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California Division: 2012 Year in Review

LAO-CA Infographic 2012 YIR

Source: Tom Reimers, President, (949) 852-8288 x28

LA – Selling Fast

As the end of 2012 approaches, the Los Angeles infill residential market continues to see increasing momentum in both new home sales and demand for new land development.

Much of the demand for new projects in the Los Angeles basin stems from the steady flow of new home sales at projects throughout the county.  In particular, there are several townhome projects in the San Gabriel Valley including Azusa, Baldwin Park and Covina that have seen absorption rates in the four to six units per month range.  In Northeast Los Angeles, Pulte’s Mosaic, Heyday’s Buzz Court look to be on pace to selling out around the New Year, while Williams Homes Olive Glen project in the South Bay was named the fastest selling community in the southland.

Buyer demand for new attached or detached homes is triggering, both builders and developers, to get more aggressive when it comes to land deals. Many are even considering B and C locations. While there is not a significant supply of developed lots available in the infill markets, our team is beginning to see progressively more tract map and permit applications being processed in many cities. Through our vast database Land Advisors avidly tracks deals that are being processed and approved, allowing us the ability to tailor information to meet any acquisition criteria.  Whether it’s 5, 50 or 200 units you are looking for we can guide you to deals that meet your specific goals and needs.

Buyer Demand has triggered both builders and developers to get more aggressive for land deals.

Related Article:

http://ourweekly.com/los-angeles/olive-glen-called-fastest-selling-new-home-community-southland

Source: Chris Gomez-Ortigoza, Marketing Consultant, (626) 378-9840 x14

Warm Weather and Hot Rents in LA

As we begin to approach the fall, you can bet the weather will cool down but the apartment market will continue its hot streak. The Los Angeles Infill Team has been paying close attention to apartment rental trends and has seen favorable signs for continued rent growth.

Apartment rental rates in Los Angeles continued on their strong path of growth as seen in year-over-year data in the second quarter 2012. Average rents for all types of rental units increased 5.3%. The biggest surprise may be the average YOY growth seen in both two and three bedroom townhome units. Rents in two bedroom townhome units increased an average of 13.8%, while rents in three bedroom townhome units increased 17.2%. Townhome and three bedroom units have seen a large boost in pricing as many families displaced by foreclosure try to find units large enough to accommodate them. Several buyers, including investors and developers, are paying close attention to these statistics and are pushing to purchase properties with the ability to build and rent townhomes then convert them to condominiums as the for-sale market improves. Average occupancy rates have continued to tick upwards and touched 95.5% in Q2 2012 for metro Los Angeles.

These are strong signs keeping the search for apartment land deals atop the list of many builders and developers. The Los Angeles Infill Team at Land Advisors recently transacted on a rental townhome project and has a handful of other apartment deals under contract. Our team is well versed in the local rental market and eager to discuss available and active apartment projects.

For further questions and information, please contact Chris Gomez-Ortigoza, Tim Barden or Richard Byrd at (626) 376-9840.

The following news articles highlight the strength of the rental market in Los Angeles and throughout Southern California.

http://www.nbclosangeles.com/news/local/Rents-on-the-Rise-Across-Southern-California-147394535.html

http://www.zoliath.com/commercial-real-estate-blog/2012/09/12/los-angeles-apartment-market-set-for-significant-growth/

Source: Chris Gomez-Ortigoza, Marketing Consultant

Asian Capital Infusion – San Gabriel Valley and Beyond

In recent months, the new home market in Los Angeles has begun to show signs of improvement with increases in absorption rates, higher pricing and improved buyer traffic. These signs are welcome in an unsteady time and can be strongly attributed to the strength of Asian home buyers. You may be wondering, what is special about Asian home buyers?

Cash and lots of it! Whether speaking with sales agents and home builders in Pasadena, Azusa and other cities, it is astonishing to hear the strength of the deals that are being done by Asian buyers and investors. In a survey of actively selling and recently sold out communities, sales agents expressed as many as 1 out of 3 sales to Asian buyers have closed with 50-100% cash down payments. An even larger proportion of sales to Asian buyers have been well in excess of twenty percent cash down payments to purchase homes. As witnessed by Land Advisors Organization, the Asian buyer pool has even begun branching into new home communities in markets that have been traditionally dominated by other ethnic groups including, Northeast Los Angeles and the San Fernando Valley.

With such a strong influence on the new home market, builders that design communities to meet the needs and desires of the Asian demographic have seen above market pricing, brisk absorption and incredible buyer satisfaction.

In addition, Asian investors have been a strong source of capital infusion via the EB-5 financing program. The program allows Overseas investors receive a green card and get on a fast track to US citizenship upon investing $500,000 into a venture that creates jobs. Each $500,000 investment qualifies for one green card if it creates ten Jobs. Hospitals, Assisted living and Hotels are popular investment due to the high number of jobs created, but residential developments are also being regularly financed through the EB-5 program as well.

The following articles both highlight the strength and demand occurring in the San Gabriel Valley and surrounding parts of Los Angeles from Asian home buyers and investors.

http://speakingofrealestate.blogs.realtor.org/2011/04/25/asian-wealth-adds-up-to-u-s-home-sale-boom/

http://www.usatoday.com/money/economy/housing/story/2012-04-03/us-homes-lure-chinese-buyers/53977638/1

Within the past three months, the Los Angeles Infill Team at Land Advisors has marketed three deals in the San Gabriel Valley and continues to see a strong desire for builders and developers to acquire new communities in this area.

For information regarding available deals and market data, please contact Chris Gomez-Ortigoza, Tim Barden or Richard Byrd at (626) 376-9840.

Source: Chris Gomez-Ortigoza, Marketing Consultant

The Flipping Indicator – New Projects Vs. Flipped Homes

The previous Landed blog posted by Land Advisors’ Los Angeles Urban Infill Team highlighted the value increases placed on flipped homes throughout a variety of Los Angeles neighborhoods.  (Re-read: Flipping Over L.A.: Out With the Old, In With the New)

For this post, we take our analysis a step further and compare how values of flipped single family detached homes correlate with those of newly constructed small lot detached and townhome units.  Conveniently, two public homebuilders have opened up projects in Northeast Los Angeles within the past week:

  • The first is Pulte Home’s project in Eagle Rock called Mosaic.  The project consists of 18 Small Lot Detached Units.
  • The second is D.R. Horton’s project in Echo Park called 36 on Echo.  The project consists of 36 Townhome units.

The first chart below represents average sales prices for flips that occurred in Eagle Rock and Echo Park.

This second chart below illustrates the asking prices at both new projects.

In comparing the two charts, note that the average square feet of the flips in each neighborhood is between the smallest and largest unit size at each new project.  You can see that the average flip pricing on a price/sq. ft. basis in each neighborhood lands squarely within the expected price/sq. ft. revenues at each project.  On a nominal pricing basis, the project in Echo Park exceeds the average flip values in the neighborhood, while the project in Eagle Rock is in the same range as the flipped homes in the area.

Why is this significant?  In our experience, properly projecting revenues on infill projects is a difficult task and has chased away a fair share of possible builders and developers.  By utilizing the correct data and local market indicators, the Urban Infill Team has created a system that helps instill a sense of comfort on project pricing for planned infill developments.

Land Advisors’ Urban Infill Team was involved in the acquisition of both of the above referenced projects, and our projected pricing was very similar to the values illustrated above.  If you are interested in discussing valuation, acquisitions or dispositions in the Urban Los Angeles market please contact…

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

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.