Copy for Real Estate Guide Column for 7-25-08

REAL ESTATE PATTERNS
By Ken DuVall

HERE & THERE

First our heartfelt sympathy goes out to all the poor people that suffered in our tragic firestorm. It’s a local and national disaster, perhaps of all time, certainly for us. May God bless all the heroic firefighters. They went above and beyond the call of duty. They’re all brave heroes.

Oil, airlines, and truckers are dropping like flies. Thanks goodness the cost of oil went down last week. We needed a break. The U.S. is using 87 million barrels a day. The City of Chico’s annual budget is $200 million. There are $12 trillion in U.S. mortgages outstanding. California home prices plunged 29% in June over a year ago while sales picked up to a 10-month high as foreclosures drove the market. Forty one percent of homes sold in June were foreclosures. There are a lot of euro dollars, rupees, rubles, and yen buying up our real estate. A global redistribution of the wealth is happening, $700 billion a year just for our foreign oil cost.

Poor old Donald Trump finally sold his Palm Beach, FL 60,000 SF ocean front shack last week for a $100 mil. He paid $41 mil for it in 2004. A Russian fertilizer billionaire bought it. There are now 10 MILLION millionaires in the world, up 600,000 from last year! Their average wealth: $4 mil. Combined wealth: $41 TRILLION! India and China account for the largest increase to the ranks. They grew in India by 23%. Still, one in three are Americans. Perspective: Millionaires represent only one-fifth of one percent of the world’s population of 6.7 billion.

Prices may be down, foreclosures may be mushrooming and the blowback from the subprime mortgage crisis is threatening banks and secondary mortgage lenders, but there are some early signs the real estate market is trending in a more positive direction- although you may not know it if you rely on the mainstream media for your news.

Recent data suggest real estate market pessimism may be overblown. Even the liberal economist Karl Case admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. Example: Home prices actually increased slightly in eight markets between March and April. Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve.

As always, I’m trying to look on the bright side here. Transaction-related indexes may be skewed by a far larger than normal share of subprime-derived default and distress sales. In the Bay Area, more expensive homes, over $721,548, have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.

Even new housing construction numbers suggest an improvement according to Case who notes that national housing starts, falling to 975,000 in April from 2.27 million in January 2006, have fallen by similar percentages 3 times during the last 35 years. Each previous time the market has staged a surprising upturn within a quarter. Only a slide into a full-blown recession would temper his optimism about the potential for a similar recurrence of this trend. 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.

Copy for Real Estate Guide Column for 7-18-08
REAL ESTATE PATTERNS
By Ken DuVall

WE’RE NOT ALONE!

The Governator did a superior thing last week: he OK’d Senate Bill 1137, which takes effect immediately and prohibits lenders from filing a loan default on borrowers until 30 days AFTER they’ve made a good faith attempt to try and work things out. Tenants also benefit in that they now get 60 days notice to vacate once a property has been foreclosed. It’s certainly no fault of theirs the landlord failed to make payments.

This is an excellent, common sense move- not a bailout- that will help stem the tide of California foreclosures. Banks are now forced to work with borrowers in trouble with their loan payments BEFORE they commence foreclosure. It encourages both parties to explore alternatives that could avoid a costly repossession. The Bill passed with bipartisan support.

California has recorded over 116,000 foreclosures already this year. Its major grim. The Bill’s goal is to encourage meaningful loan modifications between borrower and lender. It also enables cities to impose fines of $1000 a day on property owners who do not maintain homes acquired in foreclosure, aimed at preventing blight and worse in hard hit neighborhoods.

When you’re invited to a poker game and look around the table for the “pigeon”, and can’t spot him, YOU may be the pigeon! Maybe you shouldn’t have gone for that “trick” loan in the first place. Maybe the lender misled you. Either way, this new law provides parties the chance to work things out to avoid legal proceedings. I’m on our Chico Assn. of Realtors Professional Standards panel where we judge conflicts between parties. It’s ALWAYS wiser to settle than to go legal.

Even celebrities are affected as values fall. The meltdown is hitting every socio-economic class. We’ve all heard about poor Ed McMahon, Johnny Carson’s 85-year old sidekick’s troubles. Ed’s been unable to work since he fell and broke his neck in 2006. He’s $644,000 behind on his payments on his Beverly Hills home in the same gated community where Britney Spears (there went the ‘hood!) moved. Ed’s been trying to sell it for 2 years. It started at $7.6 mil and is now down to $6.5.

Angela Bassett and Courtney Vance’s home in the gated old-money enclave in L.A.’s Hancock Park off Wilshire Blvd has dropped more than $2 mil in the past year. It’s now down to $3.9 mil from $6 mil. Don’t feel too sorry for them. They bought it 17 years ago for $1.8 mil and own it free and clear. Baseball’s Jose Canseco stopped making payments earlier this year on his $2.5 mil home in Encino in the San Fernando Valley.

The good news is that Newbies are back! Entry level homes are again affordable. Builders have slashed prices and are building far smaller homes. For instance: KB Home’s average sales price east of L.A. has dropped to $248,000 from $267,000 a year ago. Their old basic 3800 SF model once sold for $328,000. Today it’s half the size and goes for $220,000. So for the first time in 10 years tenants can buy a new home for what they’re paying in rent. Hooray! Bear in mind the key player in any housing recovery scenario is the first time buyer. There’s always a flip side.

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.