New Horizons
Copy for Real Estate Guide Column for 3-24-06 (445 words)REAL ESTATE PATTERNSBy Ken DuVall New HorizonsThere are over 1 million $1,000,000 homes in the U.S. The world population is 6.5 billion. Our government spends $3 billion a day. Our trade deficit just topped $800 billion. The national debt ceiling moved to $9 trillion last week. I think we’re getting out of touch here. Let’s try to put it perspective. How much is a measly billion? A billion seconds ago it was the year 1959. A billion minutes ago the Romans were still throwing Christians to the lions! Feel any better now? A billion here, a billion there, pretty soon you’re talkin’ real money!It’s called “VantageScore”, the new credit scoring system now consistent with all three consumer credit bureau’s- Equifax, Experian, and TransUnion- criteria making it easier for lenders to evaluate you. The system will rate you in a new 501 to 990 range; the higher your score, the lower your interest rate, and vice versa. Again, beware of credit and loan schemers out there. Deal only with our local lenders. Crooks were just busted last week in Sac for recording forged deeds to your house as if you had sold it to them, and then getting a loan on it. Hello! Jeopardy is more than just a TV show.Check out www.zillow.com the brand new site providing anonymous, free “Zestimates” of home values from their 60 million U.S. homes database. Since debuting Feb 8th it’s rocketed to the 5th ranked real estate site. What’s neat about it are the satellite views and maps of your property. Just plug in your street address and go, although the local comps I’ve pulled up are far from reality. I wouldn’t sell my house for their estimate. You need local talent to get at true current value. Sellers should never substitute one of these online “guesstimators” for a Realtor’s advice, that is if you actually want to sell your home. You wouldn’t want to leave money on the table either. Zillow’s algorithms need some major tuning. But it’s fun.Despite some nervous finger tapping about the housing market, I see it chugging along just fine. All the right indicators remain positive. The GDP is rebounding strongly. Employment was 2 million higher in February. The national average home price increase projected for 2006 is nearly 6%. Still, some local sellers insist on pricing their homes too high and are languishing in the cold wind of overpriced listings, as clearly shown in our Chico MLS database of list-to-sold prices and days on market. But buyers, hoping prices would drop are wrong; that’s not happening. Welcome to a whole new/old ballgame, folks. The market she’s a changin’. But change is what we can always count on, right?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.
The Structure of Value
Copy for Real Estate Guide Column for 3-17-06 (438 words)REAL ESTATE PATTERNSBy Ken DuVall The Structure of ValueYou can’t mess with Mother Nature, or equilibrium, because things get out of control. Case in point: Look what’s happening in China right now. As Confucius said, “House without bathroom uncanny.” (Sorry, couldn’t resist that!) Shanghai’s once red hot housing market has crashed big time due to an oversupply of homes. Sales have come to a virtual standstill in some areas. As values fall below the loan amount, home buyers are suing to get their money back and banks are shuddering as defaults loom. Century 21 China reports that 3000 of their offices have closed down. The bust comes after being a doubling of prices over the last 3 years, a run-up fueled by massive speculation. That’s a no-no.Lesson here: Overpricing is the single biggest mistake you can make when listing your home. Second, by the way, is failure to disclose known defects. The only way to avoid fraud is to tell the truth. With the rapid appreciation we’ve seen in the last few years, it’s not surprising that owner’s expectations sometimes outrun market reality. A recent poll shows 50% of Californians believe their home value will increase by 15% or more in the next 3 years. I don’t think that’s an unreasonable figure. But bear in mind that sales are slowing down, inventory is creeping up, and rates, up to 6.3% lately for a 30-year loan, are on the rise, limiting your buyer pool.Along with the sales slowdown, housing starts too are down a tad. But at the projected 208,000 new units in the Golden State this year, as usual, we’re some 50,000 units shy of demand. Chico in essence is out of housing land now. The few lots you can find are around $300,000. There are some 1200 units under construction or in the permit pipeline in Corning. Builders go where the available land is. There’s never going to be enough housing in the foreseeable future, meaning that demand will continue to outpace supply. Draw the obvious conclusions. It looks like we’re finally touching down for the soft landing we’ve been expecting. Sales are at a much more sustainable level now, a welcome cooling from the recent super-heated conditions that were driving the exceptional price gains. Sales at the current level are historically strong and will give us all time to be more thoughtful about the biggest investment most of us will ever make. Don’t forget that housing is a big deal, accounting for 40% of all new private sector jobs created over the last few years. Business spending will lead economic growth and housing wealth will help support consumer spending. So be it.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.
HOUSING HIGHLIGHTS
Copy for Real Estate Guide Column for 3-10-06 (453 words)REAL ESTATE PATTERNSBy Ken DuVall HOUSING HIGHLIGHTSRewind to 1950 when a new home cost $8500. A new car was $1500. Gasoline cost 18 cents a gallon. A postage stamp was 3 cents. A pack of cigs cost 15 cents. A movie ticket was 65 cents. Tuition to Harvard University was $600 a year. In 1963 our first home cost us $27,000. It resold recently for $500,000. Things change. The average luxury home in L.A. now fetches $2.3 mil; in San Diego, $2.1 mil; and in The City, $2.8 mil, all up 13% to 16% over a year ago. The state’s median home price, now $551,300, was up 13.8% last year. The U.S. was up about 13% too. Chico’s was up 17%. The median for last week’s 353 active listings was $340,000. Real estate is cyclical. Compared with a year ago’s 3.2 month housing inventory supply, we’re now around a 5.3 month’s supply, representing a balanced equilibrium between a buyer’s and a seller’s market. Home sales may slow this year but should still maintain a historically high pace. Experts see the momentum of double digit price appreciation being sustained. Even if sales decline 5% from 2005, homes still appreciate. The longer you own, the bigger your gain. Those markets having strong fundamentals, like Chico, will experience a smooth transition. The past is your best guide to the future.The economics behind housing demand is the key. The market is sobering up in the aftermath of a 5-year party when prices nationwide zoomed over 55%. The economy ended 2005 like a lamb but is roaring back. Economists say the Fed will bump their Funds rate only ½% more, hitting 5% this year, pushing 30-year loan rates to perhaps 6.75% by year-end. In 2007, forecasters predict they’ll start lowering the Funds rate. Fed Chairman Ben Bernanke is making it clear they won't adjust rates to influence housing. The country is expected to shake off the effects of last year's hurricanes and surging oil prices. The economy figures to grow by roughly 3.3% this year. Unemployment should fall to 4.8%, down from 5.1% in 2005. Inflation is projected at a comfortable 2.9%. Sounds good to me.The FHA is studying new zero-downpayment loans for first-time buyers. One will offer those with strong credit a 100% purchase price loan, including closing costs. Another will offer buyers with “challenged” credit a higher initial insurance premium, declining with a record of on-time payments. They are also considering a floating premium structure to reflect all borrowers’ credit to reward/penalize each accordingly. Unfortunately, the 2006 Butte County FHA loan limit for a single family home is an unrealistic $275,500. However, the conventional conforming (lowest cost) loan limit for us is now $417,000. You win some, you lose some. 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.
