Copy for Real Estate Guide Column for 4-3-09
REAL ESTATE PATTERNS
By Ken DuVall

MO’ BETTAH NEWS, FOLKS!

Nationwide, February housing starts increased for the first time in 8 months, up over 22% compared with January, primarily due to an uptick in multifamily starts, according to the U.S. Dept. of Commerce. Let’s hear it for that! Sales too are up over 5% to 4.720 million units, primarily due to bargain foreclosures being snapped up by investors. I sure like hearing that word “Up” once again!

Meanwhile in California, existing home sales have nearly doubled from a year ago. Many sales, as they are in Chico, are coming closer to list price. Existing home sales increased 83% in February compared with a year ago, but the median price declined 40%, per the California Assn. of Realtors. All the foreclosures and distressed sales are primarily what’s pushed the sales volume up, brought prices down, along with appraised values as well.

Home sales in California continue to be considerably stronger than the nationwide figures but so is our share of low priced foreclosures. Closed sales of existing single-family homes totaled 620,410 in February at a seasonally adjusted annualized rate. Any way you cut it, there’s still a lot of deals happening. More good news: interest rates dropped below 5% last week, the lowest in 38 years.

Nationally, building permits in February, which can be an indicator of future building activity, rose 3% overall to a seasonally adjusted annual rate of 547,000 units. This reflected an 11% gain in single-family permits to 373,000 units with a 10% decline in multifamily permits to 174,000 units. There’s still a lot of inventory out there as foreclosures continue to flood the market in many areas. “It ain’t over ‘til it’s over” as Casey Stengel once put it.

Guess what: the Government is currently spending $1 billion AN HOUR! Staggering. Let’s play with some numbers: A stack of dollar bills 68 miles high is a $1 billion. A trillion is a thousand times that, a pile of greenbacks piled half way to the moon! Last year’s U.S. GDP was about $14 trillion. For that, imagine a belt of $100 bills placed end to end around the equator 540 times! Wow!

Be careful. California Attorney General Edmund G. Brown Jr. is warning consumers that scam artists are forging letterheads of major lenders to con Californians into paying $1000’s for non-existent loan modification services. "Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," Brown said.

Nearly 80% of Americans believe it’s possible to improve their economic standing and remain optimistic that their family's economic circumstances will improve across generations, reports a new study by Pew's Economic Mobility Project. This is true across racial lines and even among lower-income, less-educated and unemployed people, according to Pew. It’s my pleasure to report something positive for a change. Attitude is everything.

Although the current economic crisis seems to be deepening each day and many families are feeling the pinch -- either through company layoffs, decreasing home values or loss of retirement savings -- Americans are now taking a longer-term view, said Pew. "We may be struggling in our daily lives, but Americans are confident in themselves and their ability to get ahead in the future." Amen. I was counting on that.

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 3-27-09

REAL ESTATE PATTERNS
By Ken DuVall

HOW WE GOT HERE

This is not pretty stuff, people. As the U.S. financial crisis broadens and deepens, wiping out the wealth and savings of tens of millions, destroying hopes and dreams, history’s verdict on this generation will now be revealed. For how did this befall us, save through decisions that brushed aside the lessons history had taught? We simply ignored the old adage: ‘There’s no free lunch’.

It began with the distortion called sub-prime mortgages. Banks were morally pressured by politicians into making home loans to folks who could not even remotely qualify under standards set by decades of experience. Made by the millions, these loans were sold in vast quantities to Fannie Mae and Freddie Mac.

There they were packaged, converted into mortgage-backed securities, and sold to banks. They put scores of billions of dollars on their books and sold the rest to foreign banks anxious to acquire ‘Triple-A’ securities, backed by real estate in America's then ever-booming housing market.

Computer whizzes then devised exotic instruments called derivatives, which could soar in value, making instant multimillionaires, but could also plummet, based on dips in the underlying value of that paper. Came then the geniuses at AIG that insured banks against catastrophic losses should the U.S. housing market crash. Premiums were tiny. Payouts were beyond AIG's capacity.

At AIG, brainiacs created other exotic instruments, such as credit default swaps to guarantee losses and insure profits. To retain these wunderkinds at AIG, they received million-dollar retention bonuses. Angry mobs are now demanding vengeance on the scoundrels who wreaked havoc on them!

And who kept the game going? The Federal Reserve, by keeping interest rates low and money gushing into the economy, thereby creating the bubble that saw housing prices rise annually up to 20 percent.

As the economy grew, the Fed began to tighten up and raised interest rates. Mortgage terms became tougher. Housing prices stabilized. Homeowners with sub-prime mortgages then had to start paying down principal. People losing jobs began to walk away from their houses. Foreclosures soared.

Belatedly, folks awoke to the reality that housing prices could go south as well as north, and that paper spread all over the world was overvalued. Much of it became worthless. And the crash came and panic ensued. Who is to blame for the disaster that has befallen us?

Start with the politicians who bullied banks into making “entitlement” loans the banks knew were bad to begin with and would never have been made without the threats or promises of political favors. Don’t forget that den of thieves at Fannie and Freddie who massaged politicians with campaign contributions and walked away from the wreckage with $100’s of millions in purloined gains.

Then there were the idiot bankers who bought up those securities backed by sub-prime mortgages and were too dim-witted to inspect the toxic paper on their books. The ratings agencies, like Moody's and Standard & Poor's, declared it to be Grade A prime!

In short, this generation of political and financial elites has proven itself unfit. What we have is a systemic failure rooted in a societal failure. Behind the disaster lie the greed, corruption, stupidity and incompetence of the leadership of an entire generation. Tragic.

"Avarice and ambition," warned John Adams, our 2nd President, "would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution is made only for a moral and religious people. It is wholly inadequate to the government of any other."

In this deepening crisis, what is being tested is not simply the survival of capitalism, but the very character of our society. The long term U.S. budget deficit was just projected to be $9.3 TRILLION. But at least for this week, the financial and real estate news was all positive for a change. Count your blessings.

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 3-20-09

REAL ESTATE PATTERNS
By Ken DuVall

WORDS OF WISDOM

There’s not much good news again, except for the stock market rally. I’m hoping, as we all do, for some decent news, but in the meantime here’s a nice anecdote for you this week instead. Enjoy.

From 2004, it’s called “The Builder”. An elderly carpenter came to his employer and told him he had decided to retire. He and his wife weren’t wealthy but they could get by OK. The boss was very sorry to see his good worker go. He asked him if he would build just one more home as a personal favor to him.

The employee agreed but you could see that his heart was not really in it. For the very first time in his life, he compromised his integrity, resorted to shoddy workmanship, and used inferior materials. It was indeed an unfortunate way in which to end his career. He would soon come to regret it for a long time.

When the carpenter finished the home and the builder came to inspect it, he unexpectedly handed him the door keys and said, “This now your home now, my friend. It’s my gift to you for your many years as my faithful and valued employee.” What a shock! What a shame! If only he had known that he was building his own home, he would have done it so differently. Now he and his wife would end up spending the rest of their lives in a home he had built none too well.

So it is with all of us. At important points in life we sometimes just don’t give the job our best efforts. Think of yourself as a carpenter, and your life as a home. Every day, you hammer a nail, place a board, or erect a wall in your life. These are troubled times. Do the right thing. Live with no regrets. Be proud to sign your name to everything you do. It’s the only life you will ever build.

Attitude and performance is everything. It’s the rent we pay to validate ourselves as occupants of Planet Earth. Without a doubt, life is a do-it-yourself project. It deserves to be lived with dignity and honor. Don’t cut any corners. They’ll just come back to haunt you. Pay your righteous dues. Choose wisely, build carefully, strive for excellence, and have a good life. 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 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 3-13-09
REAL ESTATE PATTERNS
By Ken DuVall

WHERE TO GO FROM HERE

It’s nearly total chaos out there of late. But don’t give up hope yet. We’ll get through this debacle and shall emerge victorious once again. We always have, we always will. A friend of mine said to me, “Just don’t read email, newspapers, or watch TV anymore!” We need a break. All the poor jobless should be in our prayers as U.S. unemployment tops 12 million, and grows.

Obama is catching it from all sides. I wouldn’t want to be in his shoes. Nothing he’s doing seems to be working. In all fairness, we must give his programs a chance to work. With any luck, they might. Obama said, “The recovery plan won’t turn our economy around or solve every problem. All of this takes time and patience.” Do you have a better idea? I say, be of good faith during these troubled times.

Since there’s practically no good real estate news let’s focus on the economy, which affects every aspect of the market. Some lenders are in near lock down. The key to our credit problem lies with Congress. They’re going to have to go along with as much as an additional $1 trillion to deal with banks’ toxic assets, which are dragging down home loans, business loans, on and on. We’ve got to get the money moving again, period, or we’re never going to break this gridlock. I’d rather get a root canal than apply for a loan today!

Troubled banks will get a deal they can’t refuse. If they fail the upcoming government stress test, they’ll have to take the aid route. Geithner and company figure any banks teetering on the edge will have a strong incentive to sell to investors. Uncle Sam would prime the pump by giving low interest loans to private investors to buy bundles of their home, car, business, credit card, and student loans. That would free up reserves so banks could make new loans.

If that too unfortunately goes sour, Treasury will then take over those banks and investors would walk away. Economists say that’s a tough undertaking, and that the price of failure would be steep. But desperate measures are called for in desperate times. All we can do is hope for a favorable outcome.

Always give thanks for our Chico, which is in fairly good shape in comparison to the turmoil elsewhere. We are fortunate to be living in this blessed community. Clearly there is dark pessimism out there, and the risks are decidedly to the downside. But there is a scenario where things could turn out better than anticipated. Everything hinges on confidence, sentiment, business, consumers, and investors. Improvement in those areas could unexpectedly turn things around. It’s altogether possible bank rescues and stimulus spending will show progress by summer’s end. 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 and all my columns at www.KenDuVall.com. Call Ken at 345-3700 for all your real estate needs. Free consulting.