Copy for Real Estate Guide Column for 5-23-08

REAL ESTATE PATTERNS
By Ken DuVall

GREENER PASTURES

After hearing the near constant main stream media rants about how terrible our lives are in America: the economy in shambles, gloom and doom everywhere, on and on, I happened to hear a report on Paul Harvey radio published by the World Competitive Year Book. It says the U.S. economy has been the best in the world for the 15th straight year. They say America’s economy remains the world’s strongest, totally dominating all other countries.

We may not hear that anywhere else. The most important element about everything taking place today is not so much in where one stands, or what positions politicians and activists take. The important thing is in what direction we are moving. No matter what, take a stand for something or you’ll fall for anything! Onward and Upward, my friends.

In your dreams! Here’s another incredible world economy that’s absolutely beyond belief, almost like another planet: Dubai, capital of the United Arab Emirates on the Persian Gulf adjoining Saudi Arabia. In the last 30 years, Dubai has grown from an obscure pearl diving village of 100,000 inhabitants to a cosmopolitan megalopolis of 1.5 million. One new resident says, ‘We don’t even have to lock our doors. There’s no crime here.” Imagine that if you can. Maybe they still cut off thieves’ hands over there!

There are 5000 residential and commercial projects currently in the pipeline, gearing up for an expected population of 4 million new people over the next decade. Construction cranes are everywhere like giant birds reaching toward the sky. Sheikh Mohammed bin Rashid al-Maktoum, VP of the United Arab Emirates and absolute ruler of Dubai, sees his oil business vanishing, accounting for only 5% of their GDP, so the Emir- often referred to as “Sheikh Mo”- decreed that trade, finance, and real estate will be their future. What Mo says goes- he doesn’t do committees!

The spiraling Burj Dubai, now under construction, will be the world’s tallest skyscraper at 160 stories. Another world’s largest is will be the 6500 room Asia Hotel. How about an underwater hotel? They’ve got one. And a 5-star Ritz-Carlton Hotel opens soon. There’s an indoor ski resort (are you ready- a ski slope in the middle of the desert?!) A second one is in the works due to unprecedented demand. They’ve already constructed 300 private islands offshore in the Gulf known collectively as “The World”, shaped like a global map using sand reclaimed from the seabed. We’re talking a new global landmark, resembling some sci-fi interplanetary space station.

Islands are priced between $15 and $50 million each. The creation/dredging operation was monumental. Over half have already sold. The largest is the size of San Francisco! Search “Dubai” online for photos that’ll blow your mind. Of course there are condos. One with 7500 SF went for $6 mil recently. The first 4000 of the Palm Jumeirah’s properties were sold in 72 hours. They’ve tripled or more in value. One that sold for $700,000 in 2002 is worth $4 mil today. Among the true believers: The Donald. His 61-story condo/hotel opens in 2011. Then there’s the 1550 room Atlantis Resort now taking shape on the outer rim. Everything there is beyond belief and compare.

Despite a recent media blitz here about the moderate Arab city-state, Dubai remains a mystery to many Americans, but it may be the tantalizing new oasis investors have been waiting for. Some are saying, “I should have bought there a year ago.” We’ve all got 20/20 hindsight.

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 5-16-08
REAL ESTATE PATTERNS
By Ken DuVall

WHAT RECESSION??

The facts just don’t add up. If you’re following the news these days, it seems indisputable that the U.S. is in recession. Some 90% of the public think so. The gloom merchants keep telling us so. But there’s just one problem: There’s little evidence that we’re either in a bear market or a recession. It’s not as bad as perceived. Unless the Dow Jones average falls below its March lows, we just ain’t in one yet! Thankfully, our economy still has a feeble pulse. I’m reporting all these economic and global elements as they weigh heavily on our real estate markets.

Treasury Secretary Henry Paulson just stated the worst of the credit crisis may have passed. Wachovia Chief Economist John Silva says, “While there’s no question the economy is struggling, just how anyone could confuse the current environment with the worst economy since the Great Depression is baffling to say the least.” There are some 8 million homeowners stuck with loans bigger than their house is worth. Many are tempted to simply walk away and mail the keys to their lender. But think about it: If you don’t sell, you don’t lose anything. Moral: Don’t panic.

Despite all the bad news, the subprime mortgage crisis and the wave of home foreclosures, domestic product growth was still in positive territory in the 1st quarter, albeit up an anemic 0.6%. It’s not worth breaking out the bubbly over, but it’s not a recession either. Jobless claims last week fell to 365,000, well below economist’s forecasts. Contrast that with the 2001 recession when they stayed above 500,000 for 2 years. We may hit that again but not yet.

Given all that’s happened, the housing bust, food prices figure to be up 5% this year and may stay high for years- blame the ethanol madness for the most part- crude oil over $125 a barrel and gas over $4 a gallon, it’s no wonder we’re all feeling besieged. In Latin America alone, some 16 million people face destitution. High food costs may push 100 million people into poverty. The threat of global food rioting is a valid concern. And then there’s the ongoing tragedy in Burma, plus the new devastating quake in China this week. It’s not a pretty picture.

Commodities are unsustainably high but that bubble may burst by summer according to Kiplinger. A number of factors could do it: A cut in worldwide commodity demand, big stock market gains, a more stable dollar or tamer inflation. Prices could drop by 30% if all these factors come into play. Kip says oil could slide back to $85 a barrel. So be it.

The credit markets are finally showing some hints of a thaw, repairing their balance sheets and retrenching, raising $212 billion and recouping recent losses. But it isn’t over yet. The market won’t pick up until 2009. Yet a $2 mil property on the corner of Esplanade & Eaton went into escrow this week. Also on this week’s hotsheet was the Black Crow building downtown listed at $2.3 mil. And a primo 5.64 acre commercial use parcel on the corner of Bruce Rd. and Cal Park Dr. hit the market at $3.5 mil. Another new listing set for residential use is the 1437 acres up Richardson Springs Rd. above the airport priced at $10.7 million. Life as we know it goes on in beautiful Chico.

While it might be tempting to view this unfolding crisis as someone else’s problem, the current situation is a mess that promises to touch everyone. The Nat’l Assn. of Realtors says the foreclosure rate will be rising through 2008, estimating the ultimate toll at close to 2 million. U.C. Berkley predicts that number could double by the end of 2009. While property values are always dictated by local market factors, the national median existing home value dipped by 1.4% in 2007, marking the first time we’ve seen a nationwide decline since the Great Depression. But we shall prevail in the long run. We have so far. “Give us this day…”

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 5-9-08

REAL ESTATE PATTERNS
By Ken DuVall

HOW FAR CAN YOU GO INTO THE WOODS?

The Answer: Half Way. Then you’re on your way out! That’s about where I see us today. We’re in the middle of the deep dark woods housing slump. The Big Question on everyone’s mind: when will this down cycle end? I figure at least another year. Many experts believe we’ve already reached bottom and are rebounding. If it’s any consolation, European housing is on a major downtrend too.

Last week our economy showed unexpected and welcome signs of a come-back as job losses slowed and the dollar gained strength. But you have to get a home equity loan to buy food and a tank of gas! The unemployment rate even dipped a tad from 5.1% to 5%. Factory output increased after 2 months of decline. Economists are now saying the downturn may not turn out to be as pronounced as once feared. Hallelujah, brothers and sisters!

As buyers and investors snap up thousands of bank foreclosures, multiple offers and sales at list price are back in various metros, including some in Chico. We’re putting 25 or 30 homes in escrow every week mostly in the $250,000 to $350,000 range. We’ve sold over 200 homes year-to-date. This week there were 170 deals in the hopper vs. 414 active listings, a nicely balanced ratio. We’re doing OK.

San Francisco is hot with 10 offers last week on one $10 million home going for $1 mil over price. A $1 mil condo there went for $1.2 mil after 22 offers. Most listings are selling within 30 days. One Realtor there said he’s never seen this volume of high-end buyers before. Go figure.

Las Vegas is strange. Unless homes have been built in the last 2 years, they’re considered “out of date”. New is the most important thing. One developer has homes near The Strip for sale up to $3 mil. Folks then move up to “be with their friends” every 5 to 7 years. Five thousand to 7000 SF used to be enough. Now 8000 to 10,000 SF is the new threshold. Last year some 900 homes sold for over $1 mil. There are now more than 22,000 homes for sale there with over half of them vacant.

Many foreclosures are still coming on the market, now constituting 1.5 million, equaling one-half of a percent of all U.S. homes. There are 18.6 million vacant homes in America. Foreclosures are a recipe for falling home values. It’s a vicious circle. Fortunately the vast majority of the subprime loan problems that triggered the meltdown have been addressed. The big interest rate resets leading to higher payments and foreclosures will be nearly over by year-end. Let’s hear a big amen for that!

Although we’re still in uncharted territory, I think we’re seeing the worst of it right now, shooting the rapids and hanging on for dear life. The hope is that by year-end the waters will calm down. The upturn will be long and slow but the seeds of rebirth are now germinating. The plummeting number of new home starts will trim the inventory, in part leading the way to healthy market conditions once again.

Bottom line: From 1997 to 2006 national home prices rose about 85%, the most monumental housing boom in history. We developed a speculative culture about housing never before seen on a national basis. Many became convinced that housing prices would perpetually increase 10%+ annually. Wrong. We’re paying the price now for that “irrational exuberance”. It’s like we partied too hard and got a nasty hangover. But we’ll get well in time.

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.