Monday Morning Quarterback

The lights are on and the stores are open, but it’s quiet — not a soul in sight — as if people had only enough time to flee whatever disaster befell this place. A faint smell of sewage drifts through the air. Escalators are frozen. The lower levels of the parking garage are sterile and lifeless — a liminal space of flickering lights and zero cars. But it’s not a scene from the post-apocalypse. It’s the mystery of Orange County’s ghost town mall. It’s Mission Viejo, year 2025, at “Kaleidoscope,” the loneliest mall in Southern California. Mall culture is still thriving in parts of Southern California. But not at Kaleidoscope, which never quite found its footing over the course of 27 years. But it has refused to die. On a Tuesday afternoon in March, no more than a handful of people wander through the 243,000-square-foot complex on Crown Valley Parkway, looming over Interstate 5. Some are moviegoers heading to the Regal Theater attached to the mall. Most are employees heading to staff empty shops and restaurants that won’t see a customer for hours. There are businesses aplenty, but no customers. “It’s a ghost town,” says Sarah Akers. “This place is unbelievable.” “The doors are open, the lights are on, but no people, none!” she says. “Why does it feel like I’m trespassing?” There were signs of life in the eerie, empty space, but no real proof. TVs played ESPN above the bar, but there was no bartender in sight. A faucet dripped a steady stream of water at a kitchen restaurant, but there were no staffers. Unplayable games sat in the corner: a cornhole set with no bags, a ping-pong table with a broken net and a foosball table with a sign asking patrons to bring their own balls. “As a mall, it’s terrible. But as a study of entropy and deterioration, it’s amazing,” she says. Kaleidoscope sports a 2.3 average rating on Yelp (the lowest possible rating) and hasn’t received a positive review since last summer — and that review was only for the movie theater. “It is in shambles. Everything is broken,” writes Jack T. “A complete disaster for Mission Viejo!! The whole place needs to be bulldozed,” writes Theresa H. Kaleidoscope was built for $55 million in 1998, and in the decades since, it has suffered a plague of problems caused by both design and execution. A confusing parking garage pushes away potential visitors, and its cloistered design fails to advertise the businesses inside to the droves of cars driving down I-5. In other real estate investor news, let’s dance…

Mortgage Rates Surge As Tariffs Hit Bond Market. The average rate on the popular 30-year fixed mortgage surged 13 basis points Friday to 7.1%, according to Mortgage News Daily. That’s the highest rate since mid-February. Mortgage rates have been on a roller coaster ride all week, as bond yields spiked higher mid-week when President Donald Trump’s new tariffs on dozens of countries went into effect. Then yields dropped when Trump lowered the tariff rate on most countries hours later. Tariffs on Chinese imports, however, currently stand at 145%. But bonds begin a selling off again Friday, despite a cooler-than-expected inflation report. Mortgage rates, as you know, loosely follow the yield on the 10-year Treasury. “There have been some bad weeks for bonds here and there over the careers of most anyone who’s alive to read these words, but unless your career began before 1981, you just lived through the worst week you’ve ever seen in terms of the jump in 10-year yields,” says Matthew Graham, chief operating officer at Mortgage News Daily. Graham says there are two ways to look at where bonds are trading today: “This is either the end of the worst week for 10-year yields since 1981 or the end of a fairly average two weeks that fit right in with the trend of the past 18 months.” On Friday, another monthly report on consumer sentiment came in substantially lower than expected. The expectation for inflation jumped from 5% in March to 6.7% in April, the highest level since 1981. All of this comes right in the heart of the all-important spring housing market. For most consumers, a home is their single largest investment. “Forget about housing in this environment, with mortgage rates back up, consumers certainly concerned about the job market, housing will also be on the weak side,” said Nancy Lazar, chief global economist at Piper Sandler, on CNBC’s “The Exchange.”

California Bill Would Require Landlords To Supply Refrigerators. A new bill in the California Legislature, if approved, would require landlords to provide refrigerators and stoves in their rentals. Currently landlords do not have to provide a refrigerator. Existing California law requires any building with a dwelling unit to maintain “certain characteristics in order to be tenantable,” which includes maintenance of adequate heating and hot water systems. Even though cooking and storing food might seem like a “necessity” in order to live in any kind of housing situation, legally the appliances are categorized as amenities. The number of Californians who have entered new leases without such luxuries is far greater than any other state, according to a L.A. Times analysis in 2022. Research shows that Los Angeles and Orange counties “offered the fewest number of apartments with refrigerators among nearly two dozen large metropolitan areas nationwide.” It’s the added cost of purchasing the appliance that is the problem. The average monthly rent in the city of Los Angeles is $2,347, higher than the national average of $1,995, according to Zillow. But the highest average rent in the surrounding area is $4,500, in Ladera Heights. When entering a lease, a tenant is providing the landlord with the first month’s rent and a security deposit. If a refrigerator isn’t provided, the tenant is now looking at spending on either a new appliance or searching online for a used one. Product analysts say the average price of a new refrigerator is between $600 and $2,300, the basic one is between $200 and $600 and the high-end one is between $2,300 and $5,000. When Assemblymember Tina McKinnor (D-Hawthorne), whose 61st District covers communities from Inglewood to Marina del Rey, introduced Assembly Bill 628, she realized refrigerators and stoves were legally labeled as amenities. She decided to make it a necessity with the new bill. The bill, if passed, would add a stove and refrigerator in good working condition as a requirement of landlords starting Jan. 1, 2026.

Foreclosure Activity Increases. ATTOM real estate data released its “Q1 2025 U.S. Foreclosure Market Report” which shows a total of 93,953 U.S. properties with foreclosure filings during the first quarter of 2025, up 11 percent from the previous. The report also shows a total of 35,890 U.S. properties with foreclosure filings in March 2025, up 9 percent from a year ago. “Following three consecutive quarters of decline, foreclosure activity ticked up in the first quarter of 2025, with notable growth in both starts and completions,” said Rob Barber, CEO at ATTOM. “While levels remain below historical averages, the quarterly growth suggests that some homeowners may be starting to feel the pressure of ongoing economic challenges. However, strong home equity positions in many markets continue to help buffer against a more significant spike in distress.” A total of 68,794 U.S. properties started the foreclosure process in Q1 2025, up 14 percent from the previous quarter and up 2 percent from a year ago. States that had 100 or more foreclosures starts in Q1 2025 and saw the greatest annual increase included, Kansas (up 117 percent); Delaware (up 58 percent); Oklahoma (up 45 percent); Utah (up 42 percent); and Wyoming (up 33 percent). Those major metros with a population of 200,000 or more that had the greatest number of foreclosures starts in Q1 2025 included Chicago, IL (3,789 foreclosure starts); New York, NY (3,566 foreclosure starts); Houston, TX (3,046 foreclosure starts); Miami, FL (2,028 foreclosure starts); and Philadelphia, PA (1,985 foreclosure starts). Nationwide one in every 1,515 housing units had a foreclosure filing in Q1 2025. States with the highest foreclosure rates were Delaware (one in every 761 housing units with a foreclosure filing); Illinois (one in every 857 housing units); Nevada (one in every 874 housing units); Indiana (one in every 976 housing units); and South Carolina (one in every 1,021 housing units). Among 225 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2025 were Columbia, South Carolina (one in every 683 housing units); Lakeland, Florida (one in 694); Bakersfield, California (one in 718); Riverside, California (one in 721); and Chico, California (one in 724).

Modular Housing Having Its Day As Solution To Wildfire Rebuilding. Many survivors from the Eaton and Palisades fires are considering modular or prefabricated construction for their new homes. Besides potential advantages in speed, modular construction promises greater affordability and an off-the-shelf solution simpler to manage than designing a custom home. These assurances aren’t new. For years, modular companies have vowed to revolutionize the homebuilding industry only to fail spectacularly or plod along amid technological problems and skepticism about limited designs and quality. Those unconvinced by modular construction fear that fire victims may turn to a lesser and riskier product because they’re overwhelmed by the alternatives. “You have 8,000 residents, some of whom have never had to change a tire, all of a sudden thrown into this,” says Freddy Sayegh, an Altadena resident whose family lost homes in the Eaton fire and leads an advocacy group for survivors. “It’s not that they want a modular home. They want easy homebuilding.” Sayegh says the process might work for some people, but too many modular homes would erase Altadena’s rich architectural pasts. “If Altadena turns to this fast form of building, it would be an injustice to such a historic and beautiful town,” Sayegh says. Mass-produced homes have built and rebuilt California. Los Angeles’ mid-20th century subdivision boom was predicated on lot-by-lot replication of model ranch houses. In response to widespread homelessness following the 1906 San Francisco earthquake, the federal government built 5,300 identical tiny cottages, some of which remain today. A refurbished and combined pair of cottages in the Bernal Heights neighborhood sold last year for $1.2 million. Everyone understands the benefits of mass production in cost and speed, especially after disasters. Numerous community groups, architects, builders and others are trying to jointly purchase materials and develop shared designs for new houses, including ones that fire survivors could select from a brochure, similar to the century-old Sears catalogs. But unlike builders preparing blocks of tract homes on undeveloped land, individual property owners have specific circumstances and desires. Varying insurance payouts and design preferences make it harder to act collectively. Modular construction provides one pathway. Some companies build a whole house in a factory, truck and crane it onto a property and then bolt to the foundation. Cover (the company building Labella’s ADU), makes pieces for its homes in its 80,000-square-foot factory and then snaps them together on site.

Investors Could See Deals On New Homes As Builders Worry About Pullback. Home builders saw a small increase in the pace of sales of newly built homes in March, but they remain worried about buyers pulling back in the coming months — so they’re increasing incentives to keep buyers interested. Sales of newly built homes in the U.S. rose slightly in March, boosted by a big jump in the Midwest. New-home sales rose 1.8% to an annualized rate of 676,000, from a revised 664,000 the prior month, the Commerce Department reports. (The number, which is seasonally adjusted, refers to how many homes would be built over an entire year if builders continued at the same pace every month.) But the data paints a far too optimistic portrait of the new-home market, one economist says. “The new home sales series is too volatile, too heavily revised, and comes with too wide a margin of error, to take a single month’s numbers seriously,” Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, wrote in a note. He added that he believes the underlying trend for new-home sales is “flat-to-falling.” That assessment was based on the fact that builders are growing increasingly concerned about their ability to sell homes. Or more accurately, an inability to sell more homes. Builders are reacting to a potential dip in demand by offering more deals. The most recent sentiment read by the National Association of Home Builders noted that a growing share of builders were cutting prices to boost sales — 29% in March, compared with 26% in February. The median sale price of a new home was $414,500. Last March, new homes sold for a median price of $420,900. Builders are also boosting other incentives to entice buyers, such as offering to cover tens of thousands of dollars in closing costs. One of the biggest home builders in the U.S., Lennar, recently said incentives to sell homes were running more than double what the company considered to be normal, with buyers seemingly worried about job security.

Easter Bunny Is Coming - Bad News For Already Record-High Egg Prices. Egg prices are at record highs — and Easter is about to make it even worse. The good news is that gains in retail and wholesale prices are more tempered due to a decline in outbreaks of avian flu, also referred to as HPAI (highly pathogenic avian influenza) and a boost in imports contributing to a recovery in U.S. supplies. The bad news is that Easter (one of the highest-demand seasons for eggs) is just around the corner and likely to tighten supplies, just as U.S. tariffs also look contribute to higher prices. The spring holiday season is the second-highest seasonal demand period for eggs, only behind the winter holiday season, according to the American Egg Board. In 2024, the spring holiday sales window (the four weeks leading up to Easter) saw Americans buy 247 million dozen eggs, compared with an average of around 234 million dozen during an off-season, four-week sales window, the American Egg Board reports. That’s a 5.4% increase, equal to around 156 million eggs. Retail egg prices typically lag wholesale prices by weeks, and as the Easter holiday approaches, increasing demand may cause a “second, temporary increase in wholesale prices,” says Emily Metz, president and chief executive officer at the American Egg Board. At the retail level, the average U.S. city price for a dozen large eggs cost $6.22 in March, a new record high — up from $5.89 in February, according to data from the U.S. Bureau of Labor Statistics (see chart below) But from February to March, prices rose by a more modest 33 cents a dozen, compared to a 94-cent rise from January to February. Retail prices include production costs, producer earnings and store markups. Egg dyeing, baking and brunch traditions fuel demand during the Easter holiday, says Efficio’s Seakar, adding that in a typical year, Easter week sees a 10% to 15% spike in egg sales. With prices already high, 2025 may see “tempered increases as some families adjust buying habits, but the holiday is still expected to positively impact demand,” he says.

Private Mentoring Program. LAC-REIA offers a private mentoring program for investors looking to get started (or need a good kick in the butt). So if you need help finding deals, or financing, fixing, or flipping properties (or renting them), mentoring is for you. Unlimited meetings, telephone calls, emails and texting. Everything you ever wanted to know about real estate investing. Plus, we've now added financing plans for those of you who think you can't afford it. So let's get you started. Please call 310-792-6404 and scream "I NEED MENTORING NOW" and you're on your way!

How to Invest in Commercial Real Estate. One of the exploding areas of real estate investing is commercial properties. And it's easy to see why. The properties are generally better quality, the tenants are responsible businesses, the leases are triple net (tenants pay for everything!), and your profits are larger. What more could you ask? Plus, commercial properties are easier to find, value and buy - if you know where to look. The expert authority who will show you how to find, value and buy commercial properties is the renown Joseph James. And he's exclusively ours on May 8, 2025. Don't miss this special event! Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA. FREE Admission. Please RSVP at our website, LARealEstateInvestors.com.

Vendors Expo Returns! Our world-famous "Vendors Expo" returns in 2025, on Thursday night, May 8, 2025. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA. FREE Admission. Please RSVP at our website, LARealEstateInvestors.com.

This Week. Investors will continue to look for on-going reports about tariff policies. For economic reports, Import Prices will come out on Tuesday from the Bureau of Economic Analysis. Retail Sales will be released on Wednesday from the Census Bureau. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of our economy. Housing Starts will come out on Thursday. Markets will close early on Thursday and will be closed on Friday for Good Friday.

Weekly Changes:

10-Year Treasuries: Rose 150 bps

Dow Jones Average Don‘t Ask

NASDAQ: Don’t Ask

Calendar:

Tuesday (4/15): Import Prices

Wednesday (4/16): Retail Sales

Thursday (4/17): Housing Starts

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association, Lloyd@LARealEstateInvestors.com

310-792-6404