Copy for Real Estate Guide Column for 6-18-10

REAL ESTATE PATTERNS
By Ken DuVall

MARKETS EVEN OUT OVER TIME

Knowledgeable economists tell us that decisions about what to buy and when to buy inevitably lead to market fluctuations that can sometimes be forecast and sometimes not. Of course, an economist is an expert who will know tomorrow why what he predicted yesterday didn’t happen! But whatever, they’re the ones who inform us where it’s at any given point in time.

Over the long term, broad trends can smooth out short-term fluctuations. With 4 million births and 2 million deaths, plus 2 million newly arriving immigrants into the U.S. each year, it’s obvious that housing will remain in steady demand. Historically, the net number of homeowners continues to rise by 1 million every year. The 2 million weddings and the 1 million divorces each year also add to changes in living patterns.

Furthermore, home owners look for a new nest every 7 to 10 years. As a result, over the next 10 years, that equates to 50 to 70 million home sales. After 4 years of declining construction and sales, the painful housing slide seems to be ending. Kiplinger tells us we’ll finally begin to see an upturn this year, a start on the road to recovery. Again, nationally, existing home sales prices were up 6% and sales up 7.6% in April, the latest stats available.

But “it ain’t over ‘til it’s over”, per Yogi. We’ll see more casualties along the way. Expect a choppy, uneven period of a year to 18 months. On the upside, a big jump in new housing starts, 30% over last year, and overall home sales up to 5.8 million vs. 5.5 million in 2009. Compare to 8.4 million sales in 2006, at the peak of the boom. Also there are still some 10% of the nation’s 52 million mortgages over 90 days delinquent or in some stage of foreclosure, which ultimately will add to the existing inventory of 2 mil empty homes- huge. New home sales usually account for 15% of sales vs. 5% now.

With the primary elections over, maybe we’ll see some changes on the political front. Most things are still in major state of unrest. We’ll see as we go. California is bracing for another ferocious budget battle as we try to dig out of our $20 billion hole. The outcome matters to everybody. As the most populous state, we account for fully 13% of the U.S. gross domestic product. California could actually put a damper on the entire nationwide recovery. Meanwhile, back at the ranch, Sacramento politicians continue to squabble over raising taxes or reducing spending. So what else is new?!

Of course, demand is being hurt by high unemployment but the offset are the historically low current interest rates continue way below 5%. At the moment, the trail ahead looks to be heading up rather than down. Home prices continue going up in some areas of the country. Don’t pop the cork just yet, but after the past few nervous years, it’s cause for relief.

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