Copy for Real Estate Guide Column for 9-25-09

REAL ESTATE PATTERNS
By Ken DuVall

THE NEW DEAL

A year after the collapse of the housing market triggered the financial meltdown, lenders are demanding more money up front, higher credit scores, and full proof of income. Paperwork must be in perfect order. Patience and persistence are required. There’s a lot of red tape anymore.

It's like a return to the standards that emerged as the World War II generation bought their first homes: Buy only what you can afford. Figure on a 20% cash down payment, which was the only deal available then, period: a 30-year, 80% fixed-rate mortgage.

For sellers today, the standards are different too. Be patient, because the balance of power has swung strongly to buyers. And price is the key. "If you're not getting showings, you're overpriced," one Realtor says, “The record numbers of foreclosed homes on the market gives buyers more leverage. They can afford to wait." A seller says, "We don't feel like we went from boom to bust. We’ve gone from boom back to reality."

One borrower 3 years ago landed a mortgage with no down payment, with 2 foreclosures and a bankruptcy in his past. Now, lenders pore over bank statements, tax returns and job histories. The average mortgage application today is 3 times thicker than what it was at the start of the boom, and gets thicker as the process drags on. “He who hath the gold maketh the rules.”

Now, lenders want to know everything. It's once again a full underwriting process on each loan. Another category of risky loans, Alt-A mortgages, which required little or no documentation of the borrower's financial health, have plunged to $3 billion this year from $400 billion in 2005. Fuggedabout sub-prime loans! Appraisers have become stricter, or, some would say, more accurate. It's not uncommon nowadays for closings to take 60 days or more.

Dan Hunt, at our Chico Mid Valley Title & Escrow, reports we’re on the verge of a huge influx of REO (bank owned) properties in Butte County. In the past 8 months alone (Jan-Aug) there have been 1,492 Notice of Defaults filed, 596 Trustee’s Deeds (foreclosures) recorded and 219 sales of those were REO properties. Your local Chico title company is your best bet, an escrow officer who cares about you, and who’ll tackle any last minute surprises.

Nearly everyone in the real estate industry agrees on this much: Another dramatic boom-bust cycle isn't likely. Expect that a different consumer mindset will return real estate to its more traditional cycle over the next decade. There will be some ups and downs but in the long run, prices should move higher. The past is your best guide to the future. Bottom line: the U.S. is still growing. Everyone will always need a roof over their head. Homes are forever, as long as babies continue to be born.

P.S. An 8 BR 6000 SF home in Chicago is on the market for between $1 and $2.5 mil, list price as yet unannounced. The current owners paid $35,000 for it in 1973. President Obama lives just down the street. The block is barricaded 24/7 and you have to be screened by the Secret Service to even drive there. The owners can’t take the stress of it anymore. I’ll bet there are no burglaries in that neighborhood!


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 9-18-09

REAL ESTATE PATTERNS
By Ken DuVall

LET THE DRUM ROLL CONTINUE!

In upscale Fort Myers, Fla., people were eagerly signing up for a free bus tour of foreclosed real estate—all with ocean views. The young bus driver volunteered that he had just bought his first house, paying $65,000 for a foreclosed property that last sold for over $250,000.

Recap: Last week we reported that the Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the 3 months ended June 30 over the three months ended May 31. The National Association of Realtors reported that existing homes sales rose 7.2% in July from June. And sales of new homes rose 9.6% in July compared with June.

In short, the data suggest that real-estate prices hit a bottom some time during the 2nd quarter, and have now begun to rise. There's no way to be certain this marks the end of the long, painful real-estate bubble correction, but clearly, prices are no longer in free-fall. That means to me if you've been sitting on the fence, it's time to act. And let’s not kid ourselves: there’s still a lot more foreclosures to come as the jobless ranks continue to swell. It ain’t over ‘til it’s over.

I've never tried to time the real-estate market before. I never had to- it was always going up! I understand why buyers have been cautious. No one wants to buy in a down market, just as stock buyers avoid bear markets. For most people, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, prices don’t seem likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can't imagine a better time in years to buy than now in Chico.

Even the stricter appraisal process is working to the advantage of buyers. Appraisals are coming in far lower than most sellers have been expecting, forcing them to face the reality of reduced prices. And with stricter standards, lenders aren't going to let buyers borrow more than they can afford which protects buyers and helps keep prices down.

There's a good reason homeownership has always been a central part of the American dream. It delivers security, pride of ownership, a sense of community, and decent investment returns. That bus driver in Florida represents the flip side of the foreclosure crisis. For every hardship story, others are realizing their dreams of home ownership, and getting what may turn out to be the deals of their lives. Once again, timing is everything.

Here in beautiful Chico, we’re now seeing constant multiple offers, available loans- despite lender’s reasonable concerns- righteous appraisals, and people living happily ever after with the American dream coming true once again. 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 9-4-09

REAL ESTATE PATTERNS
By Ken DuVall

UP, UP & AWAY!

Nationally, existing home prices have risen for the 2nd month in a row, up 1.4% per Case-Schiller. Sales of existing homes are also up 5% from their year-ago levels. I don’t quote C-S often as they only use 20 metros (Chico is one of them), not the rest of America. But they report prices rising in 18 of the 20 cities in June. Robert Shiller’s the perennial pessimist. If he’s upbeat, it’s good news.

For the 2nd quarter overall, the C-S price index rose 2.9%, their very first quarterly increase in 3 years for a striking turnaround. Home prices have bottomed for the time being. Prices actually rose .5% in May over April, a very positive indicator. A lot of what follows has been in the news but here’s the big picture this week.

California existing home sales increased 12% in July compared with a year ago. Closed sales totaled 553,910 in July at a seasonally adjusted annualized rate. The July 2009 median price rose 4%. July marked the 6th consecutive month of median price increases. Clearly, our market is on the comeback trail. This was the first time in 5 years that existing home sales posted consecutive monthly increases, a significant factor. Sales are also up 5% from their year-ago levels, which is the first time since February 2006 that sales have not recorded an annual decline. Existing home sales increased 6.5% from last month.

More positive news: U.S. new home sales jumped 9.6% in July, for a 6th straight monthly gain, the longest streak on record. Existing home sales also rose 3.2%, which is 12% over July 2008. The Commerce Department reports home sales rose to a seasonally adjusted annual rate of 433,000, up from June’s rate of 395,000. By comparison, in 2008, 485,000 new homes sold. In 2007, it was a whopping 776,000. The median sales price of $210,100 was down just 11% from $237,300 a year earlier.

This July, the seasonally adjusted U.S. new home sales rate was the highest since last September. These consecutive monthly increases add to the growing body of evidence that the housing market is expanding again. July sales are up 31.6% from the January 2009 bottom.

Meanwhile, inventories of unsold U.S. new homes fell 3.2%, to the lowest in 16 years. On balance, builders have pulled back on new starts too. Yet, a 7 month supply at the July sales rate is the lowest in 2 years, which is good. At the current sales pace, there’s only a 9 months’ supply of existing homes on the market, the lowest level since last December. I think things are looking good. Timing and attitude are everything! Keep the Faith. See ya in 2 weeks.

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.