Copy for Real Estate Guide Column for 6-15-07

REAL ESTATE PATTERNS
By Ken DuVall

A NEW BALLGAME

While portions of the real estate downturn are behind us, the buyer’s market is likely to continue for two years. Foreclosures are nowhere near over. We’re heading for more price declines. The market is adjusting. Any new home offering today may be a better deal than existing home prices since many sellers haven’t bitten the bullet yet. Harsh stuff for some of us.

But resale prices will catch up as we go. Economists tell us the housing downturn will not push the country into recession. Amazingly, the Fed numbers out June 4th shows national home prices actually UP 0.5% in the first quarter, and year over year, 4.3% HIGHER than 2006! Go figure.

Fortunately the subprime situation will not affect the economy. Those loans accounted for 25% of all California purchases, yet represent a small slice of the overall loan market, which is correcting, while underwriting standards have tightened, abuses have been curbed, and the bad guys have gone out of business. There’s no reason to push the panic button there.

As the world becomes integrated, new fundamentals develop. Far East and the Middle East investments affect us greatly. Items: China makes 90% of all our Vitamin C. Mukesh Ambani, India's wealthiest resident is building a 60-story “house” in Mumbai, complete with helipad and parking for 170 cars. Cost: $1 billion, peanuts to him. The Fed’s comments aside, worldwide interest rate fluctuations had a large effect on our stock and bond markets last week. Global cash flow into the U.S. economy is vital to us.

The latest California home price appreciation report shows 1% year-over-year. The affordability factor becomes a major hurdle for the next generation of buyers. California homes were only 150% higher than in Texas in 2000. Now they’re 350% higher.

Minimum income needed to buy the California median priced $597,640 home is $100,250. Using a 6.5% interest rate with 10% down, the monthly payment including taxes and insurance impounds would be $4770. Less than 25% of all Californians can now qualify.

But Chico is not tanking. Deals are still going in the hopper every day. We’re too desirable, and a veritable bargain basement compared to the metros. A San Fernando Valley small condo goes for $494,000. You can still get a nice 3 BR 2 BA 1700 SF house here for $350,000. There were 594 active residential listings in Chico as of last Friday, median price $369,450.

It’s going to remain a buyer’s market here for the foreseeable future. Not that there’s a lack of transplants hovering out there waiting for good deals. Local REALTORS see it every day. The buyer is King for the moment. If you’ve got one, it might be prudent to bow a little in reverence. The worm has turned.

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.