Monday Morning Quarterback

A home in Murcia, Spain appears to defy physics with its dramatic canti-levered form. Famous architect Clavel Arquitectos designed the residence, known as “Crossed House,” as two stacked concrete-clad forms set at a 35-degree angle to each other. The lower level overlooks the gardens and pool, while the upper level is turned to offer views of the mountains. The second-story cantilevers out over 30 feet, providing shade to the pool area and lower façade. It is situated on a plot located in the upper part of a residential development on the outskirts of Murcia, with views of the adjoining mountains, the Sierra de la Pila and El Valle de Ricote. Being on a plot whose surroundings will be in a densely populated future, but at the same time enjoying unbeatable views today, the idea of the project was born: to orient the house on the lower level towards the intimacy of the garden and to ensure the user in the upper part the enjoyment of the views and the influence of sunlight. This conceptual arrangement is materialized through a geometric operation, the rotation of two elements, as if they were two blocks of a set of constructions that are easily stacked and manipulated. The stacked longitudinal volumes, about 20m long and close to 5m deep, rotate around each other by about 35º, so that the ends of the upper volume seek the most favorable orientation and views and generate, at the same time, significant “overhangs” of up to 10m in length. These overhangs, together with the rotation between both bodies, provide the necessary solar protection on the façade and rest areas of the pool. The surface treatment of the concrete volumes offers a contrast between the exterior, with a rough finish created by a formwork of sandblasted pine slats, and an interior space with smooth finishes. In other real estate news, let’s rotate and see the light…

State Farm Wins First-Ever Emergency Rate Hike In California. State Farm can raise homeowner and other rates starting next month, becoming the first insurance company to win approval to do so on an “Emergency Interim” basis in California. The state’s largest insurer made the unprecedented request for emergency rate hikes earlier this year, after it said it was in financial distress and expected more than $7 billion in claims because of the Los Angeles County fires in January. After careful consideration, the state Insurance Department staff recommended approval of the company’s request. But Insurance Commissioner Ricardo Lara asked the company for more information about its finances. He also asked whether the insurer could turn to its parent company, State Farm Mutual, for help. Lara then conditionally approved but punted the official decision to a judge, who oversaw a three-day public hearing last month to consider the proposed agreement between the department and the insurer. Lara, who as commissioner has the last word, adopted the ruling last week. The decision means State Farm can raise its rates an average 17% for homeowners, 15% for renters and condominiums and 38% for rental dwellings starting June 1. The decision is a “critical first step” that will allow the company to “continue serving our California customers,” said State Farm spokesperson Sevag Sarkissian in an email. There is plenty of opposition to the decision in the long-running saga — which actually isn’t over. In his statement, Lara mentioned that the company must still justify its need for rate increases at a full rate hearing late this year. The approval comes despite calls for the insurance department to investigate complaints over State Farm’s handling of claims by victims of the LA-area fires. Those survivors and the lawmakers that represent them say the company has delayed and denied claims, and urged Lara to reject the company’s request to raise its rates. But the commissioner told fire survivors in a Zoom meeting over the weekend that the rate hike and the claims complaints were separate matters. What does this mean to you? Higher rates!!!!!!!

New Housing Chief Launches Major Shakeup At Fannie Mae And Freddie Mac. The newly appointed housing chief has already made waves by launching a dramatic shakeup at mortgage giants Fannie Mae and Freddie Mac, potentially reshaping America's mortgage market. William Pulte, a private equity executive (whose family founded one of the country’s largest homebuilding companies), took charge of the Federal Housing Finance Agency (FHFA) on March 13. The regulator is responsible for overseeing both Fannie Mae and Freddie Mac. Pulte wasted no time in executing a dramatic purge of leadership at both mortgage giants. For his part, Pulte has struck a measured tone publicly. He told CNN that “it’s critical to ensure any discussion about exiting conservatorship needs not only to ensure safety and soundness but how it would affect mortgage rates.” According to multiple reports, a number of board members across Fannie Mae and Freddie Mac were swiftly replaced, with Pulte installing himself as chairman of both entities. Freddie Mac’s CEO Diana Reid, a long-serving executive, was also removed — sending a clear message about the scope and seriousness of this transformation. So, what do these abrupt changes signal for the housing market and the mortgages of millions of American homeowners? Pulte’s bold moves have ignited speculation the Trump administration is pushing to privatize Fannie Mae and Freddie Mac. Both are government-sponsored entities (GSEs) and have been under federal conservatorship since the 2008 financial crisis in which they were bailed out. Together, the companies back 70% of the mortgage market, according to The New York Times. Skeptics believe privatization would make buying a home more expensive in the midst of a housing affordability crisis. “It would mean that mortgage rates would increase — definitely,” Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute, a think tank in Washington, D.C., said to news publications. Meanwhile, privatization could be a boon for both investors and the federal government. Depending on the structure of the deal, privatizing could generate billions of dollars in revenue for an administration that’s focused on cutting down wasteful spending across the board. Placing these companies in private hands would also free the government from potential future bailout obligations.

ADUs Made Of Robot-Built Prefab Bungalows Are A Growing Trend. The fundamental way most homes are built in America (the labor-intensive process of constructing conventional wood framing on site) hasn’t changed much for more than a century, even though more industrial methods and technologies have long held the potential to be faster, cheaper or more reliable. In Sweden, for instance, 90% of single-family homes are prefabricated — entire buildings, or large portions, constructed in a factory for efficiency and then assembled quickly on site, said Ryan E. Smith, director of the School of Architecture at the University of Arizona and founding partner at Mod X, a prefab construction consultancy. Meanwhile, prefab construction represented just 3% of single-family homes in the U.S., according to the National Assn. of Home Builders. But the devastating Palisades and Eaton fires could be a tipping point. The region needs to rebuild more than 16,000 buildings (not to mention thousands of temporary structures for people to live in before then) in a market already weighed down by bureaucratic hurdles, limited labor and high materials costs. What was once considered “alternative” or “unconventional” may become standard, whether we’re ready or not. About 200 of an estimated 2,000 homes destroyed in the 2023 Maui wildfires have already been rebuilt using prefabrication, said Tom Hardiman, executive director of the Modular Building Institute, a nonprofit trade association. L.A. County Planning Director Amy Bodek said she supports prefab as a tool to help residents rebuild quickly, and she hopes to ease permitting. “We’re trying to stabilize a large segment of our population that has been affected by this disaster,” she said. “The faster we can get folks into their own version of shelter, the better we can make sure that the economy is going to be stable and hopefully rebound.” Prefab construction companies are seeing a deluge of requests from the fire zones, giving them an opportunity to move into the mainstream. But almost all acknowledge that customers still have a lot to learn. Many still confuse prefab with so-called manufactured homes, which are often built to lower standards of quality and disaster resilience. Rapidly changing technology means that seemingly unthinkable alternatives, such as 3D-printed houses, are creating more exciting choices — but also more confusion.

One In Three Distressed Commercial Borrowers Handing Back Buildings. More and more commercial borrowers are handing over the keys to their distressed buildings, according to panelists at the IMN Distressed CRE West Forum in San Francisco this week, leaving their lenders with no court fight to foreclose but often a “pretty messy” clean up job filled with potential pitfalls and liabilities. About one-third of distressed borrowers recently have been offering a deed-in-lieu of foreclosure to their lenders, according to Dan Duarte, director of the special assets department at Chico-based Tri-Counties Bank, who moderated a panel on “Forced Owner Exit Strategies.” Duarte said it had been years since he had seen this many borrowers ready to walk, oftentimes leaving the bank with not just the building, but also past due taxes. “The borrower is actually coming to the bank and saying, ‘Look, will you accept a deed-in-lieu? We’re done. We don’t want to go through the foreclosure process. We don’t want to take on default interest rates. We just want to hand it back to you,’” he said. But banks do not want to own more buildings, especially where the value of the property becomes significantly lower than the debt. So while there is some simplicity to deed-in-lieu agreements, “we spend a lot of time trying to avoid that,” said Seth Moldoff, director of special assets for Umpqua Bank. “The offer of the deed-in-lieu is interesting, but it’s usually not going to work out well from the bank’s perspective,” he said. Moldoff added that sometimes his frontline bankers will try to put a property that’s up to date on payments into the workout group just because they are a few years behind on property taxes. But in the current environment, that’s not enough to make the grade, he said. “I understand the concern, but we’ve got to focus on the companies that aren’t making the payments to the bank, and we’ll deal with the property taxes at the end of the day,” he said. Taxes and other liabilities, like payouts to vendors that lag the deed-in-lieu, can make them “pretty messy,” said Sandra Adam, director of financial diligence and forensic analysis at SitusAMC, even if there’s a creative solution where a loan sale occurs before the foreclosure.

Trumps Cuts Are Imperiling Rancho Palos Verdes’s Landslide Response. For the last 18 months, the city of Rancho Palos Verdes has been struggling to address a worsening local emergency — the dramatic expansion of an ancient landslide zone that has torn homes apart, buckled roadways and halted utility services. Triggered by a succession of heavy winter rains in 2023 and 2024, the ongoing land movement has upended the lives of residents and cast the city into financial uncertainty. Without significant outside aid, officials say they expect to spend about $37 million this fiscal year on emergency landslide mitigation (a sum nearly equal to the city’s annual operating budget). Now, to make matters worse, the Trump administration has announced that it will cease funding the Federal Emergency Management Agency’s Building Resilient Infrastructure and Communities grants — a major pot of money the city hoped to use to finance a long-term prevention and stabilization plan. For the city of Rancho Palos Verdes, the action amounts to the likely loss of $16 million for stabilization work. It also marks a striking reversal in federal support for local slide mitigation efforts. In September 2024, a campaigning Trump visited his nearby Trump National Golf Club to say that government needed to do more to help residents in the slide area. “The mountain is moving and it could be stopped, but they need some help from the government. So, I hope they get the help,” Trump said. Last week, city officials again extended a local emergency declaration as the crisis continues to pose unprecedented strain on city finances. The majority of those allocated funds have gone toward a collection of new underground “de-watering” wells, which pump out the groundwater that lubricates landslide slip planes — a strategy that geologists have credited with helping to ease the movement in recent months.

Wax Statue Of President Lincoln Melts During DC Heat Wave. The Lincoln Memorial replica was commissioned by CulturalDC and created by artist Sandy Williams IV. But in a city where presidents are honored with buildings, statues and more, one can never imagine one of them just disappearing. Unless you’re made of wax. Sitting outside. IN A HEAT WAVE. That is exactly what happened last week to a wax statue of Abraham Lincoln that sat on the Garrison Elementary School campus in D.C.’s Ward 2 when it slowly began to melt away. The Lincoln Memorial replica had been on the campus since February and didn’t experience any problems before. However, after several days of record-breaking heat, the Lincoln replica began melting and leaning backward “as if the president was sitting in a recliner, his legs detaching and headless,” Kristi Maiselman, the executive director and curator at CulturalDC, told that the statue’s head just fell off in the heat. But it has been temporarily saved, adding that the heat wave was “not something that we anticipated.” Unless made by Madame Tussauds, I can imagine that will be the last time we see an outdoor wax figure outside during the D.C. summer. (Note: No actual presidents were hurt by this melting.)

Man Rescued Twice From Japan's Mount Fuji Had Returned To Search For His Cellphone. Our “Nincompoop Award” for May goes to an unidentified 27-year old Chinese student living in Japan. You will understand why he is unidentified after reading this story. Let’s just call him Wang. Wang made an emergency call on April 22 and was airlifted near the peak of Japan's Mount Fuji last week after developing symptoms of altitude sickness, police said, adding that his climbing irons also were damaged. He was airlifted off the mountain. You would think that Wang would just go home and lick his wounds. But not our Wang. Last Saturday, he secretly returned to the mountain's Fujinomiya trail about 3,000 meters above sea level to look for his cellphone, Shizuoka prefectural police said. Another climber found him there unable to move after he apparently developed altitude sickness for a second time, police said. The mountain's hiking trails are officially open only from July to early September, but there is no penalty for hiking off-season. There also is no charge or penalty when a climber needs to be rescued, but as you can imagine the student's case prompted an uproar on social media and generated calls for him to be charged, at least for his second rescue. The 3,776-metre-high (12,388 feet) mountain was designated a UNESCO World Cultural Heritage site in 2013. A symbol of Japan, the mountain called "Fujisan" used to be a place of pilgrimage and is increasingly popular among hikers today. To control overcrowding and risks from rushed overnight climbing through rocky slopes to see the sunrise, local authorities last year introduced an entry fee and cap on the number of entrants on the most popular trail and will introduce similar rules on other main trails this year. But officials urged people to be aware of the harsh conditions at the country's tallest peak during its off-season. The Shizuoka police urged all climbers to use caution, noting that the mountain has low temperatures and is covered in snow even in spring. Especially if you’re looking for your cellphone.

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.

LAC-REIA schedule for 2025

This Week. Investors will continue looking for additional information about tariff policies. It will be a very light week for economic reports, highlighted by the housing sector data. Existing Home Sales will be released on Thursday and New Home Sales on Friday. The Global Services PMI also will come out on Thursday.

Weekly Changes:

10-Year Treasuries: Rose 005 bps

Dow Jones average: Rose 1100 points

NASDAQ: Rose 1100 points

Calendar:

Thursday (5/22): Existing Home Sales

Thursday (5/22): Global Services

Friday (5/23): New Home Sales

For further information, comments, and questions:

Lloyd Segal

President

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

310-792-6404