Flipping Over L.A.: Out With the Old, In With the New

On March 10th, the Los Angeles Times printed an article by Alejandro Lazo titled, “Investors Flip over Highland Park Homes.”  This article details how investors are purchasing physically and/or financially distressed homes in Highland Park at severely discounted values, and renovating both the interior and exteriors of the homes.  Once the homes are upgraded, the investors put them back onto the market, where they are quickly snatched up by young hipsters and urbanites, yielding great returns for the investors. 

While Lazo’s article does a good job of summarizing the L.A. flip story, his article only begins to illustrate the dramatic home flip activity in the denser, urban areas of Los Angeles. 

In the last 24 months, the Land Advisors Organization Urban Infill Team (Richard Byrd, Tim Barden and Chris Gomez-Ortigoza) has utilized a proprietary method to create a “Flip Analysis” in areas including Hollywood, Silver Lake, Mid-City, Echo Park, Eagle Rock and Pasadena.  In completing each Flip Analysis, the Team is able to draw conclusions and provide concrete information regarding the values that new home buyers place on turnkey homes in a specific neighborhood.  Providing the Flip Analysis creates a level of comfort for builders and developers assessing values, as it illustrates the tremendous demand each flip creates.  More importantly, it shows land buyers the range of values they can expect for a new development in neighborhoods that have little to no recently built, comparable projects. 

The chart below illustrates average values associated with a handful of “Flip Analyses” that we have run during 2011-2012.

The data above represents only averages associated with flips in each neighborhood.  The value increase for individual flips varies with the amount of work done on the home.  Homes with minimal improvements, such as new sod and paint may command a 10-20% increase in value.  Completely gutted and remodeled homes regularly command 50-100% increases in value and more than double in value in some instances. 

As a final snapshot of the Los Angeles infill market, a recent flip analysis illustrated that approximately 18% of flipped homes in Eagle Rock sold for 3% or more above their flipped asking price.  With multiple offers for each property, the turnkey home values are being bid up above asking prices and are creating higher values that positively affect the entire neighborhood.  In today’s market, this is a great sign of what is to come and shows the demand for both new and turnkey homes is alive and well in Los Angeles. 

If you are interested in hearing more about the L.A. Flip Analyses, please contact Land Advisors’ L.A. Urban Infill Team.

Source: Chris Gomez-Ortigoza, Marketing Consultant, (626) 376-9840 ext. 14; Richard Byrd, Senior Marketing Consultant, (626) 376-9840 ext. 13; and Tim Barden, Marketing Consultant, (949) 852-8288 ext. 30

PFAR MLS was used to source all resale information.

The Good Life is in the Santa Clarita Valley

The Santa Clarita Team is currently marketing Placerita Meadows, a 95-acre property located within the heart of Santa Clarita.  The subject site is zoned Mixed-Use Neighborhood (MXN), which allows for a variety of uses including residential, commercial and office.

The Placerita Meadows offering is a unique opportunity to control one of the last remaining residential/ mixed-use land developments within the City of Santa Clarita and the supply constrained Santa Clarita Valley.

As Land Advisors’ Santa Clarita Team discussed in prior blog posts, the Santa Clarita Valley is a highly desirable area for homeowners.  The Placerita Meadows site is well-positioned to offer its future residents all of the area’s regional benefits.  For example, Placerita Meadows is within walking distance to the Newhall Metrolink Station and several parks.  The property also offers the following:

  • Close proximity to several schools to include Old Orchard and Newhall Elementary Schools, Placerita Jr. High School and Hart High School
  • Within minutes of Interstate 5 (I-5), Highway 14 (SR-14) and Highway 126 (SR-126), residents of Placerita Meadows will enjoy convenient access to major employment centers, commercial, cultural, educational, and recreational areas throughout Southern California
  • Close proximity to shopping and entertainment at the Valencia Town Center, Stevenson Ranch Plaza and the Valencia Marketplace
  • Just minutes away from higher education facilities including: The Master’s College, College of the Canyons, Clarita Career College, and California Institute of the Arts

The Santa Clarita Valley (single family) lot inventory* is holding steady.  It currently stands at:  6,000 “Paper” Lots (unimproved lots that have entitlements), and 2,300 Semi-Finished Lots

*Source: Hanley Wood and Land Advisors Organization Research

 Source: Michel Faris, Marketing Consultant, (949) 852-8288 ext. 14

D.R. Horton snaps up 74 “Finished” Lots in Inland Empire

Land Advisors Organization – California Division is pleased to announce the closing of “Walnut III,” a ±20-acre residential subdivision located at the northeast corner of Cypress and Walnut, in the City of Fontana, County of San Bernardino.  YH Walnut, LLC sold the 74 single family lots to D.R. Horton (NYSE: DHI) for an undisclosed amount.

Land Advisors’ San Bernardino Team, which is based out of the firm’s Irvine office, represented the buyer and the seller in the transaction. 

Walnut III is located just south of the 210 Freeway, west of Sierra Avenue.  The lots are 7,200 minimum square feet, and were sold in fully improved condition with an approved final map.

“The Walnut III lots were the only finished lots available in Fontana,” remarked Land Advisors Senior Marketing Consultant, Winn Galloway. “The purchase will afford D.R. Horton the opportunity to commence vertical construction immediately and add coveted 2012 home deliveries to their business plan.” 

For more information about Land Advisors’ San Bernardino Team, contact Doug Jorritsma at (949) 852-8288 ext. 13/ djorritsma@landadvisors.com, and Winn Galloway (949) 852-8288 ext. 27/wgalloway@landadvisors.com.

Rebound in Sacramento …and We’re Not Talkin’ Hoops

The data says it all.  A look at the latest Ryness Report will tell you that new home sales are solid across the board in just about all actively selling communities in Sacramento, El Dorado and Placer Counties.

Pricing is still flat but absorption is clearly picking up.  Builder anxiety for the spring selling season seems to be subsiding and confidence in the market is growing.

More evidence to a turnaround is the fact that a very prominent publicly traded homebuilder who vacated the Sacramento Region a few years ago is back.  A new division president is once again at the helm and looking to grow the Sacramento Division, including the Central Valley and Reno.

See the data: Sacramento Regional Real Estate Trends for March 17, 2012

Sacramento foreclosures down 8.8% from a year ago: Foreclosure activity in Sacramento during February fell when compared with the same period a year ago but remained largely unchanged from January, according to figures released Thursday from RealtyTrac, an online foreclosure information company.  Full Story

Region home sales up by 16.6%, but prices are down: Homes sales in the four-county Sacramento region were higher by 16.6 percent on a year-over-year basis in February, according to data released Thursday by real estate information firm DataQuick.  Average prices were lower from a year ago, however, for all four counties.  Full Story

Source: Jim Radler, Senior Marketing Consultant, (916) 784-3329 ext. 11

Bay Area Tertiary Markets Recovering? Maybe…

In the depths of the downturn (say, March 2008), the City of Antioch had over 800 active listings of single family homes on the market.  According to the MLS, only 105 homes sold that month, which translated into an 8-month supply of inventory.  Needless to say those were also the months where we saw double digit price declines year-over-year.

Fast forward to today: In the first two and a half months of 2012, 247 homes sold in Antioch, or approximately 98 sales per month.  The current active inventory according the Contra Costa MLS is 103, meaning a 1.1-month supply of inventory!  While this may not mean that prices are going to rocket up anytime soon in East Contra Costa County, it is definitely a great sign that the market has found a “natural” bottom and might have even overcorrected on the way down.

This same story is being repeated in Brentwood, Oakley, Pittsburg and other tertiary Bay Area markets, which were first to fall off the “cliff” a few years ago.

This work-off of resale inventory is starting to show its affect on new home absorptions.  In 2011 builders in East Contra Costa County were struggling to get to 1 to 2 sales per month on average. In the first few months of 2012, absorptions have been running between 3 and 4 sales per month. If this trend continues we expect more builders to begin venturing back out to the tertiary markets to look for new residential land deals.

Source: Steve Reilly, Senior Marketing Consultant, (925) 368-3128

High Desert Team Finds Buyer for Former Frontier Homes High Desert Portfolio

The Land Advisors’ High Desert Team recently closed a multi-million dollar sale on a five-subdivision portfolio in the High Desert. Collectively, the five land assets consist of 364 residential lots in varying stages of development. A private investor (represented by John Reeder of the Mimi Song Company) purchased the portfolio with the intent to hold for the long term. Land Advisors represented the portfolio’s seller (a lender), in the transaction. 

The details of the five portfolio assets include:

  • “Barcelona Heights II” is located within the City of Hesperia and consists of 91 single family lots with a minimum lot size of 5,801 square feet.  The lots were sold in “partially finished” condition with a recorded final tract map.
  • “Copper Crest” is located within the City of Hesperia and consists of 71 single family lots with a minimum lot size of 6,000 square feet.  The lots were sold in “mostly finished” condition with a recorded final tract map.
  • “Autumn Glen IV & V” is located within the City of Victorville and consists of 66 single family lots with a minimum lot size of 7,000 square feet.  The lots were sold in “mostly finished” condition with a recorded final tract map.
  • “Falcon Point II” is located within the City of Lancaster and consists of 131 single family lots with a minimum lot size of 7,000 square feet.  The lots were sold in unimproved condition with an approved tentative tract map.
  • “Adelanto-5” is located within the City of Adelanto and consists of 5 single family lots with a minimum lot size of 7,000 square feet.  The lots were sold in “mostly finished” condition with a recorded final tract map.

“This was a challenging transaction due to the nature of five different subdivisions (and two counties) involved in the sale,” noted Land Advisors’ Senior Marketing Consultant Randy Coe, who has been selling residential land in the High Desert for about 10 years. “However, this was the largest remaining Bank REO finished lot opportunity in the submarket, and offered a significant value for the buyer of the portfolio,” he said.

In a separate transaction, the High Desert Team also recently led the closing of “Tuscany III” in Victorville.  The transaction consisted of 142 unimproved single family lots with an approved tentative tract map.  A private investor purchased the subject lots from Mojave & Onyx LLC for, with the intent of holding the project until the housing market returns.

Read the Complete Press Release Here

Coachella/Imperial Team Sells ±1,700 Residential Lots in El Centro

Land Advisors Organization – California Division is pleased to announce the closing of “Lerno Verhagen,” a ±516-acre planned community within the City of El Centro, County of Imperial.  The property was sold in its current condition as active farmland, with an approved specific plan for ±1,700 dwelling units.

Land Advisors’ Coachella/Imperial Team, which is based out of the firm’s Palm Desert office, represented the buyer (private investor) and the seller (lender) in the transaction. 

With several other sizable Imperial Valley transactions already under its belt, the Coachella/Imperial Team was able to drive value for the seller by leveraging its knowledge of the submarket and access its extensive yet focused network of key industry relationships.

“Given the prime location of this asset, this transaction was a tremendous ‘win/win’ for both buyer and seller,” stated Land Advisors Marketing Consultant, Stone James. “Imperial County is a terrific submarket for farmers and long-term land developers.”  He explained how the region is home to significant farming operations as well as several critical governmental organizations such as U.S. Border Patrol, U.S. Immigration and Customs Enforcement (I.C.E.), and the California Department of Corrections.

Read the Complete Press Release Here

Central Coast Team Sells 28-Unit Apartment Project within San Luis Obispo Mixed-Use Development

Land Advisors Organization – California Division is pleased to announce the closing of Village at Broad Street (Parcel II), where Presidio Capital Partners, Inc. with Fuller Apartment Homes, Inc. purchased 28 for-rent apartment units from H&D Maymont, LLC for an undisclosed amount.

The ±1.41-acre Parcel II was the last remaining parcel available for sale within The Village at Broad Street.  The project is located in close proximity to downtown San Luis Obispo, east of Emily Street between Roadhouse Avenue and South Street.  The Village at Broad Street is a mixed-use development that includes a newly opened Fresh & Easy Neighborhood Market and 42 multi-family affordable apartments. ROEM Corporation developed the affordable living component and finished construction in January 2012.

“The downtown area of San Luis Obispo has always been a very desirable location, and The Village at Broad Street project further enhances the quality and vitality of the area,” stated Land Advisors’ Senior Marketing Consultant Matt Power, who has been tracking residential land activity in the Central Coast region of California for about ten years.  “San Luis Obispo is a unique submarket and continues to draw interest from the building community.”

Read the Complete Press Release Here

Urban Infill Team Facilitates 1031 Exchange Deal in Burbank

Land Advisors Organization – California Division is pleased to announce the closing of a 21-unit apartment building, where Steve Porretta purchased the Burbank property from Essential Assets, LLC for $4,200,000.

Land Advisors’ Urban Infill Team, which is based out of the firm’s Pasadena office, facilitated the multi-family property sale by assisting Mr. Porretta with a 1031 Exchange. 

In 2011, the Team assisted Mr. Porretta with the sale of his Silver Lake property, “Waverly Terrace Townhomes,” which included 63 unimproved townhome lots with a recorded final map.  

Mr. Porretta then needed to find a reinvestment opportunity and looked to Land Advisors’ market knowledge and extensive network of industry contacts for purchase options.  Through its list of industry relationships, the Urban Infill Team was able to source the off-market 21-unit apartment building, and represented Mr. Porretta and Essential Assets, LLC in the transaction.

“Mr. Porretta needed something very specific,” noted Land Advisors’ Senior Marketing Consultant Richard Byrd.  “By calling on our industry contacts we were able to provide several opportunities for Mr. Porretta to choose from.”

Read the Complete Press Release Here 

West Riverside Report

MULTI-FAMILY: Last week Land Advisors’ West Riverside Team wrapped up the marketing of a 16.5-acre mixed-use (multi-family for-rent and commercial) site known as The Village at Magnolia Square, located in the City of Riverside.

With a lack of comparable land sales early in 2012, the initial challenge in selling the multi-family for-rent land was determining the market value.  Assuming a successful escrow and close, The Village at Magnolia Square will mark the third successful multi-family for-rent land sale in the West Riverside submarket (Land Advisors Organization has been a party to all three sales). With three transactions soon under its belt, Land Advisors’ has established a real value foundation for similar land sale opportunities in the submarket.

SINGLE FAMILY: On the single family detached home front, the overall market in West Riverside remains stagnate.  However, homebuilders are finding success in some areas of South Riverside County such as Temecula.  Stronger than expected interest from homebuyers is causing some homebuilders to increase home prices. If strong absorption rates continue, the finished lot and future lot supply within Temecula will quickly vanish, and likely result in pressure on lot sales in Murrieta, Menifee and Wildomar. One development company has already noticed this trend and purchased one development site and has another in escrow in Wildomar.

APPROVALS:  On Tuesday March 13th, the City of Wildomar heard residents’ environmental concerns for a proposed 151-acre residential project. The project will be developed into 315 single family homes with 3.5 acres dedicated to a commercial center and open space. 

In addition, Menifee’s City Council approved a new General Plan land use map after a two year-long process, with a vote of 4 to 1. The land use plan is the first element in writing for the City’s new General Plan and serves as the basic blue print for how land will be used going forward.

Source: Mitch Casillas, Marketing Consultant, (949) 852-8288 ext. 23

RED LIGHT: CA Foreclosures, GREEN LIGHT: Sacramento Arena

California Attorney General Kamala Harris has called on federal mortgage giants Fannie Mae and Freddie Mac to place a “good-faith pause” on all foreclosure sales in the state following the multi-state settlement with the nation’s largest banks over mortgage abuses. The nationwide settlement calls for more than $12 billion in relief for struggling California homeowners in the form of principal reductions and short-sales. Read more: California AG calls for Fannie Mae and Freddie Mac to halt foreclosures

Does this “good-faith pause” help the housing industry?  Will delaying the foreclosure process on thousands of homes prolong the time until the housing market recovers by creating an even bigger backlog of shadow inventory, potentially resulting in continued home price depreciation?  Interesting…   

Sacramento Arena Update:  The City of Sacramento, the NBA and the Sacramento Kings’ organization have come to a tentative agreement to build a new arena in the Sacramento Railyards development, with the potential of keeping the Kings in Sacramento for next 30 years.  This is welcome news for the Sacramento region, especially if the owners of the Railyards develop the area surrounding the proposed new arena. 

If the stars align and a financing plan takes shape, the new arena will be completed the end of 2014.  The development and construction of the entertainment site will provide a host of new jobs, both temporary and permanent.  The project will revive Downtown Sacramento and bring some much-needed life and dollars to the City.

Further, the Kings’ ownership and the City of Sacramento will need to sell the existing Power Balance Pavillion and surrounding property.  The sale should spur new re-development in the Natomas area, which will include a mix of residential, commercial and retail uses.  Given the site’s central location in Natomas and its development history, the property’s sale should garner national attention and interest from developers.

Maloofs pledge to contribute $75 million upfront for new downtown arena

VIDEO: Does Arena Deal Have Council Votes?

VIDEO: Kings owners, Sacramento, NBA reach arena deal

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

Coachella Valley: 1, 2, 3… Cha Cha Cha…

Some impressive numbers are driving growth within the Coachella Valley. 10,000… 300,000… and 3,600,000… According to the Social Security Administration, these are the numbers of Baby Boomers who are turning 65 years old each day, each month and each year, respectively, for the next 19 years! 

Ranked by CNN Money.com as the second Best Retirement Destination in the United States, Palm Springs (and the rest of the Coachella Valley) is experiencing growth and demand today not seen in many other markets across the US.

From a land investment perspective, demand and activity within the Coachella Valley and Imperial Valley is decidedly picking up.

  • Toll Brothers is demonstrating that selling new homes in the Coachella Valley for $740,000 IS possible.  The Nation’s top luxury homebuilder sold FIVE homes in its first month of sales at their new Alta project in Palm Springs.
  • With the majority of the finished lot opportunities spoken for within the Valley, interest in entitled but undeveloped land is picking up.
  • D.R. Horton is having success finding qualified home buyers for Renaissance at the Gallery in Palm Desert.  With homes ranging from $269,990 to $355,000 the community is at about 50% build-out and is seeing increased interest from potential buyers. 
  • In 2011 the volume of resale home transactions within the Coachella Valley was 96% of the 2004 market peak (7,275 vs. 7,574). Conversely, 2011 new home building permits are at the lowest levels since before 1983 according to Marketwatch, LLC.

CLOSED DEAL IN IMPERIAL CO.!  The Coachella/Imperial Team (Stone James & David Landes) represented the buyer (investor) and the seller (lender) in the sale of 222 acres of prime farmland located within Brawley city limits.  This Imperial County buy-and-hold asset has an approved Specific Plan for 1,149 residential units.  Contact Stone or David for more details on the deal.

Source: Stone James, Marketing Consultant, (760) 219-7227