Copy for Real Estate Guide Column for 2-29-08

REAL ESTATE PATTERNS
By Ken DuVall

THE FAITHFUL SHALL BE REWARDED!

Long column, lot to say. I know I’m sounding like a broken record, but why when there’s bad news the headline is always “As expected by analysts”? When there’s good news, it’s “What a surprise!” The U.S. housing market has taken a brutal beating in the press this past year. While a market shift has certainly occurred, the entire story is just not being told.

The “Surprise!” media reports are that the ranks of the unemployed are down. So is the U.S. trade deficit down- only a mere $58 billion- but down, not up. Other under-reported facts: January housing starts actually up 0.8%. Industrial production up- again. Retail sales up- again. Included in that category: taser guns- sales up 65%. Sign of the times.

Billionaire investor legend Warren Buffett said this month, “I’m a huge bull on the American economy. It’s not a smart thing to sell the U.S. short over the years. The world gets better. People get more productive. More human capacity is unleashed over time. The banks are not permanently crippled by all those subprime loans. The financial institutions that got wrapped up in sour mortgage loans can and will sort out those bad investments even without a government-led bailout or stimulus package.” And he puts his money where his mouth is too.

Buffett continues, “A recession is looming but we’ve overcome worse and come out ahead. I went through 1982 (so did I) when the interest rate was 21%. This is not a tough period.” Remember his famous line, “My favorite holding period is forever.” Another good line some Texas oil tycoon said, “The meek shall inherit the earth- but not the mineral rights!”

I’m not going around with blinders on. I know things are going to get worse before we get our act back together. But there’s always that pony in the manure pile if you dig deep enough. It depends where your focus is. It’s your attitude, not your aptitude, that determines your altitude.

The media concentrates on poorly chosen facts that we must dispel because they’re not telling us the whole story. While sales of existing homes are off from their high, 2007 was still the 5th best year on record for existing-home sales. As for plummeting home prices, the nation is still within 2% of the all-time high median existing-home price set in 2006. The media has painted housing as a bad investment, but any investment can have a bad year. As always, perspective is critical.

The new conforming loan limits bill, increasing Federally insured loans up to $729,750 in high cost areas, means lower rates for borrowers if the brass ever gets it all worked out. Chico’s max should be determined next month. We’ve needed this for a long time. California officials will yield to emboldened Indian gambling interests creating new tax revenues along with the largest casinos in the world down in Southern Cal.

“Project Lifeline” was also approved by the six largest lenders, who control fully half of all mortgages in the country, to put the foreclosure process on hold for 30 days while homeowners work out ways to make their loans more affordable. The wise course is not to destroy those who have already secured some success but to create conditions enabling them to be even more successful. It costs lenders far more to foreclose than to forbear.

Homebuyers in for the long haul always come out ahead. The average return on a down payment over 10 years is historically 3 to 5 times greater than stock market returns. But a home is not a stock. It’s first and foremost a place to live and raise a family. Even when prices are falling, homeowners who kept to a buy and hold strategy for at least 5 years have always come out ahead.

Home values in California have increased an average of 9% annually for the last 38 years. Sellers have controlled the market over the past 6 years. Right now is a great opportunity for buyers to stake out the home of their dreams.

P.S. A 138-acre parcel near the famous Hollywoodland sign high above Hollywood & Vine where I lived, once owned by Howard Hughes, sold 6 years ago for $2 mil. It’s again available for $22 mil! Worth every penny too, folks. And finally, if that 92-year old legally blind golfer in Florida can make a 110-yard hole-in-one as he did this month, there’s hope for all of us!

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 2-22-08

REAL ESTATE PATTERNS
By Ken DuVall

TAKE YOUR BEST SHOT!

Housing cycles are always characterized by long intervals of ups and downs. In part we tend to react to the news home buyers ingest on a regular basis. But certain events also shape and have a direct correlation to both stock and housing markets. Everyone is guessing about everything right now so let’s take a look at the Super Bowl influence for instance. We know for sure whoever wins it has unerringly had an economic affect.

Going all the way back to 1967, it has been economically more advantageous when the NFC wins it. Whoever wins the Super Bowl- which team and which conference- we can look at the past Bowls to see how the market performed over the ensuring year. The stock market has been more positive (86% vs. 63% of the time) in the years when the NFC won with above average market performance (NFC wins, +16.4% vs. AFC wins, 7.1%). They are tied at the hip. Therefore, since the Giants won this year, we may have a good thing going for us.

From a team perspective, when the Giants won, the results have been more favorable then when the Patriots won. In the Giants two previous wins (1987 and 1991) the S&P rallied 17.8%. But when the Patriots won (2002, 2004 and 2005) the market was down 2.1%. More impressive is the fact that when the Patriots lost the Super Bowl in 1986 and 1997, the markets went up 25.8%. It’s a good thing the Pats lost because the last time a team went undefeated (the Miami Dolphins in 1973) it preceded the major 1973-74 recession!

Finally, the two times the Giants won, economic conditions were totally similar to now. Their 1987 win preceded the October stock market crash, and the 1991 victory was during our last major housing crash. The good news is that in both cases the market moved higher in those years, 1987, up 5.1%, and 30.6% in 1991.

Now on to an even more esoteric strategy- feng shui! Forget about your graphs, charts and economic forecasts. Asian investors are turning to feng shui masters to tell them which way the markets will go in this the Chinese Year of the Rat. It may be no coincidence that it just happens to fall in an election year! It relies on movements of the cosmos, as well as the placement of furniture and space to generate a flow of wealth, health, and beneficial relationships.

In Hong Kong and Singapore it’s taken so seriously that corporations consult feng shui experts on everything from business strategy to interior design. Disneyland even changed the angle of the main entrance of its Hong Kong theme park after consulting a feng shui expert. Raymond Lo, a feng shui master in Hong Kong who does readings for major corporations expects industries linked to earth and metal signs to flourish during this Year of the Rat.

Lo says, “The rat is a symbol of money to the earth industry… the strong water element indicates productivity and activity,” who suggests that investors put their money into property (real estate), mining, and gold. He also “foresees a lot of correction in the stock markets. The whole concept we have for the year is the image of a seed sprouting from the ground- the beginning is hard.”

P.S. I actually do have a Tibetan prayer wheel with a mantra inside it on my desk, along with a crystal ball. Every now and then I give the wheel a spin and chant some, then I gaze into the ball. I don’t know if it really does any good, but it makes me feel better!

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 2-8-08

REAL ESTATE PATTERNS
By Ken DuVall

ANALYSIS

The question being asked most frequently today: Just how bad will the economy get? Unidentified problems may still be lurking below the surface. Is the U.S. already in a recession? No, but we may be teetering on the brink. But a recession could be a blessing in disguise, perhaps leading to a needed cleansing, eliminating the deadwood, and we could end up the stronger for it. We need to re-clarify our value structure. Will the proposed $150 billion stimulus package help? Yes, but not until later on in the year. As predicted, the Fed cut their funds rate again last week with another one expected next month. Wall Street applauded.

Is the bottom in sight? Far from it. Recovery from the credit crunch still has a way to go. A rebound in 2008 remains to be seen. The huge inventory of unsold homes will weigh heavily for months, presently a 9.6-month’s supply at the current sales pace, vs. a more balanced 6-month’s supply. Current foreclosures amount to only 1% of all U.S. homes. No less an authority than the Int’l Monetary Fund said last week that while the worldwide economy will slow this year, the U.S. will indeed avoid a recession. So be it.

So far, despite all the bad news, it doesn’t not sound like the calamity portrayed by the media. Things are definitely not the greatest by a long shot, but it isn’t a full blown catastrophe either. Included in Washington’s stimulus package is a proposal to increase federally insured loan amounts from the existing max of $417,000 up to as much as $729,750. When approved, the increase will provide liquidity to the mortgage market, allowing buyers who have been shut out to get loans. This move will definitely stimulate home sales and should also stem the rise in foreclosures by over 200,000 homes.

In fact, here in Beautiful Blessed Chico- which is what we really care about, right?- we have a loan default rate (the first alarm before foreclosure sets in) that’s fully 20% below the statewide rate, courtesy of Dan Hunt, President of Mid Valley Title. Sacramento, by comparison has default filings 206% above the state rate.

What a wonderful difference. Dan says and I agree that this should result in further support of property values in Butte County. Chico is one of the places in the country where people come for the good life. We’re the easy off ramp from the fast lane of life. As long as they come, values will stay up. The Law of Supply and Demand is cast in concrete.

The Office of Federal Housing’s January 29, 2008 report through the last quarter of 2007 for 20 metros all around the country shows home price gains running from 7.8% all the way up to 15.7%. Question: why don’t we ever hear these facts from the main stream media? Go figure.

Here are the confirmed Chico area closed sales figures for 2006 vs. 2007. For 2006, 897 homes sold at a median price of $336,000 with an average days on market (DOM) of 63. In 2007, 868 sold, median $325,000, average DOM, 82. That equates to a 3.27% price drop. As of last week there were only 384 homes- definitely not a glut- listed for sale, median $356,000, DOM, 107. At the same time, there were 127 home sales already in escrow. All things considered, Chico’s not doing that shabby, 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.