Copy for Real Estate Guide Column for 1-25-08
REAL ESTATE PATTERNS
By Ken DuVall

TAKING OUR PULSE

As Bob Dylan put it long ago, “The times they are a’ changin’.” Yet for every negative, there’s a positive somewhere, offsetting or at least tempering the downside. We’re in a precarious balance today, with our economy highly vulnerable to any new jolts from storms, war, energy, financial, etc. But barring another big shock, we just limp along with this uneasy feeling. We’re like the gag: “What lies beneath the ocean and twitches? Answer: “Nervous wrecks!” Fear of the unknown rules the day. Personally, I don’t think it’s going to end up as badly as things look at the moment. It’s always darkest before the dawn. But keep your fingers crossed just the same.

The “R” word, recession, is a definite maybe at this point. But if dealt with confidently and aided by good fortune, maybe not. While politicians propose plans to shore up the sagging economy, global stocks fell worldwide this week following the declines on Wall Street amid investor pessimism over stimulus plans to prevent a collapse. Traders worldwide are shrugging off Washington’s assurances. The whole planet is nervous about a major U.S. downturn spilling over to the rest of the globe as the Fed responded by drastically cutting their rates Tuesday to avoid a full blown market meltdown. A very wise move. Economists are betting on another cut at their meeting next week.

However, Federal spending will keep on climbing. And foreign investment here remains strong and steady. They’re not stupid. They are taking stakes in U.S. companies, investments nearing $500 billion in the last year, notably in financial firms, which though struggling, are fundamentally sound. America’s economy amounts to some $15 trillion and will remain the biggest in the world for some time to come. The next largest is China’s $2.7 trillion. We’re clearly experiencing a major correction, but we’re not going down the tubes just yet.

One good thing: Homeowners just got a tax break if they are forced to sell at a loss. No longer will they have to pay income tax on the old “forgiven debt penalty” IRS treatment through 2009. And some new home builders are even guaranteeing to reimburse buyers for any loss in value for 5 years from purchase. Surprisingly, new home construction continues in some sectors. “Build it and they will come” prevails where market conditions allow, even as the glut of new homes persists.

And existing home sellers are biting the bullet with asking prices finally becoming more realistic in today’s market. There’s still too much inventory but those areas that weren’t overheated too badly, like Chico, are still performing surprisingly well. Credit jitters on the part of lenders lingers, making it harder to get loans, further aggravating the slump. In the “Don’t count your chickens ‘til they’re hatched” department: the well-trumpeted Dyer Mountain 7000-acre resort complex near Lake Almanor is in dire (pardon the pun) straits. A S.F. lender that loaned the developer over $40 mil filed a notice of foreclosure this week. If they don’t pony up $15.8 mil by Feb 4th, the whole deal could be history.

Loan rates are plummeting. One lender is offering qualified borrowers 5.3% 30-year fixed loans and 4.8% 15-year fixed, last seen in 2004. “Such a deal” has brought new loan application levels back up to a 4-year high. The bad news is that lenders are actually beginning to run out of new funds to loan. Never in my 45 years in the business have I ever witnessed that. Amazing times we’re going through now. Most experts say that home prices nationally will have to give way another 5% from their peak in 2005 to end the oversupply of houses on the market, and housing starts must fall another 25%. Sounds about right to me.

Bottom line: Bear in mind that no matter where we are in this cycle- and this is just another cycle- there’ll always be a segment of the population who will be moving for one reason or another. People get married or transferred. They have children and need more space. They grow older and downsize. Their kids go to college and parents buy them a home. Some decide it’s a good time to invest, or buy a second home. Homes are staples just like food or water. You can’t live without them, period. There’s constantly going to be people needing to buy or sell. We’re all in the same boat here. Count your blessing and 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.

Copy for Real Estate Guide Column for 1-18-08
REAL ESTATE PATTERNS
By Ken DuVall

REALITY VS. CREATIVE JOURNALISM

There’s a lot of differing opinions out there. The latest news on the real estate front is either calmly reassuring or deeply alarming, depending on one’s point of view. The Nat’l Assn. of REALTORS reported that home sales prices actually rose in the last quarter in most metropolitan markets. The Associated Press emphasized the negative statistic that the number of homes sold had fallen in 46 states. Guess what: Both were correct.

The contrasting reports stemmed from the exact same press release, reflecting the fundamental divide that exists between the real estate industry and the news business. Reporters think the industry is out to spin the numbers and put a smiley face on a grim situation. So I’ve decided to rename the networks: ABC stands for Always Biased Coverage; CBS for Continual BS (you fill it in!); and NBC for No Body Cares. Oh yeah, CNN stands for the Corrupt News Network; and Nat’l Public Radio is for No Pertinent Reporting!

But which facts matter? By choosing only one important set of data over another, the AP story painted a gloomier picture in the public mind which real estate industry critics say holds dire consequences for the market and the economy in general. The biggest problem I see today is out-of-context reporting. I take no issue with reporting downbeat data, but what I do object to is the media obviously going out of its way to over-emphasize the most negative aspects of simple statistical reports, creating fear that has impacted and shocked the market into near paralysis. They’re poisoning the well from which we all drink.

My beef, and it affects all of us, is that their continuous drumbeat of negative coverage is causing would-be buyers to back out of transactions. It demoralizes me too. The market is actually underperforming in part due to the fear created by their depressing headlines. That’s not good for anyone. The key elements we’ve long adhered to, that housing is a good value, a good investment, a necessary shelter, a place to call home, and with significant tax benefits, is under relentless attack by the drive-by media. We should all be working together promoting fair and balanced reporting of the news to inform- not indoctrinate- the public.

There’s an unprecedented opportunity to buy right now that I’d hate to see consumers miss out on, at least not before investigating the possibilities. Interest rates have fallen dramatically, home choices have increased, and prices are very favorable. Chico sales, while not breaking records, are still ongoing. All markets, just like weather reports, are local, so don’t be spooked by the national media’s “never let the facts stand in the way of a good story” doomsday mantra scare you off. The tail is wagging the dog.

Clearly, the media has a profound ability to influence the market place. Remember: they’re fueled by sensationalism, not the mundane. Where they say prices and sales are “plummeting”, that catches your attention. But they are not plummeting everywhere! The printed word has a dramatic way of influencing your perspective. You keep reading “we’re all doomed!” long enough, you will turn into a fence sitter for sure. No matter what they report, life as we know it still goes on.

If they simply pointed out that sales are slower, true, but also true, that the industry just had its sixth best year ever, despite of all the actual really bad things that happened to us last year, that would paint a far more accurate picture. We need a sense of balance now more than ever before. Example: Stock guru Jim Cramer set off national alarms when he advised on NBC’s Today Show, “Don’t you dare buy a home now or you’ll lose money.” What he said was totally inaccurate and diametrically opposed to what he preaches on his own investment show, which is to buy low and sell high! Again, housing is not a get rich quick scheme. It’s a get rich slow agenda.

Housing never goes out of style or becomes obsolete. Demand will always continue to increase. Conversely, the supply of usable land will continually decrease. You tell me what effect that scenario is going to have on prices as we go forward. Late flash: Last week Actor Nick Cage’s Newport Beach home sold for $35 million, a new price record for Orange County. That’s $10 million more than he paid for it in 2005- at the peak of the housing boom! Cramer was mistaken. Apparently you can even buy high, and then sell high too. Amen to that!

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 1-11-08

REAL ESTATE PATTERNS
By Ken DuVall

THE NEW REVISED PERSPECTIVE

I should title this column “How I Learned to Stop Worrying and Love the Bomb”, from Stanley Kubrick’s 1964 classic movie “Dr. Strangelove.” Some say the culture and fabric of this great nation are being dismantled brick by brick, but so gradually we won’t notice until the walls sag- just before they cave in. Others believe we’re not yet ready to give up our traditions and heritage. We’ll see.

But we are in a cleansing mode now. It turns out it’s not OK to be greedy. Economist Schumpeter’s “creative destruction” is where obsolete firms are destroyed and new capital is released, making way for fresh technologies and concepts. We got into this fairy tale fixation about growth at all costs. Our values became distorted. Too many began living beyond their means, piling up excessive debt encouraged by those who proclaimed that deficits didn’t matter. We messed with Mother Nature’s scheme of things. You can’t do that without a payback.

Yet billions in offshore funds are cascading into America’s beleaguered corporations, not to mention our real estate- big time- clearly demonstrating there’s faith in our ability to survive these bleak times. Numerous fixes are underway for those who shouldn’t have bought houses they couldn’t afford and for the huge companies that lent money irresponsibly. While recession is still not out of the question, many experts are convinced that our credit and housing woes will not sink the economy. We are now exploring economic regeneration and rejuvenation.

On the bright side: A newly released Harvard University Housing study projects “…a sustainable housing demand through 2014. Housing is traditionally cyclical. It’s only a matter of time until we have worked down unsold inventory and begin setting our sights on meeting rising demand. Do not mistake short term reactions to the slowdown as a harbinger of thing to come for the long term… the market will bounce back… and turn around once the oversupply is worked off.” So be it. The qualified buyer is King today.

Laugh during the pain- Then and Now: Then: Sellers hoped for multiple offers. Now: Sellers hope for multiple showings- per month! Then: Listing agents put up their “Just Listed” yard sign. Now: Agents put a “Price Reduced” rider on it the day it goes up. Then: Sellers told buyers all offers would be considered next week. Now: Sellers inform buyers their home will be sold at auction next week. Then: Sellers worried if their house didn’t sell in 5 days. Now: Sellers are relieved when it sells in 5 months. Then: REALTORS told Starbucks workers they couldn’t afford a house. Now: REALTORS working at Starbucks can’t afford their house payment!

It’s not pretty right now, but we shall endure. The best guide to the future is the past. Look beyond the horizon as 2008 unfolds. “We are endowed by our Creator...” as Thomas Jefferson wrote. Have a Great New Year. Keep the Faith.

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.