Copy for Real Estate Guide Column for 9-28-07

REAL ESTATE PATTERNS
By Ken DuVall

PERSPECTIVE IS EVERYTHING

I’m not going to whitewash this horrid mess we’re in, not for a minute. In this time of housing and credit market chaos, we must take the long view and keep our heads about us when all else fails. I’m as shook up over this situation as everyone else is. Who in their right mind isn’t?

Foreclosures are climbing to new highs. And it’s going to get worse before it gets better. We know that. One assault media headline that got to me was: “There’s now one foreclosure for every 510 households nationwide!!!!” At first I too thought “Holy cow!” But do the math. That equates to a “gigantic” TWO TENTHS of ONE PERCENT of all loans. That’s a drop in the bucket out of the 44 MILLION U.S. residential mortgages. Perspective.

It’s tragic but not world shattering. Foreclosures are up because too many unqualified, and perhaps mislead, people bought homes and now can’t make the payments. Losing one’s home is certainly an unparalleled calamity, but many of those buyers made no down payment and had no equity to lose. They just paid “rent” as it’s turned out. New bail-out Federal loan programs to help them are being devised as I type.

The Fed has stepped up to the plate big time and taken a solid swing at stemming the bloodbath with a variety of programs aimed at propping up the markets. If, as now expected, the Fed cuts the funds rate again, we could see mortgage rates down to 5.5% by year-end. The concept is that easier money will smooth out housing, the economy, and facilitate potential home buyers. Expect continued downward pressure on home prices through next year.

As far as Chico goes, we’re still way O.K. Housing inventory is down considerably, partly because of some sellers withdrawing their listings in this grim market. We definitely do NOT have a glut of unsold homes. So far this year 2231 transactions through the Chico MLS have closed for a sales volume of $735 million. Plus there’s another $142 million worth of deals pending in escrow. And we’re putting new sales in escrow every day. Chico is NOT tanking. Perspective.

Well, that’s as good as I can do for you this week. On the face of things it’s definitely a grim and depressing picture. Most experts don’t envision a full recovery from between this rock and a hard place until the end of next year at best. But we are definitely not going to fall off the edge of the earth! Perspective.

America is amazing. In spite of the negativism/sensationalism by some media types and the unproductive/venomous gridlock inherent in current politics, we still find ways to innovate, create, and succeed. As long as our American spirit remains vibrant, we will continue to overcome and live happily ever after. Amen.

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.

Copy for Real Estate Guide Column for 9-21-07

REAL ESTATE PATTERNS
By Ken DuVall

BITE THE BULLET!

It’s hard to find anything positive this week but for the majority consensus indicating we will get back to “normal” -during our lifetimes! Notwithstanding the habitual hidden agenda behind the media’s gloom and doom “news”, home prices nationally are actually UP 2.6% year-over-year. It just depends which issues one chooses to identify. Of 330 metro areas, only 93 experienced price declines though June. People will always want a roof over their heads. Population will continue growing.

A classic old saying: “Buy on bad news, sell on good.” Based on that, since this is the most dreadful bad news I’ve ever seen, the logical conclusion must be that NOW is the time to buy. Will Rogers (1879-1935): “Buy land. They ain’t makin’ it anymore.” Still true; just new players in a new era.

In the first 6 months, 29,696 California homes sold at auction for a total of $12 BILLION, average price $400,000. In addition to the 6-figures worth of standard sales this year, almost 30,000 MORE people bought, despite today’s grim marketplace. I experienced the 80’s when interest rates hit 18%. Tough times then too. But those who bought more than doubled their investments. Many of us went through the dismal early 90’s housing crash when rates were 9.5%, compared to the bargain rate of 6+% today. Those who bought during that bust doubled their money too.

A vacant lot in a trailer park in Aspen, CO sold last week for $1.5 million. It brought $25,000 in 1987. We’ve already read a buyer plans to pay over $20 mil for the Koret industrial building at the airport. There’s a huge gorgeous new one next door just finishing up. An apartment complex off Esplanade opened escrow last week priced at $7.8 mil. The 2.9 acre vacant lot priced at $1.9 mil at Lassen/Esplanade also went into escrow. The presumption must be these high-end buyers know what they’re doing.

Still, this downturn is unprecedented in scope and steeper than we’ve ever experienced. Indeed, reports paint a stark picture of home sales and prices falling, mortgage market grief, foreclosures soaring, areas saturated with unsold inventory, buyer’s ranks thinning as credit gets tougher, etc. So what’s a buyer to do?

Bottom line: Father Time is your major collaborator here. If you can’t stay in your home for at least 5 to 7 years, don’t even think about buying now. But, if you can get a conventional mortgage, and, you’re buying for the long haul, this is the time to buy. Real estate is NOT a get rich quick scheme- it's a get rich SLOW scheme! Mega-billionaire investment mogul Warren Buffett said it, “My favorite holding period is forever.” Of course, I wish I still owned every piece of dirt I ever bought!

When the going gets tough, the tough go shopping! There will always be areas, like Chico, where home prices and population will continue demonstrating steady growth. In my opinion, the only way to lose money in real estate is NOT to own some! If needed, I have a couple of actual “bullets to bite on” sitting here on my desk. Feel free to come in and chomp away!

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.

Copy for Real Estate Guide Column for 9-14-07

REAL ESTATE PATTERNS
By Ken DuVall

“HEAD 'EM OFF AT THE PASS!”

President Roosevelt once said, “We’ve nothing to fear but fear itself.” But it’s as if a gunshot suddenly rang out last week, spooking and stampeding the herd. Beware the doomsayers. It’s extremely divisive out there. Some look out their window and see only the dirt on the glass. I see the trees and blue skies beyond that through mine, even with the dark clouds on the horizon. Take the long view as we work our way though this dilemma. The sky hasn’t fallen- yet.

The outlook is clearly dim and downbeat for any housing-linked businesses including us REALTORS, lenders- giant Countrywide just announced yet another big worker cutback- lumber and building component suppliers, landscapers, furniture/appliances, etc. And yet other industries are seeing robust sales, an offset against a more severe overall economic downturn.

Anything related to energy is golden: oil- which is expected to drop back to $60 a barrel by year end- coal and gas mining, utility equipment, and energy conservation, of course. Health care continues to boom. GDP growth is forecast at 2-2.5% in 2008. We can live with that. Interest rates remain low and stable. Most companies see orders and productivity expanding. Hiring will rebound with 1.3 million new jobs forecast for 2008.

Help for delinquent homeowners will be provided by our “Nanny Government.” The FHA will get the power to refinance high risk borrowers behind on their payments, and perhaps increase loan limits considered necessary as well. The White House and Congress have both proposed urgent reforms for those facing foreclosure. America will rise to the occasion and help resolve this mess we’re in.

A $1 billion bailout was suggested along with increasing FHA loan limits to accommodate homeowners in re-financing their adjustable loans at a lower rate. Currently, if a lender forgives a portion of an existing loan, that part is now treated as taxable income. It would become tax-exempt. That’s huge. The Fed seems likely to reduce their funds rate on Sept. 18th by up to a half a percentage point. Some economists hope so, some don’t.

At the end of the day, the Fed has powerful weapons and is poised to move swiftly. This includes “putting the arm” on lenders to persuade them not to foreclose without first giving borrowers a chance to renegotiate. They are also moving to regulate lenders to discourage future predatory practices.

The eminent Nobel laureate and former World Bank chief economist Joseph Stiglitz last week said, “The dynamics could unravel more, and of course we can’t be sure where it will stop, but the most likely outcome is that this will be just a rather prolonged slowdown, not a recession. America has simply been living beyond its means.” Sounds to me like an accurate analysis from an informed expert.

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.