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Thursday, Mar 28, 2024

Getting That Queasy Feeling

I don’t know about you, but to me the signs are everywhere that the housing market is gaining some serious momentum – and that gives pause. Really, it actually worries me. The health of the U.S. economy is so tied to the home market that we fuss over the latest housing numbers like the Greeks interpreting the oracle at Delphi. But the latest numbers are clear enough. The median home price in the San Fernando Valley hit $420,000 in January, according to the Southland Regional Association of Realtors in Van Nuys. That’s an astounding 20 percent higher than a year earlier and the highest median since August 2008. And the closely watched Case-Schiller Home Price Index released last week showed Los Angeles prices were up 10.2 percent in December and nearly 7 percent on average in 20 major metro markets. The tale seems the same everywhere. Record low interest rates have stoked demand but there is low supply, as folks who bought at the height of the boom continue to resist selling at even today’s improved prices. What’s more, speculators have swept in at the bottom of the market, taking thousands of homes for rentals until prices peak. The Southland Realtors association tells the tale of one local home that was listed for sale on a Monday night and by Tuesday afternoon had 12 offers. Builders know what’s going on, so home construction is starting to take off again. Ryland Group Inc. in Westlake Village recently reported its first full year profit since the crash. And a Wall Street Journal story last week documented how builders are helping to sell their own homes by paying closing costs or using in-house lenders. Of course, Uncle Sam is in the game too. One research firm cited in the Journal story concluded that the Federal Housing Administration backed 31 percent of all new homes sold in the fourth quarter requiring a mortgage, up from about 10 percent a decade ago. The perhaps unsurprising result: The California Association of Realtors reported this month that despite record low borrowing costs, the fast jump in home prices resulted in fewer families being able to afford a home in the fourth quarter. So, let’s get this straight. There are a whole bunch of homes in the hands of owners not yet willing to sell, a whole other bunch owned by speculators and yet more new homes entering the market, with mortgages juiced by builders and Uncle Sam. Anybody else getting a little queasy? • • • I can’t help but note the odd week just suffered by Jeffrey Katzenberg. Anyone who watched the Academy Awards show knows that the Dreamworks Animation CEO was honored with a humanitarian award for spearheading a fundraising drive to support the Motion Picture and Television Fund. The charity runs long-term care and assisted living facilities in Woodland Hills. Katzenberg personally donated $30 million to the cause. Yet a labor dispute with workers, represented by the Service Employees International Union-United Healthcare Workers, resulted in – to be charitable – some ill-timed protests outside the company’s campus and elsewhere in Los Angeles. One issue is replacing the workers’ defined pension with a 401(k) type program. And all this in the days leading up to Oscars when Hollywood goes red carpet to celebrate. In fact, Katzenberg hosted his own black-tie affair on the Saturday night before the Oscar’s at the Bevelry Hills Hilton, where some picketers showed up. Then a few days later, Dreamworks finally got specific on the depth of the pain caused by its holiday money-loser “Rise of the Guardians”: a charge of $87 million and the layoffs of 350 of the Glendale studios 2,200 employees. Katzenberg told the Hollywood Reporter it was the hardest thing he’s ever had to do at the studio. For a guy who has led a company – as I noted in my last column – that has been known as one of the best places to work in the entire country, you gotta believe him. • • • Finally, I encourage you to read our front page story on the water wars going on in the Santa Clarita Valley. We resisted the temptation to make any allusions to “Chinatown” in the story, and while no one is getting their nose sliced up in Valencia, the fight over the fate of the proposed Newhall Ranch development is intense. The developer, a successor company to the fabled Newhall Land & Farming Co., once the largest private land owner in California, wants to build 20,000 homes along one of the last undeveloped rivers in Los Angeles County. The fight between it and environmentalists has seesawed back and forth for more than a decade, and now the opponents just won a court dispute as detailed in our story. And wouldn’t you know it’s all about the water supply to the project. In California, no matter how much things change, some things never do. Water was key to the development of Los Angeles and the San Fernando Valley, and a century later it’s key to the Newhall Ranch development, love it or hate it. Laurence Darmiento is editor of the Business Journal. He can be reached at [email protected]

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