THE PAST 27 YEARS
By: Francyne Shapiro Lambert
I want to take a moment to extend our warm wishes for good health and happiness in this 2006 New Year. I also must take the time to thank you and express our gratitude and appreciation for the privilege and opportunity to serve this community for 27 years! We have experienced almost 3 decades of real estate cycles and have sold some of the same buildings 2 and 3 times! We have experienced many changes, ask trends and unbelievable politics.
The past year was dominated with news of natural disasters; the tsunami, no rx earthquakes and hurricanes. May Mother Nature spare us similar disasters this year? Energy sources along with gasoline prices will continue to be a focus this year. Bankruptcy in the transportation industry of airlines and major automotive companies is major news with dramatic economic ramifications. What about the occurrence of these high profile CEO’s being sent off to jail; think this trend will continue? Consumer spending was stronger than expected for holiday sales and the GDP (Gross Domestic Product) increased at an annual rate of 4.3 in the last quarter.
One of the biggest changes for 2006 is the new incoming Federal Reserve Chief Ben Bernanke. Mr. Bernanke supports explicit inflation targeting while the outgoing Chief, Alan Greenspan defined inflation as “low enough that it does not affect economic decisions by businesses and households.” Greenspan kept inflation in check without an inflation target. There is a fine balance between curbing inflation and promoting growth.
2005 ended with indicators that the housing market may be slowing. This is expected to slow down the overall economy and employment in this sector and trickles down to all the jobs related to this industry. Perhaps the rise in employment in the leisure, healthcare, hospitality and education industries will offset some of the expected decreases in the real estate industry. Mortgage rates continue to rise while the demand to overpay is less aggressive and inventory is increasing. A slowdown has been predicted for the last 5 years and may be in line for an economic adjustment in this segment. Many see this process of cooling down as a normalization which will bring about a balance between buyers and sellers. Most likely we will still experience property increases and appreciation but not at the double-digit rates of the last few years. Remember that the value of real estate increasing has a positive effect on our economic environment.
In Los Angeles County office vacancies are down which equates to rents going up. This demand obviously affects the demand for housing rental rates which continue to go up as the supply continues to tighten. Mixed used residential projects continue to dominate the landscaping throughout Los Angeles, Downtown and all surrounding neighborhoods. Condo conversions including re-development will remain strong as long as the demand continues and there are no signs of this cooling down soon.
Apartment buildings in Southern California particularly on the Westside and Santa Monica will continue to be in demand directly tied to the low housing affordability. Apartment building owners can remain well postured for yet another strong year. Some owners may choose to become sellers sooner than later if they have considered selling in the near future however; don’t be pushed to sell because “this is the end of the boom,” sell only because it makes sense for you to sell. The trend to sell and exchange up exists for sellers who are willing to exchange up into other areas of the country where the cap rates are higher, the gross rent multipliers are lower and “cash flow” exists. Arizona, Nevada and Colorado continue to be attracting a lot of California apartment exchange buyers. Buy low, sell high; remember that? Well, if you are going to sell and need to buy perhaps consider buying in other areas but as always, make sure that this makes sense for you.
In the past 27 years I have had the privilege to get to know many owners and the biggest success that we have enjoyed is developing real relationships with many of you. One very special relationship was with an owner of a 44 unit apartment building who was needless to say, constantly being solicited to sell, I had guided her not to sell because at the time it made no sense for her long term economic plans. I was having lunch with her the other day when her phone rang and the caller seemed to upset her, when she hung up she shared with me that the call was from an apartment brokerage firm who was bombarding her with insulting questions and actually “bullying” her into selling now because the market was “going to crash!” Fortunately, she is a very intelligent woman and won’t be “courted” into selling her building, and she now has all calls for the building referred directly to me. By the way, I still do not think it makes sense for her personally to sell at this time. That’s what a good broker (and in this case, also a good friend) is for. Nothing is more valuable than the people that we have been privileged to know and provide service to. These relationships are priceless, how can you put a price tag on the value of a trusted relationship? We honor, value and appreciate the opportunity to be of service to you and this community for the last 27 years and look forward to many more years of the same.
