Copy for Real Estate Guide Column for 6-25-10

REAL ESTATE PATTERNS
By Ken DuVall

WHAT’S AHEAD?

We should take a look at the U.S. economy this week since housing and the economy interact and affect each other in every way. It’s important to keep current events in mind to understand the big picture of where we may be headed. But for openers, there is still no short term housing or economic fix on the horizon by any stretch of the imagination.

The good news: There appears to be no likely relapse into recession or a depression foreseeable at this point in time. Odds are that concerns about Europe’s woes infecting the U.S. will recede by year-end as policymakers take steps to avoid a full-blown meltdown there. Yet regaining our own economic health will still take a few more years.

Figure on about a 3.5% gross domestic product (GDP) growth this year and next. Not too shabby considering, but still far from our more normal 6.3% growth. Meanwhile, rock-bottom interest rates will continue for now. With the Fed more worried about deflation than inflation, it should keep rates at record lows into next year, a good thing for real estate loans. Also rising consumer confidence is playing a role, with consumers finally recovering a renewed sense of wealth.

Wow stuff: There are now 4.7 million people in the U.S. classified as millionaires, a 15% increase over last year. Go figure! There are $20 trillion worth of homes in the U.S. We’ve lost 8.4 million jobs- so far- in this recession. American’s household net worth is up $3.5 trillion from a year ago, and $5.8 trillion from the recession’s low point.

In the last 5 years the national median home price has fallen 26%. Yet the California median home price is up nearly 21% over a year ago to $278,000 and up 9% just in April. High-end home sales are staring to move again too, up over 16% from a year ago. Here at home, the old Goodyear Tire store building on Cohasset below East Ave. was just purchased by Firestone Tire for $750,000. Notwithstanding the sad loss of Aero Union and Longfellow Lumber, we may be finally starting on the road to recovery.

Nagging problems: we’ve still got loads of idled resources; vacant homes and stores, assembly lines, and factories. Millions are still unemployed. The jobless rate won’t sink to the normal 5.5% rate from near 10% now for several more years. Housing and related industries account for 7% of the economy, making headway tough when they stall.

It will take many years to get back to the pre-recession highs in construction and home sales due to the artificially high peaks pumped up by shaky loans that were pre-destined to crumble. But there is a decent outlook for existing home sales of 5.3 million this year and 5.5 million next, nearing the pre-bubble level. Projections are also up for new home starts (in the pits for the moment) and sales, but still far below 2001’s 1.6 million units.

Attitude is everything. It’s a little thing that makes a huge difference. I’ve said it before: it’s your attitude, not your aptitude that determines your altitude! Keep the Faith. We shall endure.

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.