Copy for Real Estate Guide Column for 2-27-09
REAL ESTATE PATTERNS
By Ken DuVall

LET HE AMONG YOU WITHOUT SIN CAST THE FIRST STONE

A little chronology for you. I remember President Carter, 21% prime interest rates, 20% inflation, Paul Volker and his attempt to halt inflation by strangling the money supply which effectively reduced the purchasing power and the true value of the dollar forever.

Americans affectionately remember the 50s. Ike was president, America was loved, and the benefactor of the world. Life was simple. A man earning $10,000 annually was successful. A house cost maybe $13,000. A new Ford cost $2,300. Gas was 22 cents-a-gallon. I bought a brand new Cad in 1969 for $3000!

In the 70s and early 80’s Greenspan and the other gurus at the Federal Reserve told us that the rise of Merrill Lynch and Wall Street had replaced banks and savings and loans as purveyors of the American mortgage. The “Great Communicator” was elected in 1981. Houses were $150,000 up, and cars $15,000 by the end of that decade.

It was also then that “entitlement” lending initially reared its ugly head. The Community Reinvestment Act of 1977 was based on the irrational premise that bureaucrats and politicians knew best who should get home loans! More and more “creative” regulations issued over ensuing years were a formula for the financial disaster to follow. Quoting Thomas Sowell, “It was precisely government intervention that turned a thriving industry into a basket case.”

The savings and loan industry abandoned 50 years of sound banking practices. Qualifying for loans and down payments on homes all but disappeared. When the dust settled, there was no recognizable savings and loan industry left, and Wall Street had achieved their goal of displacing the community bank and becoming the “one stop shop” for all things financial. The vast majority of economists expect the trillions of dollars about to be pumped into the economy to bring inflation with it, along with a socialized environment. Bank nationalization remains to be seen.

Our new secretary of the Treasury is reportedly a brilliant man, perhaps a little forgetful about his taxes, but brilliant by all accounts. He will need every bit of that brilliance to help this great country of ours avert a total meltdown. We all fervently hope the administration will indeed accomplish that and we will eventually see a recovery, led in part by housing. It’s never smart to bet against the United States of America.

But when the money supply is increased by an amount equivalent to up to 30% of our Gross Domestic Product, inflation will result. That means that prices of all fixed assets- think real estate- will rise to keep pace with the currency devaluation. We’re in for a pretty exciting ride for a while, folks. Buckle your seatbelts.

Notwithstanding, interest rates may never hit this 50-year low again, or home prices either. This is the perfect storm. It is a great time to buy real estate, the safe haven amidst the chaos we’re experiencing. The first home we bought in Chico in 1977 cost us $80,000. It’s coincidentally on the market as I write for $595,000. You do the math.

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 and all my columns at www.KenDuVall.com. Call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 2-20-09

REAL ESTATE PATTERNS
By Ken DuVall

SIGN OF THE TIMES

And we thought China was in trouble. Well, guess again. In the news, Beijing lawyer Ying Guohua is heading here on a shopping trip, not for designer clothes or jewelry, but for a $1+ million home. Ying is part of a growing number of Chinese joining tours for investors who want to take advantage of slumping U.S. real estate prices.

"It's a great time to buy because of the financial crisis, and houses will definitely go up in a few years," Ying said. The home is an investment, but he's planning long-term: It’s for his 5-year old son to use when he goes to college here.

Chen Hang, China-born vice president of real estate at Fortune Group in Pittsburgh, PA, shows property to Chinese buyers. The tours are new, made attractive by still-rising Chinese income levels and falling American real estate prices. "The Chinese are going to seize the opportunity to take advantage of some great deals," Chen said.

Ying is one of 40 investors going to New York, California, Boston and Las Vegas on a Feb. 24-March 6 tour organized by Beijing-based SouFun Holdings Ltd. SouFun (don’t you love it? “So Fun”!) shows properties priced from $1 million to $2.5 million. "We never thought these tours would garner such interest, but we've had an overwhelming response," said SouFun CEO Richard Dai.

The home-buying opportunities mirror a larger trend. Cash-rich Chinese companies are buying resources suddenly made cheaper by the downturn or companies suffering under the global debt meltdown. Last Thursday, the Aluminum Corp. of China, the world's leading aluminum producer, invested $19.5 billion in the giant Rio Tinto Group, a debt-burdened global mining company.

While high-level incomes have continued to rise in China, which had the world's 5th largest population of millionaires in 2008 with 391,000, up 20 percent from the previous year, Chinese with money in the bank have few good investment options at home. Real estate prices have cooled and stock prices peaked in October 2007 after a two-year boom that saw shares rise six-fold in value.

After years of foreign money pouring into China to take advantage of their hot economy, tens of billions of dollars began leaving over the last 3 months as Chinese investors went bargain-hunting. Chinese buyers are looking at both commercial property and residential to rent out or use on business trips. And the U.S. has plenty of unsold homes to offer — 3.67 million as of December.

Trips are pricey. Ying paid $2,200, the equivalent of the annual income for many Chinese, plus airfare. Zeng, a real estate developer from Changsha, spent $3,500 for a 10-day trip. He bought a $1 million home in Silicon Valley where his 20-year old daughter will live while attending graduate school in the Bay Area. "The price is low now, but it's in a good neighborhood so it will definitely appreciate”, Zeng said. They’ve got the right idea: Buy on bad news, sell on good.

Come on in, China- we need you! Boy, how times change.

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 and all my columns at www.KenDuVall.com. Call Ken at 345-3700 for all your real estate needs. Free consulting.

Copy for Real Estate Guide Column for 2-13-09

REAL ESTATE PATTERNS
By Ken DuVall

WHISTLING IN THE DARK

We all know how scary and shaky it is out there, everywhere on the planet in every way. You read the news. It’s harsh times and we all know it. Instead, let’s keep our eyes on the horizon. We’re all in this for the long run. Real estate is not a get rich FAST scheme. It’s a get rich SLOW scheme.

California home sales increased 84.9 percent in December compared with the same period a year ago. Sales continue to be strong, exceeding 500,000 units for the fourth consecutive month. Year-to-date sales are nearly 27% above last year. An entry-level California home now costs $287,760.

Despite the “lame stream” media’s relentless negative drumbeat, the unadulterated bottom line for 2008 is in. The final figures as reported by the Nat’l Assn. of Realtors from across the nation - not just the 20 metro areas used by Case-Schiller- shows sales of existing homes fell by 13.1% following a 12.8% drop in 2007. They project a rise of 4.1% this year and another 6.3% in 2010. The housing slump will NOT go on forever, trust me there. You gotta have a roof over your head, period. Yet rising unemployment will continue to shrink the buyer pool and hike foreclosures.

The nationwide median price of a single family resale home fell by 9.3% to $175,400 in 2008 and is projected to dip only another 2.4% this year before rising 4.6% in 2010. New home prices fell an estimated 7% in 2008 and will by another 1.7% in 2009 before rising 4.8% in 2010. New home sales were off 37.8% in the same period, down the tubes big time. The 2009 projection is for another 30.4% drop before rising a whopping 44.9% in 2010. The expected increase in consumer confidence is the basis there. America WILL come out of this. Chico’s always OK. Ask your favorite Realtor.

Nationally, the pending sales index based on escrows opened last month increased 6.3%. The affordability index also rose 10.9% to 158.8, the highest on record. Of course. As prices go down, more buyers can afford to buy homes. Loan interest rates are the lowest in history but you better have A-1 credit and a decent cash down payment. Some really good news for us is included in the “Porkulus” stimulus bill.

The “silver bullet” is the juicy federal subsidy for home purchases made for a year if and from when the President signs the bill. Buyers will get 10% of the purchase price up to $15,000 applied to their income tax bill over the following 2 years. To discourage speculators, buyers must occupy the home for 2 years. This will help break the negative psychology that you should wait to buy a home because prices may go lower. A $15,000 income tax credit covers a multitude of sins.

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 and all my columns at www.KenDuVall.com. Call Ken at 345-3700 for all your real estate needs. Free consulting.