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NOTABLE SALE
$7.09 MILLION DOLLAR DEAL IN LONG BEACH

MARKET: Long Beach
ASSET TYPE: Multi-Family
SALE PRICE: $7,090,000
Address: 122 East 55th Street
BUYER: The Blvd Group

CBRE has facilitated the sale of two apartment buildings in Long Beach, totaling 23 units for 7.09 million.

NEWS
HOME BUILDER ETFS BEAT THE DOW IN A GREAT WEEK  

ARTICLE TLDR

• Home builder ETFs outperformed the Dow in a strong week for stocks, reaching new highs and gaining more than 5%.

• Low mortgage rates, high demand, limited supply, and positive earnings reports boosted the home builder sector, which has been resilient amid the COVID-19 pandemic.

• Home builder ETFs have more than doubled in the past year, and the outlook for the sector remains positive, as the housing market fundamentals and the economic recovery are favorable.

The Dow Jones Industrial Average had a great week, gaining 3.4% and closing above 35,000 for the first time. But some sectors did even better, especially the home builders. Several home builder exchange-traded funds (ETFs) posted amazing returns this week, surpassing the Dow’s gains and reaching new highs.

Some of the top-performing home builder ETFs this week were:

• The iShares U.S. Home Construction ETF (ITB), which tracks an index of companies that produce residential homes. ITB gained 5.8% this week and hit a record high of $77.64 on Friday.

• The SPDR S&P Homebuilders ETF (XHB), which follows a broader index of companies involved in the home building industry. XHB rose 5.6% this week and reached an all-time high of $77.29 on Friday.

• The Invesco Dynamic Building & Construction ETF (PKB), which invests in companies that provide construction and engineering services. PKB climbed 5.4% this week and touched a new peak of $46.82 on Friday.

What drove the rally in home builder ETFs this week? There were several factors that boosted the sector, such as:

• Low mortgage rates. The average rate for a 30-year fixed mortgage fell to 2.88% this week, the lowest level since February, according to Freddie Mac. Low mortgage rates make home buying more affordable and stimulate demand for new homes.

• High demand. The demand for new homes remains strong, as buyers seek more space and comfort amid the COVID-19 pandemic. The U.S. Census Bureau reported that new home sales rose 20.7% in March, the highest level since 2006. The National Association of Realtors also said that existing home sales increased 12.3% in March, the highest pace since 2006.

• Limited supply. The supply of new and existing homes for sale is tight, as builders face challenges such as rising costs, labor shortages, and supply chain disruptions. The U.S. Census Bureau said that the inventory of new homes for sale was 3.6 months in March, well below the 6-month level that is considered a balanced market. The National Association of Realtors also said that the inventory of existing homes for sale was 2.1 months in March, the lowest level on record.

• Positive earnings reports. Several home builders reported strong earnings results this week, beating analysts’ expectations and showing robust growth in revenue, profit, and orders. Some of the notable earnings reports this week were from D.R. Horton, PulteGroup, NVR, and Meritage Homes.

Home builder ETFs have been among the best performers in the past year, despite the challenges posed by the COVID-19 pandemic. ITB, XHB, and PKB have all more than doubled in the past 12 months, outpacing the Dow’s 44.2% return. The outlook for the sector remains positive, as the fundamentals of the housing market are still favorable and the economic recovery is gaining momentum. Home builder ETFs may continue to beat the Dow in the coming weeks and months.

NEWS
LA MANSION TAX PREVAILS IN COURT AS JUDGE DISMISSES LAWSUIT

• A judge dismissed a lawsuit challenging a tax on luxury real estate sales in LA, known as Measure ULA or the “mansion tax”, which funds housing and homelessness-prevention programs.

• The ruling was praised by housing activists and criticized by real estate industry groups, who plan to appeal the decision. The measure is unique in the nation and has the highest rates and thresholds among similar transfer taxes.

A controversial tax on luxury real estate sales in Los Angeles, known as Measure ULA or the “mansion tax”, has survived a legal challenge after a judge dismissed a lawsuit filed by a developer and a taxpayer group on Tuesday, October 25, 2023.

The lawsuit, which was filed by Newcastle Courtyards, a developer of luxury condos, and Howard Jarvis Taxpayers Assn., a taxpayer advocacy group, claimed that the measure was unconstitutional, unfair, and harmful to the real estate market. They argued that the measure violated the state constitution’s requirement of uniform taxation, that it discriminated against certain property owners, and that it discouraged development and investment in the city.

The measure, which was passed by voters in November 2022 and took effect on April 1, 2023, imposes a 4% tax on property sales above $5 million and a 5.5% tax on sales above $10 million, with the revenue going to housing and homelessness-prevention programs. The measure is expected to generate about $300 million a year for the city’s housing trust fund, which supports affordable housing, rental assistance, and services for the homeless.

The judge, who heard arguments from both sides on Monday, ruled that the measure was valid and lawful, and that the plaintiffs failed to show any evidence of irreparable harm or violation of their rights. The judge said that the measure was a valid exercise of the city’s taxing power, that it did not discriminate against any class of property owners, and that it did not interfere with the state’s authority over taxation.

The ruling was celebrated by housing activists, who said that the measure was the will of the people and a necessary solution to the housing crisis. They also said that the measure has raised millions of dollars for affordable housing and services for the homeless, and that it has not affected the overall market activity.

The ruling was criticized by the plaintiffs, who said that the measure has frozen the market and discouraged development. They also said that the judge made errors of law and that they plan to appeal the decision. They said that the measure has reduced the number of listings and sales of luxury properties, and that it has created a disincentive for developers to build more housing units.

The measure is unique in the nation, as it applies to all types of property sales, not just residential ones. It also has the highest rates and thresholds among the cities that have similar transfer taxes, such as San Francisco, Oakland, and Berkeley. The measure was supported by a coalition of labor unions, community groups, and homeless advocates, who campaigned under the slogan “Make LA Home for All”.

The measure was opposed by a coalition of real estate industry groups, business groups, and taxpayer groups, who campaigned under the slogan “No on ULA: Stop the Mansion Tax”. They argued that the measure would hurt the economy, reduce property values, and drive away wealthy buyers and investors.

The legal battle over the measure is not over yet, as the plaintiffs have vowed to appeal the ruling. However, the measure remains in effect until a higher court decides otherwise.

NEWS
ARTEM TEPLER, CO-FOUNDER OF SCHON TEPLER, DIES AT 41

ARTICLE TLDR

• RIP ARTEM

Pasadena Tenants Get New Protection From No-Fault Evictions

It is with great sadness that we share the news of the passing of Artem Tepler, a co-founder of Schon Tepler, a multifamily developer and investor in Los Angeles. He died by suicide on Wednesday, November 2, 2023, at the age of 41.

Artem was born in Moscow, Russia, and immigrated to the United States with his family when he was 12 years old. He graduated from UCLA with a degree in economics and started his career in real estate as a broker. He met his partner Paul Schon in 2008 and they founded Schon Tepler in 2010.

Together, they built a successful company that focused on developing high-quality, sustainable, and affordable housing in Los Angeles. Some of their notable projects include The Line Lofts, a luxury apartment complex in Hollywood; The Pearl, a mixed-use development in Koreatown; and The Alex, a micro-unit community in Glendale.

Artem was not only a visionary developer, but also a generous soul who cared deeply about his family, friends, employees, and community. He was known for his kindness, humor, and passion for life. He loved traveling, skiing, surfing, and playing chess. He was also an avid supporter of various charities, such as Habitat for Humanity, Children’s Hospital Los Angeles, and The Trevor Project.

He is survived by his parents, his sister, his nephew, his partner, and his dog. A GoFundMe page has been set up by Paul Schon to help his family with funeral expenses and other needs. You can donate here: [Help Artem Tepler’s Family].

Artem’s death is a tragic loss for the real estate industry and the world. He will be greatly missed by all who knew him and admired him. We send our deepest condolences to his family and friends. May he rest in peace.