Copy for Real Estate Guide Column for 9-29-08

REAL ESTATE PATTERNS
By Ken DuVall

CHANGED MY MIND…

I’ve been in this business for 45 years now and I’m not going to give up the ship just yet! It’s been widely reported that Standard & Poor’s Case-Shiller (you know I’m not a fan of theirs) housing price index recorded a 14.1% decline year-over-year from March 2008 to 2009. It’s a “Poor” measure of home values because it excludes data from 13 states and includes only partial data from 29 others. That’s 42 states out of 50, folks. Values in their omitted areas have been considerably more resilient so their data are based on the markets most susceptible to dramatic swings. Not an accurate representation, susceptible to liberal media slant.

Also, Case-Shiller weights their price calculations by value. For instance, they give 8 times as much weight to an $800,000 home sale as they do to a $100,000 home sale, making it far more sensitive to the largest most expensive home areas. Again, not appropriate for the vast majority of our country’s real estate markets. Other respected value models predict that even as foreclosures continue their climb, home prices will only fall modestly or remain flat, but will not collapse. Even projecting an extreme worst case scenario, U.S. home prices are not expected to fall by much more over the next 2 years. I see Chico prices continuing to firm up as I write.

Therefore, our national average cumulative home price decline in this period should end up around 5% to 6% at the outside. Of course, those who had the misfortune to buy in the hottest markets at the peak of the boom do have significant paper losses. But the fact that prices will remain relatively stable in no way implies that the housing downturn has been or is trivial. Indeed, bad loans and poor judgment have clearly been reflected in lower sales and declining housing starts for over a year. These factors have actually slowed GDP growth, of which housing represents 5%. Developers and financial institutions have been badly hurt. That’s not over yet by a long shot. Lenders can expect to be indicted and regulated as we go.

Oh oh, women are wearing longer skirts, so we must be in a recession says Kiplinger, right? It’s theorized that skirt lengths and markets move in tandem. Hemlines rose in the Roaring ‘20’s when times were good, then fell in the Great Depression of the 30’s. Miniskirts were all the rage in the 60’s boom years. Now bohemian-style long skirts, popular in the 70’s, are on their way back. That period was known for its high oil prices, a sagging stock market, and inflation. Sound familiar?

Of course, many dismiss that notion. And today, women have more fashion options. They’re as apt to wear pants as worry about skirt lengths. What counts is that women keep buying clothes, which make up 66% of that $160 billion market. Women, you’ll love this: don’t stop buying clothes or the economy suffers! Remember you heard it here first! Be Patriotic, save America!

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 8-22-08

REAL ESTATE PATTERNS
By Ken DuVall

AS THE DUST SETTLES

Turmoil in the housing market has led to fears that home prices will continue to drop precipitously, particularly if continuing foreclosures force large numbers of homes onto the market. But the projected losses have been wildly exaggerated. No matter what we’ve been fed by the hysterical media, most Americans have NOT experienced a significant decline in the value of their homes — nor are they likely to. It’s becoming clear now. But there’s far more to reflect on here.

Only four states — Arizona, California, Florida and Nevada — have had actual declines of more than 4% in home prices over the past year, according to the Office of Federal Housing Enterprise Oversight. In June, California escrows opened actually went up 5.3% with prices also up a meager 1.1%, but up, not down. Housing represents fully 5% of America’s Gross Domestic Product of $14 trillion, or some $700 billion. That’s a big deal.

The good news is home sales rose in areas where markets are now flooded with foreclosures, indicating buyers are taking advantage of steep discounts. Compared with last year, California sales were up 3.7% in June. Sacramento’s sales have increased 51% since the first of the year and their inventory is decreasing. Nationally, the median home sales price was down only 7.6% from a year ago, not a catastrophe considering housing’s inflated, irrational, and unsustainable 85% bump over the last decade.

We have some 750,000 foreclosed home in our national database equaling about 17% of the 4.5 million U.S. homes now for sale. We have a huge excess housing inventory with mortgage write-offs projected at $2 trillion, plus a possible Freddie Mac and Fannie Mae government write-off of $5 trillion, on top of a $3 trillion war cost and a $371 billion federal budget deficit. And lenders may simply put their riskiest loans into the new bailout programs. Borrowers could default anyway, leaving taxpayers on the hook for another $15 billion. All in all, not a pretty picture.

Some say America’s problems are not the economy, markets, or politics. The endless bickering is distracting us from facing our true long-term problems. Since 2000 we have seen a relentless, sickening overdose of bad news: stupidity, deceit, corruption and evil behavior. We are now suffering from post-traumatic shock syndrome! Something deep in our collective cosmic soul seems to cry out that we’ve lost our moral compass.

Why are more of us not outraged? Some feel America is broken and will take years to fix. Our monetary system and our tax base are running out. Like our overextended military, we are handicapped in our ability to face new threats, much like Rome and other great civilizations experienced. More on that in my next column. Buckle your seatbelts for that one!

Bottom line: Fears of a huge loss in home values for the majority of home owners across the United States and of overwhelming, crippling losses by financial institutions that would accompany them have been greatly overblown. I still think we’re turning the corner and headed for healthier times over the next year. So be it.

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 8-8-08

REAL ESTATE PATTERNS
By Ken DuVall

CLOUD 8 JUST WHEN WE NEED IT!

As George Carlin once said: “Cloud 9 gets all the publicity, but Cloud 8 is actually cheaper, less crowded, and has a better view.” I’m going for that on 8-8-08! Real estate IS recovering, inch by inch, piece by piece, and day by day. Illusionist Criss Angel last week actually WALKED on the water at Lake Mead. And a 60-year Michigan golfer hit TWO holes-in-one on the SAME day, a 766 million-to-one shot. So maybe anything’s possible. We’re certainly not as bad off as Zimbabwe where their inflation rate is 2 million percent!

Housing is at the very heart of our economic woes. Its drag may hold 2008 economic growth to a meager 1.5%. Nationally, home foreclosures will approach 1.31 million by year end. Ten million homeowners owe more than their homes are worth. There’ll be 1 million bank-owned homes by year end, the highest since the 1930’s. If borrowers had a pulse, lenders made them loans. We’re all paying now. Some $3.5 trillion in homeowner equity has been wiped out since 2006. If you’ve got a problem with your loan, talk to your lender TODAY.

Ninety banks are in serious jeopardy. Some broke the rules going for that competitive edge. They mistakenly thought they could walk on the water too. With stiffer qualifying and increasing rates, loans are becoming harder to get. The new housing bail-out bill just passed. Keep your fingers crossed on that.

We are returning to the basics of sound banking. Lenders must verify income. Monthly payments shouldn’t exceed 35% of the borrower’s take-home pay. Borrowers should have some skin in the game. It hasn’t been that long since you had to come up with a genuine down payment or you didn’t get a loan. Sure, down payments exclude some from homeownership but it beats a devastating “exclusion by foreclosure”.

Meanwhile, there are many markets where prices are no longer falling and sales are doing well. The high-end sales are hurting, but otherwise, Chico is one of them. Fortunately Chico didn’t go crazy during the boom. Deals are going into escrow, some even sold before our Wednesday MLS Tours. We’re beginning to see prices firming up and multiple offers again. Chico is thankfully not overwhelmed with high inventory. That’s why I think, despite ongoing negative media reports, housing appears to be turning the corner.

I read recently about life on Rodeo Drive in Beverly Hills with all their outrageously expensive designer shops. It talked about trophy girls strutting around in tight jeans and low-cut tops. One held a small dog under her arm like a purse. The poor animal had a bow on its head and was wearing a poncho. He didn’t look happy. He seemed to be saying, “Dude, I’m just the dog. It’s the people that are crazy!”

In my opinion, that entire pretense has no significance. Who really needs a $150,000 watch? Gimme a break. Chico, just being here with our superior people, the good life, living in this blessed place- that’s priceless. We shall endure. Let the rest of the world go nuts as we enjoy our daily bread. Amen.

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.