Copy for Real Estate Guide Column for 1-29-10

REAL ESTATE PATTERNS
By Ken DuVall

WHAT’S AHEAD FOR HOME PRICES?

California remains ahead of the nation in recovery with many first-time home buyers entering the market due to affordable home prices, low mortgage rates, and first-time home buyer tax credits from the state and federal governments. However, credit still is tight and unemployment remains high, which could hinder an immediate full market recovery.

Yet home sales in California hit bottom and the median home price of an existing single-family home has reached its trough, per the California Association of Realtors. In November, the state’s median home price rose in year-to-year comparisons for the first time since August 2007. C.A.R.’s closely watched "2010 California Housing Market Forecast,” projects that the median home price in California will rise 3.3% in 2010.

Although some economists are forecasting another surge of foreclosures in 2010, C.A.R.’s expect that foreclosures will remain flat this year compared with 2009. In 2008, many lenders flooded the market with foreclosures, and as a result, the state’s median price declined by historic levels. By comparison, in 2009, lenders listed properties for sale at a more measured pace, which helped moderate another home price decline.

Government efforts to maintain a low mortgage interest rate environment have somewhat stabilized the market for the moment, hovering around 5%. However, mortgage analysts predict that rates likely will rise to 5.5% by mid-2010.

Going to sell the house? Don't wait for 'spring' in February. The busiest season for home sales traditionally begins the day after the Super Bowl. Putting it off would probably be a mistake, experts say.

The Fed is expected to unveil a new program that will reimburse homeowners for up to half the cost of making their homes more efficient. Through the program, homeowners will receive the returns from simple upgrades like caulking windows, adding insulation, and changing incandescent light bulbs to those more energy-efficient ones.

To determine which energy-efficiency upgrades are best for their house, homeowners should obtain a home energy audit. You can hire a contractor licensed by the Building Performance Institute or the Residential Energy Services Network. These contractors first test your home to determine the amount of energy it is losing, and then makes suggestions on renovations.

California median home prices rose 5.8% before the Holidays while sales rose 4.7%. The median price of an existing home at the time was $304,520, an increase from $297,500 in October. The price has risen for 9 consecutive months and marked the first time it has risen in year-to-year comparisons since August 2007. Sales have risen 7.4% to the highest levels in 3 years.

More than 20,000 California homebuyers under the Governor’s new proposal, if approved, would allocate $200 million in tax credits up to $10,000 for new or existing home buyers- good news. There’s no income limit and it would provide up to $3333 off state taxes for each of the next 3 years. It could be combined with the Fed’s $8000 tax credit. So it’s not all bad news. Things look like they’re beginning to stabilize, at least for the near future.

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 his 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 1-15-10

REAL ESTATE PATTERNS
By Ken DuVall

LATEST DATA GOOD NEWS FOR HOME BUYERS

Homes are now cheap. No, not everywhere in the country, and it's anyone's guess when they might turn around and start rising steadily again. But if you've been thinking of buying a home to live in, the current meltdown is a big opportunity.

You might not know it from the latest data. Too many, as usual, are focused on the trees instead of the forest. The composite indexes were unchanged between September and October. The numbers were lower than a year ago, but the rate of decline seems to have slowed. Two facts that are both obvious and practically useless. Indeed the latest survey contains a truckload of information for all those who prefer data to knowledge.

But long-term fundamentals are more important than the short-term noise. And it's generally a mistake to pay too much attention to doomsayers. Here are some truths: Real estate prices overall have now fallen by a stunning 20% to 30% from their 2005 peak. Nothing like it has been seen since the Great Depression and, according to some sources, not then either. Obviously for anyone who bought a home at the peak of the market, this has been a disaster. But for those thinking of buying a home now this is exceptionally good news.

And at the same time, mortgage rates have also plummeted. In 2006 you had to pay an average of about 6.4% on a 30-year fixed loan. Right now you can get deals for about 5%. Put the two together, and it's a winning combination. A home now is as reasonably priced as it was in the mid-1990s, when houses were an absolute steal.

Over many decades people have been choosing to spend more on housing, buying bigger and better homes. But the bubble, and subsequent collapse, still stands out clearly. Yet many median priced homes nationwide today are about as cheap as they were in the early 1990s. Yet back then mortgage rates were around 8, 9 or even 10%.

If you buy an average home today with a 30-year mortgage at 5%, the annual bill for interest and repayment of principal will come to about 19 times typical weekly earnings. If you get the $8,000 tax credit too, it drops below 18 times. (Note: if Arnie’s newly proposed California $10,000 first-time buyer tax credit goes through, that’ll just sweeten the pot). We haven't seen it that low since the early 1970s.

You can hear the objections. Doomsayers ask: What about these waves of mortgage resets coming in the next two years? What about all the unemployment? And the “shadow” foreclosures lurking in the background? And so on.

These are all valid arguments for not buying homes when they are expensive, or even averagely priced. But the whole point about markets is that they adjust. Prices now reflect the current bad news, and more. But if you have a stable income, can qualify for a loan, and are willing to drive a hard bargain on a home in this market, this is your time.

If an investment feels comfortable, it's should make you nervous. If it makes you really nervous, that's probably good. So feel good- buy a house! Right now, real estate is cheap. Timing is everything.

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 his 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 1-8-10

REAL ESTATE PATTERNS
By Ken DuVall

Economic Outlook 2010

All this from various economic prognosticators across the country. Expect decent if not vigorous growth. As the federal government shuts down its emergency programs, the economy will face big challenges. 2010 will be one of transition and modest growth for a shaky U.S. economy. But we should be able to avoid a fundamental economic collapse as some doomsayers predict.
Federal aid will carry the economy into the 2nd half of the year as it struggles to overcome lingering challenges. For a while, unemployment will go up. Credit markets are not fully healed. Commercial real estate has problems.

The government will begin to carefully withdraw after pulling the economy back from the brink and spurring a recovery through massive intervention. Expect a very different landscape a year from now. Government will still be an active player, but look for the economy to stand more on its own.

Gone will be many of the emergency props put in place when fears of a depression reigned. Taking their place: More federal regulation, as Congress and the Administration increase oversight in hopes of preventing yet another financial crisis. Tepid growth is expected: a 3% gain in GDP for 2010 with a net gain of 1 million jobs. That will be a welcome change after 2 years of job losses. But the unemployment rate will remain close to 10%.

On the plus side, consumers will spend about 2% more in 2010, after cutting back by about 0.7% in a dismal 2009. Retail sales will gain a modest 3%. Exports are set to rise as foreign economies, especially in Asia and Latin America, keep growing. This will prompt firms to restock inventories. Count on inflation staying in check at about 2%.

Housing will also boost GDP a tad after dragging it down a percentage point in each of the last 3 years. The National Association of Realtors seasonally adjusted index of sales agreements fell 16% from October to November. It was the first decline following 9 straight months of gains and the lowest reading since June.

Look for housing starts to total 750,000 this year, up from 600,000 in 2009 but well below the pace seen in the 1990s of about 1.5 million annually. Fortunately, our neck of the woods just keeps on chugging along, relatively fine.

But, as the economy picks up and government pulls back, big challenges will still threaten a sustained recovery. The federal stimulus won’t be nearly as large. Parts of the two-year, $787-billion stimulus program will continue to help, but temporary boosts, tax breaks for home buyers, extended jobless benefits, subsidies that keep mortgage rates low, extra food stamps, etc., are set to expire in 2010.

State governments must cut back, struggling with budget shortfalls that total more than $25 billion. Deficit spending isn’t an option. Direct aid in the stimulus bill helped states limit layoffs, and more federal help -- up to $30 billion -- is likely soon, but it won’t be enough to avoid significant state austerity measures. As we all know, the Golden State is hurting, big time.
Despite the murky news, America, California, and Chico will prevail. Keep the Faith, my friends.

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