"Does a Seller need to pay income tax on the difference between what they owe and what the Seller sells

The property for?" PLEASE consult your CPA or Tax Attorney. "Not disclosing it to the seller or the wrong answer could cause you a Law suite."

 

Here is an explanation of the two forms that escrow holder will send out to the sellers to have them complete and return.    One is the Certifications of No Information Reporting and the other is the 1099-S form.  The seller is to review both forms and complete the one that applies to him.  Here is an example of both forms and a brief explanation for them.  In the case of a shortpay transaction, escrow holder will only be reporting a 1099-S if it applies to the seller in the below situations.  Escrow holder is only reporting what the actual sales price of the property was not how much the seller received as proceeds or how much debt was forgiven; however, the lender on the property may file their own 1099 for the shortage on the loan against the seller.  It would be in any realtor's best interest to always advise their sellers in a shortpay situation, to contact their CPA or tax attorney to find out what tax consequences they may face.

 

1. Certification for No Information Reporting

 

Proceeds from real estate transactions must be reported to the IRS on the Form 1099-S. Real Estate transactions include the sale or exchange of residential, commercial, agricultural, vacant land, multi-family, etc. We have in the past issued 1099-S on all sales/exchanges. The laws pertaining to 1099-S reporting proceeds from real estate transactions were amended 1998. The Internal Revenue Service now allows for the use of a capital gains Certification in connection with the sale or exchange of certain residential property. Use of such a Certification eliminates the requirements that Form 1099-S be completed and filed with the IRS. This Certification now falls under "exceptions" in the 1099-S Reporting Regulations. The "exceptions" for "volume transferor" have not changed. The IRS has set out specific guidelines for the use of the certification. Attached for your use is the Certification for No Information Reporting which conforms to the IRS requirements.   The Certification may be used as an alternative to Form 1099-S reporting for sales or exchanges of a principal residence where the sale price is $250,000 or less for a single person or $500,000 or less for a married person. The Certification must be in writing and signed by each seller, including spouses, under penalties of perjury. Each spouse must execute a separate Certification. If a seller answers false to any of the assurances listed in Part II of the Certification you must file a 1099-S. In the Certification, the seller makes the following assurances: The seller has owned and used the principal residence for two of the last five years The seller has not owned or exchanged another principal residence during this two year period No portion of the residence has been used for business or rental purposes Stated sale price limitations have not been exceeded and/or capital gain and marital status requirements have been met They did not acquire the property within the last 5 years in a 1031 exchange The property was not acquired by gift and by 1031 exchange within the last 5 years You should have either an appropriately completed and signed Certification or a 1099-S in your file. Please remember never to offer advice as to which Form the seller/exchangor should complete. If they have questions, please refer them to seek the advice of their CPA and/or attorney and provide them with a copy of the 1099-S IRS Reporting Regulations. They can be easily obtained from the internet at http://www.irs.gov/.

2. 1099-S Form

Unless we receive certification that the particular transaction is exempt from reporting, the transferor must complete Substitute Form 1099-S.

The top portion of the form contains basic information about the transaction, including the Branch Address, Escrow Number, Locate Number, Date of Closing, and the Property Address and Assessors Parcel Number.

In situations where the transferor is an estate or trust, the name of the estate or trust should be entered on line 1. Optionally, the name of one executor or trustee may be entered on line 2. In all cases, however, the TIN of the estate or trust named on line 1 must be reported.

A deceased person's Social Security Number cannot be reported on a 1099-S form. In the event that one or more of the owners is deceased, the executor of the estate must obtain a Taxpayer Identification Number on behalf of the estate prior to closing. TINs for estates and trusts can be applied for at the IRS, either on the phone or through its web site at http://www.irs.gov/.

When the transferor is a Partnership or Limited Liability Company, the entity's Employee Identification Number should be used.


The PROCEEDS Section is used to report the total consideration and the gross proceeds allocated to this transferor.

If there is more than one transferor and they are not spouses, a separate form must be completed for each transferor. In this situation, you should request an allocation of proceeds at or before the closing. You can rely on the response of any of the transferors provided it is not contested.

If for whatever reason you cannot obtain an allocation, file a separate 1099-S for each transferor and report the total proceeds on each form.

MARKET COMMENT The most important data releases last week, the producer price and consumer price indexes, turned out to be nonevents. The producer price index showed that prices paid to U.S. producers unexpectedly fell by 0.2% in June after rising 0.9% in May. This good news was counterbalanced by a 0.3% rise in the core PPI, which excludes more volatile food and energy prices. On the consumer end, the consumer price index rose 0.2% in June, down from May's 0.7% rise. The core CPI, which also excludes food and energy prices, advanced 0.2%, up from the previous month's 0.1% increase. The numbers were broadly in line with most expectations. Meanwhile, housing continues on what seems like its unending Bataan Death March. Home construction unexpectedly rose in June, after two straight months of declines, but a plunge in building permits suggests the upturn will be short-lived. Additional signs of weakness were reflected in the N AHB/Wells Fargo Housing Market Index, which fell four points to 24. Any reading below 50 is considered pessimistic. Mortgage rates held firm for most of the week, with the 30-year fixed-rate mortgage averaging 6.73%; the 15-year, fixed-rate mortgage averaging 6.38%, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaging 6.35%; and the one-year Treasury-indexed adjustable-rate mortgage averaging 5.72%, according to Freddie Mac's weekly survey. Points averaged 0.4 to 0.6. Rates are about where they were this time last year.

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
MBA Mortgage Applications	Wed. July 25, 7:00 am, et	None	Important. Both purchase and refinance application trends suggest increasing activity.
Existing Home Sales (June)	Wed. July 25, 10:00 am, et	5.83 Million (Annual Rate)	Important. Current estimates suggest a further slowdown in home sales.
Beige Book	Wed. July 25, 2:00 pm, et	None	Important. The Federal Reserve is expected to expound its stance on housing and inflation.
Durable Goods Orders (June)	Thurs. July 26, 8:30 am, et	1.8% (Increase)	Important. Market participants are looking for signs of continued economic growth.
New Home Sales (June)	Thurs. July 26, 10:00 am, et	890,000 (Annual rate)	Important. Current estimates suggest little chance for an immediate recovery in new-home sales.
Gross Domestic Product (2nd Quarter 2007)	Fri. July 27, 8:30 am, et	3.1% (Annualized)	Very Important. Current predictions suggest normal, non-inflationary economic growth.
Consumer Sentiment (July)	Fri. July 27, 10:00 am, et	91 Index	Moderately Important. Confident consumers should continue to sustain the economy.

MORE OF THE SAME Anyone associated with the housing sector - builders, mortgage brokers, Realtors - would love to see improved sales in both new and existing homes this week. Unfortunately, that's unlikely to happen, so attention should be deflected to the secondary data releases; namely, the beige book and gross domestic product. Both will have direct bearing on interest rates. Credit markets are resigned to the fact the Federal Reserve is unlikely to lower its influential fed funds rate this year, but they want additional insight on the Fed's stance on inflation and future economic growth. The beige book will supply that, while the gross domestic product will supply hard data on actual growth. Given current expectations surrounding both data releases, which foresees no surprises, odds favor mortgage rates again holding steady for the week.

MARKET COMMENT The most important data releases last week, the producer price and consumer price indexes, turned out to be nonevents. The producer price index showed that prices paid to U.S. producers unexpectedly fell by 0.2% in June after rising 0.9% in May. This good news was counterbalanced by a 0.3% rise in the core PPI, which excludes more volatile food and energy prices. On the consumer end, the consumer price index rose 0.2% in June, down from May's 0.7% rise. The core CPI, which also excludes food and energy prices, advanced 0.2%, up from the previous month's 0.1% increase. The numbers were broadly in line with most expectations. Meanwhile, housing continues on what seems like its unending Bataan Death March. Home construction unexpectedly rose in June, after two straight months of declines, but a plunge in building permits suggests the upturn will be short-lived. Additional signs of weakness were reflected in the N AHB/Wells Fargo Housing Market Index, which fell four points to 24. Any reading below 50 is considered pessimistic. Mortgage rates held firm for most of the week, with the 30-year fixed-rate mortgage averaging 6.73%; the 15-year, fixed-rate mortgage averaging 6.38%, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaging 6.35%; and the one-year Treasury-indexed adjustable-rate mortgage averaging 5.72%, according to Freddie Mac's weekly survey. Points averaged 0.4 to 0.6. Rates are about where they were this time last year.

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
MBA Mortgage Applications	Wed. July 25, 7:00 am, et	None	Important. Both purchase and refinance application trends suggest increasing activity.
Existing Home Sales (June)	Wed. July 25, 10:00 am, et	5.83 Million (Annual Rate)	Important. Current estimates suggest a further slowdown in home sales.
Beige Book	Wed. July 25, 2:00 pm, et	None	Important. The Federal Reserve is expected to expound its stance on housing and inflation.
Durable Goods Orders (June)	Thurs. July 26, 8:30 am, et	1.8% (Increase)	Important. Market participants are looking for signs of continued economic growth.
New Home Sales (June)	Thurs. July 26, 10:00 am, et	890,000 (Annual rate)	Important. Current estimates suggest little chance for an immediate recovery in new-home sales.
Gross Domestic Product (2nd Quarter 2007)	Fri. July 27, 8:30 am, et	3.1% (Annualized)	Very Important. Current predictions suggest normal, non-inflationary economic growth.
Consumer Sentiment (July)	Fri. July 27, 10:00 am, et	91 Index	Moderately Important. Confident consumers should continue to sustain the economy.

MORE OF THE SAME Anyone associated with the housing sector - builders, mortgage brokers, Realtors - would love to see improved sales in both new and existing homes this week. Unfortunately, that's unlikely to happen, so attention should be deflected to the secondary data releases; namely, the beige book and gross domestic product. Both will have direct bearing on interest rates. Credit markets are resigned to the fact the Federal Reserve is unlikely to lower its influential fed funds rate this year, but they want additional insight on the Fed's stance on inflation and future economic growth. The beige book will supply that, while the gross domestic product will supply hard data on actual growth. Given current expectations surrounding both data releases, which foresees no surprises, odds favor mortgage rates again holding steady for the week.

The 258 fastest growing U.S. cities Here's the stats on all 258 cities listed by the Census Bureau June 29 2007: 4:26 PM EDT

Fastest-growing cities Rank City State Population July 1, 2006 Population July 1, 2005 Numerical Change Percent Change 1 North Las Vegas city Nevada 197,567 176,527 21,040 11.9 2 McKinney city Texas 107,530 96,805 10,725 11.1 3 Port St. Lucie city Florida 143,868 130,959 12,909 9.9 4 Cape Coral city Florida 151,389 139,986 11,403 8.1 5 Gilbert town Arizona 191,517 177,653 13,864 7.8 6 Grand Prairie city Texas 153,812 144,352 9,460 6.6 7 Peoria city Arizona 142,024 134,259 7,765 5.8 8 Cary town North Carolina 112,414 106,963 5,451 5.1 9 Denton city Texas 109,561 104,264 5,297 5.1 10 Lancaster city California 140,804 134,106 6,698 5.0 11 Fort Worth city Texas 653,320 623,119 30,201 4.8 12 Joliet city Illinois 142,702 136,159 6,543 4.8 13 Miami city Florida 404,048 386,619 17,429 4.5 14 Bakersfield city California 308,392 295,769 12,623 4.3 15 Raleigh city North Carolina 356,321 342,812 13,509 3.9 16 Chandler city Arizona 240,595 231,728 8,867 3.8 17 Baton Rouge city Louisiana 229,553 221,148 8,405 3.8 18 Henderson city Nevada 240,614 232,014 8,600 3.7 19 Visalia city California 113,487 109,433 4,054 3.7 20 Irvine city California 193,956 187,457 6,499 3.5 21 Fontana city California 170,099 164,468 5,631 3.4 22 Orlando city Florida 220,186 213,250 6,936 3.3 23 Laredo city Texas 215,484 208,935 6,549 3.1 24 Elk Grove city California 129,184 125,293 3,891 3.1 25 Palmdale city California 138,790 134,650 4,140 3.1 26 Olathe city Kansas 114,662 111,278 3,384 3.0 27 Thornton city Colorado 109,155 105,962 3,193 3.0 28 Elgin city Illinois 101,903 98,932 2,971 3.0 29 Moreno Valley city California 183,571 178,272 5,299 3.0 30 Phoenix city Arizona 1,512,986 1,469,794 43,192 2.9 31 Brownsville city Texas 172,437 167,731 4,706 2.8 32 Austin city Texas 709,893 691,263 18,630 2.7 33 San Antonio city Texas 1,296,682 1,263,598 33,084 2.6 34 Santa Clara city California 108,518 105,778 2,740 2.6 35 Midland city Texas 102,073 99,623 2,450 2.5 36 Charlotte city North Carolina 630,478 616,075 14,403 2.3 37 Aurora city Colorado 303,582 296,861 6,721 2.3 38 McAllen city Texas 126,411 123,678 2,733 2.2 39 Simi Valley city California 121,288 118,671 2,617 2.2 40 Carrollton city Texas 121,604 118,998 2,606 2.2 41 Tampa city Florida 332,888 325,800 7,088 2.2 42 Reno city Nevada 210,255 205,794 4,461 2.2 43 Salem city Oregon 152,239 149,024 3,215 2.2 44 Albuquerque city New Mexico 504,949 494,477 10,472 2.1 45 Durham city North Carolina 209,009 204,680 4,329 2.1 46 Atlanta city Georgia 486,411 476,483 9,928 2.1 47 Sioux Falls city South Dakota 142,396 139,494 2,902 2.1 48 Lafayette city Louisiana 114,214 111,944 2,270 2.0 49 Killeen city Texas 102,003 100,084 1,919 1.9 50 El Paso city Texas 609,415 598,240 11,175 1.9 51 Tempe city Arizona 169,712 166,625 3,087 1.9 52 Pasadena city Texas 144,793 142,297 2,496 1.8 53 Plano city Texas 255,009 250,654 4,355 1.7 54 Winston-Salem city North Carolina 196,990 193,826 3,164 1.6 55 Portsmouth city Virginia 101,377 99,772 1,605 1.6 56 San Jose city California 929,936 915,668 14,268 1.6 57 Scottsdale city Arizona 231,127 227,584 3,543 1.6 58 Columbus city Georgia 188,660 185,799 2,861 1.5 59 Norman city Oklahoma 102,827 101,274 1,553 1.5 60 Billings city Montana 100,148 98,666 1,482 1.5 61 Denver city Colorado 566,974 558,663 8,311 1.5 62 Jacksonville city Florida 794,555 783,043 11,512 1.5 63 Greensboro city North Carolina 236,865 233,459 3,406 1.5 64 Eugene city Oregon 146,356 144,317 2,039 1.4 65 Glendale city Arizona 246,531 243,144 3,387 1.4 66 Las Vegas city Nevada 552,539 544,958 7,581 1.4 67 Charleston city South Carolina 107,845 106,366 1,479 1.4 68 Miramar city Florida 108,072 106,590 1,482 1.4 69 Dallas city Texas 1,232,940 1,216,264 16,676 1.4 70 Montgomery city Alabama 201,998 199,350 2,648 1.3 71 Amarillo city Texas 185,525 183,106 2,419 1.3 72 Arlington city Texas 367,197 362,530 4,667 1.3 73 Oklahoma City city Oklahoma 537,734 530,992 6,742 1.3 74 Houston city Texas 2,144,491 2,117,937 26,554 1.3 75 Overland Park city Kansas 166,722 164,681 2,041 1.2 76 Omaha city Nebraska 419,545 414,447 5,098 1.2 77 Anchorage municipality Alaska 278,700 275,474 3,226 1.2 78 Mesa city Arizona 447,541 442,381 5,160 1.2 79 Riverside city California 293,761 290,417 3,344 1.2 80 Tallahassee city Florida 159,012 157,203 1,809 1.2 81 Arvada city Colorado 104,830 103,643 1,187 1.1 82 Roseville city California 107,158 105,946 1,212 1.1 83 Seattle city Washington 582,454 575,884 6,570 1.1 84 Fresno city California 466,714 461,454 5,260 1.1 85 Irving city Texas 196,084 193,877 2,207 1.1 86 Aurora city Illinois 170,617 168,701 1,916 1.1 87 Fort Collins city Colorado 129,467 128,017 1,450 1.1 88 Mesquite city Texas 131,447 129,995 1,452 1.1 89 Huntsville city Alabama 168,132 166,314 1,818 1.1 90 Chesapeake city Virginia 220,560 218,219 2,341 1.1 91 Stockton city California 290,141 287,069 3,072 1.1 92 Lexington-Fayette Kentucky 270,789 267,929 2,860 1.1 93 Mobile city Alabama 192,830 190,802 2,028 1.1 94 Lubbock city Texas 212,169 209,946 2,223 1.1 95 Cambridge city Massachusetts 101,365 100,318 1,047 1.0 96 Chula Vista city California 212,756 210,563 2,193 1.0 97 Athens-Clarke County (balance) Georgia 111,580 110,461 1,119 1.0 98 Jersey City city New Jersey 241,789 239,395 2,394 1.0 99 Shreveport city Louisiana 200,199 198,236 1,963 1.0 100 Rockford city Illinois 155,138 153,628 1,510 1.0 101 Knoxville city Tennessee 182,337 180,576 1,761 1.0 102 Bellevue city Washington 118,186 117,137 1,049 0.9 103 Colorado Springs city Colorado 372,437 369,156 3,281 0.9 104 Waco city Texas 121,496 120,426 1,070 0.9 105 Sunnyvale city California 130,519 129,371 1,148 0.9 106 Fairfield city California 104,897 104,003 894 0.9 107 Naperville city Illinois 142,901 141,707 1,194 0.8 108 Madison city Wisconsin 223,389 221,545 1,844 0.8 109 Lincoln city Nebraska 241,167 239,196 1,971 0.8 110 Rancho Cucamonga city California 170,714 169,330 1,384 0.8 111 Corpus Christi city Texas 285,267 282,972 2,295 0.8 112 Vancouver city Washington 158,855 157,603 1,252 0.8 113 West Valley City city Utah 119,841 118,917 924 0.8 114 Wichita city Kansas 357,698 355,029 2,669 0.8 115 Nashville-Davidson (balance) Tennessee 552,120 548,286 3,834 0.7 116 Springfield city Illinois 116,482 115,676 806 0.7 117 Garland city Texas 217,963 216,478 1,485 0.7 118 Portland city Oregon 537,081 533,467 3,614 0.7 119 Kansas City city Missouri 447,306 444,314 2,992 0.7 120 Fort Wayne city Indiana 248,637 247,000 1,637 0.7 121 Berkeley city California 101,555 100,888 667 0.7 122 Cedar Rapids city Iowa 124,417 123,600 817 0.7 123 Tucson city Arizona 518,956 515,610 3,346 0.6 124 Corona city California 150,253 149,427 826 0.6 125 Fort Lauderdale city Florida 185,804 184,842 962 0.5 126 Newark city New Jersey 281,402 280,007 1,395 0.5 127 Columbus city Ohio 733,203 729,748 3,455 0.5 128 Gainesville city Florida 108,655 108,143 512 0.5 129 El Monte city California 123,162 122,584 578 0.5 130 Oxnard city California 184,463 183,602 861 0.5 131 Clarksville city Tennessee 113,175 112,658 517 0.5 132 Fremont city California 201,691 200,770 921 0.5 133 Springfield city Missouri 150,797 150,118 679 0.5 134 Sacramento city California 453,781 451,743 2,038 0.5 135 Pueblo city Colorado 103,730 103,269 461 0.4 136 Elizabeth city New Jersey 126,179 125,634 545 0.4 137 Daly City city California 101,005 100,569 436 0.4 138 Santa Rosa city California 154,212 153,548 664 0.4 139 Salt Lake City city Utah 178,858 178,099 759 0.4 140 San Francisco city California 744,041 741,025 3,016 0.4 141 Peoria city Illinois 113,107 112,651 456 0.4 142 Tacoma city Washington 196,532 195,740 792 0.4 143 Ontario city California 173,351 172,656 695 0.4 144 Westminster city Colorado 105,753 105,338 415 0.4 145 Allentown city Pennsylvania 107,294 106,877 417 0.4 146 Tulsa city Oklahoma 382,872 381,479 1,393 0.4 147 Anaheim city California 334,425 333,229 1,196 0.4 148 Indianapolis city (balance) Indiana 785,597 782,871 2,726 0.3 149 Inglewood city California 114,914 114,534 380 0.3 150 Topeka city Kansas 122,113 121,725 388 0.3 151 Oakland city California 397,067 395,864 1,203 0.3 152 Columbia city South Carolina 119,961 119,614 347 0.3 153 Cincinnati city Ohio 332,252 331,310 942 0.3 154 Little Rock city Arkansas 184,422 183,921 501 0.3 155 Pomona city California 154,271 153,876 395 0.3 156 Chattanooga city Tennessee 155,190 154,823 367 0.2 157 San Bernardino city California 198,985 198,524 461 0.2 158 Pasadena city California 144,133 143,804 329 0.2 159 Des Moines city Iowa 193,886 193,576 310 0.2 160 Memphis city Tennessee 670,902 669,864 1,038 0.2 161 Burbank city California 104,317 104,169 148 0.1 162 Hartford city Connecticut 124,512 124,354 158 0.1 163 Honolulu CDP Hawaii 377,357 376,879 478 0.1 164 Augusta-Richmond County (balance) Georgia 189,366 189,166 200 0.1 165 San Buenaventura ( Ventura ) city California 104,092 104,002 90 0.1 166 Evansville city Indiana 115,738 115,642 96 0.1 167 Hayward city California 140,606 140,503 103 0.1 168 Los Angeles city California 3,849,378 3,847,059 2,319 0.1 169 Spokane city Washington 198,081 197,969 112 0.1 170 Pompano Beach city Florida 104,402 104,355 47 - 171 Minneapolis city Minnesota 372,833 372,674 159 - 172 Yonkers city New York 197,852 197,778 74 - 173 Manchester city New Hampshire 109,497 109,460 37 - 174 Sterling Heights city Michigan 127,991 127,956 35 - 175 Arlington CDP Virginia 199,776 199,761 15 - 176 New York city New York 8,214,426 8,213,839 587 - 177 Abilene city Texas 114,797 114,805 -8 - 178 Garden Grove city California 166,296 166,316 -20 - 179 San Diego city California 1,256,951 1,257,328 -377 - 180 Antioch city California 100,586 100,622 -36 - 181 Fullerton city California 132,918 132,977 -59 - 182 Richmond city California 102,120 102,177 -57 -0.1 183 Hollywood city Florida 145,794 145,879 -85 -0.1 184 Worcester city Massachusetts 175,454 175,559 -105 -0.1 185 Erie city Pennsylvania 102,036 102,099 -63 -0.1 186 Torrance city California 142,350 142,467 -117 -0.1 187 Washington city District of Columbia 581,530 582,049 -519 -0.1 188 Hampton city Virginia 145,017 145,154 -137 -0.1 189 St. Petersburg city Florida 248,098 248,365 -267 -0.1 190 Lakewood city Colorado 140,024 140,175 -151 -0.1 191 Thousand Oaks city California 124,207 124,342 -135 -0.1 192 Ann Arbor city Michigan 113,206 113,364 -158 -0.1 193 Richmond city Virginia 192,913 193,186 -273 -0.1 194 Lowell city Massachusetts 103,229 103,383 -154 -0.1 195 Orange city California 135,070 135,276 -206 -0.2 196 Huntington Beach city California 194,436 194,741 -305 -0.2 197 Costa Mesa city California 109,809 109,987 -178 -0.2 198 Springfield city Massachusetts 151,176 151,483 -307 -0.2 199 Santa Clarita city California 168,008 168,357 -349 -0.2 200 Oceanside city California 165,803 166,163 -360 -0.2 201 Jackson city Mississippi 176,614 177,026 -412 -0.2 202 Santa Ana city California 340,024 340,865 -841 -0.2 203 Grand Rapids city Michigan 193,083 193,563 -480 -0.2 204 Louisville/Jefferson County (balance) Kentucky 554,496 555,899 -1,403 -0.3 205 Kansas City city Kansas 143,801 144,167 -366 -0.3 206 Waterbury city Connecticut 107,251 107,549 -298 -0.3 207 South Bend city Indiana 104,905 105,207 -302 -0.3 208 Green Bay city Wisconsin 100,353 100,651 -298 -0.3 209 Virginia Beach city Virginia 435,619 437,021 -1,402 -0.3 210 Boise City city Idaho 198,638 199,285 -647 -0.3 211 Newport News city Virginia 178,281 178,869 -588 -0.3 212 Chicago city Illinois 2,833,321 2,842,753 -9,432 -0.3 213 Paterson city New Jersey 148,708 149,222 -514 -0.3 214 Glendale city California 199,463 200,181 -718 -0.4 215 New Haven city Connecticut 124,001 124,451 -450 -0.4 216 Downey city California 109,376 109,782 -406 -0.4 217 Long Beach city California 472,494 474,307 -1,813 -0.4 218 Savannah city Georgia 127,889 128,404 -515 -0.4 219 Coral Springs city Florida 129,805 130,348 -543 -0.4 220 Stamford city Connecticut 119,261 119,760 -499 -0.4 221 Vallejo city California 116,844 117,351 -507 -0.4 222 Pembroke Pines city Florida 150,064 150,741 -677 -0.4 223 Alexandria city Virginia 136,974 137,602 -628 -0.5 224 Escondido city California 133,510 134,131 -621 -0.5 225 West Covina city California 107,745 108,248 -503 -0.5 226 Warren city Michigan 134,589 135,230 -641 -0.5 227 Akron city Ohio 209,704 210,771 -1,067 -0.5 228 Milwaukee city Wisconsin 573,358 576,336 -2,978 -0.5 229 Philadelphia city Pennsylvania 1,448,394 1,456,350 -7,956 -0.5 230 Modesto city California 205,721 206,885 -1,164 -0.6 231 St. Paul city Minnesota 273,535 275,084 -1,549 -0.6 232 Birmingham city Alabama 229,424 230,726 -1,302 -0.6 233 Independence city Missouri 109,400 110,039 -639 -0.6 234 Bridgeport city Connecticut 137,912 138,763 -851 -0.6 235 Norwalk city California 105,240 105,895 -655 -0.6 236 Syracuse city New York 140,658 141,657 -999 -0.7 237 Clearwater city Florida 107,742 108,520 -778 -0.7 238 Norfolk city Virginia 229,112 230,775 -1,663 -0.7 239 Rochester city New York 208,123 209,662 -1,539 -0.7 240 Providence city Rhode Island 175,255 176,614 -1,359 -0.8 241 Baltimore city Maryland 631,366 636,377 -5,011 -0.8 242 Fayetteville city North Carolina 168,033 169,400 -1,367 -0.8 243 Concord city California 122,204 123,241 -1,037 -0.8 244 Lansing city Michigan 114,276 115,312 -1,036 -0.9 245 Dayton city Ohio 156,771 158,203 -1,432 -0.9 246 Boston city Massachusetts 590,763 596,638 -5,875 -1.0 247 Flint city Michigan 117,068 118,247 -1,179 -1.0 248 Provo city Utah 113,984 115,135 -1,151 -1.0 249 Salinas city California 145,032 146,518 -1,486 -1.0 250 Toledo city Ohio 298,446 301,728 -3,282 -1.1 251 Pittsburgh city Pennsylvania 312,819 316,299 -3,480 -1.1 252 Buffalo city New York 276,059 279,138 -3,079 -1.1 253 Cleveland city Ohio 444,313 450,560 -6,247 -1.4 254 Detroit city Michigan 871,121 883,465 -12,344 -1.4 255 Beaumont city Texas 109,856 111,493 -1,637 -1.5 256 St. Louis city Missouri 347,181 352,572 -5,391 -1.5 257 Hialeah city Florida 217,141 220,611 -3,470 -1.6 258 New Orleans city Louisiana 223,388 452,170 -228,782 -50.6 Source: U.S. Census Bureau

TURN YOUR LISTING INTO YOUR OFFICE!

If any of you agents are like me, then you work out of home most of the time. Working from home is fine but to me is no different than working out of an office because you can get distracted at either place. At home my angels/devils may make alot of noise and at the office other agents make alot of noise which is fine sometimes because you may come across an agent who may have a buyer for your listing or vice versa but working out your listing especially if it's vacant is great because you can meet clients or potential clients. While you're there be sure to put your open house signs out that way you get the right distractions plus you're giving the listings more exposure especially if you're working on a Tues, Wed or whatever but if you're going to be at a desk anyway then turn it into a open house. You can get a small folding chair and table and keep those in you vehical at all times so you're ready to go to work you have what you need and if you're wireless it's perfect. So for those who have no listings I'll be more than happy to let you sit on mine and If I'm out of your area ask your colleagues I'm sure they will have no problem letting you hold an open house for them.

 PLEASE READ, complete overview of California Real Estate.Population loss: The cost of housing is so high that people are leaving in droves, moving inland. This is great news for us. The Antelope Valley is the inland there talking about. Just look around and see the massive Commercial and Industrial growth were seeing here in the Antelope Valley . Great news! Lot 's of jobs and I mean lots of jobs! Just about any home under $300,000 is moving and seeing in many cases multiple offers. Please remember Frank & Fidelity Title, were here to serve you with great serviceJ

 

Sick and tired of inaccurate housing reports, Schahrzad Berkland started The Berkland Group, a consulting firm which provides straight talk about the Southern California housing market. You can see Schahrzad's housing forecasts on californiahousingforecast.com.

Thank you for taking time to complete this interview, Schahrzad. We are very excited to share your views and data on housing with our readers. Can you let everyone know how long you have followed the housing market in Southern California ?

 

Since October of 2005.

In your opinion, what are the biggest problems in the So Cal housing market right now?

 

• Excess prices and risky loans: CA's prices are far removed from their fundamentals of wage and rent multiples. A large percentage of the population lives in California , and the banks are very exposed to CA real estate--so there is a lot of paper profits and risky bank loans, whose collapse will ripple through the entire country.
• Wages: Salaries here are not high enough to truly afford the homes, so in CA we resorted to risky financing. In San Diego , 68 percent of all mortgages in 2005 and 2006 were IO or ARMs. People cannot afford their homes, so they are renting them from the bank, thinking they own them. This is happening in California more than anywhere else, which means the dollar amounts involved in overpriced homes and loans-about-to-go-bad is so much higher. For this reason, California is where you'll find the most risky loans, the highest mortgage equity withdrawal, and the greatest impact of all that consumer spending from the housing ATM.

• Population loss: The cost of housing is so high that people are leaving in droves, moving inland or to cheaper states. (See #1 below.)

• Job growth: Employment growth is too dependent on real estate.

• Looming foreclosure crisis: With no skin in the game, people in foreclosure now are not even listing their homes for sale. They don't even have 6 percent equity to hire a realtor. So they live rent free for 7 - 9 months until evicted after auction. Foreclosures will go through 2 waves through 2012. For more info, see the chart on my homepage: californiahousingforecast.com

Some recently published news stories have lead readers to believe that wealthier neighborhoods in California are not experiencing the same housing market issues as other nighborhoods. Are the problems really limited to a specific group of people, i.e. the poor to middle class?

 

Even the wealthy are in over their heads, with rising property tax liens, cash-out refinancing, and foreclosures. I'll just give you one example of each. In Maderas golf course community, where some of the Padres players live, we've got a half dozen 2004 tax liens on $2 - $3 million homes. A guy on the water in Encinitas took out a $1 mil HELOC last year...

I go through hundreds of listings through the MLS, foreclosure.com, and ForeclosureRadar.com. One thing is clear: the more expensive the home, the more cash was taken out. It is rare to see anyone who abstained from the housing ATM. Last, foreclosures are rising all over the city. While they are highest in new subdivisions (because you had entire communities who got 100 percent financing at the peak of the market with short-term teaser rate loans that are resetting), they are rising in middle and upper income areas too.

Is there anyone in particular to blame for these problems?

 

The Federal Reserve created and nurtured the housing bubble. They ignored all the Homeowner Relief Acts and other banking legislation, all predatory lending guidelines. They wanted the stimulus of cash-out refinancing, to avoid a recession in 2001 from getting worse. So who knows what they have in store for an encore. Just like the housing bubble covered up the stock bubble collapse, what is the next bubble? The Fed is printing money at 10 percent per year, creating high inflation is anything that is not imported from Asia . So consumer goods are cheap, but prices are rising for US services like education, healthcare, oil, and food. What's next?

Do you think what we are seeing now is normal bubble behavior? For example, do you think the current bubble in California is similar to the housing bubble that occurred in Japan ?

 

I have not studied Japan , but Dr. John Talbott discusses this in his book Sell Now. Their prices kept going up, but then reached a maximum when their elderly population reached 12 percent of the total. Also, Japan 's Ministry of Finance didn't want the banks to write off all their bad mortgage loans, so they kept it covered up, letting the losses be offset by income over a 10 year period. With all those losses to cover, banks had to be more conservative, and lending really dried up. Too much saving means low consumer spending.

Do you see the same thing happening in California ?

 

CA economy will stall as cash out refis dry up, property tax and sales tax falls. House prices will fall further once reality sets in after the recession is realized. We are already in a recession, but it is not yet reported in the media. Q1 GDP growth for US was 0.6 percent. This quarter could be well negative already.

Can the Fed balance everything out?

 

The Fed will panic and lower interest rates. They will do the wrong thing. They don't want to learn anything or make a long-term solution. I am sure they are terrified of a banking crisis and credit crunch, as our entire economy is addicted to ever rising access to credit. If you take away credit cards from Americans, our economy will melt down immediately. People just don't have money from their productivity or savings to even pay their basic living expenses. So the Fed is worried, but they won't learn a thing. They will just keep printing money at 10 percent a year and create another asset bubble.

Remember, the Fed is not a government agency, but a consortium of private banks. This would be a good research project for a media organization: who are the shareholders of the private banks making up the Fed, and what is their mission? The Fed is operating outside the Constitution. Our Founding Fathers explicitly stated that only gold and silver could be legal tender, because they had used paper money before and it caused such severe depressions that they did not want us to go through that again. So the interests of the shareholders of these huge banks, which by the way is secret (nobody knows who they are), are not aligned with the interests of the American citizen...so they will do what makes them richer.

So the right thing to do is...?

 

The right thing to do is stop printing so much money, and only spend what we earn. We have to pay down our debt and stop making entitlement promises that cannot be kept.

There are optimists who think Southern California will defy the housing downturn because the area is such a desirable place to live. What do you think of this view?

 

Two things:

One: CA has always been desirable, but just because people want something doesn't mean they can afford it. After all, if it's so desirable, why are people leaving in droves? CA houses now cost over twice as much as they used to compared to salaries. Despite all that exotic financing, people are simply priced out. Wages have not kept up. So people are voting with their feet, and walking away from 'desirable CA'. So they are leaving high-priced cities in CA in droves. Last year, per the US Census Dept, 40,000 people left San Diego , 229,000 left LA, 42,000 left San Francisco , 6,800 people left Santa Barbara , and 8,400 left Ventura County . In contrast, 63,000 moved to the Inland Empire last year.

I have a good one for you: whiskey is so desirable among alcoholics, that grocers can charge whatever they want...people will pay it. Guess what! Alcoholics switch to wine or tequila or beer. So people only pay what they can afford or are willing to pay, and then they switch products. In the case of housing, they buy a house in Kansas . My realtor friend was showing 5 houses one weekend, and every seller was planning to leave and buy a mansion with his CA sale proceeds, in a cheaper place.

Two: Stricter lending puts a cap on what people can pay. That forces prices down. People are getting turned away by lenders, so they can't buy, even if they want to. Now we have lower demand as buyers are priced out, turned away by lenders, or leaving the area. So sales are way down. To make matters worse, sellers keep adding more homes for sale. Foreclosures are projected through 2012, so we're going to have lots of homes for sale for many years to come.

If half of all buyers could get $600,000 loans with no money down, but now half of all buyers can only get $250,000 loans because they need a down payment, anyone who wants to sell must lower their price down to that $250,000 level. So prices will need to drop to the point where a teacher can buy a small single family home on 2.5x her income.

Exactly how far do you think prices will drop in each of the following counties: Los Angeles , Orange , San Diego , and San Bernardino ?

 

Prices will fall in half. We'll go back to 1999 prices. It could be worse. Don't be surprised by my statement. Let's just look at what happened in the 1980s and 1990's downturns. It's easy enough to look up at the County Recorder Office, or on the MLS, but neither the County Recorder , nor the realtors, wants to advertise the ugly truth: CA has 15 year housing cycles and prices fall 30 percent to 50 percent in a downturn.

I have many examples. I'm talking about homes in Laguna Niguel, Encinitas , Del Mar, La Jolla, Poway, Pacific Palisades .....the most desirable properties, which are still rising now by the way, fell 40 percent in the last downturn. The media needs to start asking realtors this tough question: 'How much did superior properties fall in the last housing downturn?' When I posed this question on a Carlsbad realtor's blog, he blocked my internet address.

So it's not a question of what I think will happen to prices. It's a matter of fact what actually does happen to prices. History tells us.

Your estimates probably aren't far off from what many people think, but they are quite a bit different than the estimates presented in the media. Is there something they're not telling us?

 

Nobody is going to give you the straight scoop on CA's housing bubbles. Realtors and mortgage brokers need their commissions; journalists are English majors and don't even have access to the MLS so they rely on realtor salesspeak; economists are paid by governments or investment banks so they have to keep quiet; and local municipalities try to promote growth of their region.

Gregory Smith, the San Diego County Assessor, is promoting real estate purchases...he's encouraging more fools to enter the pyramid scheme. This housing market is in a bubble, and no public official should be encouraging anybody to buy homes right now. Of course, he might be worried about falling property tax revenue, but the rising tax default rates are worse in the long run. In the 1990's, our property tax default rate was near 5 percent. This time housing prices climbed much higher.

There has been talk of a recession caused by housing, but for the most part, the mainstream media has been quoting economists who don't think there will be a recession. Is this another case of not getting the straight scoop or are economists optimistic for the most part?

 

Economist Dr. Dean Baker wrote that economists never predict a recession, saying 'I happened to get a copy of the Blue Chip top 50 forecasters' projections for 2001, dated Sept. 2000. Not one forecaster in this group projected a recession. In fact, the lowest growth projected by any of them for 2001 was 2.4 percent. Keep in mind, the stock market had already begun to unravel at that point, so it shouldn't have been too hard to imagine that there would be some economic impact.'

What about median home price tracking-a method most media outlets use to report the market? You mention on your website, californiahousingforecast.com, that median prices, average prices, and $/sq ft measurements are useless indicators of what is really going on in the market. Can you tell us why?

 

The median, average, and $/sq ft measure the prices of homes which sold that particular month. First time buyers are priced out, or they can't qualify for a loan, so now we have fewer cheap homes selling. The snapshot of sold homes has really changed. How can we measure the median or average price of a basket of produce when one month people are buying mainly apples, and the next month they are buying mainly mangoes and blueberries? We can't! The high end homes are 50 percent more of the market, so they are skewing the data up. They used to be around 6 percent of sales, and are now around 9 percent of sales.

The $/sq ft is falling for the same reason that the median is going up. I know that sounds backwards, but it's correct as written. Remember, our sales mix has a smaller portion of starter homes now. The low end is priced out and can't get loans. The rich are still buying, so they are skewing all the data.

Big homes cost a lot less per square foot, because land is a fixed cost and due to economies of scale. A 1000 sq ft house is $400/sq ft, while a 3000 sq ft house is $300/sq ft. See what happens when you have more homes at $300/sq ft? The $/sq ft goes down when you sell more big homes. So we are measuring the distribution mix again. Some people think they are analysts, because they see a number go down and jump to the conclusion they finally found a way to measure the price drops. This is why I scolded Rich Toscano publicly. You may know, or not, that I emailed him privately several times before going public. But anyway, it's a distribution number.

Here's another problem: any method which uses sold homes to measure the prices of all homes, will always be wrong. You cannot know the price of a house that didn't sell, because it has not sold yet. And in this market the homes that didn't sell will have to be severely discounted. So you can't know the price of homes not on the market, or those languishing on the market, based on those that sold. The homes that sold are the cream of the crop.

How can you know the price of the 2000 sq ft house on the highway that ain't gonna sell in this market where buyers have a ton of choices, based on the price of the 2000 sq ft house with a stunning kitchen, next to a park in the beautiful subdivision down the street? They are both 2000 sq ft homes, on the same size lot. The buyers are going for the good one, and leaving the bad one behind. The spreads between good and bad are getting bigger. Mr. Highway has to take a huge deduction if he wants to sell.

In a hot market, everything sold, so the sales prices accurately reflected the value of the entire market. But in a weak market like we have now, only the good homes sell. So by measuring only the sold homes, now we've shifted our data collection to the good homes. We don't know the value of the bad homes, because they are not selling. If you want to improve the median, then make every homeowner lower his price to the place that his house would sell, and then see how much the median drops.

What about the Office of Federal Housing Enterprise Oversight? They claim that their house price index provides more information and is more accurate than other indices.

 

The OFHEO index has problems too, which I explained on my site. Just one: it does not measure the huge amount of remodels. Every one of my friends tore out her kitchen or put in a backyard barbeque with those nice Viking outdoor barbeques and refrigerator. Of course the house will sell for more now than 5 years ago! But it's not because housing prices are rising! The OFHEO and Case-Shiller indices are not adjusting for that at all, they can't. They're just using county sales records. So again, the house with the $60,000 kitchen upgrade will sell, but the one next door with original 1980 kitchen will not. So it seems like the housing price is going up, but really you are paying more for that kitchen.

All housing metrics use data from sold homes...so that is a lot cheaper than hiring appraisers to do walk-throughs on thousands of homes. I doubt anyone is going to devise an appraisal methodology. Where is the incentive? Who would pay for it?

The ONLY way to measure housing prices is an appraisal method. Someone needs to design a sample set of homes and appraise them every quarter. The appraiser must do a walk-through appraisal, so he can adjust for remodeling. This would be expensive.

What indicators should investors and the everyday homebuyer be using? Where can they get reliable info?

 

What people need to do is watch the number of homes listed and sold in their neighborhood. As long as listings are increasing and sales are falling, prices will come down. Only 10 percent of homes are selling, so people who want to sell, have to lower their price, and inevitably, will set the new price for the area.

You can get home sale and listing info from your realtor. Don't let them sweet talk you into buying a home. Insist on knowing this data:

1. How low did housing prices fall in the last downturn? You have to see samples of homes which sold in two specific time periods: 1989-1990 and again 1995. There will be some. You need to see those.
2. Figure out months supply. Ask your realtor for sales and inventory data for that area. Sales/inventory = months supply. As long as that is above 4, prices have to come down.
3. Wait to see how badly the foreclosure wave pummels the market. Do not buy any real estate until the ARM resets are behind us. The bulk of ARM resets ends in 2008, so a one year lag means the highest REOs will be at the end of 2009. You might get a great buy then. But the foreclosure wave will continue, as the prime borrowers hit their resets on their 7 year IO loans in 2011. I am waiting to see how much prices get pummeled after my friends in their $1.5 - $2 million homes have their loans reset. So wait to buy until after the REO wave is over.

When do you think the market in So Cal will finally bottom out?

 

Not before 2012. CA real estate cycles are 15 years long: 5 - 7 years up, 5 - 7 years down.

There is not one clear month for the top of the housing bubble, since the top happens in waves, starting with the lowest end and working up, over 3 years. Condos peaked in the spring of 2004, single family homes peaked in the spring of 2005, and the prime properties in Carlsbad and on the water are still rising.

How can people watch for the bottom? Or more precisely, how will they know when to buy?

 

People should keep reading blogs and my forecast. Watch for the foreclosure wave to end, and when panic is high and nobody wants anything to do with real estate, then go in and buy. I bet all the people reading this, who are waiting for prices to drop, won't want to buy once prices have dropped. The people reading blogs are priced out...they are not market timers like me. Some sold and are renting, like me. Many are first time buyers, who are waiting for prices to come down to their comfort level. But those same people will be scared to death to buy after prices have gone in half...foreclosures are everywhere, as they will be afraid of further price drops.

When I see sales pick up after the foreclosure wave is finished, then it' time to buy. Look for the market to completely wither and die, and then start showing signs of life.

On the other side of the coin, what can sellers do to avoid losing their shirts?

 

Sellers are hurting themselves with false pride. They really need to look at the comps and go look at other homes in their price range. They'll find they are overpriced, and their home won't sell. When they are overpriced, they won't even get anybody to come through the door to look at the home. So no traffic means no sale. If you can't get traffic, how can you sell? If every seller would lower their price by 10 percent to get to where they need to be, they could have a chance at selling their homes.

Thanks for the info Frank!!!

 

Southern California
Changes In Existing Home Market Conditions

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When we analyze and forecast new home market conditions, we first examine changes in recent sales volume for existing homes, as it is resale volume that supplies the equity rollover that supports many new home sales. Our Existing Home Sales Report offered at RealEstateEconomics.com compares current market statistics to those of the same period 12 and 24 months previous, and provides our clients an accurate interpretation of the direction of overall market conditions. The new home market is especially sensitive to changes in the resale market, as resale homes not only provide equity rollover that potentially flows to a new home purchase, but resale listings may also represent increased competition during times when the number of listings balloon. This report highlights various existing home market changes, lending insight to the overall near-term health and direction of the new home market in Southern California .

The chart below presents year-to-year changes in the existing home price and price-per-square foot averages for all of Southern California, defined as Ventura , Los Angeles , Orange , San Diego , Riverside and San Bernardino Counties :

As shown above, a 6.0% increase in the average price of existing homes has been observed during the past 12 months, which is far below the gains seen 12 to 24 months previous, but is unjustified, given the current market disruption. The average price per square foot (a better indicator of appreciation) has increased by only 1.5% during the past 12 months, reflecting almost no upward price pressure.

Even these modest price gains should have occurred. Current price levels are perceived as overstated, and the impact of overstated pricing has been a dramatic reduction in existing home sales volume, as shown below:

The serious decline in sales volume shown above has not been due to an economic downturn. Rather, it originated from the ‘artificial' price inflation caused by far too many speculative purchases during the past 24 months. Once speculative buyers left the market, prices were left at a level beyond where they can be supported by the economy. Even though speculative buying has ceased, the continued increase in prices (albeit modest increases) will likely need to reverse before sales volume stabilizes. Existing home prices have reacted to the drop in sales volume far more slowly than the new home market, and both the new and existing home prices will need to recede further in order to stabilize sales volume.

Based on our measure of supportable prices (in the table below), the housing market is still over priced by about 4.5%:

As prices recede to levels that are supported by the regional economy, existing home sales volume will stabilize and lead to improvements in the new home market. This stabilization in existing home sales volume is becoming apparent in select Southern California markets (mainly coastal markets), and given continued stable economic growth, market stabilization should become apparent throughout Southern California during the next few quarters.

Our existing home market database is updated each month. A review of existing home market conditions and our near-term new home market forecasts for Southern California are presented in The Residential Economic Report, and can be accessed at http://www.swiftpage5.com/SpeClicks.aspx?Acc=REE.Mike&SPCED=C070530184300&LNK=3&UId=122.

Recent national reports about the slow housing market have raised many questions for concerned homeowners: “Is now the time to sell?” “Should I buy that vacation home in Miami?” In order to really discover the answer to nagging real estate market questions, homeowners must collaborate with their mortgage and real estate professional to explore the real estate situation on a local level.

Should I Buy?
Tips for Buyers:
The market is in your favor, interest rates are low, more housing is available in select markets and sellers are offering great buyer incentives. Below are a few tips to help you successfully shop for new real estate.

· Take your time, but not too much time Yes, home prices are lower, but continuing to wait in hopes that the price will decline may backfire on buyers. If you find a property that you can't live without, make an offer and negotiate. Work with your real estate professional and suggest a price that reflects the local market and sales' price of the homes nearby.

· Watch out for competition The National Association of Realtors is expecting more than 6 million home sales in 2007, so don't think you are the only one out there shopping. People are constantly moving due to new job opportunities, marriage, divorces and more, so be prepared to make counter offers.

· Know your loan According to bankrate.com, interest rates are still very low. The average national interest rate on a 30-year fixed mortgage is about 5.79 percent. But, before you sign, be sure you fully understand your loan products. Work with your real estate and mortgage professionals to find the best option that will fit your financial situation.

Should I Sell?
Tips for Sellers:
The National Association of Mortgage Brokers predict a big selling boom this year, so be prepared for lots of competition. Below are a few tips that will help you successfully sell your real estate.

· Set a realistic asking price Over the past few years, home sellers have been able to get away with asking extremely high prices for their property in select markets. Now that the market has cooled, sellers may feel that they are getting the short end of the stick. According to Jim Gillespie, president and CEO of Coldwell Banker, sellers “need to realize that a home is where you live. It's not a lottery ticket,” it is a long term investment.

Work with your real estate professional and investigate the local real estate market and what the sellers within your community are asking for their property. Setting a proper asking price will obtain more offers.

· Fix up your home Making a great first impression is crucial. A few minor improvements and a fresh coat of neutral colored paint to visible exterior and interior parts of your home will help catch buyers' attention.

 

This story appeared in the Antelope Valley Press on Wednesday, February 21, 2007.

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LOS ANGELES - The Los Angeles County Economic Development Corporation, says the Southern California economy looks pretty good and the Antelope Valley - unlike other regions of Los Angeles County - still has lots of land available for development.

The organization's 2007-2008 Forecast and Industry Outlook, released today, says land availability and a business-friendly environment place the Antelope Valley in a unique position in heavily developed Los Angeles County .

"All areas of Southern California are in a growth mode. In the Antelope Valley , the key issue is the land that is available for industrial and logistics development in the urban core of Southern California ," said Jack Kyser, the organization's senior vice president and chief economist. "It would be a mistake for (local leaders) not to crank up the volume of the message up there - 'Hey, there's space up here and good workers available.' "

The report is a precursor to the more detailed LAEDC report due in July that breaks out data specific to 13 regions of Los Angeles County .

The report said total building permits were down by 14% for the year 2006 in the five Southern California counties: Los Angeles , Orange , Riverside , San Bernardino and Ventura . But in Los Angeles County alone, it said, construction "inched up in 2006, a mere 2.7% growth; with more than 61% of the units permitted being multi-family (condos and apartments).

"This reflects the lack of land available for new housing development in Los Angeles County except in the Antelope and Santa Clarita valleys."

Housing acts as brake

Overall, the report said, Los Angeles County "had a decent year economically in 2006. However, it will see slightly slower growth through 2007-2008, with housing acting as a brake."

The report added: "One segment to watch is the for-sale condo market where there has been a burst of development that seems to have out-run market demand. However, there will be positive trends in key industries, such a aerospace, business and professional services, international trade, technology and travel and tourism. The latter industry has come back strongly, and the 30 large conventions booked for 2007 will keep the momentum going."

An array of major projects in the county will keep the economy rolling along in 2007 and 2008, the report said, including the 7,100-seat Nokia Theater and the $2 billion Grand Avenue project in downtown Los Angeles . Also coming are light-rail lines from downtown to East Los Angeles and to Culver City , plus other transportation projects funded by the November 2006 state bond package.

Worker contract renewals

The forecast report said "there will also be drama on several fronts in both 2007 and 2008" - a possible strike by grocery workers when their contract expires in March; the expiration of the Writer's Guild contract in October; and the expiration of Directors and Screen Actors guilds contracts in June 2008.

A major risk, the report said, "is labor unrest in the motion picture-TV production industry. That 'de facto' strike in 2001 caused significant pain in the areas of the county with heavy exposure to entertainment. If there is a worker interruption in the industry, it would not be pleasant."

Other dramas include the battle for leadership of the Los Angeles Unified School District , "pushing and shoving over legislation requiring hotels along Century Boulevard at LAX to pay a 'living wage' " and local governments feeling the pinch of lower property taxes.

Flights to San Francisco

Kyser said the twice-a-day United Express service scheduled to start June 7 between L.A./Palmdale Regional Airport and San Francisco will be a business bonus, "providing more access for a lot of people."

The Antelope Valley , he said, has much to offer.

"Look at the area," he said. "It has a growing population, a growing business base and very positive attitudes. Business is the friend and not the enemy like in other areas."

Defense spending not over

Defense Department spending, a vital part of the Antelope Valley economy, is going through changes, Kyser said.

"We expected defense spending to taper off, but it may not happen."

The Antelope Valley , he said, reportedly has a number of secret defense programs - called "black programs" - that aren't known to the public.

"There are a lot of black programs going on in the Antelope Valley ," Kyser said. "At night scan the skies."

The report noted that the fate of the C-17 military cargo plane, assembled in Long Beach , is uncertain.

"More orders from the Department of Defense will be required by year-end 2007 to prevent the 'shutdown' process from starting again," the report said.

Office space shortage

The report said the shortage of office and industrial space is another pressing problem for the county.

Office vacancy rates in the county at year-end 2006 were at 9.7% and headed down.

"The situation was much more serious in the industrial sector where the year-end vacancy rate was just 1.5%, again with a modest amount of new space in development. Worse yet, residential developers are trying to scoop up industrial sites for construction of housing with no thought given to possible job losses," the report said.

The irony, the report said, is that the decline in manufacturing employment in the county looks like it is getting close to bottoming out. Because defense and "quick-turn" manufacturing work cannot be sent overseas, Kyser said, Southern California job losses are coming to an end.

The report said, "There is a shortage of developable land in the urban core of Los Angeles County , so there will be more disputes over how sites are redeveloped. Complicating the situation is the jump in land costs."

New businesses in county

Newcomers to the Los Angeles business scene, the report said, will be Wachovia Bank, UK retailer Tesco with its smaller food stores similar to Trader Joe's and apparel retailers H & M and Zara.

Nonfarm employment in the county will grow by 1.1% or by 43,700 jobs in 2007, and by 1.3% or 51,800 jobs in 2008, the report said. Personal income will increase 4.9% in 2007 and 5.3% in 2008, outpacing the cost of living, which will be up in 2007 in the five-county Southern California area by 2.5% and in 2008 by 2.6%.

The county's travel and tourism industry will continue to perform well, the report said, with a 0.4% increase to 25.3 million overnight visitors in 2007.

International trade also will continue to be a reliable engine of growth, with an 11.3% increase in the value of two-way international trade at the local customs district to a new record level of $365 billion.

Housing industry risky

The county's real estate industry, the report said, "will have a split personality over the next few years. After an increase in the number of housing units permitted in 2006 (up by 2.7%, thanks to the multi-family sector), the permit count will drop by 23.3% in 2007 and by a further 3.0% in 2008. Partially offsetting this decline will be modest gains in nonresidential building permit values of 2.5% in 2007 and of 3.2% in 2008."

The report calls the housing industry risky, "but especially the for-sale condo market which has gotten a little ahead of itself. Some developers will be at risk."

On the state level, the report said that trends in the housing market "will continue to be a drag on the economy."

"The state's budget will be in a deficit situation again," the report said, "while there are ambitious environmental, social and infrastructure programs being discussed in Sacramento . Who will pay for them?"

The slowdown in property tax revenues, it said, could cause government agencies to tighten their budgets, and "most government agencies will have to start accounting for their obligations for retiree pensions and health care."

Immigration, trade policy

The report anticipates that with Californian Nancy Pelosi serving as speaker of the house, attention will be paid to a guest worker program to cope with undocumented immigration.

"The latter could help the state's labor-starved farming industry," the report said.

Another item will be trade policy, the report said, "with the Democrats concerned about the movement of jobs offshore. The state has lost manufacturing jobs, yet the business of international trade has been a significant engine of job growth."

In the agriculture sector, the report points out that the severe freeze that damaged the fruit did not damage the trees themselves. Income from the state's farm sector, it said, was little changed from 2005 to 2006, but the job count will decline in 2007 due to freeze-related disruptions.

In international trade, the Transportation Worker Identification Credential will be implemented some time during the year. "There are concerns many of the port truckers won't be able to obtain a TWIC due to their immigration status."

Greenhouse gas legislation

Professional, scientific and technical services will continue to expand, the report said, but "an emerging driver will be compliance with AB 32, the greenhouse gas legislation. Many industries will need to determine their requirements and how to best meet them."

Technology should see decent growth, the report said, as will tourism, as the weaker U.S. dollar attracts international travelers.

On the risk side, the report said the housing downturn "could be more severe than currently forecast."

And, the report said, the already high operating costs for businesses in the state "will go up due to tight office and industrial real estate markets, which will translate into higher lease rates. Longer range, a significant investment will have to be made in the state's electric distribution system, and higher power rates will result."

The 2007-2008 Economic Forecast and Industry Outlook for California and Southern California was written by Chief Economist Jack Kyser and economists Nancy D. Sidhu, Eduardo J. Martinez, George Huang and Candice Flor.

East side to get huge new plaza

1,000 jobs expected at new center AV Press on Thursday, February 8, 2007. PALMDALE - With earth-moving equipment grinding away in the distance, city officials and builders ceremoniously broke ground for what will be the largest shopping center on the city's rapidly growing east side.The 47-acre Palm dale Gateway center, on the northwest corner of 47th Street East and Avenue R, will be larger than the east side's first major center: a 33-acre plaza containing 11 businesses, including Wal-Mart and Lowe's, on the southeast corner of 47th Street East and Avenue S. The Palm dale Gateway plaza on Avenue R will be a hub for 18 businesses, including the Antelope Valley 's first SuperTarget, which will offer groceries in addition to other goods. The SuperTarget will be the Gateway plaza's largest anchor, spanning 172,815 square feet, said Brian Hopkins, vice president and development manager of the Hopkins Real Estate Group.

The SuperTarget should be open by mid-October, Hopkins said Wednesday.All told, the Gateway plaza will provide 522,766 square feet of new commercial business space, Hopkins said.About 140,000 square feet will be taken by a new Home Depot outlet, he said. "In addition to that, PetsMart and Staples will be joining us, and numerous pad shops and restaurants" Hopkins said. The SuperTarget will be one of the first structures to be completed, while the Home Depot will not be finished until about March 2008, he said. His company will be investing about $70 million in the project, for which grading was initiated in January, Hopkins said. Government approvals for the project were pushed through in about half the normal time, Hopkins said, extending his appreciation to many individual staff members in various departments at City Hall. Construction of the center will bring improvements to both Avenue R and 47th Street East , which is part of state Route 138, Hopkins said. "The sales tax that will be generated by the center is going to be incredible," Hopkins continued. The new businesses are expected to provide employment for about 1,048 people, city documents show. Mayor Jim Ledford said he was pleased with the business community's interest in serving east side residents. "It's great to see this blueprint unfolding on the east side of our city," said Ledford, who was joined at the groundbreaking by Mayor Pro Tem Mike Dispenza and Councilman Steve Knight.