WHICH MARKET?

REAL ESTATE PATTERNS for 5-11-07
By Ken DuVall

WHICH MARKET?

We keep hearing that the real estate market has changed. Depending on the media source its either “slowed, leveled off, is in a trough, has retreated, plunged, collapsed, corrected, contracted, or, returned to normal”. The market has not returned to normal. It’s simply moving on.

Change is the only constant. Every market is different and unique, driven by combined events of the moment. If you’d been the game since 1963 like me, it becomes clear. Return with me now to those thrilling days of yesteryear.

Our last “normal” year was 1978. Housing was generally affordable. Loan rates were 9.5%. Between 1980 and 1981, sales plummeted as rates topped 16.5%. Homes languished unsold and there were foreclosures. The 20% mandatory down payment vanished. “Creative financing” made its appearance.

By 1983 the market had improved dramatically as adjustable rate loans appeared and rates declined. Even as rates stayed above 10% until 1990, more and more homes were sold. In 1988 sales hit a new record, but by 1991, they had bottomed out. The market went along mostly sideways until 1999. Then the Big Boom began.

Record numbers of homes were sold over the next 2 years. The new “easy loans” appeared. Everybody and his brother started snapping up homes like they were going out of style. Demand of all types combined to overwhelm the inventory. Price no longer seemed to be a factor. Multiple offers were common. We had entered the real estate explosion of all time.

Was it a “feeding frenzy”? Or, was it simply an incredibly dynamic period when real estate met with many economic elements that just fell perfectly into place? The stars were in alignment. But by mid-2006, the honeymoon was over. You can’t fly that high and not have some fallout. Nature has a way of avoiding extremes and seeks balance.

Regarding the troubling sub prime loan fiasco, the Mortgage Bankers Assn. assures us that only 1% of all existing loans are in foreclosure, historically normal. It’s not as bad as it may seem. Many borrowers in default and their lenders will work out deals to avoid foreclosures. New rules and regs now being formulated at the highest levels will preclude a repeat.

It’s not all hearts and flowers right now but the present downturn will run its course. In Chico we’re still putting a nice quantity of deals in escrow. The national economy is doing well. We’ve had 14 consecutive quarters of double digit growth. Over 95% of Americans have jobs. The Dow stocks are at an all-time high. It may be that we have nothing to fear but fear itself. Give it a few more months. Time will tell.

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.