Gazarian Real Estate Center

CAN you help?

2012-02-07T14:01:00.000-08:00

JOIN MANCO ABBOTT THIS SATURDAY

FEBRUARY 11, 2012 9 AM - 2 PM

Manco Abbott is trying to gather 20,000 pounds of food to go to the hungry of our community and our drive ends SATURDAY!

It is shocking to learn the hunger statistics and realize this is happening where we live and work.

For more information call: 559-435-1756 or go to facebook.com/mancoabbott

Please ask family, friends and co-workers to drop cans off at any of the following 18 sites:

Commercial Sites:
Villagio Shopping Center, Blackstone/Nees - Fresno

Former Warner Building, Palm/Herndon - Fresno

Manco Abbott Office, Bullard/Fresno - Fresno

Mary's Vineyard, Ben Maddox/Noble - Visalia

Apartment Host Sites:

Cotswold, Champlain/Perrin - Fresno

Le Provence, Champlain/Shepherd - Fresno

Park Ridge, Audobon/Fwy 41 - Fresno

North Creek, Cedar/Shepherd - Fresno

Birch Commons & Birch Court, Maple/Alluvial - Fresno

Lakeside, Shaw/Brawley - Fresno

Palo Alto Place, Herndon/Polk - Fresno

West Point & Stonegate I & II, Ashlan/Fwy 99 - Fresno

Sierra Ridge, Fowler/Tollhouse - Clovis

Marbella, Herndon/Temperance - Clovis

Four Creeks, Douglas/Lovers Lane - Visalia

Cameron Crossing, Caldwell/S. Court - Visalia

Parks Grove , Lovers Lane/Caldwell - Visalia

College Park, Fwy 41/W. Hanford-Armona, Lemooree a

We could really use your help!

Guest Speaker Event

2012-02-06T14:03:00.000-08:00

Emerging Real Estate Opportunities in Times of Change featuring:

Christopher Lee, National Real Estate Analyst

Mr. Lee has rich experience in strategic planning and performance improvements within the real estate industry. Mr. Lee's background includes diversified experience in real estate development, land-use economics, long-range planning, investment analysis, mergers/acquisitions, and performance benchmarking.

Thursday, February 16, 2012

8 am - 10 am

Hosted by the Gazarian Real Estate Center at the Craig School of Business,

California State University, Fresno

Investors/ Exchange

2012-02-06T00:25:00.000-08:00

Zack Kaufman
Fin 183

On Friday, February 3rd I went to the Investors exchange meeting at the Fresno Association of Realtors building. It was my second time going and I saw many familiar faces. Everyone was very kind and some even remembered me from the prior meeting I attended. The meeting started by Tom Hyatt introducing two gentlemen at the opposite end of the table who were going to give a presentation and answer questions from the following week. One of guys was an associate at the law firm Cuttone & Associates, and his partner was a law clerk and student on his way to becoming a lawyer. Both were very nice and very educational on the topics discussed during the meeting.

The first topic was a question from the previous week. It was regarding a situation in which an agent is representing a seller, and as the sale is in escrow the agent discovers the seller has filed bankruptcy. The questions were, what happens to the sellers agents commission? Is the agent legally entitled to the commission or is the commission wiped out along with the bankruptcy? The question was important and many of the attendees claimed they had had similar situations happen to them recently. The lawyer and his clerk were very knowledgeable and informative. They broke the question down to the different types of bankruptcy individuals go through. First is chapter 7, second is chapter 13, and lastly is chapter 20. Most of the time was focused on chapter 7 and 13. The lawyer stated in a nutshell that in most cases if the individual files chapter 7 bankruptcy they will not recover any commission because the individual has wiped out all their debt and commission debt falls under debt that can be wiped with under chapter 7. However, if chapter 13 is filed there is a chance that they may recover some, if not all their commission through a reorganization of their debt. The topic of got in more depth and was very informative regarding commission in general not just in residential real estate transactions.

` The second topic was about tenant rights when their house is bought, primarily focusing on houses bought at auction or through REO. The consensus was the tenants have rights and cant just be kicked out the day the transaction closes. Especially if the house was bought at the foreclosure auctions, the new owner usually has plans of flipping the house or other investment ideas for it. The owner can either respect the lease terms or give them 90 days to vacate. However, if the person living in the house is the previous owner and still has not vacated after the whole foreclosure process, that calls for different circumstances the lawyer stated. In that case, they can pretty much do two things, negotiate a time for them to get out and settle it that way, or if the holdover owners persist, they can serve them with an eviction, which causes a lot of stress and can be very bad for the previous owner. It can affect their credit rating dramatically. Either way, in any circumstances it is best handle the situation reasonably and rationally.

I would like to thank Tom Hyatt for allowing and welcoming me to attend this meeting, and everyone else in attendance.

Fresno Commercial Real Estate Firms Announce Big Merger

2012-02-01T17:05:00.000-08:00

Pearson Realty and Retail California announce plans for a potential merger. For the story, please see http://www.thebusinessjournal.com/index.php?option=com_content&view=article&id=11315:fresnos-pearson-realty-retail-california-mergining&catid=24:real-estate&Itemid=130

Home Prices Decline Nationally (expect for Phoenix)

2012-01-31T19:08:00.000-08:00

The Case-Shiller Index data released today indicated declining home prices nationally, with the sole exception of Phoenix, Arizona. For the story, please visit http://www.businessstreetonline.com/news.php?ax=v&n=1&id=2&nid=3282

Thank you, Manco Abbott!

2012-01-30T12:01:00.000-08:00

Thank you, Manco Abbott for your generous donation of real estate related books to the Gazarian Library!

Gazarian Real Estate Center Sentiment Index - Fall 2011

2012-01-28T16:01:00.000-08:00

The Gazarian Real Estate Center, Craig School of Business at the California State University, Fresno announces the launch of the Gazarian Real Estate Sentiment Index. The Gazarian Real Estate Sentiment Index measures homeowners, business owners, and real estate professionals’ sentiment for the Fresno real estate market. The sentiment survey is administered by email and was taken by 122 participants. The Gazarian Real Estate research staff compiles the index and index averages are computed for the overall real estate market as well as individual property sectors.
For the premier survey, participants identified the real estate market segment in which they are primarily involved in and responded to questions concerning each market segment and their feeling of market sentiment, both their present state and their 6-month forecast. Market segments include:

· Agricultural

· Industrial

· Land

· Multi-family residential

· Office

· Retail

· Single-family residential

Each market segment was rated on a scale of poor, fair, or good. For all questions, participants had the option of “no opinion” if they do not follow a particular markets. Answers are weighted and a numerical index is calculated. As the survey continues, a timeline graph will also be included to show the index change over time. The graph below shows the final results for both current market sentiment and anticipated market conditions 6-months into the future.

Additional survey questions asked participants their opinion of investment potential by geographic areas and their opinion of anticipated change in single-family residential mortgage interest rates. For the questions, “In the next 6 months, which Fresno real estate submarket has the best investment potential,” 44 (36%) selected Northeast Fresno as having the best investment potential. The next most popular responses were ‘no opinion’ which received 36 (30%) and Northwest Fresno with 13 (11%). Other answers included ‘West of Highway 99’ with 8 (7%), ‘Downtown Fresno’ with 7 (6%), ‘Central Fresno’ with 6 (5%), and 3 (2%) did not answer this question. Finally, ‘Central Fresno’ had 5 (4%) and ‘Southeast Fresno’ had 3 (2%). No participants selected ‘Southwest Fresno.’ The last question asked participants to forecast expected changes in single-family residential mortgage interest rates in the next 6 months. 85 (70%) answered ‘no change,’ 28 (23%) anticipated ‘increasing rates,’ 6 (5%) anticipated ‘decreasing rates,’ and 3 (2%) did not respond.

Agriculture had both the highest level of current and forecasted levels of market sentiment. Conversely, retail had both the lowest current and forecasted levels of market sentiment. From the graph above, we conclude that survey participants anticipate that real estate market conditions will generally improve over the next six month, with one exception – Agriculture. For the agriculture sector, market sentiment maybe at a peak now with the forecasted sentiment declining significantly in the next 6-months.

C.A.R. Scholarship Available

2012-01-25T11:11:00.000-08:00

Real Estate Students -

California Association of Realtors - Scholarship Available

Please follow the link below to print the application and guidelines...

https://docs.google.com/open?id=1MHaixE2gt-yXtZ0FCZ8pLrcQfi9fyEvlp-4cMKKOcI9u9QZBj7W39Ict9GR2

Good Luck!

Job Opportunity in Demographics and Statistics

2012-01-25T10:17:00.000-08:00

The California State Census Data Center within the Demographic Research Unit, Department of Finance has an opening for a Research Program Specialist I or II (Demography).

PLEASE NOTE: Applications will be accepted ONLY from current State employees at the Research Program Specialist I/II level, those within transfer range, or individuals who have list eligibility.

We are seeking a motivated individual who has a college degree with any major and with extensive course work in demography, economics, sociology, or a related research-oriented field. This must include or be supplemented by at least six semester units in statistics. They should have extensive knowledge of demographic principles and concepts in a research and statistical setting; have a working knowledge of statistical software (ie. SAS) and relational databases (ie. Access, SQL); exercise a high degree of initiative and independence of action; possess strong written skills; communicate effectively; able to work on multiple projects and meet deadlines; and develop and maintain effective and cooperative working relationships.

A link to the job announcement, including how to apply, is online athttp://www.dof.ca.gov/career_opportunities/current/view.php

Please share this message as appropriate.

Demographic Research Unit

Department of Finance

915 L Street, 8th Floor

Sacramento, CA 95814

(916) 323-4086

www.dof.ca.gov/research/demographic/

HUD Employment Opportunities

2012-01-24T13:56:00.000-08:00

HOUSING AUTHORITIES CITY AND COUNTY OF FRESNO

EMPLOYMENT OPPORTUNITIES

Procurement Administrator

The Procurement Administrator supports all of the Fresno Housing Authority (“Agency”) operating departments by providing procurement oversight. This position functions as the subject matter expert for the solicitation process, Requests for Proposal (RFPs), Requests for Qualifications (RFQs) and Invitations for Bid (IFBs) and is responsible for handling negotiations, drafting contract language, developing evaluation criteria, coordinating the review and selection process for the awarding of contracts, and ordering department-specific purchases. The incumbent is also responsible for contract oversight and aligning departmental procurement requests with federal, state and local rules and regulations.

Administrative Services Manager

Under the general direction of the Chief Administrative Officer (CAO), the incumbent coordinates and directs the day to day administrative functions and activities within the Policy & Operations (P&O) Department; assists in establishing department goals, objectives, strategies, policies, and procedures regarding P&O issues; continuously evaluates, plans, strategizes, assesses, and monitors all aspects of the division to ensure maximum efficiency; and works in close collaboration with others (internal and external partners) to maximize team strength to carry out the goals of the department and the Fresno Housing Authority (“Agency”). The Administrative Services Manager primarily concentrates on providing strategic oversight of the budgeting function, facilities management, fleet management, and procurement functions.

Evaluation and Accountability Manager

The Evaluation & Accountability Manager coordinates, oversees and performs professional, technical and analytical work in one or more assigned areas including coordinating and leading major and challenging projects to expand practices proven to increase Agency effectiveness. Provides timely delivery of high quality services; serves in a lead capacity and creates innovative approaches to meet the needs of the Agency.

Housing Analyst:

Under direction of the Senior Manager – Housing Management, the Housing Analyst develops, analyzes and delivers program reports for the purposes of program compliance monitoring and financial forecasting. The Housing Analyst also oversees leasing, waitlist and application processing for Housing Management developments, and assists in employee training.

Accountant

Under direction of the Senior Manager of Accounting & Finance, the Accountant performs a variety of professional and technical accounting duties involving the maintenance of multiple programs, general ledger within the accounting system, financial reporting, cash receipt and transfer accounts, and payroll functions. The Accountant also provides technical assistance to Fresno Housing Authority staff.

If interested – follow this link to the HUD employment opportunity page and download the job description and application:

http://www2.hafresno.org/default_sub.asp?page=employment_listing

FIN 180 & 183 Students: The Writing Center...

2012-01-19T12:32:00.001-08:00

The Writing Center is open for your students to use its services M-TH 9-4 and F 10-2. It it located in the Ed Bldg 184. Tel.278-0334. www.csufresno.edu/writingcenter.

Twenty-five well-trained tutors are available this semester to help student writers at any stage of the writing process:

-understanding and getting started on assignments: Students can come even before they have done any writing. Tutors will help them understand the demands of an assignment, review the knowledge they have, brainstorm and set them on the way of writing a draft
-expanding, clarifying and re-organizing drafts: Once they have a draft (no matter how skimpy or provisional or rough), tutors will give writers feedback on what works and what doesn't, and will help them negotiate revision
-correcting and polishing final drafts: At the last stage of the writing process, tutors will prioritize and point out patterns of grammatical or mechanical errors and help writers learn how to correct and avoid them.

The Writing Center has three kinds of services:

1.    semester-long group tutorials—for those students who will have a lot of writing assginemnts and/or who want to learn in small groups how to read and evaluate drafts, give and receive feedback, take their drafts through multiple revisions, etc. These tutorial groups provide deep, semester-long learning that affects students’ behaviors and knowledge as writers and readers. The time to sign up for these is during the first weeks of the semester (before 2/13)
2.    walk-in and by-appointement one-on-one tutorials—these are offered throughout the semester and help students with particular assignments
3.    on-line tutorials—students submit their drafts and receive comprehensive feedback via email

Employment Opportunity

2012-01-12T11:52:00.000-08:00

Job Description – Development Team Position
1/9/12

Fresno, CA based real estate development and finance company with a 25 year history and large portfolio, consisting of multi-family housing statewide, is seeking a highly motivated individual interested in real estate development. Individual is preferred to have a four (4) year college degree and experience in project management, financial analysis, real estate development, real estate finance and/or affordable and public housing. This position has great growth opportunity as the organization is highly structured and well positioned for growth. This individual should be highly organized, capable of multi tasking, have proficient computer skills (i.e. Microsoft Office, Word, Excel, PowerPoint, etc.) and most importantly be a team player. This is a full time position with benefits. If you are interested, please forward your resume by January 27, 2012 to resumes@ahdcinc.com.

Clovis Valuation Study Published

2011-12-22T08:22:00.000-08:00

A valuation study of property values in Clovis, California was recently published in the Journal of Sustainable Real Estate. The paper examines the relationship between property age, dual pane windows, and property values.

For the full paper, please visit: http://www.costar.com/uploadedFiles/JOSRE/JournalPdfs/08.142_161.pdf

FIN 181 & MBA 289T Office Hours Tomorrow

2011-12-20T16:33:00.000-08:00

FIN 181 and MBA 289T students. I have final exams graded and will have office hours tomorrow from 8 AM to 2 PM if you would like to see your final exam. Just call or email me before you stop by the office.

I am still working on grading papers and projects and do not have final course grades at this time.

FIN 181 Mark Massie Appraisal

2011-12-15T15:30:00.000-08:00

Massie Appraisal Report

By Jackie Perkins & Andrew Vera

For our Mark Massie appraisal report we found that our subject property and the information contained within the report was extremely interesting. During the first day when we were handed the assignment, we looked through a detailed report cluttered with information. Many students would have probably passed this off as useless information, however we looked at it and were fascinated with the structure and detailed information that was in it. Not only was this report organized with a vast amount of information, there was something great about being able to get inside the mind of a great appraiser like Mark Massie.

Our subject property was located on the Southwest corner of Fresno & “B” Street. The property, at the time, consisted of three old and poorly maintained small residences. Along with a garage in back of the first home, and a shed behind and between home two and three. A more detailed description of the property states that the subject property is “Improved lot in West Fresno that has 150 feet frontage on the southeasterly side of Fresno Street, and is 100 feet deep (with frontage on “B” Street). All city services and utilities are available to the site, which has curbs, gutters and paved street. The lot is approximately 12 inches above street grade, and soil characteristics are favorable for foundation purposes”. This is one example with how elaborate Mr. Massie was with his work. He seemed to put down every single detail when it came to putting his appraisals together.

In the report it is stated that during 1962, when the appraisal was taken, the “property is located in an area in West Fresno which is in a gradual transition from residential to commercial and light industrial land uses. There has been relatively little real estate activity; a search of the Official Records of Fresno County revealed only two recent sales of roughly comparable properties”. In the report Mr. Massie used two properties to compare with the subject property to get a general idea of a highest and best use analysis. Site one was a Shell gas station on the southeasterly corner of Fresno and “C” Street. The second property was adjacent to the first, it was an inside lot improved with a single story brick store building. Given that both of these properties were being used as commercial sites, Mr. Massie believed the subject property would best serve as commercial use. In the report he states that the homes on the subject property are poorly maintained and would have little or no salvage value. He also took into account the cost of moving them, which would be great and any renovation would cost a lot more as well.

Mr. Massie concludes that the best use of this property would be to use it as a commercial property. Using the comparable units in and around the market at the time, he felt this would be its best use. He appraised the value of the subject property to be $25,000 in 1962. Today, using market comparable units, similar commercial properties are selling anywhere between $750,000 and $2,000,000 in and around the Fresno area. Currently the property is in fact being used as a commercial site. It now holds a Rite Aid Pharmacy, Panda Express, and a Burger King. One struggle we found was trying to figure out the exact location using the maps and pictures. None the less we found it and were able to get the current status of the location.

All in all, it was an enjoyable task completing this assignment. We consider it a great honor to be able to look at another appraisers work and see the passion he had for his work. Our report, in particular, was organized in such detail, which worked towards our benefit. We would like to thank Mr. Massie for all his hard work and his wife for allowing us to use his work on this assignment. Thank You.

Market Watch: Best Place for Business

2011-12-13T02:07:00.000-08:00

Market Watch released their list of best to worst places for business in the United States. Washington DC was at the number 1 spot this year. Fresno was at 100, up two places from last year. For the story and complete list, please see http://www.marketwatch.com/story/california-florida-ohio-cities-in-bottom-10-2011-12-13.

Fresno Least Expensive Commercial Real Estate Market According to BOMA

2011-12-09T08:46:00.000-08:00

Fresno was selected the least expensive commercial real estate market, considering operating costs, in the country by BOMA International. New York City was the most expensive market.

For the story, please visit http://www.mortgageorb.com/e107_plugins/content/content.php?content.10439.

Fresno Real Estate Investment Opportunities

2011-12-07T12:54:00.000-08:00

In the book “Rich Dad’s, the Case for Real Estate” the authors talk about the benefits of owning real estate and what risks come with it. Specifically Real Estate can be used as passive income and in the long haul possibly for capital gains as well. In fact the books argument leans towards getting into real estate just as the title implies. The reader is cautioned to consider 3 sides to real estate: Finance, Management and Liability.

First and foremost for the book’s theory to work a profitability test must be met. That is after considering all the costs involved in owning an investment property will there be an acceptable profit? In my research, being a humble beginner that I am, office or retail space was excluded from consideration. Instead I focused on single family homes, duplexes and small apartment buildings.

Assumptions:

Home owner warranty (per unit) - $30 / month (6) (this money is not recoverable)

Property Management fee (per unit) – $ 90 / month (7) – Require 12 month contracts

APR for 30 year fixed business property – 5.5% (with my credit/ per Chase bank)

Down-payment – 20%

Improvement to Land Ratio – 80/20

Other Tax Deductions – (i.e. Renting myself space in my own house for office use to run my real estate business and other expenses associated with it: 25% of debt service, utilities and maintenance = $287.50)

Personal Income Tax: 28%

Vacancy Rate: 1.44% (Assuming Worst Case Scenario 5%)

As a small investor I do not have a required IRR or a set cost of capital. My requirement is simple: Rent covers all monthly expenses, however the Payback period should not exceed 10 years.

Business Assumption: Most Properties purchased in this area were priced higher than my purchase price which means higher debt service and thus higher rent requirement. (I can be the low cost market entrant).

The Market:

Single Family Homes: In Fresno a typical 3 bedroom 2 bath single family home may go between $800 - $1400 (1) rent/month. It seemed that if the house was located west of Route 41 and closer to Route 99 then the rent was cheaper while rentals further north or east of Route 41 were more expensive. These houses were in various conditions ranging from poor to acceptable (based on appearance).

Looking at similar properties for sale (i.e. 3 bedroom 2 baths) in the same area yielded various results. My focus was on those selling for less than $100,000 (2, 3, and 4). With 20% down the debt service is $413 with insurance and taxes an additional $150. That is the total monthly outflow would be $683 (including assumed expenses listed above). Yearly depreciation is $2909.10 (80,000/27.5). This particular property was 8 miles north of route 99, right off 41. My research shows that similar properties in the same area currently rent for $1,200 (2). I would only charge $950 to ensure quick fill rate and to overcome any defects the property may have that I did not notice on the picture.

Calculating Yearly Cash flow and the Payback Period:

Profit before Taxes= ((950*.95) – 683)12 = 2,634

Profit After Taxes = 2,634*.72 = 1896.48

Tax Benefit = (2909.10+ (287.50*12))*.28= 1,780.55

Cash Flow = 1896.48+1780.55 = $2075.03

Payback = 20,000/2075.03 = 9.64 years

Though the payback period seems a long time away I am satisfied because I own an asset and someone else (i.e. Renter) is paying for it. At the same time I have a benefit of passive cash flow. I feel my business assumption is valid in that monthly rate is competitive. Also I hedge by going with a property manager who prescreens potential renters and by requiring a 12 month contract.

Multi-Family Units: This proposition seems even more lucrative due to the financials. Specifically there were several (3-to-4) 1 bedroom, 1 bath unit buildings at a going rate of $120,000 – $160,000 (5). The rent is between $600-$800/unit, depending on the area (1). While the rent depends on the neighborhood and conditions, it seems that these prices are reasonable for Fresno. That is on paper this is a great investment, however I would need to see the actual state of the properties as well as the types of tenants that occupy that space. Again I would charge $550 which is 10% lower than the competition. Debt Service would be 635.92, (given a value of $140,000) an additional $213.00 for insurance and property taxes and management and maintenance costs at 480 ((30+90)4). Yearly depreciation 4072.72 and other tax deductions at $287.50.

For now let’s assume that everything is as is at face value. So what is the math?

Calculating Yearly Cash flow and the Payback Period:

Profit before Taxes= ((4(550*.95)) – 848.92-480)12 = 9,132.96

Profit After Taxes = 9,132*.72 = 6,575.73

Tax Benefit = (4072.72+ (287.50*12))*.28= 2,106.36

Cash Flow = 6,575.73+2,106.36 = $8,682.10

Payback = 28,000/2075.03 = 3.23 years

Both properties meet the profitability test. The conclusion seems obvious, Multi-Family dwellings are the way to go, but both properties yield income. The money is good and we are paying a property manager to take care of it all. The final hold up than, is in the liability aspect. As the calculations stand now we are looking at a sole proprietorship which has unlimited liability. To start an LLC would require an additional $800/year, which I believe would be worth it in the multi-family case.

In the end the financials certainly make sense, however it is the last 2 components, management and liability exposure, that are difficult to predict. There is only one way to really see how these investment properties will pan out, is to buy them and let renters in. I believe the last two components are a matter of experience and that the book makes a valid case. Investing into real estate seems a good source for additional passive income and route towards better retirement.

Bibliography

1. http://www.mynewplace.com/search?back=T&q=Fresno%2C+CA – Rentals comparison

2. http://www.realtor.com/realestateandhomes-detail/8701-Highway-41_Fresno_CA_93720_M17829-30921?source=web – Buying an investment property

3. http://www.realtor.com/realestateandhomes-detail/8701-Highway-41_Fresno_CA_93720_M17829-30921?source=web – Mortgage Opportunities (single Family)

4. http://www.californiamoves.com/property/details/1604148/MLS-12158321/3274-Acacia-Ave-Fresno-CA-93726.aspx?SearchID=13161728&RowNum=9&StateID=9&RegionID=5&IsRegularPS=True&IsSold=False- More Mortgage Opportunities (Single Family)

5. http://www.fresnoincomeproperties.com/listings.html - (2-5 apartments)

6. http://home-warranty.firstam.com/?code=BM51 -Appliance Insurance

7. http://www.oaktreepropertymgmt.com/services.php (Property Management)

8. http://www.thebusinessjournal.com/real-estate/3513-recession-impact-on-fresno-less-severe (Vacancy Rates In Fresno)

The Fresno Brain Drain

2011-12-07T12:02:00.000-08:00

The Fresno Brain Drain

Brock Lechowicz

The city of Fresno is a very interesting city; it is one of the largest cities in a state with the largest economy in the country, but what does Fresno really have to offer? With such a prestigious university in the heart of a city with roughly half a million residents, one would assume that Fresno would be a hotbed of innovation. Unfortunately the opposite is mostly true, Fresno is not known for its innovation or societal achievements, but is in fact known as one of the dumbest areas in the nations. How is this possible? How is an area that has so much potential and seems to have all of the right tools to be successful fall short in almost all categories that involve intellectual achievement? The Fresno “brain drain” as it is so commonly called is an interesting phenomenon that has plagued the city and its residents for years (Ganga, 2005).

In the book that I had previously read called “The Great Stagnation” by Tyler Cowen, one of the main points of the book was about society today always going after low hanging fruit (Cowen, 2010). When he explains this, the idea basically breaks down into the idea that society has sculpted us into a race that likes to the take the easy way out and use whatever resources are easiest for us to obtain. I feel that this relates very well to this whole idea of the brain drain in the Fresno area because of the ease of finding a job or creating a job (Ganga, 2005). Due to the large number of current Fresno residents that are in the process of obtaining an upper level education, one would think that it would be easy to find a job in the Fresno area. However the Fresno area is one of the highest ranking areas in the country for unemployment and thus good jobs are fairly scarce (Ganga, 2005).

It seems that upon graduation from some of the academic facilities in the Fresno area that there is somewhat of a mass exodus to more lucrative markets. The majority of educated Fresno residents are fleeing to larger more metropolitan areas to find employment, such as Los Angeles or San Francisco. “Between the years of 1995 to 2000 Fresno lost one sixth of its single college educated residents, while Los Angeles saw the same demographic grow by 10% and San Francisco saw a 20% growth as well (Ganga, 2005).” This is a perfect example of the populous moving to where more low hanging fruit is available, instead of working hard to find a good career or to start your own career in the Fresno area. The educated Fresno workforce is moving to where they can more easily find occupation or low hanging fruit.

There are many factors that are encouraging this exodus of the educated Fresno workforce. The most prominent of these factors is the job market, not just the availability of good jobs, but the regular wages of those jobs. “For example, a computer programmer in Fresno earned an annual salary of $56,210 in 2004, according to the U.S. Bureau of Labor Statistics, while that same programmer in Los Angeles made $72,740, and in San Francisco $87,120 (Ganga, 2005).” The numbers seem to speak for themselves, cost of living is one reason for the increase in wages, but is not the whole factor. When considering this, one must ask themselves; why would I want to live in a smaller town with virtually no room for advancement and virtually no culture and make less money than a city with those things? I think in looking at that question one would find the answer to why Fresno has such a problem with brain drain and how this problem is going to continue in the future.

The Fresno community must realize this overwhelming problem to fully understand how it is affecting the local economy and local community. With the mass exodus of educated Fresno residents, it has left the town with an almost unemployable workforce and an almost stagnant economy. Fresno must realize that a revitalizing the economy of the town is going to the most important aspect of slowing this increasing problem. Until Fresno is able to find a way to combat the increasing number of educated residents leaving for greener pastures, it is always going to cause numerous economic problems in the future.

Works Citied

Cowen, Tyler. “The Great Stagnation.” New York; Dutton Publishing, 2010. Print.

Ganga, Maria, “Fresnos Brain Drain Has Left The Town Smarting.” New York Times, 2005.

Uncontrolled Growth

2011-12-06T22:34:00.000-08:00

In The Big Short, Michael Lewis delves into the overextension of credit and the poor management of real estate. The overbuilding of houses and overextension of credit to less worthy borrowers is highly evident in Fresno. The Sunnyside area of Fresno, which holds many acres of agricultural land, was a great example of overbuilding and what happens when residential demand outpaces demand for all other uses. With high foreclosures and a customer base that mirrors some of Lewis’ examples, Fresno was obviously not insulated from the crash. The end of the real estate boom left many areas deserted with developers leaving in droves just as fast as they came in. The Sunnyside area of Fresno is no stranger to these developments.

Financial bubbles have occurred since the beginning of financial markets. In the past 30 years we have seen history repeat itself several times but our memory remains very short-term. When demand skyrockets and optimism abounds, things can get out of hand. This is very evident in Fresno where developers began to take large lots of land, often agricultural areas, and build housing developments.

The Sunnyside area of Fresno, which was mostly comprised of agricultural land, transformed quite a bit during the real estate craze. Bounded by Chestnut Avenue on the west, most of the area is considered County land. When the general real estate market began to heat up, so did the public’s need for more residential land. In southeast Fresno this meant replacing farm land with new housing development. Builders clamored to convert lots for residential use. The extension of highway 180 also helped boost demand for these homes. The Sunnyside area that once contained large lots with spacious backyards began to see the typical traits of new housing where lots are smaller and neighbors are closer together. Population density essentially increased by 50 percent (Advameg, 2010).

A big issue with real estate booms is the inherent risk involved with mortgage loans. Lengthy terms, borrower creditworthiness and fluctuating economic conditions can all affect real estate markets. As a lagging economic base, Fresno’s markets tend to experience the effects a bit later than northern and southern parts of California. Fresno’s agricultural base also creates employment that is very sensitive to changing prices as well as seasonal trends.

In The Big Short, Lewis cites many cases where banks did not do their due diligence in screening borrowers. He writes about a strawberry picker who made $14,000 a year and was approved for a $700,000 mortgage (Lewis, 2010). For many new developers in the Sunnyside area, this scenario could have very well been true. First-time buyers with low or seasonal wages soon became viable borrowers for an industry that began to run out of truly qualified participants. In this situation the Sunnyside area saw an influx of builders coming in and capturing these untapped borrowers in an area that was largely undeveloped (Fresno, 2008). Unfortunately, many were simply too late to the game.

Michael Lewis paints a picture of uncertainty and desolation in the aftermath of the real estate boom and bust. He points to areas like Bakersfield that were once beacons of hope and now are largely abandoned. A quick drive to the Sunnyside area a few years ago likely evoked those same emotions. Unlike more developed areas that simply have “for sale” signs dispersed throughout a neighborhood, many of the housing developments in the Sunnyside area were left unfinished and essentially abandoned in hopes of a better time when the market was able to recover.

The Fresno residential market had overextended itself and in the process perpetuated urban sprawl and left agricultural land unusable for the foreseeable future. Real estate generally lags behind in demand and the central valley lags behind other expensive markets and thus unfinished developments were the outcome for the Sunnyside area. For an area that once had mostly older housing mixed with large lots of crops, the undeveloped lots were a big eyesore.

Michael Lewis rails against those banks and investment firms that perpetuated the idea of the American Dream. Individuals were led to believe that they could somehow own homes that were far beyond their means. Cities and communities were driven to accept this idea as well. The Sunnyside area of Fresno, a once harmonious mix of agriculture and older but classic housing, succumbed to these same market pressures. Overbuilding and urban sprawl created a desolate landscape that disrupted the once scenic area. The area will recover but it will be interesting to see if history will repeat itself in another 20 years as has been the pattern that Lewis explains in his book.

Works Cited

Advameg, Inc. (2010). City Data - 93727. Retrieved December 2, 2011, from City-Data: http://www.city-data.com/zips/93727.html

City of Fresno. (2008, July 8). Fresno Southeast Growth Area. Retrieved December 1, 2011, from City of Fresno Web Site: http://www.fresno.gov/Government/DepartmentDirectory/PlanningandDevelopment/Planning/SEGA/default.htm

Lewis, M. (2010). The Big Short. M. Lewis, The Big Short. New York: W.W. Norton & Company.

High-Speed Rail in Fresno

2011-12-06T21:35:00.000-08:00

Many people wonder what the high-speed rail system will do for Fresno. Do the benefits outweigh the costs, which according to a recent Fresno Bee article, are estimated at a whopping $98 billion for the statewide project, more than double the previous projections of $43 billion (Siders, 2011)? In the book, The Great Reset, the author dedicates one of his chapters to explain the significance that new infrastructure, namely the high-speed rail system, will play to “reset” the economy in times of crisis. Florida states, “Just as in the past, infrastructure provides a critical platform for growth and a framework on which to build a new kind of economy. “ (p 170).

This youtube video shows a conceptual design of the growth and development that will occur in Downtown Fresno with the high-speed rail. Not only will the Central Valley experience growth, but job creation as well. According to the California High Speed Rail Authority, this project anticipates 16,500 construction-related jobs for Fresno-Merced section alone.

In addition to those jobs, the California High-Speed Authority expects the project to create hundreds more for the high-speed rail system and businesses along the statewide route, which includes Fresno.

There are also environmental benefits that come from the high-speed rail system. Air pollution and smog will be reduced as a result of electric-powered trains. Air quality will be improved, also. The high-speed rail system will also reduce gas emissions by 12 billion pounds per year. For example, this interactive map picture, available on the California High-Speed Rail Authority's website, shows a route starting in Fresno and ending in San Francisco. It shows trip stats - travel time is estimated to be 1 hour and 20 minutes and CO2 emissions saved is 141 pounds for the trip.

Over the years, there have been several failed attempts to revitalize Downtown Fresno. the high-speed rail system will definitely benefit this community. With this system, we can expect economic development and revitalization to occur. Florida would also agree with this idea. In his book, he compares past economic crises with regard to transportation infrastructure development and what we can expect to see occur in the future. Denser, more concentrated areas will develop along the routes. This will help revitalize struggling cities that are along those lines (p. 169).

When you consider the US highway system costing the equivalent of $429 billion in current dollars (p. 166), I believe that the high-speed rail system is essential to help spur the economic development that our community desperately needs. By improving the movement of people, goods, and services, you are increasing economic opportunities while at the same time, improving our environment. I vote yes for the high-speed rail system.

Sources:

California High-Speed Rail Authority. http://www.cahighspeedrail.ca.gov/

Florida, Richard. 2011. The Great Reset: How the Post-Crash Economy will Change the Way We Live and Work. New York, NY.

Siders, David. (October 2011). High-speed rail cost projected at $98.5 billion. http://www.fresnobee.com/2011/10/31/2598092/high-speed-rail-cost-is-rising.html

Taking Advantage

2011-12-06T14:55:00.000-08:00

The aspect of renting out versus buying a home is a dilemma that every aspiring homeowner must face sometime in their life. A potential home buyer will weigh his or her options of whether or not it is a wise investment to either purchase a home or continue renting. The fear that most, if not all, of us experience is if we will receive a return on our investment in purchasing a new home or if the home’s value will go belly-up and cause us to lose a fortune. The book “Why Smart People Make Big Money Mistakes” (Belsky&Gilovich) focuses on enlightening people on how we “psych” ourselves out of making investments that will eventually benefit ourselves in the long run.

The most recent market crash of 2007 and 2008 has left a glaring scar on the housing market with many homeowners (both now and at the time of the crash) seeing red over the fact that their home’s value dropped so significantly that their mortgage payments were being paid for more than what their home was actually worth. The housing market crash, coupled with harsh economic times (most notably the loss of jobs), has deterred many potential home buyers from following through with their dreams of buying a home. Unfortunately, this has also caused many of the large, national banks to stiffen up on their qualifications for people who are looking to receive a home loan.

The authors of the book “Why People Make Big Money Mistakes” (Belsky&Gilovich) discuss many different instances where we, as investors, have created a certain mindset that prevents us from making a sound financial decision. This is mostly due to the fact that we don’t always conduct our own research in regards to a specific type of investment and then resort to relying on the actions of the entire investing community in order to persuade ourselves to move in one direction or the other. The authors refer to this as “following the herd” (Belsky&Gilovich). The authors warn against falling into the “herd” since the “herd” is mostly made up of people moving their funds around based on the combination of emotion and lack of knowledge. This can be applied in to the scenario of deciding to continue to rent a home or to step out and purchase a home.

According to the blog the “Economix” from the New York Times’ website, now is an opportune time to make a home purchase if you are capable of doing so (most notably if you have a steady job and your credit is in check). The blog presents a graph that displays the average monthly mortgage payment versus the average rental payment.

As you can see from the graph, the average monthly mortgage payment is about the same as the average rental payment. Of course, this graph does not take into effect of upfront costs from either scenario (i.e. down payment, security deposit). Notice how the monthly rental payments have continued to increase steadily over time, while the average monthly mortgage payments have experienced significant volatility over the same time period. This graph is an indicator that the monthly payment of renting a home will continue to steadily increase as time progresses. Although this may be mostly true for the average mortgage payment as well, home prices (along with mortgage payments) will continue to fluctuate over time.

The purpose of this blog is to encourage those of us who are looking to invest in buying a new home to reevaluate their current living situation and ask themselves “do I really want to continue to pay rent every month?” We should all strive to become a property owner and increase our own personal equity instead of paying somebody else every month and losing out on such an opportunity. The first step in doing so is to refuse to be a part of the “herd” and go against our mindset of being “safe” and “conservative”. Succumbing to this mindset of playing it safe will prevent us from receiving the potential benefits of owning a home as well as taking advantage of the current market situation which has made available to us record-low monthly mortgage payments as low as four percent!! Breaking our current investing mindsets will allow us to achieve great returns on our investments and allow us to live without regret over the long run.

Written by: Kyle McDonald

Sources:

Belsky, G. &Gilovich, T. (1999).Why Smart People Make Big Money Mistakes-And How to Correct Them. New York: Simon & Schuster.

Rampell, C. (2011, October 13). Rent vs. Buy.The New York Times.Retrieved December 5, 2011.http://economix.blogs.nytimes.com/2011/10/13/rent-vs-buy/

Fresno's Real Estate and Unemployment Dilemma

2011-12-06T12:30:00.000-08:00

The City of Fresno is much like many of the other communities in the Central San Joaquin Valley in that they face tough economic times, tightening budget constraints and high unemployment. In Fresno County alone the unemployment rate in 2011 is estimated at 15.8% according to the San Joaquin Valley Regional Planning Agencies Policy Council. With such a high unemployment rate and tight budgets, one of areas of the local economy that suffers is the real estate industry. How can the lessons of Rich Dad, Poor Dad help in such a difficult time? Well it will take investment in the community and it will take individuals with the capacity to provide the necessary capital to step up to the plate.

It is without a doubt that the unemployment rate for Fresno County has contributed to the number of foreclosed homes. The inventory of foreclosures in the City of Fresno as recently as October 2011 was between 1,500 and 1,600 homes. Those who lose their homes need a place to stay. It is typical for those who have lost their home because of foreclosure to go to the rental market. That is where Robert Kiyosaki and others come into play. Kiyosaki, the author of the book and self made millionaire, described techniques on how to take control of one’s financial life. One of Kiyosaki’s biggest wealth builders is real estate. He has used his business savvy to buy and sell real estate and it has subsequently allowed him to retire early. Kiyosaki and others with available capital and their business acumen can go into these distressed communities and find some great deals on foreclosed homes. They can then fix up these homes as necessary and rent them out to those in need of housing. The homes are better for the community and neighborhood with people occupying them. Those that are without occupants tend to get run down and lead to a decreased sense of pride in the neighborhood.

Driving around town, I have noticed that there are many small retail developments that seem to be empty and they tend to be around the neighborhoods that are distressed. Getting people back into homes also provides a boost to the local economy due to the fact that people need to maintain their homes and the goods and services that surround the distressed neighborhoods come back to life. When people need goods and services, there is demand that has to be met. With that demand, retailers tend to enter these markets. By entering these markets, personnel are needed to staff these new developments. This leads to people working and providing benefits to the local economy. This has had a ripple effect that has spread to different sectors of the economy.

Relating another theme of Rich Dad, Poor Dad to the real estate market is the idea that the poor tend to purchase items that take money out of their pocket while the rich purchase assets that provide a continuous positive cash flow into their pockets. Not only does this idea apply to humans, but it also applies to local governments. These entities have to reassess how they do business and realize that they need to look at areas where they are losing money and determine how to better manage them. Although governments are not in the business of turning a profit, they are also not supposed to be in the business of wasting taxpayer money. The local governments should provide incentives for residential and commercial development. I am not advocating reducing their standards, because once that is done; it is hard to come back from that. I do think that maximizing the opportunities for job creation and residential and commercial real estate is key to getting people back working and reducing unemployment rates.

Getting out of the economic crisis will not be easy. We have been in the downturn for a few years now and it is hard to see the light at the end of the tunnel. Recent national unemployment figures that indicated the rate below 9% for the first time in a long time is a step in the right direction, but as the chart above indicates, the San Joaquin Valley is lagging behind badly. Reinvestment in the local communities is vital to kick starting the recovery process. Kiyosaki and others like him need to have opportunities that allow them to reinvest in their community. These successful individuals have a proven track record of revitalizing communities and making them better. Local governments also need to reassess their business practices and identify areas where taxpayer money is being wasted and look for areas to reinvest in the community as well. In the City of Fresno, the Granite Park Development for the most part has been a disaster. But, there have been some bright spots including the very successful Me ‘N Eds Victory Grill pizzeria as well as a local night club and a brand new rock climbing facility. These private industry organizations are working to revitalize this area and turn it around to make it a success. The local government needs to be a champion for this effort. Doing so will get all of us back on the right path.

References:

Kiyosaki, Robert. Rich Dad, Poor Dad. New York, NY. Warner Books, 1997

San Joaquin Regional Agencies Policy Council, Valley Voice Sacramento 2011

http://www.foreclosureradar.com/, December 2011

Central Valley Prospects

2011-12-05T19:56:00.000-08:00

College living is truly an experience all unto itself. The dormitories of on-campus living provide a solid beginning for freshmen just starting out while off-campus apartments provide a broad array of possibilities for those who don’t want the on-campus style. Each comes with distinct advantages and disadvantages with prices that, until recently, reflect the cost of moderate accommodations. With several large universities in California, the Central Valley provides an interesting consideration for those looking for a school with a quality reputation and reasonable living arrangements.

Coldwell Banker, a prominent national real estate brand recently released its “College Home Listing Report” that arranges data for 117 of the 120 schools in the Football Bowl Subdivision (MarketWatch). The data is a compilation of the market listings for the past year for 3 bedroom, 2 bathroom homes, is arranged by city, and can be used to see valuable trends in key cities across the nation. A look at either end of the list (highest average listing price, or lowest average listing price) we can see the cities with either a high cost of living (generally a function of the median cost of a listed home) or those where it may be more affordable to attend a major university.

Of particular importance for this conversation is that five of the top 10 most expensive markets are within California:

UCLA $1,271,428

Stanford $1,232,070

USC $733,473

UC Berkeley $695,520

San Jose State $541,231

Fresno ranks number 34 in order of most affordable at $157,311.

A little further north in the central valley, a similar situation of affordability has occurred somewhat by accident as speculative investors have found themselves upside down. Merced, which in 2005 received the first new UC school in 40 years, promised to give outside investors a quick return, many purchasing land with a hope that prices would rise given the projected market demand related to the new university (Kinchen). Unfortunately, that isn’t the way things played out which has worked out pretty well for those students! With the downturn of the real estate market in recent years many of those investors and planned communities went underwater. Students have seen the opportunities and are flocking to purchase and share these seeming mansions for only $200-350 each for a private bedroom, shared pool, Jacuzzis, etc. (Brown). The accommodations are a true bargain for ~$7,000 per year compared to $13,720 a year for a dorm room (Brown).

The apartment market in Fresno has also benefited from the market downturn with an increased number of families and students turning to renting over ownership. Robin Kane, an expert on multi-family housing said “…more families are renting apartments rather than buying houses like they would have in years past,” (Kincheloe). The apartment and rental market took large hits with the recession and just in the past year has regained some significant ground against those losses. Again from Mr. Kane, “At the end of this year, we should be at about 35 percent over where we were last year,” (Kincheloe). One secret benefit to these gains is that it serves to coerce investors to bring money to the central valley in the form of apartment complex purchases and construction while providing affordable and attainable housing to those that need it, particularly of the college and university age.

Despite a bad rap for being expensive, California still has many affordable opportunities in the central valley. Students and young families alike, all of whom are generally unable to afford a place of their own as they start out, can find great prospects in the central valley despite the reputation and expense of California’s more urban cities. A low median housing cost, underwater and foreclosure opportunities, and rental properties all provide a wide range of possibilities for those seeking the warm California sun on a budget – whether they are buying or renting for themselves, or simply intend to invest. Investors and potential buyers alike truly should not overlook the central valley on the same assumptions made to Los Angeles and the bay area as we have many possibilities to contribute to California real estate.

Kincheloe, Michael. “Expert: Apartment sales to rise 35% this year.” The Business Journal. 2 December 2011. http://www.thebusinessjournal.com/real-estate/12341-expert-apartment-sales-to-rise-35-this-year

“Coldwell Banker Real Estate Report Finds Incredible Value in College Town Living.” MarketWatch. 2 December 2011. http://www.marketwatch.com/story/coldwell-banker-real-estate-report-finds-incredible-value-in-college-town-living-2011-11-15

Kinchen, David. “PARALLEL UNIVERSE: College Students in Merced, CA Rent Underwater McMansions, Saving Money, Annoying Neighbors.” HuntingtonNews.net. 2 December 2011. http://www.huntingtonnews.net/13351

Brown, Patricia Leigh. “Animal McMansion: Students Trade Dorm for Suburban Luxury.” The New York Times. 2 December 2011. http://www.nytimes.com/2011/11/13/us/homework-and-jacuzzis-as-dorms-move-to-mcmansions-in-california.html?_r=1&nl=todaysheadlines&emc=tha23

Applying Demographics and Migration trends to Local Markets

2011-12-05T19:26:00.000-08:00

Have you ever wanted to know what kind of neighborhood you were moving to? Or maybe you’re planning on developing an existing property and want to find the best use for the area? Many people would simply drive through the area to get a visual, but what about those times when that just isn’t possible? Well that’s where demographics can help. When used with today’s latest Geographic Information Systems (GIS) this information can be used to display, current, historical, or even forecast trends in population data for the area under consideration.

In looking for this information two primary sources for this data emerged; data gathered from the 2010 US Census, and surprisingly tax return statistics published by the IRS. Using this publicly available information several widely known publications have managed to put together a few interactive maps utilizing GIS software. With just a few quick searches the general public now has access to easily understandable demographic information and trends. Here I will detail some of the resources provided by the New York Times, and Forbes magazine.

The New York Times, one of the nation’s leading newspaper publishers has taken upon itself to undertake several initiatives to analyze the volumes of data provided through the US Census Bureau. With the “Mapping America: Every City, Every Block” project we see how annual data provided can be used to display such factors as ethnicity, distribution of household income, home and rental values, and education within a target area. With the Mapping the 2010 Census project we can see not only the current demographics, but long term changes on many of the same factors as mentioned above. I would encourage everyone to take a look at these resources, and start thinking of how you can apply this information to real estate and other decisions. Income distributions by neighborhood could assist with site analysis when planning a new location or branch office. Age and ethnicity factors could even be reviewed to determine if a given site fits corporate marketing objectives. (Bloch, Carter, & Mc Lean, Mapping America: Every City: Every Block, 2011); (Bloch, Carter, & Mc Lean, Mapping the 2010 US Census, 2011)

Forbes.com also proved to be another credible source for convenient access to demographic data analysis. By utilizing the American Migration Interactive Map made available through Forbes.com we have access to a geographical representation of a wide variety of statics collected through the Internal Revenue Service. What’s surprising here is the level of detail collected and published by the IRS. If we take a look at Fresno County, we can see a representation of the exact inflow and outflow of individuals from one county to another. By simply moving your cursor icon to any one of the destination counties, additional data becomes available displaying movement counts and per capita incomes. What we notice in our example here is that overall migration trends for Fresno County remain relatively stable from 2005 to 2009, with inbound migration approximately matching outbound migration. What this tells us is that demand is likely to remain stable if this trend continues. However this is not the case for other counties across the nation. Select a major county jurisdiction in Colorado, El Paso County (Colorado Springs) for example, and you will see migrations trends where inbound migration is nearly double that of outbound migration. (Bruner, 2011)

So how do we apply this information? Keep in mind that the interactive maps shown here are free but relatively limited resources. Professionals can and should seek out the paid services of data collection agencies depending on your needs. In your search for the ideal site, first we can look to demographics for migration trends to determine those areas with the potential for long term inbound migration. From there using these tools could be compared to a continuous process of overlaying one set of criteria upon another. Population density maps, can overlay income distribution maps, further compared to maps detailing changes in per capita income over time. Only by reviewing and comparing those criteria determined to be important to the viewer can one really understand how it all fits together.

References

Bloch, M., Carter, S., & Mc Lean, A. (2011). Mapping America: Every City: Every Block. Retrieved December 1, 2011, from New York Times: http://projects.nytimes.com/census/2010/explorer

Bloch, M., Carter, S., & Mc Lean, A. (2011). Mapping the 2010 US Census. Retrieved December 1, 2011, from New York Times: http://projects.nytimes.com/census/2010/map

Bruner, J. (2011, November 16). Forbes: American Migration [Interactive Map]. Retrieved December 2, 2011, from www.forbes.com: http://www.forbes.com/special-report/2011/migration.html

Land use planning in Fresno

2011-12-05T07:00:00.000-08:00

San Joaquin Valley has seen shifting land use, decline in skilled labor force and startling rate of 15.7 % for joblessness. Furthermore, Fresno County has topped the state with poverty rate of 26.8%. Fresno has witnessed increase in air pollution, deterioration in quality of drinking water with a rank in 16th percentile of national average due to use of pesticides in farms, resulting in adverse impacts on residents health.

Fresno County is one of eight counties in the San Joaquin Valley Unified Air Pollution Control District (Valley Air District), which currently does not meet many of the air quality standards required by the Federal Clean Air Act or the California Clean Air Act. The Valley Air district has failed to meet the air standards for ozone and other pollutants set forth by the state of California. Since automobile and truck traffic alone are responsible for a third of these emissions, Fresno should rethink its future land use decisions and infrastructure improvements. Fresno must focus on employing high-capacity means of transportation which will result in improved occupancy, shortened travel times, and lesser costs.

Political governance includes firms and government agencies, and hierarchical governance structures, like zoning are included under institutional arrangements which are closely interconnected in practice. These structures execute control in land use decisions which affect the transaction costs considerably. These costs to the developer are a vital source of revenue for the government, also mentioned by Peter Herzog. Local government of Fresno has to take effective measures to keep these costs low to attract developers while formulating growth strategies. Planning and Development department of city of Fresno listed “Provide activity centers and intensity corridors within plan areas to create a mix of land uses and amenities to foster community identity and reduce travel” and “Coordinate land uses and circulation systems to promote a viable and integrated multi-modal transportation network” under “Applicable 2025 Fresno General Plan Goals”. However, these goals need commitment to get fulfilled and have to align with contingent sustainability requirements laid out by SB375.

The biggest challenge that Fresno faces in next few years is the population growth. Graph below shows the increment in number of households required to support the job growth. Although we may argue that there is a surplus of commercial and residential real estate in Fresno, the future market demands more units.

Careful land use planning with emphasis on transaction costs reduction will not only provide the necessary infrastructure requirements but also attract potential development schemes which might help in revitalizing the downtown and other areas of Fresno. Crafty planning and investment in transportation infrastructure will help revitalize Fresno economically and attract more opportunities for development of local people and regions. Confluence of governance and developers’ motives towards development can stand miraculous for Fresno.

A move towards service based economy is the trend nationwide to achieve competitive advantage but Fresno is rich in fertile agricultural land and cannot overlook its economic base. Local government can divert resources to encourage research in Agriculture so that we can capitalize on it. Careful Zoning can protect this rich fertile land while addressing the need for urban growth.

Take a look at the “Interactive Map – includes zoning, land use designation information and aerial photos” and “2025 Fresno General Plan – Land Use and Circulation Map”.

Sources:-
Buitelaar, Edwin. The Cost of Land Use Decisions. Malden, MA: Blackwell Pub., 2007. Print.

"County of Fresno - Public Works and Planning - Planning and Land Use." County of Fresno. Web. 03 Dec. 2011. .

"Fresno County Tops State's Poverty Chart - Local- Fresnobee.com." Covering Fresno and the San Joaquin Valley in Central California - Fresno Bee. Fresno Bee, 29 Nov. 2011. Web. 01 Dec. 2011. .

www.climateplan.org. Oct. 2011. Web. 01 Dec. 2011. .

www.dot.ca.gov. CalTrans, 24 June 2005. Web. 01 Dec. 2011. .

www.fresno.gov. 28 May 2009. Web. 1 Dec. 2011. .

www.kimley-horn.com. Web. 1 Dec. 2011. .

Jimmy Stewart is Alive

2011-12-04T23:13:00.000-08:00

Limited Purpose Banking (LPB) is a theory proposed by Laurence J Kotlikoff in Jimmy Steward is Dead. Much of the theory is in response to the financial crisis of 2008, which Kotlikoff attributes to a few greedy individuals and corporations who acted selfishly by overleveraging in sub-prime, toxic assets eventually causing the near collapse of the United States Economy. Under LPB nearly all institutions of the financial system are converted into pass through mutual funds. Thus the degree of risk is placed in the hands of the investor alone, and not the institution in which the investor buys stock. A new government body, the Federal Financial Authority (FFA), is created in LPB to consolidate all existing government bodies such as the SEC, FDIC, etc. because institutions are only pass through mutual funds under LPB and only individuals take on risk through investment. Existing government bodies are no longer necessary because government regulation in LPB is not necessary except to “verify, supervise custody, fully disclose and oversee the rating and trades of all securities purchased, held and sold by the LPB mutual funds (Kotlikoff, 126-127).”

The City of Fresno has recently decided to focus its efforts on the Southeast Growth Area (SEGA). The vision for the SEGA is a new urbanism, planned community of more than 9,000 acres complete with green space, multi-family housing of varying densities, single family housing, agriculture and industry. The city believes by 2050 the area will be fully developed, with a portion of the development currently underway.

Map of SEGA (Administrative Draft SEGA Document, 95)

The success of the SEGA depends on many variables, but access to capital is without a doubt one of the most essential aspects to the plan. Without credit, potential developers will not be able to secure funds to improve rural land, potential homeowners will not be able to secure a mortgage to buy a home, and small business will not be able to secure a the goods to start a local shop. Limited Purpose Banking does not radically change the current loan process. Under LPB a home mortgage is obtained at a bank, but the bank is simply a mediator and retains a fee for services. An application is completed and submitted to the FFA, which verifies all information (such as earnings) and fully discloses all information (except anything compromising the identity of the individual) on a public forum for review. Additionally an independent rating company would rate the information for investors as disclosed on the website. The mortgage is then returned to the bank, and placed for public auction for purchase by investors in home mortgages. The note for the mortgage would change hands after funds have been wired.

According to the City of Fresno, 45,000 households are planned for the SEGA, in addition to the preservation of rural farms, development of industrial zones and other commercial development (Administrative Draft SEGA Document, 94). Additionally, the city estimates a growing need of affordable housing. The SEGA includes a 10x10 plan, calling for 10,000 affordable housing units by 2010. This goal has not been met, as the SEGA has slowed due to the bearish economy. The SEGA promotes affordable housing, mandating that no more than 20% of housing be at 120% of median income for the area (Administrative Draft SEGA Document, 99). Furthermore affordable housing in the SEGA will receive preferential treatment such as economic incentives and fast track approval (Administrative Draft SEGA Document, 99).

Limited Purpose Banking would severely hinder the speed, success and strategic planning of the SEGA. The FFA is the greatest obstacle in the loan process. While existing government agencies are eliminated, the FFA is now the one and only, overarching government body that every home loan must pass through in order to obtain a home mortgage. Bureaucracy and government agencies are amongst the most inefficient bodies in our society today. Government has yet to prove half as efficient as any private sector body. The discovery and disclosure process proposed by Kotlikoff as performed by the FFA will take months. As more and more applications are submitted, backlog will build creating a waiting period for simple aspects such as income verification. Ultimately government red tape will undermine the process making obtaining a home mortgage a six to twelve month process. Within the confines of LPB the time line of 2050 will never be realized for the SEGA.

Ultimately people will have to turn to individuals for home mortgages. Wealthy individuals or groups of individuals will form with money to loan. The private sector will revolutionize the process and have an internal process of discovery and disclosure within the group of investors. Initially home mortgages will be made on character, as people will turn to personal networks to obtain capital to purchase a home through personal relationships. As the network grows and FFA inefficiency increases, the network will grow and the SEGA will arrive back at a very familiar place, George Bailey and the Bailey Savings and Loan. Ironically, the very system Kotlikoff proposes will drive the re-emergence of Savings and Loans out of necessity for expediency. Bedford Falls is not much different than what is proposed in the SEGA a community of people, homes and business’. New Savings and Loans will form to service the SEGA amongst other areas in Fresno. Eventually the S&L will grow large enough that the need of government regulation will be necessary and society will be back in the same place it was pre financial crisis.

A second issue arises with LPB and the SEGA, affordable housing. With only 20% of SEGA housing to be priced above 120% of median income, a great majority of the new urbanism development will be aimed at lower incomes. While this is a great social project, private investment and development will drive the SEGA, thus requiring government subsidy. As we have learned this is accomplished through tax credits, purchased by large corporations in partnership with developers. The goal however is for home ownership, not home rental. In order to promote the low income housing the FFA will be forced to put priority on the low-income mortgage applications. This will have two effects. First, it will further delay other applications in process for areas outside of the SEGA, and within the SEGA above median income. Second, investors will require a greater rate of return for the increased risk due to the lack of assets. Savings and Loans will not want to take the added risk of low income housing, which required government subsidies unless the government provides those subsidies to the S&L, much like the what the developers received.

In the end, LPB will produce great inefficiency in the home mortgage process. The SEGA will suffer as a result and the S&L will re-emerge as the primary method of securing capital, as the private sector will outperform the government yet again. Ultimately, the government will intervene in the S&L mortgage process to promote low income and affordable housing, exposing the taxpayer to potential bailouts through government guarantees, as it was pre 2008 before the financial collapse.

Works Cited

Kotlikoff, Laurence. Jimmy Stewart is Dead; Ending the

World's ongoing financial plague with limited purpose banking. Hoboken, NJ: Wiley, 2010. Print.

Lerner, Jonathan. "Rescuing the Rural Edge — It Takes a Village." Miller-McCune. 26

Sept 2011: n. page. Web. 5 Dec. 2011. .

The City of Fresno. Planning and Development. Administrative Draft SEGA Document.

Fresno: , 2008. Web. .

The Fresno Bee: Fresno community is making a gradual comeback

2011-12-04T14:52:00.000-08:00

For BoNhia Lee's recent story on a Fresno neighborhood, please visit http://www.fresnobee.com/2011/11/26/2628830/fresno-community-is-making-a-gradual.html.

Fresno’s Downtown Revitalization and Sustainable Urbanism

2011-12-04T14:13:00.000-08:00

Fresno is in the midst of planning its future. The City is working on updating its General Plan and proceeding with the Fulton Corridor Specific Plan and the Downtown Neighborhoods Community Plan. The main goal is to revitalize Downtown Fresno, which has suffered years of disinvestment and neglect. There is a clear economic argument (reduced infrastructure and service costs, higher property values, more jobs) to revive the city center as well as a sustainability approach. For Fresno a healthy, vibrant downtown will help make the city more sustainable, while applied sustainable urbanism principles can lead to a more prosperous downtown.

Fresno residents seem to understand the “why”, when it comes to the “how”, however, the scenario is much different. For years the City and community members have been searching for the answer. Redevelopment Agency (RDA) projects like the Grizzlies Stadium and the Fresno Metropolitan Museum were not sufficient. Attempts to attract an “anchor” store have been unsuccessful. Former Mayor Alan Autry went so far as to propose a river attraction for downtown which was unable to secure City Council support or financial backing. Compared to previous attempts, the current efforts of creating and changing planning documents don’t sound so appealing. However, these documents are the vehicles and sustainable urbanism principles are the drivers on the road to revitalization.

Density

Density, appropriate for Fresno, is needed in order to achieve sustainable and revitalization goals. Feasible public transportation, like FAX, needs density. There has to be enough people within walking distance in order to have enough ridership for it to make sense economically. Downtown needs to be connected via corridors for people to get there. Downtown businesses also require density to have enough people within a reasonable distance to frequent and sustain them. While business doesn’t always follow rooftops, there is some truth to the saying. Density is achieved, partly, through deliberate planning for it.

Corridors

An important part of sustainable urbanism is its focus on corridors. Kings Canyon and Blackstone are Fresno examples that will be key in revitalizing downtown as they are entryways to the city’s core. Planning work underway is addressing the difficulty of entering downtown and navigating in the area. Efficient multi-modal transportation linking the downtown activity center with other activity centers is another crucial aspect. Currently the corridors are very automobile-centric, making it even dangerous for pedestrian and bicycle transit. Alternative forms of transportation make a city more sustainable and more convenient for people to access the goods and services.

Neighborhoods

Preserving, enhancing and creating distinct neighborhoods that are attractive become places people want to go to live, locate a business and shop. Preserving historical character, adding street trees and decorative street lighting for example, accomplish both beautification and sustainability goals. These elements are being emphasized in the current draft version of the Downtown Neighborhoods Community Plan. If the neighborhoods around downtown Fresno are desirable places, there will be enough interest in being there, that would in turn promote density to help sustain the downtown businesses.

The City of Fresno’s efforts to change plans in order to spur revitalization, while at the same time promoting sustainability, are promising. While skeptics still abound, transformation of downtown Fresno cannot occur without the proper foundation. Tower District Specific Plan is a successful example of planning having a revitalization effect in Fresno.

*Pictures taken from the Draft Downtown Neighborhoods Community Plan

The final meeting of the Downtown Neighborhoods Advisory Committee is :

Tuesday, December 13 at 2:00 pm

Fresno City Hall, City Council Chambers

2600 Fresno Street, Fresno, CA

For a list of General Plan Meeting dates click here.

Fresno Association of Realtors Investors/Exchange Meeting

2011-12-04T13:16:00.001-08:00

The Investors/Exchange Meeting included many different professionals involved in the Real Estate field. From Brokers and Agents to Mortgage Bankers and Homeowner insurance professionals. This allowed the group to have very diverse opinions because of their different experiences. Many different topics were discussed during the meeting. I will discuss just a few that stood out to me.

The first issue brought up by Mr. Hyatt was the concern for buyers not knowing exactly what they are signing. He gave an example from a recent experience that he encountered. He said the problem was that neither the lender nor the agent showed up for signing. The notary, who is simply there to guarantee the signature, is not required or permitted to explain important elements of the loan documents. In this particular situation, the buyers' lender or agent did not educate them well enough prior to signing. Mr. Hyatt saw what was happening and agreed to sit down and explain the specifics to the buyer. I am positive that buyer was extremely thankful Mr. Hyatt offered to help them.

The next topic that caught my attention was the foreclosure crisis. They mentioned an article in the Fresno Bee "Fresno minority homeowners have high rate of foreclosure." In this article they pointed out that Asian and Hispanic homeowners are almost twice as likely to lose their homes due to foreclosure as "white homeowners". Minorities received much riskier loans from 2004-2008. Read the full article at http://fresnobeehive.com/news/2011/12/fresno_minority_homeowners_hav.html.

After the meeting ended, I had the opportunity to sit and talk with two very experienced and knowledgeable men. Although Mr. Hyatt and Mr. Miller disagreed with each other on basically everything discussed; they both had great advice. Their diverse opinions come from many years of experience in different areas of investing. I asked Mr. Hyatt what advice he would give to graduating college students who want to start their career in real estate investing. He said "If you remember anything from today, remember your first home should be the start of your portfolio".

Concluding the meeting, the group agreed home sales in Fresno are up 10%. However, larger home prices have dropped more than median homes due to the narrow market for the larger more expensive homes. I would like to thank Mr. Tom Hyatt and everyone involved for allowing us to join the meetings this fall and taking the time to give such great advice.

Robin Kane on the Fresno Apartment Market

2011-12-02T15:21:00.000-08:00

Robin Kane was quoted in The Business Journal regarding the Fresno apartment market. For the story, please see http://www.thebusinessjournal.com/real-estate/12341-expert-apartment-sales-to-rise-35-this-year.

Thank You Peter Herzog of AHDC Inc.

2011-12-02T09:09:00.000-08:00

Thank you to Fresno developer Peter Herzog for visiting MBA 289T Real Estate Analysis last Wednesday evening to talk about multi-family residential development. Speaking to a seasoned developer was a great way to conclude the semester. Thanks again Peter and please come visit the real estate classes again!

Applying Bottomless Well Concepts

2011-12-01T22:10:00.000-08:00

The El Paseo Project in Northwest Fresno was the subject of my first blog post and my vested interest in this planned retail center bordering my neighborhood spurs me to discuss it once again. Traffic has been one of the most contentious topics relating to this project, as reported by local news media (KFSN, 2010). This review will consider the traffic concerns of the El Paseo Project and discuss how a concept gleaned from the book The Bottomless Well applies to this development.

Traffic flow is a key element all retail center developers consider because the potential for congestion can easily discourage consumers and cause them to choose a different shopping location. Deciding the location and number of entrances/exits contributes to the order of movement and impacts the shoppers overall experience. The Bottomless Well discusses the concept of “order” and how “by moving things around into new logical structures” order is created (Huber & Mills, 2005, p. 142). The key to melding these two subjects is to understand the source of potential problems so a preemptive solution can be implemented.

El Paseo faces a difficult challenge regarding traffic flow due to its proximity to the major artery Herndon Ave. Herndon is a primary east-west passageway in northern Fresno and the section between Bryan Ave and Freeway 99, where El Paseo will be built, already provides access for thousands of commuters each day. Recent improvements such as widening Herndon from 2 to 4 lanes and synchronizing the signal lights have eased traffic congestion but vehicles still pack the roadway several times a day. The railroad crossing as well as elementary and middle schools add further constraint to this bottle neck on a regular basis.

The current plan proposed for phase 1 indicates one entrance/exit will be located on Herndon Ave and three will be located on Bryan Ave. Completing a new section of Veterans Blvd is also planned and will provide a new access route. The problem still remains that a significant volume of vehicles will use Herndon and Bryan avenues daily to access the freeway, schools and neighborhood. These vehicles will pass the new center’s entrance/exit points increasing the probability that traffic jams will occur as commuters and shoppers make their respective turns.

So, how can “order be created by moving things around” (Huber & Mills, 2005, p. 142)? I believe a logical approach is to add a variable that will siphon traffic away from Herndon/Bryan and change a major contributing factor.

Completing Veterans Blvd from Herndon to 99 and including a new freeway access point as well as an overpass for the railroad will create a second route for commuters. This concept is already included in the El Paseo Master Plan (Center, The Planning, p. 181). Completing the Veterans extension in Phase 1 will allow commuters that only need freeway access to by-pass potential traffic congestion related to schools, shopping (especially during Holidays), or trains. Improving the overall flow of traffic in the area will further entice shoppers wanting to avoid the traffic jams that will continue to occur on Shaw or Blackstone avenues around competing retail centers.

Bibliography
-Center, The Planning. (n.d.). Major Development Proposals Under Review. Retrieved 12 1, 2011, from City of Fresno: http://www.fresno.gov/NR/rdonlyres/D4E01F37-5630-4A6D-A44F-7414C6931953/0/FINAL_EIRElPaseoNovember.pdf

-Huber, P. W., & Mills, M. P. (2005). The Bottomless Well. New York, NY: Basic Books.

-KFSN. (2010, November 22). News Story Section. Retrieved September 10, 2011, from ABC Local: http://abclocal.go.com/kfsn/story?section=news/business&id=7800287

Zoning for pot

2011-12-01T21:55:00.000-08:00

When prohibition of alcohol ended in 1933, it was no longer a federal crime to produce or sell alcohol in the United States. From this time on, it was now a state and local issue to permit alcoholic beverages to be produced, sold and or consumed. As noted in Brewing Up a Business by Sam Calagione, the state of Delaware did not pass a law permitting breweries until Sam pushed the law through himself so he could open up his brew pub, Dogfish Head. To this day, there are still many localities that are either dry or partially dry within the United States. This methodology of the federal government allowing the states to regulate such activity has worked well. When Sam personally went to the state government offices to change the law, he was able to change the laws at the local level producing hundreds of jobs, new revenue for the state and some very good beer. The founding fathers of this country would be proud to see how their vision of states’ rights worked so well.

What if the federal government continued to have prohibition laws still on the books? What if the states started passing laws that allowed the manufacture, sale and consumption of alcohol in conflict with the federal government laws? This situation is developing now with the issue of medical marijuana. Marijuana was listed in Schedule I of the Controlled Substance Act by the US Congress in 1972. Administrations from both political parties have enforced this ban of marijuana at the federal level. Contradicting this ban, 16 states and the District of Columbia have passed legalization laws for the medical use of marijuana. Unlike with the alcohol prohibitions, here the federal government bans the substance. However, some states legalized the substance and the local municipalities take sides using whichever law fits their purpose. The result is a very convoluted legal issue and a sure disappointment to the founding fathers.

Just as in the prohibition of alcohol, the local communities are taking a side also. The Fresno County Board of Supervisors has passed local ordinances limiting the growing and sale of marijuana. The dispensaries were all forced to close within seven months of the August passage of this bill Also, as a result of this bill, marijuana was only permitted to be grown in designated industrial areas, away from neighborhoods and schools. The supervisors are looking to improve the admittedly poorly written law in the near future. The current condition sounds very similar to a partially dry county, like Moore county Tennessee where Jack Daniels whiskey is produced, but not allowed to be sold in the county.

Fresno County Sheriff Mims expressed relief for the support in shutting down the dispensaries. The federal laws prohibiting any marijuana use gives the sheriff’s office the legal support needed considering the California law allowing the medical usage. Days prior to the US Attorney’s office making a statement that the California law allowed medical marijuana was being abused, the Obama administration made statements that it would not involve itself in this California issue. Arguments supporting this crackdown are that medical marijuana cards are too easy to acquire. A Google search for “Medical Marijuana Fresno” produces links to what claim to be easy access to a 420 medical card, the document required to legally acquire marijuana in California. One link has subtext stating that if you don’t get your card, you don’t pay anything for the service. The federal government has been prosecuting individuals for violating the federal law. The people involved with this issue are getting mixed signals from every level of government, sometimes from a single level of government.

If the medical marijuana issue were handled exactly like alcohol, then the federal government would leave the legalization and regulation of the substance to the states. The states that did make it legal would then have counties that would be like the dry counties of the south that would put their own restrictions on the production, sale and consumption of the substance. In the case of Fresno, the new ordinance clearly states the growing of the substance to be limited to certain industrial areas with restrictions on locality in relation to schools. These restrictions may add some overhead to the business of marijuana when compared to growing the stuff in homes, but at $50,000 per day profit that was recorded by some of the establishments; I would think they could agree to this. Currently the feds are maintaining their ban on marijuana and the issue is confusing to everyone involved; including us on the sidelines watching.

I would like to note; I am not on either side of this issue. I don’t know enough about the benefits or harm of the controversial substance. From a legal and constitutional perspective, it is very interesting to look at this issue from the perspective of zoning and land use for something that is both legal and illegal.

References:

ProCon.org. (2011, November 30). Medical Marijuana ProCon.org. MedicalMarijuana.ProCon.org. Retrieved from http://medicalmarijuana.procon.org/

Alexander, K. 2011. Talk of loosening weed rules: Fresno Co. to take a new look at its pot law. The Fresno Bee, 2011-11-15

Alexander, K. 2011. Pot crackdown lights haze of confusion: Legal questions over medicinal use still waft in air. The Fresno Bee, 2011-10-15

Coates, A. 2011. Fresno county bans medical marijuana dispensaries. News broadcast cbs47. http://www.cbs47.tv/mediacenter/local.aspx?videoid=2739716

Decentralization of America

2011-12-01T12:09:00.000-08:00

With the United States population growing from high fertility rates and immigration, congestion and soaring prices in big cities is continuing to drive more people into the suburbs. According to Joel Kotkin, the author of The Next Hundred Million: America in 2050, the country will continue to change as desires for different lifestyles evolve. The lower cost of living and the low-key, small-town way of life is becoming more attractive to Americans, especially after the downturn in the housing market and the economy. Generally rural residents spend less of their income on housing, even though they tend to have lower earnings than those in metropolitan areas. This trend of moving to the suburbs is increasing and studies show that one out of three adults would prefer to live in a rural area. The perception of small towns in America is also attractive as they are seen as safer for children, and have strong traditional family values and friendlier communities (Kotkin, 2010). Even in tough economic times, small towns in Fresno County like Selma and Fowler, continue to experience growth as more people move away from bigger cities and towards quiet farm towns like these.

Kotkin’s theory of more Americans wanting to move to rural areas is supported when looking at the growth of towns like Selma and Fowler. Selma is known as the “Raisin Capital of the World,” and depends heavily on the agriculture industry. There are about 24,000 residents, with the median resident age of 28.4 years and over 54 percent are married (“City of Selma,” 2011). Since 2000, there has been a population increase of 17.5 percent in Selma. Most of the residents in this town, about 81 percent, are a part of family households and the estimated median house/condo value is $196,544. The graph on the left shows the number of homes that have been sold in Selma from 2006-2011 ("Selma," 2011). It illustrates a constant trend of home purchases in this town and shows that there is movement towards this area.

Fowler, California is an even smaller town than Selma with under 6,000 residents, but it is also experiencing growth. The graph on the left shows the number of homes that have been sold in Fowler from 2006-2011. It demonstrates a stable growth of homes being bought in this town and supports the data of a population increase of 40.4% since 2000 (“Fowler,” 2011). Fowler also has a high amount of married residents with families and is seen as a safe community for their children. Selma and Fowler have both experienced an increase in population over the past decade as more people yearn to live in smaller areas where there is a greater sense of community and lower costs of living. The younger generations are placing a stronger emphasis on home ownership, and relocating to rural areas makes this desire more affordable and more achievable (Kotkin, 2010). These towns are examples of the changes that are occurring within the United States and the shift of people from bigger cities into smaller towns.

This movement of Americans, more specifically young families, moving into towns like Selma and Fowler, will affect the country as a whole. As more people live on the outskirts of larger cities, there is a growing concern for the increase in air pollution and and traffic that will be caused by more commuters as they have to travel greater distances to get to their jobs. Kotkin however, does not think that this will create a problem. He states that a decentralization of America will reduce the commuter-dependent areas as it will encourage the progression of technology and the use of tools like emailing and teleconferencing. Furthermore, there will be a greater amount of telecommuters and more people working from their homes. If there is a 10 percent increase in telecommuting over the next decade, then it will reduce 45 million tons of greenhouse gases and also cut office construction and energy use (Kotkin, 2010).

If these trends of decentralization and counter-urbanization persist, then by 2050 the United States will no longer have big urban areas or small farm towns. With an additional hundred million Americans, citizens will have no choice but to continue to spread out across the country and create even more of an urban sprawl (Kotkin, 2010). Even in Fresno County there is an apparent shift of people returning to small towns like Selma and Fowler and newcomers moving into these rural locations. Americans have consistently had the yearning to be a part of a small town way of life, and with the rising prices in urban areas, they are being pushed to relocate (Kotkin, 2010). The results of this decentralization movement have the potential to be extremely positive for the United States if elements like technology are utilized effectively

References

“City of Selma.” (2011). City of Selma. Retrieved from http://www.cityofselma.com/index.htm

“Fowler, California.” (2011). City-Data. Onboard Informatics. Retrieved from http://www.city- data.com/city/Fowler-California.html

Kotkin, J. (2010). The Next Hundred Million: America in 2050. NewYork: The Penguin Press.

“Selma, California.” (2011). City-Data. Onboard Informatics. Retrieved from http://www.city-data.com/city/Selma-California.html

New Normal, New Opportunity in the Fresno Real Estate Market

2011-12-01T09:11:00.000-08:00

Things are changed in the real estate world. After experiencing highs and lows in real estate prices in the last five years, Fresno/Clovis area is facing a new reality of steady, reliable, and predictable pricing. Distressed properties are still dominating the market since more than half of the houses sold on 2010 were bank owned houses. This is the "New Normal" for the Fresno real estate market. This new normal creates its unique investment opportunities for investors. The question is: what is the good investment in today's distressed market?

Low interest rates, and drastic drop in real estate prices, created an extensive number of buyers. Low prices are also attracting a large number of investors into the Fresno housing market which also pushes demand. The inventory of homes for sale in Fresno and Clovis has dropped from a high of 20 months supply in Sept of 2007 to a 2-months supply today.

Image source: http://www.movoto.com/statistics/ca/fresno.htm
However, despite the growing demand, the Fresno home-price-index number continues to drop."Core Logic", based in Santa Ana, reports that in Fresno, single-family home prices, including distressed sales, declined by 10.9% in September 2011 compared to the same month in 2010. With distressed sales excluded, year-over-year prices declined by 7.8% in September, compared to September of 2010.

This new market created a good opportunity for investors to buy bank-owned houses and create rentals. Foreclosures are forcing previous home owners into becoming tenants who prefer to live in single family dwellings. Rentals ranging from $600 to $800 per month are more desirable in the Fresno area, for that reason investing in older units might be a good idea in this market condition. As all real estate investors know, location is the most important factor in real estate investment. The safety of the neighborhood and closeness to shopping centers and schools are key factors when choosing a location. However, investors need to evaluate each property by immediate neighborhood, not just by what part of town property may be located in because tenants are seriously shopping for more affordable housing, and they widen their property search to the locations that were not desirable before.

The ongoing recession coupled with high rates of unemployment and a less educated, less skilled labor force, has made Fresno County at the top of the list for poverty statewide, according to U.S. Census Bureau, nearly 27% of Fresno County residents are living below the poverty line. Because of that Fresno residents need more affordable rental apartments. Two to four units are becoming more affordable as the market works through a price adjustment and there are some very good buying opportunities. The older, lower priced rental units are most competitive in this market.

With real estate prices down and rents climbing up with inflation, many properties are now rental, creating cash flow on a monthly basis with a modest 20% down payment. The best investment properties are returning up to 7-10% in positive net cash flow. Compared to virtually zero returns on bank deposits or even short term bonds, investment properties offer a compelling asset-backed return profile. The new economy created good opportunity for investors who can come up with solid down payment and qualify for loans. Now is good time to enjoy the low interest rates while having nice cash flow created by the rental properties.

Refrences:
1- Fresno Housing Market, Third Quarter, 2010, Larry Hawkins, Investment Broker
http://www.yourfresnobroker.com/news.html#housing
2- KMJNOW, Census: Fresno Has Highest Poverty Rate in CA, Nov. 30, 2011
http://www.kmjnow.com/pages/landing?Census-Fresno-Has-Highest-Poverty-Rate-i=1&blockID=570240&feedID=806
3- Multifamily Investments in Fresno, Larry Hawkins, Investment Broker
http://www.yourfresnobroker.com/multi_family_income_properties.html

ULI's UrbanPlan Project in Fresno Concludes with City Council Event

2011-11-22T21:28:00.000-08:00

This past Sunday we wrapped-up the Urban Land Institute's UrbanPlan project with a mock City Council event. Fifteen MBA students in three teams presented redevelopment case studies to our expert panel consisting of John Stewart, Robin Kane, and Hank Delcore. The students have been working on this case study for about a month in MBA 289T Real Estate Analysis. Good work to all three teams as the competition was very close.

Special thanks to the ULI, Paula Blasier, and Marasita Jarvis for helping us bring this project to Fresno. Also, thank you to the City of Fresno for allowing us to use Council Chambers.

CSB Students attend UC Berkley's Fisher Center Real Estate Symposium (BA funded)

2011-11-22T18:35:00.000-08:00

The CSB Business Associates funded a trip for a group of students to attend the 34th Annual Real Estate and Economics Symposium which was held at the St. Francis Hotel, Downtown San Francisco. The symposium was sponsored by the Fisher Center for Real Estate and Urban Economics at University of California, Berkeley.

Keynote speakers included Dr. Kenneth Rosen, Director of the Fisher Center, and Henry Cisneros, former Secretary of the Department of Housing and Urban Development. The full day of speakers was very informative.

Students (left to right) included Anmmar Alsaggaf (entrepreneurship major), Grant Gaddy (management major and Vice President of the Student Society of Real Estate (SSRE)), Scott Buckowski (real estate major and President of the SSRE), Zack Kaufman (real estate major), Kelsi Marques (real estate major and former President of the SSRE), and Jacqui Curry (real estate major and Secretary of the SSRE (not shown)). In the center is Dr. Robert H. Edelstein, Co-Chair of the Fisher Center for Real Estate and Urban Economics. Thank you for hosting the students Dr. Edelstein and thank you Business Associates!

Investors/Exchangers Meeting

2011-11-22T14:35:00.000-08:00

Demetri Filios
Fin181
11/22/11

The investors/exchangers meeting was very interesting, and a great learning opportunity for me. It brought together people that were involved in all facets of real estate, from brokers to agents, loan officers, appraisers, and investors. This is a very lively group and by no means agrees on everything; actually I think the arguing between the different sides was greatly beneficial to me. The arguments really let me see both view points on different issues.

The first subject brought up by Tom Hyatt was an EPA lead bases paint issue. Tom said that the EPA wants home’s that have non-permitted repairs to require an ALTA upon sale. An ALTA is a type of title insurance that is more thorough but also much more expensive than a CLTA. A CLTA is the basic type of title insurance used by most Californians when selling a their house. The ALTA protects the title against more issues than the CLTA for example: Unrecorded Liens, easements, encroachments, encumbrances, as well as requiring a physical inspection of the property. From my understating the physical inspection of the property is the reason why the ALTA is part of the lead based paint issue. When people do work on a house that has lead based paint the lead particles can be suspended in the air or settle in the home, this means they can be inhaled by the occupants of the house. This is why the EPA wants to have certified renovators to do this kind of work. There was a discussion on if this precaution is needed and whether it is being followed.

The next discussion was about interest rates. It was brought up that rates went up in October. Then some said that they were just the same as September. They went back and forth jokingly before they told me that it depends on whom you talk to. Tom Hyatt asked, “Are interest rates going up or down?” then he answered his own question “yes”. They said that no one could accurately predict them; interest rates can change 4 times a day.

The group also talked about how property and real estate values are dropping. They agreed that Property values have nothing to do with insurance values. It was said when appraising properties the cost approach should not be used because it has no relationship with the current market. An Appraiser in the group suggested that if a client requests a cost approach on a property there should be a disclaimer required on that portion of the appraisal.

There was also an argument on making multiple offers at a time on different properties. There was also talk about some agents even using the same copy of a check as a deposit to different sellers. One man said, “Having earnest money for every offer made is only right”. Most of the group agreed that this is wrong, yet a few explained if both offers were accepted then the buyer would buy one house and give the deposit to the other. The group generally established that this is not the most ethical practice.

This was a excellent learning experience for me and I greatly appreciated Tom staying after the meeting to elaborate and chat over a doughnut. This will probably not be my last time at this meeting since I thoroughly enjoyed it. I think everyone, whether or not you’re in real estate, can learn a great deal from sitting in on this meeting; it was a great experience.

Past to Present: A Unique Look at Highest and Best Use

2011-11-22T12:01:00.000-08:00

By Laura Rios and Jacqui Curry

The Massie appraisal report on Lots 21 and 22 in Block 6 of Fresno City (later to become 1022 B Street, Fresno, California, 93706) is a very thorough and informative appraisal, researched and executed by Mark Massie’s colleague Mr. Grail Fernwood. The purpose of the report was to appraise vacant land as collateral for a construction loan. The owners of the lots wanted to build a funeral home, mortuary, and adjoining attendant quarters. So not only was the market value being determined to secure a loan, it was also being assessed based on highest and best use. Mr. Fernwood was using the report to determine marketability of the intended use for both the City of Fresno and for the owners/developers.The property was vacant land as of the report date of 9/9/1960. The land was valued using the sales comparison approach using a total of 9 comparable sales. Each sale was rated as inferior, comparable, and superior. Once the land value was determined, Mr. Fernwood went on to determine land use and marketability. In his land use and marketability report, he indicates that commercial sales have been weak in this area of Fresno except for the acquisition of property by the government to relocate Hwy 99, federal housing, and nearby Chandler airport clear zones. However, he was able to find 9 comparable sales of vacant land and a land value of $80 - $100 per front foot. The subject property has 50 front feet and therefore a combined lot value of $4,000.00.

Once the construction loan was secured, Mr. Fernwood was then asked to appraise the value of the property with the improvements finished in order to qualify the owners for a takeout loan after construction. Mr. Fernwood used the income approach to satisfy this valuation method. He also did a market activity report, land use report, and funeral industry report. He made assumptions as to mortality rate to determine case load and total sales. He also retrieved information regarding caseloads from area mortuaries already in existence. He stated that the subject property is unique because they cater to the Hispanic population and he made adjustments accordingly with the reasoning that this niche market would be a differentiating factor for future success. Mr. Fernwood determined the value of improvements to be $50,000.00; plenty enough to cover the cost of construction.

It turns out Mr. Fernwood was correct in his assessment of highest and best use as a mortuary. This property is still operating as a mortuary today and is currently Funeraria La Paz; a successful mortuary that provides a full service funeral salon to mostly Hispanic immigrants and farm laborers. In fact, according to the current management they still uphold Mr. Sanchez’s desire to serve the population of people that have experienced a death in the family but have only been in this country for a short time. The current value of the property was only available through the county assessor’s office with a total value of $213,000.00; $19,444.00 land value. That is a 386% increase over time or a 7.6% increase in value per year. 326% increase in total value; 6.4% increase per year. Land value has remained steady as a percentage of total value at around 8%.

Funeraria La Paz

Massie Appraisal

2011-11-16T14:34:00.000-08:00

Erica Mendoza & Demetri Filios
Finance 181

The Mark Massie appraisal that we evaluated was on property address 1645 N. San Pablo Ave. This property was evaluated in 1961 and was at the time a single-family residence. Mr. Massie used to evaluate the property the cost approach to value, the market data approach to value and the analysis and correlation of value estimates. The purpose of the appraisal was to find the market value of the fee simple interest of the property at the time which was March 6, 1961.

Through his different analysis he came to a final conclusion of value of $8,500.00. It was a 2 Bedroom, 1 bath with a single detached garage with 1,175 square feet. The property was built in 1922 which at the time of the appraisal made it 39 years old it had both an effective and economic life of 25 years which gave it future marketability and sustained value in relation to other competitive neighborhoods for the 25 years. According to Mr. Massie’s evaluation he also determined that the highest and best use was as its present use Residential. The property was zoned R-2 which would make it low density Multiple family Residential.

The most interesting part of Mr. Massie’s report was the investigation process that he went through to determine the highest and best use of the property and the evaluation that he made of the market at that time. Based on his research at that time Fresno County extended over an area of approximately 6,000 square miles which 40% he approximated to be held by Federal, state and local governments and was non-taxable. In his analysis he did mention how since the property was located in the City College District and that because of this the property would be affected by the amount of traffic. By speaking to neighbors in the area and he found out that the biggest complaint about the area was the students parking on the front of there properties so he considered traffic nuisance in the estimate of the economic obsolescence of the subject property giving it a depreciation of $500 because of it.

This property is no longer a residence and now forms part of Fresno City College. Figuring the exact location was a bit of a hassle because of this but, using Google map and our own estimation based on the map in the appraisal we determined that it now forms part of Fresno City College’s pathway leading through campus. Estimating the value of that property today is difficult to determine since it forms such a small piece of what Fresno City College has become today.

Investors/Exchangers Meeting Nov 11th

2011-11-15T11:19:00.000-08:00

Fresno Association of Realtors Investors/Exchangers Meeting

Prepared by Timo Fitzer

Every Friday the Fresno Association of Realtors Investors/Exchangers Meeting takes place at their office located at Herndon/West. This meeting consists of several experienced real estate professionals like residential real estate investors, local brokers, enrolled agents as well as lenders and is headed by Tom Hyatt. They meet to discuss current topics regarding the Fresno´s residential investor´s market. I was attending this meeting on November 11^th which lasted only about one and a half hours. Several topics were discussed but I am going to deal only with the most important topics during the meeting.

For the first topic there was distributed a Schedule C-example for everyone. The Schedule C is an IRS (Internal Revenue Service) tax form used to calculate how much profit or loss a taxpayer received from a business. People who manage a business as a sole proprietor use this form mostly combined with Form 1040. The Schedule C form lists the income (Part I), the expenses (Part II), the cost of goods (Part III) as well as information on your vehicle (Part IV) to determine the net business income. Thus this result is used for calculate the business owner´s taxes. The group discussed some positions on this Schedule C. For instances they reflected which costs belong to which position on this form. One gentleman brought up an example when the business owner goes to a football game and afterwards having meal together with a client. They talked about what counts for a business and what does not. The committee agrees on considering this case under position 24b meals and entertainment. Also costs for the business´ web site should make allowance for advertising. Another question in this meeting was whether the owner should complete this form with his wife or separate. They came to an arrangement that each spouse should complete Schedule C for his or her portion of the company´s income and expenses. Such a husband-wife partnership could be considered as a qualified joint venture. But for matters like business check there should always be both names on it due to tax reasons. Also home warranty was an issue at this meeting. They all stressed the importance of engaging a home warranty because the property owner is protected against unexpected breakdowns and replacements of appliances and major systems like electrical or heating. To get this benefit you only have to pay about $50 per month. Therefore it belongs to the expenses on Schedule C.

Now some brief conversations. One gentleman spoke about a future volunteer program conducted by the IRS. They will teach you all about taxes and after passing this program you know how to lower taxes. He prompted the other members to participate in this program because they will get valuable knowledge and this would be helpful for sure. The group next discussed the topic “What is going on in market?”. For instances the value of single family houses were dropping. Thus Tom Hyatt came to the conclusion that the toughest job in real estate is currently to sell residential properties. Moreover Tom Hyatt pointed out the two main reasons why investments in real estate fail. First adequate capitalization is missing and second they don´t consider the guiding principle “location, location, location”.

The next topic discussed was investments in general. One gentleman brought up that you should differentiate your investments in three groups. Group A stands for really good and profitably properties. Group B are medium properties but you are able to sell them at a good price. Finally group C represents risky investments. They talked also about two different types of real estate investments. Some investors buy and sell properties without making any changes or repairs, and the others renovate or improve on the property before selling. A lady recommended that you should never buy real estate investment directly in your own name. If someone hurts themselves and sues you, you are on the hook for anything above and beyond the insurance settlement. This could lead to personal bankruptcy or at the very least significant financial hardship. To avoid this all investors use a special legal structure known as a Limited Liability Company (LLC) or a Limited Partnership (LP). You should better use different LLCs or LPs for each real estate investment you owned. This technique is called asset separation because if one of your properties got in trouble, you may be able to put it into bankruptcy without hurting the others. After the meeting I talked to this gentleman who told about the procedure for investing in real estate. He explained to me that he doesn´t recommend to invest in land from experience because the value for land doesn´t increase so much during a long period in comparison to residential property for instances. Furthermore he emphasized the importance of the three key questions before investing in real estate. In his opinion you have to know first for how long you want to invest, second in which type of real estate you want to invest and third which place or which real estate market is the best for the chosen property.

Overall the main topics of this meeting were very interesting and informative as well the experience to participate in a meeting with experienced real estate professionals. I think it is very valuable and helpful for real estate students to get an impression what is going on in the real estate market and to expand their practical knowledge as this is one of the most important factors that matters. Especially for me as an exchange student I got in contact with the American real estate market. It was a nice Friday morning, each member of the Association of Realtors was very friendly and I had a great conversation with a gentleman afterwards and a short talk with Tom Hyatt before the meeting. I would like to kindly thank all members of the Fresno Association of Realtors for allowing me to attend this meeting.

Gazarian Center Featured in ULI San Francisco Annual Report

2011-11-09T08:30:00.000-08:00

Please see the link below for the full 2011 ULI San Francisco Annual Report.

http://www.ulisf.org/wpLoc/wp-content/uploads/2011/05/ULISF_AnnualReportFY11_web.pdf