Copy for Real Estate Guide Column for 2-26-10

REAL ESTATE PATTERNS
By Ken DuVall

HOME VALUES STABILIZING!

A recent report shows that 20% of U.S. homeowners owed more on their mortgage than their home was worth in the 4th quarter. However, California’s housing market is bucking the national trend. Foreclosures and delinquencies around the country are slowing too, thank goodness, but there’s still many in the pipeline.

Although it states the percentage of American single-family homes with mortgages in negative equity and foreclosures rose in the 4th quarter, the report does not account for seasonal price changes. The traditional home-buying season is April through August. Historically, this is when home prices rise. In September, median home prices usually start a declining trend.

Unlike the national median home price, the month-over-month changes in California’s median home price for 2009 were stronger than the long-run average. Low interest rates and tax incentives led to a rise in the demand for housing. As a result, housing inventory was constrained, thereby creating upward pressure on prices.

California’s housing market has shown signs of stabilization since early 2009. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009. In December, California’s median home price was 25% above the low for the current cycle.

In December, the median price of a California existing home rose to $306,820, an 8.4% rise year-over-year, the second consecutive year-over-year increase, and the 10th consecutive month-over-month increase, according to the California Assn. of REALTORS’s (CAR) latest sales and price report.

Although home buyers should not focus solely on future home price appreciation, homeowners who do purchase a house, live there for at least 5 years, and sell it at the then current median price, have averaged an annual rate of return of more than 11%, according to data collected by C.A.R. over the last 40 years. Time solves a multitude of sins.

More in the same vein: Syd Leibovitch, owner of Rodeo Realty in Los Angeles is doing what many real estate agents can only dream of lately: expanding. In the past 3 months, Leibovitch has hired more than 40 agents and is opening a new office on Hollywood’s Sunset Strip.

“My sales last year were 30% higher than 2006, which was our best year,” said Leibovitch. “A lot of my competition closed or went out of business entirely, and I picked up a lot of their agents.” He attributes some of his business improvement to buyers feeling more optimistic and sellers being more realistic with pricing. But declining inventory is also helping.

Chico is experiencing somewhat the same phenomena. I have lately gotten more and more would-be agents calling me about obtaining a real estate license. Still, despite some gloomy numbers and mixed reports in recent weeks, many economists see evidence that Western states like California, Arizona and Nevada—the hardest hit in the housing crisis—are showing signs of healing. Home prices in Los Angeles, Phoenix, San Diego and San Francisco have risen for 6 straight months. Don’t bet against the trend.

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 2-19-10

REAL ESTATE PATTERNS
By Ken DuVall

LOOKIN’ MO’ BETTAH!

Buyers returned to the market for U.S. pre-owned homes in December after the federal tax credit was reinstated. The pending home sales index rose 1% in December after plunging 16.4% in November, with buyers reacting first to the expiration, and then to the return of the tax credit. The index was up 10.9% compared with December 2008.

The Commerce Department says housing vacancies remained near record levels in the 4th quarter with 2.1 million vacant homes for sale and 4.5 million for rent. The oversupply of housing should continue to depress prices and rents. Of all housing units built since 2000, 21% are vacant. Wow.

By the time Congress extended the federal tax credit and expanded it, the market had dried up. The newer tax credit gives $8,000 to qualified first-time buyers and $6,500 to qualified repeat buyers, who must now sign a contract by April 30 and close by June 30, to get the subsidy.

"These swings are masking the underlying trend, which is a broad improvement over year-ago levels," said Lawrence Yun, chief economist for the Nat’l Assn. of REALTORS (NAR). "December activity was the fifth highest in two years." He expects about 2.4 million buyers will take advantage of the tax credit this year. NAR’s economic outlook for 2010 and 2011, projects existing-home sales to rise from 5.19 million in 2009 to 5.66 million in 2010 and 5.7 million in 2011. Yun projects 2.4 million households will take advantage of the credit in 2010. All good so far.

In its latest national market forecast, NAR expects new home sales to rise from 375,000 in 2009 to 446,000 in 2010 and 637,000 in 2011, surpassing 2008's 485,000. They expect prices to rise in both 2010 and in 2011 with a 3.4% price increase for existing homes and a median home price of $179,800 in 2010, along with a 4.3% increase in 2011 to $187,500. Prices should rise even more for new homes, with a 3.7% increase this year to a median price of $221,300, and a 4.7% increase in 2011 to $231,700.

"For several months now we've been seeing stabilization in all of the home-price measures as inventory is pulled down," Yun said. "As a result, the housing wealth for many families has begun to stabilize. Expect existing home sales in 2010 to rise 9% and make up the vast majority of transactions.” Affordability is high and foreclosures are declining for the moment, thank goodness.

New home sales should also rise rapidly, up 18.8% in 2010 and up 42.9% in 2011. Residential construction is expected to gear up 27% in 2011 after a slim 3.2% increase in 2010. Housing starts are projected to increase a whopping 60.6% in 2011, after a 21% increase in 2010, equaling 1.07 million starts in 2011. The record high of 2.07 million units was in 2005. Expect 30-year fixed rate mortgages to rise from 5.1% in 2009 to 5.5% in 2010 and 6.2% in 2011, the highest level since 2008’s 6.1%.

Most important for us to realize is that our housing market will rebound like all others have in the past. The American Dream is alive and well. Owning a home is one of the biggest parts of that. P.S: Four years after home prices hit their peak in 2006, CNN Money looks at how 330 metro areas fared. Most important for us to realize is that our housing market will rebound like all others have in the past. The American Dream is alive and well. Owning a home is one of the biggest parts of that.

P.S: Four years after home prices hit their peak in 2006, CNN Money looks at how 330 metro areas fared. In 2006, Chico’s homes were 59% undervalued. They say we’ll still be 4.8% undervalued in 2010! We didn’t go crazy then. Chico’s always a bargain. The Good Life here is just a bonus!

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 2-12-10
REAL ESTATE PATTERNS
By Ken DuVall

MIXED REVIEWS

Chief Economist Mark Zandi of Moody's predicts that the national market will level out in housing starts and that by the end of 2010 the numbers will return to 1 million units through 2011. Based on the ongoing stabilization of the banking industry and adjusted consumer spending, Zandi anticipates the current economic recession to end sometime this year. We’ll see.

As economists look into their crystal balls, it appears there is a consensus. The winds of change are blowing towards improvement in new single-family construction. Yet, home sales nationally tumbled 16.7% in December, the largest in more than 40 years. Sales of existing homes took their largest drop too, yet managed to end 2009 with the first annual gain in 4 years. Go figure.

Still, prices nationally plunged by more than 12% last year, the sharpest fall since the Great Depression. The drop for 2009, to a median of $173,500, showed the housing market remains too weak to help fuel a sustained economic recovery as hoped. Yet total sales for 2009 were up about 5% from 2008. Again, go figure.

Meanwhile, California’s home inventory shrunk to a 5-year low. The inventory of unsold homes on the market fell about 7% to 3.3 million. The unsold Inventory Index (UII), a closely watched index indicating the number of months needed to deplete the supply of homes on the market at the current sales rate, declined to 3.8 months in December, the lowest level in 5 years. A 6 month inventory is healthy, so we’re good there.

Some economists believe that California’s housing inventory is artificially low because many discretionary sellers—homeowners who do not have to sell their homes—are waiting on the sidelines until home prices rise. Others say more foreclosures are to come, as unemployment continues to rise. However, the California Assn. of REALTORS predicts that foreclosures will remain flat in 2010 compared with 2009, as lenders are listing properties for sale at a far more metered pace.

California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median price reached its trough in February 2009. In December, the median price of an existing home rose to $306,820, an 8.4% rise year-over-year, the second consecutive year-over-year increase, and the 10th straight month-over-month increase. That’s good news.

With affordability (due to distressed prices!) near-historic highs, low interest rates, and home buyer tax credits, many properties in California are receiving multiple offers and sparking bidding wars. A REALTOR colleague told me some Sacramento homes are selling for as low as $30,000! For perspective, sales are now up 21% from the bottom a year ago, but down 25% from the peak 4 years ago.

The median price of an existing home in California during December 2009 was $306,820, an 8.4% increase from a $283,060 median for December 2008. The December 2009 median price rose 0.8% compared with November’s $304,520 median price. Of course, the recovery will depend on whether the economy starts adding jobs in the second half of 2010. As always, housing shall endure. Chico is still so far, so good. Don’t be afraid. Keep the Faith.

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.