Our recovery from the 2020 recession has been described as a K-shaped recovery. Generally speaking, this means that the recovery occurred at starkly different paces for different segments of the population. More specifically for 2020-2021, while wealth decreased for many groups, it actually increased for those who were largely unaffected by the circumstances of the recession — in this case, primarily job losses and lockdowns. Many of those who were able to keep their jobs and continue to work from home during lockdowns enjoyed their reduced daily spending and lower mortgage rates.
This led to a increase in demand across the board, but notably in one sector of the market: vacation homes. Those who were affluent enough to possibly purchase an additional home were encouraged to do so by low mortgage rates and increased savings, and higher-income jobs are actually more likely to be able to be done from home. In California, the trend was first made obvious in October 2020, which saw a 120% increase in second-home demand from the prior year. The trend continued, though, demand for second homes increased 178% between April 2020 and April 2021. Rising prices dampened the effect, but it only slowed when lenders tightened restrictions on mortgages for second homes and lockdowns ceased being much of a factor.
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Much of California, especially Central and Northern California, is experiencing a major drought much like the one from 2012-2016. Temperatures are going up and precipitation is going down. While water usage is still below 2013 levels due to lasting changes in water use habits from the last drought, conditions aren’t currently improving. It’s not precipitation levels that directly affect how much water a community receives, though. Some of the communities struggling the most actually have more rainfall than others but are lacking the infrastructure to account for drought conditions, and possibly the money to build said infrastructure.
Speaking of building, the drought is also affecting home construction. At a time when lumber prices are just starting to slip back down, a new threat emerges. And this one hits even the wealthiest of construction companies, who didn’t necessarily mind high lumber prices. Under drought conditions, some areas have placed restrictions on new construction to ensure that they meet water availability standards, and several areas simply never will meet the standards. The city of Marin is considering a move that would effectively ban all new construction for a time — temporarily banning all new water hookups. The legislation isn’t aimed directly at builders, but of course, all new constructions do require water hookups.
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Though certain areas have always been at higher risk for certain types of natural disasters, only since climate change have people heavily prioritized climate risk as a factor in their search. Wildfires, droughts, and floods are becoming much more common, so people are avoiding these areas more. People don’t necessarily know how to research which areas are high and low risk, though. Fortunately, one real estate service, Redfin, is noticing the need and has begun publishing climate ratings.
The ratings aren’t from Redfin — they’re from ClimateCheck, a company which assesses future risk and change in risk on a scale of 0-100. They start with several different global climate models to project risk on a global scale. Then, they localize the data to specific areas by filtering the global risk through local weather patterns. ClimateCheck is now also sending that data to Redfin so that it’s easily accessible for people searching for a home. Of course, you can also visit the ClimateCheck website directly at climatecheck.com.
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Inventory may be low, but housing isn’t the only thing in short supply. Once work from home became more popular, homeowners started looking to upgrade their homes since they would be spending more time there. Part of that was updating their appliances and buying new furniture, particularly stoves and grills because homeowners would be cooking at home more often. Combined with a decrease in manufacturing productivity due to labor shortages, appliances and furniture are selling out quickly.
While increased new construction is a potential solution to low housing inventory, it’s definitely not going to help the appliance shortage. Even with construction being low, the increased demand for already existing homes is stretching the appliance supply thin — and new constructions would require all new appliances. It’s even affecting the timing of real estate transactions. Closing time is being delayed because the new owners want the place to be move-in ready when it closes, and they aren’t able to get their hands on appliances and furniture.
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The National Bureau of Economic Research (NBER), a private non-profit economic research institution well known for researching recessions, has declared that the 2020 recession is over. In fact, it ended quite a while ago, and only lasted two months, the shortest recession in history. NBER defines the start of a recession as the month following a peak in economic activity, and the end of a recession as the month at the bottom of economic activity. In this case, those months were March 2020 and April 2020 respectively. The delay in declaration is because it generally takes several months to figure out whether a recession is truly over or not, since there can be ups and downs in between the peak and trough. With this declaration, another downturn would officially be considered a separate recession.
So what does this mean? Well, it doesn’t mean the economy is healthy again. It just means we’re past the worst of it, and are in the recovery stage after the recession. We’ve been in recovery for quite some time, and will continue to be. It’s important to note that while the start of the pandemic and the start of the recession occurred at approximately the same time, they aren’t codependent. Rather, the pandemic was merely an exacerbating factor in a recession that was already approaching. Many of the effects, both psychological and government mandated, of the combined scare of a simultaneous recession and pandemic are still lingering and slowing down the recovery. The major factor keeping us back is lack of recovery in the job market.
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Even though racial discrimination against homeowners was banned in 1968, the homeownership gap between White and Black households in the US is actually higher now than it was before the ban. Between 1960 and today, the gap has increased by 4% and sits at 31% nationwide, and 27% in California.
In order to address this issue, the Black Homeownership Collaborative has drafted a plan that they hope will bring homeownership to 300,000 more Black households by 2030. Their 7-point plan was approved by the Mortgage Bankers Association. The focal points are homeownership counseling and education, down payment assistance, affordable construction, improved credit and lending opportunities, increased civil and consumer rights, sustainability of homeownership, and marketing and outreach towards Black communities. Similar proposals are also in the works for Latinx communities, which make up a significant percentage of California’s population.
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The FHFA established a new refinance fee at the end of 2020 called the Adverse Market Refinance Fee, which was designed to cover projected losses during the pandemic. But they’ve now said that their losses were not severe and that the market was not as adverse as they expected. Only 2% of single-family loans remain in forbearance. So, this fee is going to be removed come August 1st. The FHFA hopes this encourages more buyers to take advantage of low rates.
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NASA has set the date for their Near-Earth Asteroid (NEA) Scout to this November, when it will launch along with the Artemis I test flight mission. The NEA Scout is a small craft with solar-powered sails, the first of its kind to be released outside of Earth’s orbit. If the mission goes well, it’s a good sign for an expected 2025 mission named Solar Cruiser, with a much larger solar sail. The NEA Scout is outfitted with a high-powered camera and its pictures are expected to provide valuable information about a certain class of asteroids. But it will take two years for the NEA Scout to reach its destination, even though it’s only a small asteroid near Earth.
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California is proposing a plan to start the “California Dream Fund,” which is intended to allow the state to subsidize purchases by first-time homebuyers without any tax increases. They hope to achieve this by allowing investors to use their money to subsidize the purchase, in exchange for an equivalent share of ownership. This will be limited to 45% to prevent the investors from owning a majority share.
The plan is still in the works, but there are already a few criticisms. Currently, there is no indication of who is liable if the property goes into default. Is it only the buyer? Do the investors have a stake, since they have an ownership share? Is the state liable since they’re the ones providing the subsidy program? Perhaps these questions will be answered later, but if the answer is simply as existing law, the program is no different from a state matchmaking program between investors and prospective homebuyers. Furthermore, subsidizing home purchases does nothing to address the real problem — the fact that home prices are so exorbitantly high in the first place that the plan is being discussed to begin with. Subsidies will increase demand, but demand is already high; it’s the low supply that needs to be addressed.
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The eviction moratorium for federally backed mortgages was set to expire at the end of last month, but on June 24th, it was extended through July 31st. California has even gone above and beyond the CDC recommendations, extending the state residential moratorium through September 30th. With a third of renters in California feeling they were likely be evicted in July or August, and an additional 6% being quite sure of it, something needed to be done. 10% of California renters are still behind on their payments, and over a fifth of them had little to no confidence in their ability to make their July payment.
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When the pandemic hit, event venue The Grand in Long Beach was no longer able to host events, most of which are weddings. Rather than panic about the loss of income, The Grand decided to get involved in the community. They contacted the City of Long Beach numerous times and eventually were able to find a deal where they could cater to Roomkey and Homekey sites, which are former hotels converted into homeless housing.
Though The Grand did charge for their meals, since they were already at a loss from the pandemic closure, that wasn’t the main purpose. Each meal was only between $5 and $6, so the primary benefit to The Grand was feeling like a part of the community. And the homeless community benefitted immensely. Not only were they provided with meals without needing to leave the safety of their homes, but this was professionally catered food from a business that does events for a living. It’s good food, and helps give the homeless community hope and feelings of self-worth.
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The City of Long Beach approved the Commercial Rental Assistance Grant (CRAG) back in January, and their application period is now open. It allows small businesses to get up to $4000 in funding to help them pay rent. The funding, which is approximately $1.7 million, comes from the federal COVID relief funds. Eligible businesses must be in a designated CRAG zone within Long Beach, conform to the Health Code, and have no more than 50 full-time employees. The application period began June 11th and goes until July 22nd, and applications can be done online.
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With demand being so high in the housing market, house sales are happening quickly. But that’s not the only thing selling quick. Those new homeowners are also looking to purchase new appliances and electronics for their new house. Best Buy in particular has exceeded their sales expectations. They’ve particularly noted sales of big screen TVs and home consultations and installations. Home Depot and Lowes are also faring well, and Walmart has increased their investment in home goods.
Representatives from Best Buy say that it’s the consultations and installations that put them over the top. There are many companies that sell appliances or TVs or office supplies. But most don’t also offer home services along with the sales. Services such as internet tech support are in high demand for buyers just moving in, who don’t want to waste any time getting connected. However, they’re less certain about their future in the second half of the year, as pandemic restrictions are ending and people are spending less time at home.
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Relativity Space, an aerospace company headquartered in Long Beach, has announced its new rocket the Terran R. The Terran R is fully 3D printed and is reusable. The 3D printing process allows for manufacture in under 60 days, with 100 times fewer parts than traditionally built rockets. Relativity was also working on a smaller rocket, the Terran 1, but decided to raise $650 million from investors to accelerate development of the Terran R.
The Terran R is intended to be a space freighter, capable of carrying cargo between Earth, the moon, and Mars. Relativity believes software-based 3D printing is the future of aerospace manufacturing and can enable efficient space travel. Their eventual goal is human colonization of Mars.
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Union labor is strong in Long Beach, where the International Longshore and Warehouse Union (ILWU) has a large workforce. Despite unionization, some things are out of their control. Terminal operators currently are frequently union workers working for a public entity, since ports are usually owned by the city. But the terminals themselves are often owned by private companies, and leased to the city.
In Long Beach, the Pier T terminals are owned by Total Terminals International (TTI), which is itself jointly owned by companies based in Switzerland and South Korea. TTI is in the process of considering terminal automation to improve efficiency. While they may achieve their efficiency goal, it will also cause many of the ILWU workers to lose their jobs as terminal operators. With the terminals being internationally owned, TTI doesn’t have much incentive to care about US workers, unless their decision causes the City to want to break ties with them.
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In response to the Covid-19 pandemic, Catalina Island was closed to tourism. Tourism is a major economic sector on the island, making the pandemic a significant economic crisis in addition to a health crisis. With Catalina Island now reopened, tourists are eager to get in on the fun. Tourist activities include kayaking, zip lining, outdoor recreation classes, hiking, tours, fishing, and souvenir shops.
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Here are some photos from earlier in the month: https://lbbusinessjournal.com/in-pictures-visitors-are-flocking-back-to-catalina-island-for-outdoor-adventures-and-fun-in-the-sun
On May 13th, the CDC dropped the recommendation of wearing a mask for fully vaccinated persons. However, the CDC guidelines are only recommendations, not law. Federal, state, and local laws still apply. California law still has a mask requirement, so even fully vaccinated people should still be wearing masks inside businesses. The state has opted to wait until June 15th to remove this requirement.
Not everyone in California is vaccinated yet, particularly in underserved communities. The hope is that the four week period will help ensure more people are vaccinated, as well as give businesses time to readjust to the new regulations. Vaccination progress will be monitored. Current trends are good, so if they continue as they have been, vaccinated people should be able to keep their masks off after June 15th. Of course, the virus doesn’t care about laws — it may still be there after that date, so if you want to stay safe, nothing is preventing you from continuing to wear your mask until you feel comfortable.
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If you know architects, you may know Edward Killingsworth, a US architect who lived in Long Beach. One of the houses he designed still sits at 2 Laguna Place. The estate of the original owners sold it in 2018 with the original design for $2.6 million.
It’s no longer fully Killingsworth, as the new owners have remodeled it, but it retains some quintessential Killingsworth features: plenty of glass, floating stairs, stone countertops, and perhaps most importantly post-and-beam ceilings. It’s been updated with top-of-the-line new appliances and modernized master suite and bathrooms. There’s even an elevator. The new additions bring the price tag up to $5.179 million.
The Neverland Ranch, near Santa Barbara, California, is a 2700 acre property previously owned by Michael Jackson. The main residence is 12,500 square feet, and there is also a 3,700 square foot pool house as well as a movie theatre and dance studio. Neverland Ranch additionally features a train station, fire house, and barn. After attempting to list the property for $100 million in 2016 and then again for $67 million in 2017, the trust has now sold it for $22 million.
The new owner is billionaire Ron Burkle, co-founder of the investment firm Yucaipa Companies, who had been an associate of Michael Jackson. Also the controlling shareholder of Soho House, he had been searching for a new location for the members-only club. Burkle eventually concluded that Neverland Ranch was too remote for a new Soho House location, but decided to put in an offer anyway, and was successful.
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In the neighborhood of Jordan in Hong Kong is a street called Woosung Street, popular for its restaurants. There is also a hockey academy there, as well as a sports foundation founded by Ahmen Khan. But Khan is doing something else to make people want to come to Woosung Street — he went to a nearby refuse collection site, picked up a refrigerator, painted it blue, and set it up just outside the hockey academy. The color isn’t important, though; what’s important is the sign reading “Give what you can give, take what you need to take.”
And that’s exactly what’s happening. The blue refrigerator project has gone viral, and people are visiting just to drop off food so that others can pick it up for free. The refrigerator is there 24 hours per day. Even though it’s a refrigerator, food isn’t the only thing people are picking up and dropping off. You’ll also find masks, cleaning supplies such as towels, and even clothing items such as socks.
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This photo does not depict the refrigerator described in this article.