New Homes Soar

Copy for Real Estate Guide Column for 12-9-05   (455 words)

REAL ESTATE PATTERNS
By Ken DuVall

New Homes Soar, Prices Flatten

New home sales were up 13% in October, the biggest 1-month gain in more than 12 years, ironically in what could be the last hurrah for our booming housing market, and confounding analysts who’d predicted a 1.8% decline. The increase pushed sales to an all-time high. At the same time, sales of existing homes fell by 2.7%. Experts estimate next year’s price appreciation from 5% to 15%. The national median home price shot up 16.6% to $231,300 (the average: $286,500) in October, the highest year-over-year increase since 1979. Sales were up 43% in the West. Chico sales are still going along just nicely, thank you.

Clearly, we are returning to a more balanced market between buyers and sellers, placing buyers on a more even footing with sellers. We expect further cooling in the months ahead and are now confident that housing is landing softly even as rates rise and appreciation moderates. Inventory has risen to a 4.9 month supply at the current sales pace, meaning buyers will have a wider choice available to them. But demand continues. Consumers know housing will always be a good investment, and, you’ve gotta have a roof over your head. The past is our best guide to the future.
SHOULD I BUY NOW?
Ah, the eternal question: “To buy or not to buy.” There’s always risk. Interest rates are rising. Homes are selling more slowly. The answer: considering the big picture, this could be the very best time to buy. More sellers than ever have decided to sell, either because they had to or thinking we’ve hit a peak. But if you postpone buying as rates and prices inevitably rise, you’ll just pay more later on. Rate increases will also diminish your purchasing power. There’s no free lunch.

Bottom line: Over the last 50 years home prices have always risen. No one can time the market, but, you won’t realize any appreciation unless you’re an owner. Simple logic: Your purchase should be based on need and the anticipation of continued appreciation over the long run, period, end of story.
SAME OLD, SAME OLD
I’ve been doing this for a long time, actually since 1963, the buying and selling of well located, well maintained real estate, the quintessential element of Planet Earth. The only way that I’ve ever lost money is to NOT to have owned some chunk of it at any given point in time. Whenever I was out of the market, I lost money! If you’re able to, buy real estate. We’ve got all of it there’ll ever be right now. I’ve said it before: It’s the only sure way to avoid becoming old and poor at the same time. Time, not timing, is your ally. 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.

Copy for Real Estate

Copy for Real Estate Guide Column for 12-2-05 (440 words)

REAL ESTATE PATTERNS
By Ken DuVall

The Hangover Economy

After the stock market went flat 5 years ago the subsequent recession/slump that followed was in fact rather brief. The job market came back, inflation is in check for the moment, and productivity is up over 3% so far in 2005. Gasoline prices are dropping like a rock. Consumer spending is up 50% over the last 10 years. And it’ll keep on rising. Expect the 15% rate on capital gains and dividends to be extended through 2010, even as Congress feels pressure to staunch the red ink and each painful cut gores someone’s pet ox. In a generally cooling housing market, the hot spots will still outperform, including Chico’s. The average 2006 U.S. gain should run about 4%, down from 10% last year. So far, so good, one more time.
FLIPPING IS OUT
Don’t buy an investment property that you intend to turn over right away. The inventory of unsold property is increasing, as is the time between listing and closing. If you already own one, give some thought being a landlord (think of it as being “Lord of the Land”) for the next several years. Even a negative cash flow is a welcome tax shelter every April, plus equity build-up via appreciation and debt reduction. But if you already own a vacation place, there’s absolutely no reason to bail. The 2nd home market is expected to remain strong over the long run, thanks in large measure to retiring Boomers.
INSTINCT
Just before last December’s tsunamis, the elephants in low lying areas of Thailand trumpeted, broke their chains, and fled to high ground. The rushing waters inundated the land only 5 minutes later. PBS’s “Nature” series explores this incredible phenomenon. Scientists think animals’ sense danger and warn each other through “infrasound”, vocalizations below the range of human hearing. My hearing aids don’t pick this up at all, darn it! If we mere mortals could but pick up “housing vibes” like this, we’d all be home free!
HOUSING FUTURES
By now you know the Chicago Mercantile Exchange, dealing in the future value of everything from interest rates to pork bellies, will next April begin offering housing price future values based on median home prices. Housing is the most exotic contract ever offered by the world’s largest futures exchange. Home values went up 65% nationwide from 2000 to 2004, more than doubling in some areas. Combined U.S. residential properties were recently valued at $18.6 trillion. You don’t want to buy a house? Now you’ll be able to trade contracts electronically, betting the market up or down on the median home prices in 10 U.S. cities. “Bet a bunch and go without lunch!”

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

Copy for Real Estate Guide Column for 11-18-05    (484 words)

REAL ESTATE PATTERNS
By Ken DuVall

In Other Fields

Investors overwhelmingly believe the U.S. housing market is overvalued. Yet 75% of them perceive real estate as a better investment than the stock market. There is a notable disconnect between the run-up in housing values that investors are seeing as homeowners, versus their desire to participate in real estate over the stock market. Interesting, eh? But only 58% say that housing in their own community is overvalued. So perceptions of real estate values are local. Fully 75% of investors say they have no plans to sell their homes and use the proceeds for retirement income. They view real estate as a better value than the stock market, even as stocks are forecast to return 9% next year. Look for new home demand to soar in the coming decades. New home construction will total $14 trillion over the next 35 years vs. $6 tril over the last 35. But today, we’re either at a crest, a peak, or a plateau. You pick it.
HIGH-END HOMES
They’re getting harder to sell. The competition is fierce. Markets are flooded with listings as Baby Boomers downsize. It’s turned from a seller’s to a buyer’s market. Buyers are becoming pickier. Anything over $500K in Chico represents our high end. Today there are 80 homes over $500K, vs. maybe 15 a year ago. Since 1975, the average square footage of a new home has increased 30%, to about 2400 SF. The trend away from super-sized homes is one reason “big” houses are staying on the market longer. More high-end buyers now prefer amenities over a bigger house, offering lower utility bills. Changing times and values.
TIMING AND MOTIVATION ARE EVERYTHING
November and December are the tail end of the best home sales season. The most active season is spring when the largest numbers of buyers are in the market. Interest rates are trending up. Savvy buyers can negotiate hard now. After Thanksgiving is the toughest time of year to sell. But conversely, that is the best time to buy. As always, it depends where you’re at in the game.
TECH STUFF
Your computer printer is collecting data on you. The Secret Service, with the cooperation of HP, Xerox, etc., is able to track down counterfeiters by decoding the embedded invisible dots in every doc we print, disclosing your printer’s serial number and the date you printed it. New cars have “black boxes” recording your speed, heading, location, the number of occupants, and even whether they’re wearing seat belts. Driver’s licenses must soon be machine readable to be acceptable. Next October all passports will have embedded radio frequency chips to locate you anywhere. Cameras are watching us almost everywhere. We’re a society in which privacy has become a thing of the past. Thanks to Al Qaeda, we’re now under near-constant surveillance. I don’t care because I’m a good guy. I want the cops out catching the bad guys, whatever it takes.

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.

Boom to Expansion

Copy for Real Estate Guide Column for 11-11-05    (464 words)

REAL ESTATE PATTERNS
By Ken DuVall

FROM BOOM TO EXPANSION

The boom may be waning, but the majority of markets, including Chico’s, remain strong thanks to sound fundamentals and powerful demographic trends. Only modest cooling is expected next year.  Home sales may decline by 4% next year as appreciation falls from 12% to 6%, but we’ll still have our second-best year ever. A few markets are fragile but most will have a soft landing. The 6.75% or so interest rates foreseen by year-end 2006 will not stall the market. The bigger threat, as I’ve mentioned, may be the proliferation of adjustable rate and interest-only loans in response to higher home prices, which can lead to foreclosures. Regulators will issue more stringent mortgage guidelines. Corporate profits are the strongest in 15 years, and their spending is rising at a double-digit pace. This news of slowdowns is good, representing a healthy transition from frenzied to sustainable. We all knew it was coming. So far, so good.
OTHER FACTORS
During the first 9 months, new construction nationally amounted to about $827 billion or 8.8% above the same period in 2004. That’s good too. Builders are showing no weakness in their wallet muscles. When they pull in their horns, that’s the first sign of trouble. Total housing starts figure to be the highest since 1972, rising 5.7% to over 2 mil units this year, still not enough. California’s up nearly 21%. New home appreciation is projected at 7.3% in 2006. Baby Boomers remain in their peak earning years. Their offspring- the “Echo Boomers”- are just entering the period when they buy first homes, plus immigrants arriving in increasing numbers also buying big time. Housing activity will remain healthy for some time to come. Historically, home prices grow at 1% to 2% above the inflation rate, likely to end up at 3.4% in 2005, easing in 2006 to 2.7%. Say you put $30,000 down on a $300,000 house. At 3% appreciation, that’s a 30% cash-on-cash return. Not too shabby. Real estate beats the stock market every time.
POTPOURRI
1. Not in Chico that I’m aware of; there are still 4 million instances annually of housing discrimination violations across the U.S. A Realtor should not “steer” ethnic buyers to predominantly ethnic ‘hoods, no more than you can talk about “active adult communities”, implying buyers with disabilities aren’t welcome. I’m amazed. 2. Buy a house now. This is the best time of year to buy. Each week there are fewer buyers in the market, particularly in the high end. Sellers are highly motivated these days. 3. Dr. Phil told a Realtors convention in S.F. last week: “Have vision. Know where you’re going and move toward it always. Behave your way to success (with me: conduct and performance always count). Be excited about what you do every day.” I know I am.

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.