Copy for Real Estate Guide Column for 11-21-08

REAL ESTATE PATTERNS
By Ken DuVall

OUTLOOK THOUGHTS

There still doesn’t seem to be anything outside of financial and economic problems to talk about this week. While the world continues to reel in turmoil, everyone is uncertain about how all this will affect housing, my primary concern. Nearly every day we hear about another company going broke or thousands of more jobs gone. But the situation will improve- over the long term.

Our recent declines are in part due to the psychological impact of global market gyrations. While a true fiscal crisis is undeniable, one underlying inherent factor is the emotional and irrational gloom and doom involved. Most people are just plain spooked by all this upheaval, and rightly so. There’s pure panic in the streets right now.

Yet, people are still buying and selling homes all over America, just not at the frenzied levels of recent years. Financial market volatility is causing many home buyers and sellers to pause temporarily, while the truth is that market conditions are ideal for homes that are priced right, for first-time and move-up buyers, and investors. That’s as long as you can get a loan in these stricter qualifying days- and you still have a job!

Consumer confidence, which has taken the biggest hit today, will take time to rebuild. Consumer spending constitutes a massive 70% of our GDP. When we don’t go out and buy stuff, the GDP takes a big hit. But in the meantime it’s important to understand that advantageous market conditions currently exist for those who are motivated to buy or sell a home.

Our Chico home inventory is at reasonable levels and sales continue at an acceptable pace. Less than 20% of our listings are classified as distressed sales, small by comparison with some metros. We just keep on chugging along because we’re a special and desirable place to live, work, and raise our families. As always, we are somewhat insulated from the outside world.

Philosophy corner: “The budget should be balanced, the Treasury should be refilled. Public debt should be reduced. The arrogance of officialdom should be tempered and controlled. The assistance to foreign lands should be curtailed lest the country becomes bankrupt. People must again learn to work instead of living on public assistance.”

Who said that? The famed Roman statesman, Cicero, 2000 years ago in 55 BC! Nothing changes but the players. And there’s those “God Speaks” highway billboards around the country. One of them says, “Don’t make me come down there!” And another proclaims, “You think traffic is bad now?!” We better shape up fast, folks!

Consider ‘The Knight’s Oath’, as administered by King Arthur in the 6th century when he initiated a new member to his Roundtable. With his sword Excalibur on the shoulder of the kneeling recruit he said: “Be without fear in the face of your enemies. Be brave and upright that God may love thee. Speak the truth always, even though it may lead to your death. Safeguard the helpless. Do no wrong. Protect the people. That is your oath. Arise a Knight.” Wouldn’t it be wonderful if everyone- particularly politicians- were Knights of the Roundtable?

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 11-14-08
REAL ESTATE PATTERNS
By Ken DuVall

WHAT NOW?

This will be the most challenging presidential transition in history. Never before has a new president assumed control in the midst of two wars, a recession, and oversee a massive rescue of the entire financial sector. He talks real good but that ain’t gonna get it as Obama hits the trenches. Sounds like he is already signaling moderation. We should all be praying for him and our country.

Battling the recession and reigniting growth will dominate Obama’s first year, maybe even his entire term. Expect him to invoke presidential “Executive Orders”, meaning regulations can be made, changed, or revoked at will. Democrats will pass another up to $100 billion stimulus bill later this month. Ten million people are now unemployed and growing. Ten million homeowners owe more than their homes are worth.

Economics has a huge effect on housing. Washington has no magic bullet to fix it just like that. The best estimate is another year to put Humpty back together again. Still, home prices nationwide may take another 5% to 10% hit before it’s finally over. Good news: 70% of Americans are now homeowners. Bad news: nearly 1 million personal bankruptcies in the last year, a 40% increase.

Millions of homeowners with unmanageable loans will get a lifeline in the form of easier payments, reduced interest rates and principal amounts, stretching out the length of the loans, along with Gov’t loss guarantees to lenders. The two largest, Chase/Washington Mutual and Bank of America/Countrywide are cooperating big time.

The estimated cost is upwards of $50 million to help some 3 million homeowners facing foreclosure. Over half of foreclosures are being bought up for rentals. The blessed reality is that 97% of the some 100 million U.S. homes are not facing foreclosure.

Taking stock of the sobering expenditures: The Fed will borrow $550 billion before year end plus $368 billion more in the first 3 months next year. Plus the $700 billion housing bailout. And the auto guys need another $50 billion now too (word is Chrysler won’t survive). The AIG assist just zoomed from $85 billion to $150 billion (they need more luxury spa trips!). Then there’s the $1.4 trillion for the Wall Street bailout plus $250 billion to buy up to 7800 banks’ stock plus $5.5 million in fees to two NY law firms to “monitor” that. The Gov’t distributed the first $125 billion to the 9 largest banks last week.

All told: a whopping $2.7 trillion for these rescue programs. The federal budget deficit will hit $988 billion in the current fiscal year. Oh yeah: the IRS paid out $1 billion in fraudulent refunds because they “just couldn’t manage it.” Will someone give us break, please? And plug in the 42,000 Washington lobbyists lawmakers have to placate. All want money for their special interests. Too many people are taken in too much of the time. The Gov’t should learn to raise money like Obama has. Let’s hope he runs the country as well as he did his campaign.

President Reagan said it: “There is no weapon or arsenal in the world as formidable as the will of free men and women. If we ever forget we are one nation under God, then we will be a nation gone under.” I believe it. As always, we live on hope and the promises of others. We will get through this. We always have and we always will. It’s America’s style. Give thanks we live here. Kiss your kid and pet your dog. Give us this day, count your blessings, and keep the Faith. This is a test. There will be a pop quiz, and the prizes will be fantastic!!

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 11-7-08

REAL ESTATE PATTERNS
By Ken DuVall

THE PROMISE OF TOMORROW

Housing price stats are always reported behind the curve. Housing prices today, are reaching the point where they’re a good deal again. Disregard the often quoted Case-Schiller Index that reports home prices down 16.6%. Their data considers only the 20 large metro areas, all overloaded with subprime loans and distressed sales. What about the vast majority of the rest of the country? By comparison, the California statewide home price decline for 2008 is forecast by NAR at 4%.

Per the Fitch Ratings, U.S. home prices doubled in the 1990’s and doubled again from 2001 to 2005 as home equity grew by $9.6 trillion. Since peaking in 2006, national home prices have fallen by only 22% If you bought or owned a home during the last decade, you’re way ahead of the game using anyone’s data.

We’re seeing an enormous amount of activity in the unfortunate foreclosure sales across the country. Those sales are happening at huge discounts, prices we won’t see again. Chico, fortunately, is not one of those areas. To be sure, we’ve got our share, but we didn’t go crazy during the boom years so we didn’t get hit as badly. With a high unsold inventory, builders have cut back sharply on new home production, helping lower inventory and stabilize prices, a good thing for the moment.

Once we hit true bottom, prices will start up again. Demand never stops and supply is always limited. Annual home appreciation has historically been 1% to 2% higher than the rate of inflation, historically 4% to 6%. If you put $20,000 in the bank at 4% interest, your annual return would be $800. But put that same $20,000 down on a $200,000 home, the same annual return of 4% on the house translates to $200,000 value X 4% equals $8000, a 40% profit on your cash. Not too shabby. That’s the principle of leverage.

All over the planet, things are changing exponentially. Just look at the extraordinary things we’ve witnessed in recent months. The panic and hysteria will continue to subside as balanced thinking returns. With all the new Gov’t entitlement and rescue programs, ask yourself if that “meek shall inherit the earth” thing- will it be a structured settlement or a lump-sum payment?! The only way to go wrong in today’s market is NOT to buy real estate. Real estate is forever. Ownership over the long-term is the key.

Staggering stats: Consider that in all of 2007 there were 2.7 billion Google searches conducted. This year there have already been 31 billion searches. There are now 1 trillion internet connections. We’ll get well as we go forward. Life goes on. We’ve got a new President and a new deal in store for us. Maybe we’ll even start hearing good news again! Maybe our U.S. Senators can even be trained to answer “present” instead of “not guilty” when there’s a roll call!

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.