Copy for Real Estate Guide Column for 11-30-07

REAL ESTATE PATTERNS
By Ken DuVall

DANCING WITH THE ISSUES

What with all the depressing news lately, it’s really getting hard to stay positive, even for me. But I’ll do the best I can. There may a global redistribution of wealth taking shape as a huge Abu Dhabi investment firm just popped a $7.5 billion transfusion into troubled Citigroup, a vote of confidence for the nation’s largest bank which has suffered severe losses amid the ongoing mortgage market crisis.

Citi is lopping off another 45,000 jobs to cut their losses. Funds like Abu Dhabi’s with their gigantic cash reserves could be viewed as a “White Knight” to the rescue. Whether we like it or not the U.S. is on sale right now. The weak dollar makes us a bargain. Wall Street investors are encouraged, hopeful the financial sector will now remain healthy in spite of our credit crisis.

Major financial institutions have taken another $80 billion worth of write downs, on top of the $75 billion already taken, as home loan defaults have rendered some mortgage backed securities essentially worthless. There’s still $600 billion in subprime loans out there due to reset next year, with the specter of even more home foreclosures.

Perspective is important here. Only 15% of all mortgages in America fall into the subprime category. Of that, only 3% are over 30 days late on their payments so far. The possibility exists it may not be turn out as bad as it looks, but it will take time to work through it. Bear in mind we are in uncharted territory.

While we have yet to see the full extent of the damage from the soaring foreclosures across the country, it doesn’t appear the economy is going to tank just yet, although the possibility of a depression still looms on the horizon. By the way, a recession is when your neighbor is out of work. A depression (think back to the 1930’s) is when you’re out of work!

Last Saturday’s front page story, written by reporter Joe Bruno of the Associated Press, proclaimed “Mortgage failures may create nightmare economic scenario.” What we do- me too- is select any of the various statistics, negative or positive, from the many available and then we just write a story around them. It then magically becomes “the news”. With the main stream media, bad news sells, so if it doesn’t “bleed”, it doesn’t lead. We’re not interested in hearing from Ronald McDonald- we want to know what Chicken Little has to say!

Sure, the national sales volume is down, but people haven’t stopped buying homes. That’s the key element. There are many areas in this country where there is no housing slump because they’re still enjoying double digit price increases and strong sales. Still, and have no doubt about it: pricing is the critical factor now more than ever. Anything will sell at a price. You can never be too thin, too rich, or price a listing too low.

Every home sales downturn in the last 30 years was spurred and accompanied by economic problems. This time, in contrast, the fundamentals are solid. The U.S. gross domestic product (GDP) is expected to grow by a reasonable 2%, supported by 2 million job gains in the last 2 years, amid continuing and historically low interest rates which should be back below 6% soon. So national sales are down 4.5%. Look on the bright side: that means more people have more of a selection and more can now afford to buy homes. It’ll all settle down eventually. It always has.

On the dark side, Sacramento, among others, is having big problems. Some Sac new home builders have just stopped construction altogether. One even filed bankruptcy. It’s not wonderful everywhere. Many who bought homes in the past 2 years may not be able to resell today for the purchase price. If you got in late, it may be a rough ride. But if you really don’t have to sell right now, time heals all wounds.

For Chico: the Office of Federal Housing’s Metropolitan Statistical Area Home Price Index (MSAHPI) shows a 73.3% home price gain over the last 5 years. From January through November 15th, 2006, 943 homes closed at a median price of $325,000 with an average 67 days on market. This year through November 15th, we’ve sold 873, median $313,500, down 3.54%, with 87 days on market. In the last 30 days, 215 homes were listed, 89 sold, with another 138 pending in escrow. That’s a comfortable 41% absorption rate. We are fortunately not seeing a huge foreclosure problem here either. So far, so good.

Housing is a cyclical affair. Values invariably go up, down, or sideways. Over the last 50 years, of those who bought and held for the fundamental long term benefits of homeownership, the losers were those who didn’t own one. Its people-pressure that makes values. Chico, the “City of Fortune”, is a place where people really want to live, and in my opinion, for all the right reasons. We have a lot to be thankful for. Onward & Upward.

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 11-16-07

REAL ESTATE PATTERNS
By Ken DuVall

POINT OF VIEW

Let’s forget all the gloomy headlines for this week. It’s always darkest before the dawn, so while we wait, here’s a true story for you. I was in my early twenties, just sitting around one dismal rainy day. I had a cold and was feeling miserable. I was really depressed at that moment in my young life. I had lost my job, and my girlfriend. My car needed a new radiator and I didn’t have the money, even though a dollar’s worth of gas would last me a whole week in those days. And to top it off, my unemployment checks had just run out.

Sitting there in the gloom I heard this voice say, “Cheer up, things could be worse.” So I said, “Why not?” Well, I cheered up, and sure enough, things got worse! I’m kidding. But I knew that I had to stop feeling sorry for myself. I was an optimist. I could find a pony in a pile of manure!

I didn’t have anything else to do that day so I started reading this book on positive thinking I’d never opened. There was a test in it which changed my life forever. What with all the negative news today we need its principles more than ever. Fear is just excitement in need of an attitude adjustment. We have to take charge of our lives.

It sounds deceptively simple: all you have to do is to go 30 days without having one single negative thought. If you don’t go the 30 days, you have to start over and go another full 30 days. It took me 3 months to master it. Remember the 11th Commandment: “Thou shalt not kid thyself!”

I’ve lived happily ever since as the fairy tales say. The process works spectacularly. We’re all going to have our daily trials and tribulations but if you don’t allow them to bring you down by day’s end, you’re going to be a winner. Everything shall pass. The trick is to train your mind to deal with the inevitable problems so they don’t gain the upper hand.

There’s only one thing in today’s upside down world you can control- your thoughts. No one can tell you how or what to think but you- at least not in our country. Don’t forget to laugh too. You know me: I’d rather laugh and be excited than eat. My stimulants of choice are endorphins and adrenalin.

Across from the Hollywood Post Office where I picked up my mail everyday was a shoe shine stand run by this charming old black guy named Casey. He came up every day from South Central L.A. I always got my shoes shined there. So did all the L.A.P.D. motorcycle cops with their high top boots.

Casey was a blessing on the planet. He brightened your every day with his presence. He had a sign you could read from the street that said: “A smile doeth good like a medicine.” He always had a smile on his own beautiful countenance. When Casey died, every cop in the Hollywood Division gave him a tribute motorcade all down Hollywood Blvd. I was there with tears in my eyes.

It’s your attitude, not your aptitude, that determines your altitude! Learn to take the stressful events of today in stride, laugh a lot, and have a nice rest of your life.

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 11-9-07

REAL ESTATE PATTERNS
By Ken DuVall

LIGHT AT THE END?

The country is experiencing a period marked by an enormous degree of uncertainty. The housing slump is deepening. Credit market woes persist. New home loans are becoming as scarce as hen’s teeth. Wall Street is nervous. Investors are biting their nails as brokerage losses and scandals continue to mount. Corporate CEO’s are dropping like flies. The nation’s largest bank’s profits are plummeting and they continue to slash jobs. Home foreclosures are soaring while lenders have been forced out of business. These are the cold, hard facts.

Nothing is cast in concrete as we continue dealing with the volatile Middle East chaos. Kiplinger says oil could go as high as $150 a barrel in the next few years, putting gas at $5 a gallon. Europe already pays over $7. We may look back and remember now as the “Good Old Days”. If and when a barrel of oil hits $100, all bets are off. A crippling oil price spike is a clear and present danger.

Yet mortgage rates are now at a 6-month low. Flip side: the big investors that buy the pre-packaged home loans from lenders are scared to death right now. If they don’t buy loan packages, home mortgages dry up. I don’t think there’s any really good news coming there soon. They’ll need time to get over their jitters. The psychology of fear is deadly. So is losing billions in bad paper. We’ve yet to see the ultimate long-term effect of the credit crunch. “It ain’t over ‘til it’s over” as Yogi Berra once said.

But, if things are really as bad the press portrays, then why are things so good?! This is no picnic we’re having but they would have us think America is going down the tubes. The sky was still up there the last time I looked. I’m just saying take the main stream media “reports” with a proverbial grain of salt. Keep your perspective throughout these complex and unnerving times. Analyst’s odds on a recession just dropped and they expect housing’s negative impact on the economy to start leveling off sometime next year.

Against this backdrop, the huge run-up in home prices over the last 5 years resulting in the current downward price adjustment is really not that alarming. What we’re seeing is a gradual correction. But prices are actually holding up surprisingly well so far. Homes that enjoyed a 40%-50% or more gain in the last few years may now be down say 10% today. That does not constitute a net loss. Of course, individual situations will vary.

Giant Countrywide just announced they’re refinancing or modifying up to $16 billion in loans made to their financially strapped subprime borrowers now facing possible foreclosure. The economic fallout may not be nearly as severe as analysts once predicted. But yet another giant, Citigroup, is now in trouble too, writing off $11 billion and their CEO along with it. However, these huge financial institutions will absorb their losses.

We now know they have the capital to do it. When the dust settles, the winners will emerge victorious. Plus, the Administration is still in the act doing further damage control for both them and homeowners alike. Also, overseas growth helps keep the U.S. economy strong, somewhat offsetting housing’s drag, but is fueled by the undervalued dollar. Prices for commercial real estate continue to increase to all-time highs. Foreign investors are pouring money into the U.S. in response to the weaker dollar. New York, Sac, San Jose, San Francisco, L.A. and San Diego top their list and look cheap to them.

In the “who cares” department, the ultra-high end is amazing. All around the country in the enclaves of the rich and famous, home sales over $10 mil are hotter than ever. At Tahoe, where an average of two mega-homes sells a year, eight have already sold this year. One with 10 acres of lakefront went for $36 mil. No loan problems there. These heavy hitters use the “interest free” plan: cash!

P.S. The NAT’L ASSN. OF REALTORS® just donated $500,000 to victims of the disastrous Southern California fires. NAR's contribution should go a long way in mitigating the impact on those poor unfortunate people.

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.