The Rich & the Richer

Copy for Real Estate Guide Column for 6-30-06 (471 words)

REAL ESTATE PATTERNS
By Ken DuVall

The Rich & The Richer

I’m always fascinated with the high end. For openers, George Clooney just bailed on his joint venture with America’s largest residential developer. They had planned a $3 bil condo project on 25 Las Vegas acres. Vegas’ condo market is slowing, so they sold it for $202 mil, double what they paid a year ago. By the way, vacant land in Vegas is going for up to $30 mil AN ACRE! Billionaire Warren Buffett just bought the 3rd largest real estate brokerage in Atlanta. You can’t go wrong following the smart money. The I.M. Pei designed (feng shui harmony included) 100,000 SF office building on the corner of Wilshire and Santa Monica Blvd. in Beverly Hills is for rent for $500,000 a month. That’s $60 per SF! Chico office rents start at $1 a SF.

U.S. households with over $5 mil in assets rose 26% last year to nearly 1 million. Plain old garden variety millionaires hit a record 8.3 mil, their combined wealth is $33 mil. One in every 125 Americans is now a millionaire! Those with a paltry $500,000 number 14 mil. The ultra-rich, those worth over $30 mil, number 85,400.  While we’re at it, there is now one California Realtor for every 52 adults in the state, a record 495,000 agents, with 100,000 new licenses issued in the last 3 years. Speaking of records, the listing that “Trumps” all others in the U.S. is The Donald’s humble 75,000 SF Palm Beach, FL “shack” that he picked up in bankruptcy for $41 mil. It’s back on for $125 mil. Well, it does have 475’ of waterfront, an 8-car garage, and 15 bedrooms! Bottom line: it’s not about shelter.  Billionaires are now looking to separate themselves from “mere” millionaires. Oh, my. Well, I’ve still got my reputation, which is worth more to me than money.

In S.F. 18 homes over $5 mil sold in the 1st quarter. An unfinished mansion there is asking $65 mil, twice what it sold for last year. In Palm Beach, 10 homes sold for $5 mil or more. In Jackson, WY 21 homes went for over $3 mil in the same period. NYC condos are up 22% this year, median price now $1.08 mil. There’s a 30,000 SF home near Newport Beach in So Cal priced at $75 mil. A prospective purchaser who wants to even SEE it has to show a net worth of $500 mil or an annual income of $10 mil first. Are you ready? But they are getting qualified buyers regularly. And finally, there’s the private resort on Necker Island in the Caribbean where rates start at $30,000 PER NIGHT. One recent guest booked it for a whole month. His tab: $900,000! Got a match? These guys have money to burn! Don't be surprised at anything anymore. It's a whole new world.

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.

What's Ahead for Housing

Copy for Real Estate Guide Column for 6-30-06 (464 words)

REAL ESTATE PATTERNS
By Ken DuVall

What’s Ahead for Housing

My crystal ball is cloudy, but I do see a cleansing under way. The excesses are being wrung out of some high-flying markets. In Chico, I see values quietly continuing to rebuild. By next year, look for stability. Don’t panic, no matter what you hear from the “sky is falling” crowd. Forget the “61% overpriced” study. There are many reports to the contrary. There’s no free fall in sight, even as we hear about price-slashing and incentives in some once-hot areas, and purchase cancellations for new homes. Those spec buyers are bailing because they can’t make a killing in the next half hour anymore. Houses are for living in once again. One million people became homeowners last year. Immigration alone, running at 1.2 million annually, will drive new households to 14.6 million over the next decade. That’s a ton of demand. Strong household growth combined with record incomes and wealth, will continue to lift housing to new frontiers. It’s still easier to get on welfare here than it is to get a building permit, limiting our growth, further fueling demand.

Mortgage rates won’t hit levels where buyers can’t qualify for loans, undermining both sales and construction. Housing is a critical component in the overall U.S. economy. Continuing economic growth and worker productivity will hold down rates. Builders are adjusting quickly this time around to softer demand, and scaling back construction to avoid a glut of unsold units. The current oversupply is less than in previous slumps. I was really concerned about too many foreclosures adding to the mix, but it’s not happening. Housing is inherently cyclical. In my 43 years in the business, it’s always been UP over the long haul. Remember: Any commodity is only worth what someone will pay for it. The Law of Supply & Demand says the market always sets the price. And when you reach a certain price, the phone starts ringing!

The “too much too fast” appreciation we’ve had may show up in flatter home sales and prices over the next year. That too was a cycle which HAD to end. But the Baby Boomers, and their offspring, the Echo Boomers, are continuing to enter the market. Remodeling is coming on big time, triggering a 6% consumer spending increase there, keeping demand high for appliances, building materials, etc. Nationally, median home prices figure to be up about 5%, both this year and next, down from 12% in 2005. Local performance (Chico homes enjoyed 17% appreciation last year) will vary widely. Sure, we’ve got a lot of unsold inventory, and prices are softer now, but “Chico, the City of Fortune” will always top people’s wish lists. There’s no doubt we have emerged as one of the most desirable places to live. And let’s hear a big amen to that!

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.

It's Hot, It's Not, It's In, It's Out!

Copy for Real Estate Guide Column for  6-16-06 (466 words)

REAL ESTATE PATTERNS
By Ken DuVall

It’s Hot, It’s Not, It’s in, It’s out!

As the wild housing boom of the last few years wanes, we have to come back to reality. This is a pause to catch our breath. The demand is not going to go away. Our prices just got a little ahead of themselves. We’re NEVER going to have enough houses to satisfy demand. Even though new home sales are up doesn’t mean there’s enough inventory for our burgeoning population, plus the immigrants. While new home profit runs about 20%, you’ll never pay less again for that new home. Over the years, it’ll be one of the best investments you’ll ever make. The 2006 national appreciation rate is projected at “only” 5 to 6%. And the cost of building materials is finally beginning to fall. Now if Bernanke would get his act together. He’s making the markets crazy.

But the real estate market is local. For instance, in Memphis, you can still buy a 3 BR 2 BA 1700 SF home with a brick exterior for $102,000! Chico has had 3000 to 4000 people move here annually since I got here in 1977. The population then was about 23,000. Today our urban area is 103,000. Our prices have doubled in the past few years because people keep moving here. Prices are steepest and rising where demand is highest, like Chico. Our supply is limited by geography, our green line, and government regulations, etc., which explains why S.F. and NYC stay expensive year after year. We’re in demand. That’s not going to change. Chico is still the easy off-ramp from life’s fast lane, offering the good life so many seek. And people are what make values.

Last week there were over 500 homes- vs. 120 a year ago- listed on the Chico MLS. We Realtors are getting used to seeing 50-60 new listings weekly, along with price reductions. But we’re still putting a bunch into escrow. Even with many more sellers now, there are still buyers, just not as many as there were last year. Advice for sellers: if your home is priced right (your Realtor knows- do NOT be overpriced!) you should probably accept your FIRST offer, assuming it’s reasonable and not frivolous. Come on: this is the person you were looking for! When a home first hits the market, it gets the most attention from the largest number of Realtors, and showings, in the shortest possible time. That is the moment when a buyer is most likely to make an aggressive offer. I recommend not turning it down in hopes of a better offer later. In my experience, your first offer is nearly always your best offer. In today’s market, have all your inspections done so no skeletons pop up after your pre-approved ready-to-rock and roll buyer makes their offer. Don’t lose that bird in hand!  
     
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.