Copy for Real Estate Guide Column for 9-30-05 (480 words)

REAL ESTATE PATTERNS
By Ken DuVall

Katrina’s Aftermath

Expect higher prices on everything from apples to zucchinis, assuming you can even get them, thanks to the devastating blow Hurricane Katrina has dealt to the nation’s transportation, agriculture, and fishing industries. The increased cost to move those goods is being passed on to consumers. Wholesale prices of the fish we get from the Gulf of Mexico are up $1 to $1.50 a pound. And forget about gas prices. My wife said last week on our 42nd wedding anni, “Take me someplace expensive.” I said, “How about a gas station!?” Farmers trying to ship their harvest on the Mississippi River are having trouble finding barge space. Drought in the Midwest had already lowered river levels to the point that some barges were running lighter than normal. Katrina added to the pain by temporarily closing the Port of New Orleans altogether, the world’s 3rd largest in tonnage. More recently, the Port restricted all cargo to priority disaster materials. And the double whammy hurricane “Rita” is raging on as I write this last Friday. New Orleans is flooded again.
A MAJOR PORT
Who ever knew that New Orleans was such a critical port? The impact on the overall shipping and transportation industries will be far reaching as we adjust to this tragedy and what’s happening to those poor people there. About 70% of the nation’s grain exports travel from the Port of New Orleans. There’s a ripple effect, and those ripples are moving quickly. Grain export operations have been essentially halted for the moment. Kansas farmers face tough issues if they can’t get their grain out through New Orleans. There’s no wiggle room for perishable crops. Rail and trucking have been disrupted by the increased cost of fuel and damage to highways and rail hubs. Freight is being diverted to Memphis, Dallas, and Atlanta. Problems are likely to persist for some time.
HOME DEMAND AND PRICES
While California’s appreciation may be down from 21% last year to “only” 16% in ’05, Katrina will have long term consequences for the housing market and economy, boosting both prices and construction costs as rebuilding gets underway. The number of homes going under contract in Louisiana is huge. Desperate buyers are making offers over the phone for all cash deals. The frenzy has prompted many homeowners to sell, even as property losses approach $100 billion, putting pressure on already short building materials, sending construction costs even higher. Housing inventory will remain tight nationwide, which translates to demand continuing to outstrip supply in most areas. “Post storm economic conditions” to accommodate the loss of homes and jobs may result in interest rates remaining low. New and existing home sales will again set new records for the year, on top of building replacement homes for up to 200,000 displaced families. This certainly does not suggest that we are done. We don’t know the stopping point involved here yet.

Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 9-16-05 (496 words)

REAL ESTATE PATTERNS
By Ken DuVall

Chicken Little was Mistaken !

Nationally, existing home sales slipped 2.6% but were still up 4.6% over a year ago, the third highest level on record, a huge number any way you slice it. New homes sales jumped 6.5% to a record high, up 27.7% over last year. In the West, the increase was 36% although there are signs of softness here and there. The 30-year fixed rate has plunged to 5.7%, vs. 6.4% in March, mainly due to surging energy cost concerns. California’s median existing home price is now $540,900, up 17% over last year. Chico’s active listing median is around $390,000. We remain the least affordable State.

In examining the hottest markets in price appreciation, we see a rolling boom moving from one metro to another, as well as a spillover effect into nearby areas offering lower prices, e.g., Oroville and Orland. This equates to a spreading of the wealth, and an easing of appreciation in areas with extraordinary price growth. Even after slowing in a given area, prices have continued to rise faster than historic norms. Since 2000, no area experiencing double-digit price growth has seen price declines.

GROWTH NOTES
This growth is a simple reflection of supply and demand. Despite the devastating human suffering from Katrina, economists expect the economy will feel only a small ripple from this deadly catastrophe. This is a very different backdrop from 9/11, when the economy was struggling, while now our economy is expanding. The rebuilding process will stimulate economic growth. Some $150 to 200 billion dollars in aid will pour into the stricken region, offsetting the negative effects which will have largely faded by next year. Individual Realtors had contributed $2.3 mil as of last week.

People displaced by Katrina are snatching up shelter in nearby communities. MLS’s there report doing 2 month’s business last week alone. Inventory has dwindled to next to nothing. The entire rental market disappeared in a couple of days. Forget about commercial space. Though inventory levels have increased (Chico’s too), they’re still lean by historic standards. We’re still opening a ton of escrows. As the supply of homes rises, as it does seasonally, it will reduce competition between buyers and sellers, taking some pressure off prices. Even so, expect appreciation to remain above “normal” over the next year.

TAX TIP
For those older than 55, Butte County allows homeowners to transfer their existing property tax base value from an existing home to a new replacement home- if the new home is of equal or lesser value than the old home. Say you bought a home years ago for $100,000 and your tax base is now say $125,000 with a tax of $1250 a year. But its value is now $300,000. If not for this Home Replacement reg, your taxes would be $3000 a year on the new home. This means you can sell your present home for $300,000, buy a replacement home for up to $300,000, and still pay your old taxes of $1250, not $3000.

Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 9-23-05 (463 words)

REAL ESTATE PATTERNS
By Ken DuVall

On the Other Hand…

No question that the real estate boom is fading some. While interest rates are still low, price increases are slowing, and inventory is increasing. Chico’s and the State’s have doubled since the 1st of the year. California’s home prices are twice the U.S. average. We’re clearly in an economy being driven by this extraordinary real estate explosion. Many experts are saying the housing market should stay reasonably strong. But even if it should falter, our economy is growing and healthy enough to compensate. The U.S. economy is expanding at a 3.3% rate. California’s rate is 5.5%. However, be aware we’ve been relying primarily on housing activity for that economic growth.
COOLING?
A big stumble is not imminent, but in an apt symbol of the changing times, Aerojet, one of the North State’s signature employers, is now pinning its profit hopes mostly on building houses on its land holdings. Statewide, the real estate sector created fully 40% of all jobs in the last year. The year before, California’s real estate activity created 40,000 jobs while the rest of the economy lost 105,000 jobs. Nationally, real estate generated 465,000 new jobs from 2001 to 2004 while the rest of the economy lost 821,000 jobs.
HOME EQUITY EQUATIONS
If you bought a house 5 years ago, it’s probably doubled in value. Home equity loans have pumped $300 billion into the U.S. economy in the last 2 years. Homeowners are using their homes like an ATM. Otherwise, the recession of 2001 would have been more severe and the subsequent recovery much weaker. Equity is a cushion against uncertainty. More and more folks are just staying put and improving their existing home with new “creature comforts” and putting cash in the bank for a better standard of living and emergencies. The increase in home value is there in your hands. You can touch it, feel it; it’s real. You are free to go out and spend a little more comfortably.
PERSPECTIVES
However, these changes put more pressure on real estate to carry the economy, something it’s been doing to a degree not seen since the post-World War II housing boom some 60 years ago. Nothing else has even come close to what we’re experiencing of late. Will the good times end soon? I don’t think so. In my opinion the better quality of life, better most everything, will keep values up. Most experts think the government will keep interest rates low enough to insure the boom’s continuation. I don’t think it can nor will keep going forever, but people have been saying that for a long time now. The rate of price increase is tapering off, not prices. The only thing going down around here is elevators and escalators! Don’t get nervous until I do, OK? Keep the Faith.


Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.