Monday Morning Quarterback

Just like these brave workers steady themselves on this girder high above the NYC skyline, our jobs growth also steadies as unemployment holds at 4.2%. The April jobs report showed roughly steady payroll job growth with a net 177,000 jobs added to payrolls. The unemployment rate held steady at 4.2%. The impact of federal cuts from the so-called Department of Government Efficiency was somewhat more pronounced in the April data, which showed a decline of 9,000 federal jobs in the past year compared with a gain of 3,000 in March. Although job market concerns have risen among consumers, as expectations for the future dim, the data has not yet signaled a concerning shift, but stay tuned. Wage growth, which weakened in March, held steady at 3.8%, above pre-pandemic highs of 3.6%. This might help to offset consumer anxiety about how tariffs and rising prices will affect their budgets, and certainly affect investors with houses for sale. In Realtor.com, April housing data, economists saw some growing advantages for buyers who had more options and more time to make decisions, and even more price cuts in many markets. But economists also saw that home prices and the amount of income it takes to buy a home remain significantly higher than pre-pandemic (which partly explains the relatively sluggish home sales pace in early spring). Ongoing job creation and wage growth are essential for our economy, and the April jobs report was reassuring. In the months ahead, we’ll see whether consumers shrug off tariff and job concerns or adjust their homebuying plans instead. In other real estate investor news, lets get down into the weeds…

Rite Aid’s Real Estate Floods The Market After Second Bankruptcy Filing. Drugstore chain Rite Aid’s latest bankruptcy could shake up the retail real estate market. The pharmacy placed almost its entire real estate portfolio up for bid one day after filing for Chapter 11 bankruptcy protection, CoStar reports. The availability includes 1,194 store leases and 50 company-owned properties across 15 states. The stores range from 5,000 to 70,000 square feet, most averaging between 10,000 and 15,000 square feet. Rite Aid’s 23,000-square-foot Philadelphia headquarters is also up for grabs, as are six distribution centers and a small data center. “There’s real opportunity here, investors” said Emilio Amendola, co-president of A&G Real Estate Partners, which is marketing the leases. “Some of the rents are going to be high. But there’s a good number of them that are good, attractive rents with long-term remaining.” The 60-year-old pharmacy chain plans to close all locations after selling or rejecting its leases in the bankruptcy; 47 stores are already slated for closure this month and approximately 1,000 more will begin to shutter in June. All 178 New York state stores will reportedly close. U.S. retail vacancy is at 4.2 percent, according to CoStar data, but the winds are blowing in both directions regarding the storefronts. “Rite Aid’s real estate is highly adaptable with sizes and features attractive to a broad range of retailers, restaurants and service providers,” Rudy Milian, president of Woodcliff Realty Advisors, told CoStar. He expects nearly all spaces to be absorbed within two years. Rite Aid joins Party City and Joann in flooding the market with available leases from bankruptcies. Rite Aid, which operated 1,277 stores at filing, had already closed approximately 800 locations during its previous bankruptcy and an additional 29 stores since emerging last September.

Future Of Santa Monica Airport Sparks Debate Over Parks vs Affordable Housing. Santa Monica Daily Press reports that Santa Monica is approaching a historic turning point as community leaders, activists and elected officials begin weighing the future of the Santa Monica Airport, a 227-acre site slated for aviation closure in 2028. After decades of political battles over the airport, the new debate hinges on a difficult question: Should the site become a massive urban park or help ease the city’s affordable housing crisis or attempt to do both? “The airport land provides us with a chance to leave a legacy for generations to come,” said Frank Gruber, speaking on behalf of the Santa Monica Airport2Park Foundation. “A legacy like those that have been passed down to us, a legacy of optimism, of public and civic generosity and inclusion that is part of who we are as Santa Monicans.” Gruber, a longtime planning commissioner and activist, urged Foundation members to support transforming the entire open portion of the airport into a “Great Park,” warning that any attempt to divide the land or introduce housing could fragment public support and risk prolonging aviation use. Citing the 2014 Measure LC ballot measure, which restricted post-airport development to parks, open space and recreational uses without a public vote, Gruber said that honoring the spirit of LC was critical to maintaining the community’s trust. The Airport2Park group framed its argument as one of environmental justice, pointing to Santa Monica’s low parkland-to-population ratio compared with other cities and warning that once the land is redeveloped, the chance to build a major new park would be lost forever. Yet advocates for a different vision are mobilizing. A coalition called Cloverfield Commons, represented at the meeting by community organizer Vivian Rothstein and Santa Monica Forward co-chair Bradley Ewing, presented a competing plan that would divide the site equally between parkland and affordable housing. Bradley Ewing emphasized that Santa Monica was already struggling to meet its Regional Housing Needs Assessment obligations under state law. “Santa Monica is looking at probably another 9,000 to 10,000 units that we have to plan for,” he says, warning that if the city does not plan proactively, it risks losing control to state enforcement mechanisms. Meanwhile, Santa Monica residents are left grappling with a choice that will shape the city's environmental, economic and social landscape for generations.

Home-Price Growth Fizzles As Economic Uncertainty Weighs On Buyers. Home-price growth in the 20 biggest U.S. metropolitan areas is losing steam as buyers exit the housing market in the face of persistent unaffordability. Home prices are growing much more slowly compared with the past few months. The S&P CoreLogic Case-Shiller “20-City Home-Price Index” rose 4.5% in February compared with a year ago. The Case-Shiller Index measures repeat-sales data. It reflects a three-month moving average and generally has a two-month lag. The previous month, home prices rose 4.7% on an annual basis. A broader measure of home prices, the “National Index,” also showed signs of slowing. Nationally, home prices rose 3.9% in February from a year ago, a deceleration from a rate of 4.1% in the previous month. Home-price growth could slow even further in the months ahead as economic uncertainty weighs on home buyers. Bess Freedman, chief executive of New York-based real-estate company Brown Harris Stevens, says that as of the end of April, she has heard more stories from her agents about buyers holding off in the current environment. “There is a decent amount of uncertainty in the air,” she says. The index makers pointed to the deceleration in prices but said that marked a return to a regular market. “Buyer demand has certainly cooled compared to the frenzied pace of prior years, but limited housing supply continues to underpin prices in most markets,” Nicholas Godec, head of fixed-income tradeables and commodities at S&P Dow Jones Indices, said in a statement. “Rather than broad declines, we are seeing a slower, more sustainable pace of price growth,” he says. Within the 20-City Index, New York posted the biggest year-over-year home-price gains in February. Prices were up 7.7%. The city was followed by Chicago and Cleveland, which saw home prices grow 7% and 6.6%, respectively. Tampa saw the biggest drop in prices compared with a year ago, with prices falling by 1.5%.

Profit Margins on Home Sales Continue to Drop in First Quarter. ATTOM property data released its first quarter “2025 U.S. Home Sales Report,” which shows that homeowners (including investors), on average, made a 50.2 percent profit selling single-family homes and condos during the first quarter of the year. That was down 4.8 percentage points from the first quarter of 2024. The national median profit margin for home sales has declined slightly almost every quarter since the summer of 2022, but it still remains well above pre-pandemic levels. The national median home sale price (whose historic peak was $358,000 in the third quarter of 2024) has held steady for the last two quarters at $355,000. However, the median raw profit that sellers made on their homes dropped about 4 percent from about $124,000 in the fourth quarter of 2024 to $119,000 in the first quarter of 2025. “Sellers may not be enjoying quite the same windfall they were a few years ago but by historical standards profits are strong, both in terms of margins and raw dollar value,” said Rob Barber, CEO for ATTOM. “The first quarter also tends to be the weakest of the year, so don’t be surprised to see profits regain ground during the summer months.” He added that “the dip in profits has affected homes across the price spectrum and country, but several communities in Florida and California saw the biggest drop offs.” Among metro areas with populations over 1 million, the biggest year-over-year decreases in typical profit margins were in San Jose, CA (down from 105 percent to 88.8 percent); Tampa, FL (down from 73.9 percent to 59.1 percent); Fresno, CA (down from 75 percent to 60.8 percent); San Francisco, CA (down from 78.3 to 64.3 percent); and Jacksonville, FL (down from 59.6 percent to 47.4 percent). And among those largest metro areas, including Birmingham, AL the biggest year-over-year improvement in typical sales profit margins came in Chicago, IL (up from 41.9 percent to 45.2 percent); Buffalo, NY (up from 79.1 percent to 82.2 percent); Cleveland, OH (up from 52.9 percent to 55.4 percent); and Virginia Beach, VA (up from 37.8 percent to 39.8 percent).

The Biggest US Cities Are Sinking. Investors do NOT invest in Houston. I say this because Cosmos Science Journal reports that the fastest-sinking city in the United States is Houston, Texas, with more than 40% of it descending more than 5mm a year, and 12% sinking twice as quickly. Some localized spots are going down as much as 5cm per year. Other fast-sinking zones include parts of Las Vegas, Washington DC, San Francisco and the area around New York’s LaGuardia Airport. “As cities continue to grow, we will see more cities expand into subsiding regions,” says Leonard Ohenhen, a researcher at Columbia University in New York and lead author of a paper published on the research in Nature Cities. “Over time, this subsidence can produce stresses on infrastructure that will go past their safety limit.” The 28 cities are home to 34 million people in total – 12% of the US population. At least 20% of the urban area of every one of these cities is sinking by 2 to 10mm each year. At least 65% of the urban area is sinking in 25 of the cities. The sinking is not confined to coastal areas with many inland cities experiencing just as much, if not more, subsiding. As you can imagine, differences in the sinking rate between parts of an urban area can cause stress on infrastructure and building foundations. Cities are at risk of sinking as the demand for freshwater increases and the extraction of water from underground aquifers is faster than they are being replenished. Building weight and construction are also causing a downward pressure and adding to sinking, according to Cosmos. Much of New York City is slowly sinking, with some hot spots, especially around La Guardia Airport, and parts of Jamaica Bay and Staten Island. The new study also found that 8 of the US cities had seen 90 significant floods since 2000. It is possible that increasingly extreme flooding is a result of sinking land. But there is still hope. Flooding can be mitigated with land raising, drainage systems and creating areas to absorb floodwaters (like artificial wetlands). Structures can also be strengthened and land motion integrated into building codes, as well as limiting new building in the areas of most threat.

Baby Chickens Are America’s Hottest Commodity. Murdoch’s Ranch & Home Supply in Helena, Montana, doesn’t often see a crowd. But, these days, with eggs prices through the roof, the line to get in the door can be hours long. People yell at one another as they jockey for position, and inside, employees field as many 200 calls a day from eager patrons. Everyone is after the same thing: baby chickens. “It’s pretty ridiculous,” said Kira Amdahl, who works there. Chicks typically spend days, if not weeks, at the store before finding a home. “Now people are coming in, and we’re selling out within an hour.” Murdoch’s isn’t the only place turning people away. Nationwide, the demand for chickens has far outstripped supply, leaving would-be poulterers scrambling to find baby birds. But, experts say, the chick crunch is not directly linked to the avian influenza (also known as bird flu) that’s plagued the country. For the most part, the number of chicks on offer to hobby farmers hasn’t dipped. “It’s not necessarily a chick shortage as there is increased demand,” said Tom Watkins, the president and co-owner of Murray McMurray Hatchery in Webster City, Iowa. Where he usually sees a two- or three-week wait for chickens, he’s sold out for the rest of the year. “I went into last fall thinking we’d have a slowdown. By the end of January, I knew it was going to be one of those different years.” Why? Because the bird flu outbreak has raised the prices of eggs. According to Federal Reserve Economic Data, a dozen eggs cost $3.37 in October. They crossed the $5 mark in January, and, last month the price was up to $6.23. As costs have ratcheted up, so too has the appeal of raising chickens at home. A Reddit post about the run on chicks has hundreds of upvotes, while other folks are getting around the problem by trying to hatch their own birds at home. “Every time we have a downturn in the economy, people turn to self-sufficiency,” said Scott Beyer, an assistant professor and poultry expert at Kansas State University. Such was the case during the Great Recession, and again during the pandemic. This time it’s egg prices, and Beyer said it could take months, if not years, for commercial flocks to recover enough to stabilize the market. But, he said, that recovery will happen, and an over-correction could even mean that “soon they’ll be discounted.”

Pay Phone In Takoma Park Only Makes Bird Calls. Imagine you have a flat tire and your cellphone runs out of battery and nobody is around. Suddenly you see a pay phone on the corner. Ideally, you could use it if you have an emergency — unless you’re in Takoma Park, Maryland (suburb of Washington, D.C.), that is. WTOP-FM reports on the “Bird Calls Phone” — an old pay phone located on the corner of Flower and Erie avenues that only plays bird calls. Yes, that’s what I just said – only bird calls. You pick up the receiver and press any button on the keypad, and you hear a different bird: the cawing of a crow, the whistling of a wood thrush, or the chatter of the belted kingfisher. Ten numbers, ten different birds. Even better, each bird call is accompanied by an authoritative voice giving the listener not just the identification of the bird, but other salient facts. While not helpful if you’re urgently looking for a pay phone, it has been amusing the neighborhood for years and is considered a “public arts work.” Expect it to continue entertaining Takoma Park residents for years to come. Next time you’re in Takoma Park, be sure to call.

Basic Training Investing Boot Camp. Our super-duper semi-annual Basic Training Boot Camp will be held on Saturday, May 31, 2025, 9:00 am to 6:00 pm. Everything you ever wanted to know about real estate investing but were afraid to ask. Plus special guest speaker! Iman Cultural Center, South Hall, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034.The cost of the Boot Camp is $149.00 per person if paid before May 24. On May 24, the prices jumps to $249.00 per person. So don’t wait to register. (Gold Members and former Boot Campers can attend for FREE, but still need to register.) Plus free parking. Please register at our website, LaRealEstateInvestors.com.

June LAC-REIA Meeting. Join us on Thursday night, June 12, 2025, 6:30 to 9:30 pm, when Ken Letourneau shows us how to invest in tax liens and tax deeds. For the past 15 years, Ken has specialized in tax lien certificates and tax deed properties, actively participating in tax sale auctions across the United States. Ken’s expertise is built on a foundation of hands-on experience — from navigating complex deals to overcoming real-world challenges. He doesn’t just talk the talk; he walks it. His continued participation in auctions keeps him at the cutting edge of the tax sale space. 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, June 12, 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 looking for additional information about tariff policies. For economic reports, the main event will be Consumer Price Index (“CPI”) on Tuesday. The CPI is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will be released on Thursday. 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. Import Prices and Housing Starts will come out on Friday.

Weekly Changes:

10-Year Treasuries: Rose 005 bps

Dow Jones Average: Rose 100 points

NASDAQ: Rose 50 points

Calendar:

Tuesday (5/13): Consumer Price Index

Thursday (5/15): Retail Sales

Friday (5/16): Housing Starts

For further information, comments, and questions:

Lloyd Segal

President

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

310-792-6404