Thursday, March 22, 2007

Daily Breeze: Torrance housing boom ends, but not the fallout

This March 21 story by Nick Green (link will expire) in my opinion reveals a potential future direction in our social mood. Residents of Torrance are tired of overcrowding and have started applying the brakes to further development. The current mayor, Frank Scotto (he of the towing service), was elected last year on a platform of slowing residential development. He is concerned about city services being impacted by the addition of many new homes, and wonders where the money will come from to add more services, and wants the time to "play catch-up" before further development. Scotto is also concerned about addressing social issues - having more affordable senior housing available, the use of space for parks rather than cramming more condominiums into them, and so forth.

I don't know if I believe the studies that claim that commercial development and commuters are to blame for the increased traffic (rather than residential development - did home builders fund this study?). But I'll post the article here and you can read it yourself.

With 10 years of residential growth slowing, the city looks for ways to lessen the
impact on infrastructure and quality of life.
By Nick Green

Torrance's almost decadelong residential building boom is over, done in by a 
combination of political and economic forces.

Last year the number of approved housing units in the city declined to double digits 
-- 61 -- for the first time since 1996, when just a dozen were given the green light.

But the legacy of that boom -- an increase in traffic, a strain on some municipal 
services and, perhaps most significantly, an unprecedented shift in the city's 
political climate -- remains.

"It will take us some time to adjust to the additional population we have in the city 
of Torrance," said Mayor Frank Scotto, elected last June along with two other council 
members who shared a platform of dramatically slowing the pace of residential 

"We now have to try to catch up with the city services that are being impacted by the 
addition of all these homes," he added. "Where do we find the money to add more 
paramedic units? Where do we find the monies to add more police officers? That's the 

To be sure, there are still large-scale housing projects going on in the city of 
Torrance. A half-dozen are under way, sprinkled throughout the city, that together 
account for roughly 750 homes.

But all but one of those were approved in 2003, the year residential development 
approvals peaked in Torrance at almost 600 housing units.

There could have been many more, possibly inadvertently creating a housing glut given 
the slowing real estate market.

More than 1,400 proposed homes in three dense developments -- 104 condominiums on the 
former Days Inn site on Pacific Coast Highway, 917 condominiums at Del Amo Fashion 
Center and 409 more near the Costco between Skypark Drive and Lomita Boulevard -- 
were spiked by city officials before they got too far along. Another 226 proposed 
homes behind the Del Amo Financial Center were rejected by the City Council in 2005.

Today, the prospects for new large-scale subdivisions or condominium projects in 
Torrance are poor given the economic and political climate, said developer Doug 
Maupin of Torrance-based Maupin Development Inc., which has built several hundred 
homes locally in the past six years.

Economically, Maupin said he has noticed the slowdown at a 60-unit senior condominium 
project his company built at Torrance Boulevard and Madrona Avenue. "We're at about 
half the (sales) pace we used to be," he said.

Politically, Maupin said, pressure from Torrance's powerful homeowner associations 
has been a major factor in putting the brakes on large housing projects.

"They feel it's overcrowded in the South Bay -- there's too many people," he said.

While studies have shown that commercial development and commuter traffic are more to 
blame for the increased number of cars on Torrance's streets than housing 
construction, the perception of rampant residential growth caught the attention of 
residents and policy-makers.

The 1,400 homes built in the past six years is more than double the number built in 
the preceding six.

That's added an estimated 4,400 people to the county's sixth largest city since 2000, 
sending the population to more than 142,000 in 2005, according to the U.S. Census 

"Traffic, I think, would be the main thing people have noticed in particular," said 
Todd Hays, co-president of the Old Torrance Neighborhood Association and chairman of 
a committee Scotto appointed to examine uses for the Del Amo parcel once considered 
for the dense condominium project.

"It just seems there's a lot more people on the roads, especially at rush hour," he 

The tipping point for residential development came about not solely because of the 
sheer volume of homes being approved -- although that was certainly a factor -- but 
because of how it was being done.

Large parcels of former industrial or commercial land were being rezoned residential, 
infuriating residents who had long cherished the notion -- true or not -- that 
Torrance was a balanced city, as its slogan goes.

Moreover, critics believed those moves often violated the city's own General Plan -- 
its blueprint for growth. A plan update has been halted over concerns it was hijacked 
by pro-growth factions and will be reworked with greater community input.

"When they put in these massive condominium blocks in what used to be commercial 
areas or industrial areas, it just kind of tears at the fabric of the community," 
Hays said. "The backlash against the tremendous residential development that went on 
there for a few years has put the reins on the current development climate."

That backlash also claimed the political careers of former Mayor Dan Walker and two 
City Council incumbents last June.

It was the first time in the city's history voters had dumped an incumbent first-term 
mayor, Scotto said.

The election results confirmed a survey the previous year performed by a coalition of 
Torrance homeowners associations, said Robert Thompson, president of the Madrona 
Homeowners Association.

"(The survey) showed us what the people wanted and the election verified that," he 
said. "(A total of) 98 percent of the people were upset about the way the growth in 
the city was going and the election reflected their feelings."

The scale of the win, which many believe mirrored the depth of the electorate's 
discontent, caught even candidates who triumphed, like Councilman Bill Sutherland, 

"I thought it was going to be close, but it wasn't close in the least," he said. "It 
was quite a mandate."

With that mandate Scotto and the new council have turned their attention to 
infrastructure they believe has suffered from the development.

For instance, the council wants to add a fifth paramedic unit during peak daytime 

No additional paramedic units have been added since 1996, said David Dumais, the Fire 
Department's operations division chief.

Meanwhile, the number of incidents the department has responded to increased from 
10,000 in 1998 to 12,500 last year.

"We've been on an increase the last five years," Dumais said. "We've had an average 
rise in incidents of about 5 percent in the last five years. If it continues, are we 
going to catch up? That's the question."

The aging population has played a role in the increase in paramedic calls -- as has 
the fact that more commuters means more traffic accidents, he said.

More traffic also puts more strain on city streets.

That's prompted a renewed focus on street projects, for example, and the city has 
allocated $1.5 million to repave 190th Street in conjunction with neighboring Redondo 

But in the wake of the growth the city plans to reassess all its needs -- from 
recreational amenities such as gyms and swimming pools to public transit and 
affordable housing.

The buzzword now is smart growth rather than unrestrained growth.

"The sad part of all this is that with all this building we haven't addressed the 
social issues -- we haven't even built any affordable senior housing," Scotto said. 
"There's locations in the city that potentially could be park sites and things like 
that rather than more housing development.

"This council recognizes that we need to do everything in our power to increase these 
services," he added. "Hopefully in the next three to five years we'll be able to do 
that catch-up we need to do."


Blogger bearmaster said...

As of February 2007 it certainly looked as of Torrance has been slumping along with much of the south bay. On a raw basis, real estate dollars transacted hit a five-year low, but that will probably rebound somwhat this spring. Unfortunately I don't have enough historical data to track median house prices.

Real Estate $$$ Transacted, Torrance 90501-90505

7:50 AM, March 22, 2007  
Blogger wannabuy said...


By holding back on development when they did, Torrance will have ~1,500 fewer housing units than if the bubble had been allowed to run its course.

Its actually a good thing the south bay won't have thousands of empty units.

However, the mood has changed at work. A few coworkers have confided that before the summer they will be moving out of state. They have reached the end of their patience on cost of living here in California. :(

Its not just us. Every single large aerospace company is reporting problems recruiting in the south bay. This won't last. The rumors on corporate moves permiate the office daily. Which are true? I wish I knew. :(

In June a large batch of Lockheed and Boeing engineers move out of state. About 1,200 from lockheed and a few hundred from Boeing. Is this enough to have an impact? In a normal market I would say no. Today? Maybe. (Its still not enough jobs to do it on its own.)

Got popcorn?

9:46 AM, March 22, 2007  
Blogger bearmaster said...

That's interesting Neil. Like my former coworker who reached the limit of his patience when his landlord hiked his rent last year. He and his family now live in Portland.

Well I guess we now know what a lot of potential buyers are planning to do this year. If sellers don't lower their asking prices, buyers leave.

9:52 AM, March 22, 2007  
Blogger wannabuy said...


Buyers are definately leaving. I don't know what changed... but it seems like peoples' "I give a damn" just busted. It has me sad as the people leaving are exactly the type I'd love to have as neighbors. :(

That $ chart for Torrance is very interesting. Integrating by eye (thankfully, the 2MA is a near perfect triangle, allowing me to be really lazy).

2005: $1,260,000 in sales
2006: $1,170,000 in sales.
Or a mere 7% hit in commisions.

That isn't enough to get anyone excited.

But if this year goes on the same schedule as it has (and I think it will get worse), we're looking at:

2007: $ 900,000 in sales or 29% below the peak.

Since we know many Realtors and brokers invested in south bay RE... how many will miss their mortgage payments due to that cut in commisions? Thus foreclosing or having to sell quick (cheap).

I see sales for 2007 being in between $600M and $850M in Torrance with similar scaling for the entire sout bay. This isn't so much mathmatically based but rather taking my $900M and doing a few scenarios and guessing the hit the market would take. Homes will still sell... but oh will it be slow.

Oh, I talked my sister in law's sister into taking her 1st offer on her home (whew) and instead of "upgrading" to rent for 12 months. One more buyer saved! Hopefully her escrow closes. Why I wish she would be willing to delay longer... she isn't ready to listen to how bearish I am. In a year? Well, at least I would have saved her 10% to 25%. ;)

If you haven't guessed, I love your statistical information! Great work! Thank you so much for sharing.

Got popcorn?

10:01 AM, March 22, 2007  
Blogger Delon said...

I have been looking very closely on the housing market situation in Torrance area. It has been very frustrating to see houses are still listed at an unrealistic high price. Amazingly enough, I still see people buying, at the listing price! I don't know if they are smoking or so out of touch with reality. Buying at this stage when the whole world is going through a subprime meltdown. Well, I guess they listen to the unethical realtors. Buy now or be priced out!

For me I will wait. Rather be "priced out" then "forced out" later!

10:31 AM, March 22, 2007  
Blogger bearmaster said...

Bruce and I are planning a summer excursion to check out a new area to live, within the next 3-5 years. We haven't decided exactly where yet, but know it will be in the west - maybe Northern Nevada, Arizona, Utah, or Colorado. Some of the sparseness of Northern Nevada appeals to me but that can turn into "bleak". Arizona appeals to me for the scenic attractions, but I fear it has been recently overbuilt with stuff I don't want to live in. We both like Colorado. Have never been to Utah other than Four Corners.

It's a tough decision. There are some benefits to living here that I cherish - like year-round farmers markets!

10:46 AM, March 22, 2007  
Blogger bearmaster said...


You are doing the right thing. Believe me I know how hard it is to stick to your guns. I've been collecting material for this blog since 2002, if you can believe that. Was actually bearish on housing many years before that. If in fact there is a major buyer drain along with lending implosion, that's certainly going to make things rocky, won't it.

10:51 AM, March 22, 2007  
Blogger wannabuy said...


Its no longer hard to "stick to my guns." I admit the pressure from friends and family was pretty intense a quarter ago. Now a few are asking me for advice. Some are even acting on that advice.

It will be interesting in 90 days after we see a month's sales that is truly post the current mortgage tightening. (Too many homes closing today are on mortgages circa January.)

Thus your March, April, and especially May charts are of interest to me. :)

Got popcorn?

9:59 AM, March 23, 2007  
Blogger bearmaster said...

Neil, I'm noticing something interesting in March sales, which will have to be published as an addendum to my dollar volume charts.

90278 sales, on the surface, look spectacular. However when I dug last night into 46 March sale records, I found maybe 5 (10%) in which I am pretty certain that severe financial distressed was behind the sale. I'll know more details when I have time to sit down and look at them. For now I'm calling them "hot potato" sales.

And this is what a friend on a bear board says about short sales and foreclosures:

My understanding is that this 'short sale' approach is become popular with lenders and sellers threatening foreclosure. It had benefits for the lender because it keeps the house off their books and out of their management, and they often get a better settlement than if they go the foreclosure route. Its certainly better for the seller credit wise.

What's funny is that some of the investment banks are packaging this as products to commercial banks as a way of protecting their balance sheets.

It also has the effect of "boosting" the headline home sales numbers. I have heard, but have not verified, that the price sold is treated as the list price or the value of the mortgage for reporting purposes, as opposed to the short sale price. This stems the tide of price decreases in the official numbers.

11:09 AM, March 23, 2007  
Blogger wannabuy said...

It also has the effect of "boosting" the headline home sales numbers. I have heard, but have not verified, that the price sold is treated as the list price or the value of the mortgage for reporting purposes, as opposed to the short sale price. This stems the tide of price decreases in the official numbers.

Wow! I did *not* know that. If true (from your post it sounds like you haven't verified that information yet)... it will screw up the comps for a long time. Hmmm...

That could make for some very interesting scatter plots! May I suggest a new color for those identified? Blue for inventory, keep the color (cyan?) for sales... Just have a third color on those data points (Green? I don't like Excel's yellow... but that's just me).

If there were 5 outliers due to short sales in the February chart... that could dramatically alter the picture.

You detail on Redondo beach amazes me. Well done.

Got popcorn?

5:37 PM, March 26, 2007  
Blogger wannabuy said...


It must be tax time for you. I'm going into withdrawl. ;)


6:26 PM, April 03, 2007  
Blogger sylvie said...

This month should be a turning point as I've heard a lot of ARM's are due to start re-sets April 2007. Seems to me that the unravel should start in earnest even in ultra sticky LA. Bear Master perhaps you might not have to conciser relocation if the momentum increases.

2:40 PM, April 08, 2007  

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