building Industry Association of Southern California, is a non-profit regional trade association that represents more than 1,000 member companies within a six county region. Together, BIA members build most of the homes and communities throughout the same six-county region. For more information about the Baldy View Chapter go to

Economy Property

The Expansion of the Panama Canal Will Not Have a Negative Effect on the Demand for Industrial Space in Southern California

Published by:

By Ronald J. Barbieri, Ph.D., CPA
The Bradco Companies

The completion of a third set of locks in the Panama Canal by 2015 will enable container vessels capable of carrying up to 12,000TEU’s of containers to pass through the canal and deliver goods from China and other countries in the Far East directly to eastern half of the United States via East and Gulf coast ports. The conventional wisdom is that this will substantially reduce the flow of in-bound containers through the Ports of Los Angeles and Long Beach. An article titled: “Panama Canal: Myths and Misconceptions” that appeared in the May 2012 issue of the American Shipper argues that the opening of the third set of locks in the Panama Canal will only have a minimal impact on the volume of imports entering through the twin Southern California ports.

This conclusion is based on the following observations discussed in depth in the article: First, there are few, non-bulk products that are not shipped by containers; so there is little growth from the conversion of loose cargo to containers. Second,the amount of outsourcing by U.S. manufacturers has already been maximized to the greatest extent possible. The relocation of manufacturing from Canada and Mexico to China was mostly completed during the last decade; and there are an increasing number of companies that have begun to relocated production back to Mexico and the United States, because of issues related to cost, quality control and time-to-market. The article claims analysts are now predicting slow growth and more trade volatility with competition among ports for container throughput becoming a zero sum game of winners and losers. A third point made in the article that shippers will not realize any significant cost savings due to the shipping of goods through the Panama Canal because the tolls chargedby the canal will offset much of the cost savings of using the larger container vessels. Also the West Coast carriers, ports and railroads have the advantage of being able to differentiate pricing by market segment and could lower prices for less premium service with slower transit times if they feel pressure from the all-water service going through the Panama Canal.

Fourth, the all water service via the canal,though less expensive,can be one to two weeks slowerthat transcontinental intermodal transport. High-value or perishable products that must quickly get to market will continue to rely on the faster transit times available through the West Coast corridor. Finally, the article also notes that by 2015 only the four ports of Norfolk, New York-New Jersey, Baltimore and Miami will have the 50-foot deep channels and berths capable of handling the largest vessels. While many of the ports are competing for federal and state funds to dredge channels and increase railroad capacity most will have a difficult time securing adequate funds because they will not have the shipping volumes to justify the required infrastructure investment. Whereas, the West Coast ports already have the infrastructure in place, and have the container volumes to justify adding additional infrastructure.

The articles concludes that the ports of Los Angeles and Long Beach could lose up to 10% of their volume to East Coast ports serving the Ohio River Valley or gain a few percentage points in market share depending on how shippers respond to the expansion of the Panama Canal. What is apparent from reading the article is that there are a number of offsetting factors that make it difficult to determine with precision the level of impact the expansion of thePanama Canal will have on the twin ports of Los Angeles and Long Beach. Nevertheless, the article, which is on The Bradco Companies website, makes a convincing case that the decline in the level of imports handled through the twin Southern California ports, is not likely to be much greater than 10%.

Even if the Ports of Los Angeles and Long Beach were to experience a 10% decline in volume because of the expansion of the Panama Canal it is not likely that such a decline in container volume would have any significant negative impact on the demand for industrial warehousing space in Southern California for following three reasons.

First, approximately 2/3 of the inbound containers that are handled by the Southern California ports are loaded on trains or trucks and are transported to the east. The containers placed on trains are hauled more than 1,200 miles because that is the distance at which the cost of shipping by train before transferring the containers to trucks become less than the cost of loading the containers directly on trucks and hauling them to their final destination. Even if the containers transported by trains experience some reduction in traffic it would not impact the demand for industrial space in Southern California.

Second, the expansion of the Panama Canal will not have any impact on the containers that are hauled east by truck because it would not make any economic sense to ship the containers to Texas and then backhaul them west to their destination points that are within 1,200 miles of Los Angeles. Containers transported from the ports to the east by truck do not create any demand for warehousing space in Southern California; nevertheless, they are one of the factors motivating the Los Angeles Metropolitan Transit Authority to get the E220 Freeway from the City of Palmdale, CA to the I-15 freeway in the City of Victorville, CA completed ASAP. The construction of the E220 is by far the least expensive solution to get trucks from the ports of Long Beach and Los Angeles to the I-15 Freeway heading east. The E220 is also expected to relieve congestion on I-10, I-210, I-15 and the 60 Freeways in the Los Angeles Basin and therefore mitigate several environmental and congestion problems.

One third of the inbound containers at the ports of Los Angeles and Long Beach are transported by truck from the ports to industrial firms in the Los Angeles Basin for local distribution, inventory storage, or for use in manufacturing. None of these will be impacted by the addition of a third set of locks in the Panama Canal.

The high levels of Net Absorption in the Inland Empire by large industrial users and tenants is further confirmation that Southern California role as a warehousing, distribution and manufacturing center will not be negatively impacted by the expansion of the Panama Canal.

Economy Property

A Shortage of Homes for Sale Has Caused a Significant Increase in the Price of Homes in the High Desert

Published by:

By Bob Thompson & Ronald J. Barbieri, Ph.D., CPA 
The Bradco Companies

During the 2004 -2005 housing bubble, 600 new homes were sold each month in the Victor Valley area in addition to 500 previously owned homes. The vacancy level was low and builders were straining to meet demand, which was artificiality inflated by the lax lending standards fostered by the federal government through Freddie Mac and Fanny Mae. The median price for previously owned single family homes in the Victor Valley area peaked in February 2006 at $322,000. By April 2009 the median price had declined approximately 68% to $103,000, which was the low point for this real estate cycle. In March 2012 the Median price for the area was only $110,000; however prices have increased consistently since May of this year. By September 2012 the median price reached $121,000. The table below titled the Victor Valley SFR Market Condition Report for September 2012 was prepared by Bob Thompson for Escrow Junction. It is the information source for this article.

A Shortage of Homes for Sale-Table 1


In the last six months the financial institutions including Freddie Mac and Fanny Mae have further reduced the number of home they release for sale. The number of homes listed has declined from a 2.2-month supply last March to only 1.4 months today. There were 641 homes available for sale in September 2012 compared to 451 closings. During 2004 and 2005 the number of outstanding listings averaged 2,500, which represented four to five months of sales. Real estate agents believe this is one of the factors causing the rise in home prices over the last few months.

Also, a review of the second page of the Market Condition Report would reveal that only 77 REO properties were listed for sale at the end of September, which is less than the 209 units available at the end of March. There were only 97 “short sale” units available in September compared to 230 in March of 2012. On the other hand in the latest report there were 469 “Standard Sale” homes listed by non-financial institutions which was essentially the same number available last March. In case of REO sales the ratio of closings to listing as only 0.50 months. There is truly a shortage of REO listings. The inventory for Short Sale properties that could be sold in 1.1 months at the current rate of sales, while the ratio of supply to demand was 2.2 months for Standard Sales.

A Shortage of Homes for Sale-Table 3


A Shortage of Homes for Sale-Table 4


A Shortage of Homes for Sale-Table 5

REO and Short Sales accounted for 53% of the transactions in September 2012. This is down from 67% in March of this year and 74% from 18 months earlier. This is a positive trend because it indicates properties that were foreclosed on represent a declining portion of the sales activity. Many of the buyers were investors, rather than owner occupants, who renovate the homes, and either, resell the units, or lease them to renters who are not able to purchase a home.

The demand for single family homes continues to be artificially inflated, because of the policies of the federal government. Interest rates are extremely low and down payments are usually substantially below 20% of the purchase price for owner occupants. Individuals are purchasing homes in the High Desert with as little as 3% down. On the other hand the underwriting criteria and documentation requirements are far more rigorous and extensive than normal; and the requirements for home appraisals tend to place a downward pressure on home prices. In the past appraisals could only include REO sales comps which are lower than standard sales comps. The effect of all this is to make home prices in the High Desert the most affordable in Southern California.

The requirement to use REO sales when doing an appraisal has been recently waived, which will make it easier for home price to increase. This will be the case, not only for the High Desert but for all of Southern California. The second page of the Market Condition Report depicts the Median Close Price for the 11 residential submarkets in the Victor Valley Area. In September of this year the Median Close Price for the REO sales in the area was $108,000. This compares to a Median Close Price of $116,000 for Short Sales and $130,000 for Standard Sales.

Home prices are expected to continue trending upward if the U.S. and California economies continue to expand, creating jobs that could support population growth and substantial household formations in both the High Desert and the Inland Empire. The good news is that the population of the High Desert increased since the U.S. Census and is currently slightly higher than it was at the beginning of 2009, before there was an out migration caused by the last recession. Recent population trends are discussed in another article on population in this Bradco High Desert Report.

Politics Property

The County of San Bernardino is Moving Forward with Major Construction Projects

Published by:

By Brad Mitzefelt
Vice Chairman & First District Supervisor
San Bernardino County Board of Supervisors

As I’m completing my service as San Bernardino County’s First District Supervisor in December, I’m pleased to take this opportunity to update readers of the High Desert Report on just a few of the county’s many ongoing and recently accomplished initiatives.

First and foremost, the ability of local government to provide public services is correlated to the success, or lack thereof, of local businesses. While I have recently successfully pushed for reforms to our development code and permit processing to encourage economic activity, my successor will have much to work on to build on this progress. In addition to whether an area is open for business, there are several other factors considered by a business making a decision about where to locate, including infrastructure and quality of life, especially related to public safety and public and private amenities.

Infrastructure is perhaps the most visible. For example, it’s impossible to miss the rapid construction of the La Mesa/Nisqualli interchange on Interstate 15, due to be complete next year. It was a true team effort by High Desert representatives to SANBAG, and I was proud to have been President of SANBAG when we agreed to partner with the City of Victorville in constructing this critical bypass to Bear Valley Road.

Strategic flood control improvements, including two that help advance development of a critical east-west corridor, from the Yucca Loma Bridge in Apple Valley to the Nisqualli Interchange in Victorville, to more traditional projects like a new storm drain at Mountain View Acres in the Victorville area are just a few examples of the county and cities working together to solve longstanding problems. Mountain and desert communities worked together to bring more than $28 million in additional road funding from state sources over the past few years, not including tens of millions of state bond dollars secured for Nisqualli and the new Ranchero interchange in Hesperia, and a hundred million dollars for the soon-to-be-reconstructed Devore Interchange at the I-15/I-215 junction that will eliminate the evening and weekend backup there.

A longer-term project that deserves special attention is the High Desert Corridor, which will link Palmdale and Victorville through a Public-Private Partnership that will speed up construction by 20 years. It will be the most powerful job-creating machine the High Desert has ever seen, ranging from blue-collar logistics jobs to highly skilled manufacturing to high-tech research and development. I was proud to be the founding chairman of the joint powers authority between the two counties that has since expanded the environmental analysis to include a rail component. This is our ticket to Metrolink commuter rail service to the High Desert, and potentially even a Palmdale to Victorville leg of the XpressWest private high-speed rail to Las Vegas project.

On October 1, the Board of Supervisors supported my motion to approve the Cadiz Valley water project, 15 years in the making, that will make available more than 200,000 acre-feet of water to water agencies within San Bernardino County over a 50-year period after it’s constructed in a few years. This will provide hundreds of millions of dollars of investment in our county and thousands of jobs, without harming the environment in the remote desert watershed near Amboy.

Public safety is always the top priority of local government, and nearly tripling the capacity of the Adelanto jail from 760 beds to 2,152 beds will allow the county to better deal with state prison realignment, which is putting thousandsof additional convicts and parolees under County jurisdiction. This improvement is currently under construction.

Outstanding public safety services require modern facilities. We’ve built new fire stations in Hesperia and Phelan, and the County’s new High Desert Government Center in Hesperia will soon be home to a state-of-the-art Public Safety Operations Center that will house dispatch for sheriff and fire and will serve as an emergency operations center. The County recently approved plans for a new fire station at Spring Valley Lake, which should be completed by fall 2013.

Public safety is one aspect of the important services provided by county government. Educational, cultural and recreational facilities also define the character of a region. The Victor Valley Museum in Apple Valley reopened last year as a fully accredited branch of our exceptional county museum system. It is truly an important cultural and historical touchstone for the High Desert.

It was quite an undertaking to acquire this previously private museum and bring it into the county system. However, I am now concerned with its future. So I am helping start the Friends of the Victor Valley Museum to raise private support to keep the museum open and thriving. I have pledged matching funds to a fundraising kickoff event on November 8 from 6 p.m. to 8 p.m. at the museum.

The County continues to support development of the Mojave River Walk trail which will join downtown Victorville with Mojave Narrows Regional Park and beyond. Victorville is the lead agency and my office was able to provide $75,000 as matching funds for a grant that allowed the environmental review by Victorville to continue uninterrupted. And early next year, Wrightwood will have a new skate park, providing young people with a safeplace to enjoy their favorite pastime.

The most popular and internationally recognized attraction in the nine-park county regional park system is undergoing major improvements. Calico Ghost Town just opened the new Calico Mining Museum in the previously unused Zenda Building, providing an entertaining and informative window into the past lives of the miners and the historic mining equipment and techniques that made Calico one of the most productive mining districts in the late 19th and early 20th centuries. The Lane House at Calico is also being refurbished with new exhibits, and the County recently awarded a contract to construct new restrooms and showers at the campground that serves as a popular staging spot for off-road trail adventures.

As we continue to look to the future, we want to ensure that growth and development down the road has necessary infrastructure and public amenities to ensure a great quality of life. The community of Helendale in the not-too-distant future will be an even more ideal location for the highly skilled workers and managers the region is beginning to attract. When a number of proposals emerged several years ago to build hundreds of new homes there, I called for and have since funded development of a Helendale specific plan, which is analyzing and planning for the community-wide need for roads, water, parks, and other infrastructure. The specific plan will guarantee that Helendale will live up to its potential.

To address the county’s past corruption and prevent future continued ethical issues, we have prosecuted and pursued wrongdoers for punishment and restitution. We are recovering millions of dollars lost to corruption and we have passed numerous reforms. We have made county government more transparent and put a cap on campaign contributions to county elected officials. Our citizens demand clean government and our good name depends on it.

I was proud to have helped usher in entirely new management that includes a world-class, respected and empowered County Executive Officer, who has helped us get our financial house in order over the past few years, identifying and eliminating myriad deficiencies and bringing order and professionalism to a government that was at times dysfunctional, sometimes unable or unwilling to do more than follow the whims of elected officials.

Like any family or business, the County is obligated to live within its means and serve as vigilant stewards of your tax dollars. The decline in property values and taxable sales have hammered County government on the revenue side, but generous pensions for our public employees that were negotiated and awarded during boom times threaten to overwhelm our ability to provide essential public services.

Employee associations are recognizing the gravity of the long-term situation and have been partners in reaching solutions. Top administrative staff started paying the 7 percent employee share of their pension deductions more than a year ago and fire department employees followed suit. More recently our deputy sheriffs and probation officers joined them in being part of the solution as well. The next challenge will come when the contract with the general employees comes up for negotiation in 2014. Labor costs are the bulk of local government expenditures so we will have an opportunity to make adjustments that will put the county on solid financial footing for years to come.

But government is a lagging indicator and the financial health, and as I said before, of local government depends on the success of the private sector. The High Desert needs to work as a region to attract employers. I have made key investments on your behalf in education of our workforce, from aviation mechanics training to nurse training to precision machinists training. But there is much more to do to replicate these efforts and leverage training programs and dollars across all major industries.

Our selling points are compelling – location, land, labor, and leadership. But we need to realize that whether a business comes to Adelanto or whether it comes to Apple Valley, we all benefit. To that end, I am supporting the creation of Team High Desert, a cooperative effort among the four Victor Valley cities to market the region to site locators.

I see High Desert governments working together better than they did when I began my public service with the county. This is helping us solve regional problems, which is always a huge challenge. I consider that one of the most important things I have had a hand in. It has been an honor to serve, and I thank you for the opportunity.