Bottom Line Wrap-Up

Copy for Real Estate Guide Column for 10-13-06 (457 words)

REAL ESTATE PATTERNS
By Ken DuVall

Bottom Line Wrap-up

We have a cacophony (always wanted to use that word!) of housing market theories lately. It’s like a roller coaster at the top of the ride- then the pause to assure maximum terror on the way down. We’re at that “pause point”. Guessing how far this ride will fall has become a major sport for economists and an army of armchair experts.

The reality is that home prices are more stable than the news would have us believe. The following data emanates from my compilation of the analyses of the top economists across America. Barring the unforeseen, this is how I see things at this point in time, based in part on 43 years in the business. I think the “Chicken Little’s” are panicking prematurely.

We’re clearly in a correction cycle. Unquestionably, the housing slowdown is becoming more pronounced, but it’s not crashing. The roller coaster always goes back up. Fed Chair Bernanke said last week: “I think there are some strong fundamental underpinnings that should help the housing market over the medium term. These include a good job market, strong income growth, and continued low mortgage rates.”

Nationally, homes going into escrow- pending sales- actually rose 4.3% last month, 9.2% in the West, an indication of stability. There is healthy underlying demand from household formation and job creation. There are good buying opportunities now. It’s called getting back to normal. Icarus (Greek mythology) flew too high, his wings melted off, and he crashed back to earth. There’s no free lunch.

Sellers’ markets are shifting to buyers’ markets. There’s always pain in that transition. Total home sales may decline 4% in 2007 after a drop of 9% in 2006, the 3rd best year ever. New homes represent only 15% of the market. With the sales pace fluctuating, builders are offering more incentives to ease their unsold backlog. They’re tossing in upgrades, landscaping, club memberships, etc. We’re seeing wise Chico home sellers doing likewise. Give a buyer a reason to buy yours instead of the other guy’s.

The median price is either up or down a little over the last year, depending who you listen to. Prices/sales may even decline in 2007. Still-modest loan rates figure to hover around 6% for the next year. Declines in mortgage rates should help put a floor on any decline. Rumor has it the Fed may even reduce their funds rate sometime next year, if inflation stays in check.

Housing starts have tumbled but are still expected to remain stable over the long term, with 1.6 million new homes in 2007, up 4%. Construction materials cost will fall. Population growth, fueled by immigration will continue providing steady demand. Everything should work out fine. Again, take the long view, and 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.