Setting it Striaght

Copy for Real Estate Guide Column for 3-30-07 (442 words)

REAL ESTATE PATTERNS
By Ken DuVall

Setting it Straight

I’ve had it with the “Nattering Nabobs of Negativity!” Every week I study a dozen national and state news sources from recognized expert business analysts and economists. Here’s the true picture at the moment:

There are certainly a few cracks in the economy’s walls, but the foundation is solid. A housing-led recession is not in the cards. The current economic expansion will survive. The consensus for overall first-half growth this year is 2.5%, accelerating to 3% in the second-half. The Fed held on their interest rate. The stock market is surging as I write.

Nonetheless, the ongoing weakness in the residential housing markets is causing pain for many players. On the other hand, the commercial market continues to enjoy a tight inventory. The old adage: “Buy on bad news, sell on good” is what’s happening there.

The problems are most acute in the sub-prime mortgage segment catering to borrowers with either low incomes and/or poor credit. Those lenders flew too high and will pay the price for ignoring standard screening practices by making loans to people who really couldn’t afford them in the first place. Fortunately, those loans total a mere 7% of the $10 trillion mortgage market. The sub-prime meltdown will not spill over into the prime market.

The vast bulk of the mortgage market is solvent. The alarming increase in foreclosures will not overwhelm housing. On the contrary, mortgage demand is up 10% since last fall, a very positive indicator. Also helping is the ongoing creation of jobs. Unemployment is way down. Past housing slumps were linked to downturns in employment.

Meanwhile, fears of a broad credit crunch are overblown. Lenders are not going to stop making loans, but expect to see more stringent qualifying criteria. Contrary to some in the media, the real experts continue to set very slim odds of a recession in 2007. The true anchor of economic activity, consumer spending, is not at risk.

No question that housing will continue its correction this year. While prices remain soft, sales nationally were up 3.9% last month. Locally, Chico is chugging along just fine this year with some 200 closed home sales- vs. 166 sales in the same period last year - plus 160 more in escrow as of last week. The number of active listings is in balance. So far, so good.

By year end the market should emerge far healthier as sales and construction shift into a gradual upward trend. Happiness is a place somewhere between too little and too much. P.S. The new wave of women buyers are turned off by the term “Master suite.” It’s been renamed “Owner’s suite!” Keep the Faith, my friends.

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.

All Over the Board

Copy for Real Estate Guide Column for 3-16-07 (396 words)

REAL ESTATE PATTERNS
By Ken DuVall

All Over the Board

One thing to remember is the sales lag time from the big cities compared to Chico. We run about 3 to 6 months behind the curve. If they weren’t selling down there 3 to 6 months ago, or if they were, then it’s either up or down here during the lag time period. Right now, Chico’s in an up-time frame with sales going well. All the economic indicators are looking good too.

Nationally, average home prices rose 1.12% in the 4th quarter of 2006, compared with 3% in the same period in 2005, according to the Office of Federal Housing. During 2006, prices rose 5.9% compared to a 13% increase in 2005. The data suggest that appreciation is again in line with historical norms. We should see daylight by year-end when the market’s downward correction has run its course.

The speculative activity that fueled sharp price gains will not return. Future price gains will be modest. Prices may still fall a point or two in some areas this year, but, properties will be selling. That’s the key, sales and activity. Is it time to hunker down for a slump? I don’t think so. Any growth, even sluggish, is still growth. Bottom line: Don’t panic. Keep your eye on the horizon. Stronger economic growth is expected in the 2nd half of 2007.

On the bright side for buyers, current conditions are virtually ideal. Right now, housing offers a real window of opportunity. Not only have prices stabilized at attractive levels, but there’s a wide selection of well-priced homes, plus the unprecedented array of entry level loans available. Warning: avoid the minimum payment option, which doesn’t even cover interest, resulting in a rising loan balance.

Rates are still low. The outlook could hardly be more encouraging. Many experts expect the pace of home sales to quicken as our traditionally busy spring market gains steam. Making a home purchase sooner in 2007 rather than later may well prove to be a buyer’s savviest financial move.

After 5 years of frenzy, our current market is just what the doctor ordered. By the end of 2007, residential real estate could be poised to again become an economic driver. Expert forecasts call for modest price and sales gains throughout the year. We’re inching back up, little by little. Remember: despite what we heard from the mainstream media, the sky did not fall!

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 Like Old Times

Copy for Real Estate Guide Column for 3-9-07 (442 words)

REAL ESTATE PATTERNS
By Ken DuVall

It’s Like Old Times

For the moment, we’re back to business as usual. For instance, at a recent Chico MLS Tour meeting where we agents pitch our new weekly listings, there were 5 sold properties out of the 36 (a low number) new offerings. Weekend open house traffic has increased by leaps and bounds too. This year will mark a shift in housing. The current slump will find its floor, even as we experience its final gyrations.

When the Tour Chair announced the cancelled and solds for the day it was like shock and awe time for us. The last time that happened was in 2005 when properties were selling within the hour. The housing affordability woes that reduced demand last year are bottoming out, as incomes rise, prices moderate, and interest rates remain favorable.

Also on today’s agenda are the ladies. While married couples still account for 60% of homebuyers, down 10% from a decade ago, single women made up 22% of last year’s sales, up 14% in the same period. On the other hand, single men accounted for only 9% of home sales last year, unchanged.

You don’t need a Ph.D. to know women are far more concerned in a home, a nest, than men. Many unmarried men just want a place to hang out ‘til they marry, while women view homeownership as both desirable and a ticket to financial security. Nationally, women outnumber men by 5.8 million. Realtors: keep thy eye on thy marketplace!

When we bought our first home, the only deal out there was 20% down, period. That’s gone the way of $1 a gallon gas. Fully 45% of first-time buyers, along with 30% of all buyers, now opt for the ubiquitous 100% loan. Hey, it’s tough to scrape up $30,000 for a 10% down payment, let alone 20%, on a $300,000 home.

Not a surprising trend. The danger is when borrowers add an adjustable rate feature, and then run into financial problems later on when the payments go up. It’s easy to just walk away when there’s no equity in the home. That’s why foreclosures are on the rise.

With the majority of the Boomers (born 1943-1960) now heading for retirement, we are seeing many shortages in jobs and occupations. It’s sure to worsen. Chico school attendance is down. Many young folks are shunning even well-paid blue collar jobs. Employers increasingly need to put more emphasis on job location and work/life balance.

Planning must be creative, reaching out to students and try to open their eyes potential opportunities. Rural areas like Chico particularly need to think about fostering an environment for younger employees. They’re our future home owners.

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.