Copy for Real Estate Guide Column for 9-17-10
REAL ESTATE PATTERNS
By Ken DuVall

TRIAL BY FIRE

As the economy sputters and home buyers view the market with uncertainty- July home sales sank 26% from July 2009- there’s a growing sense of fatigue with all the government intervention. Many economists and analysts are now urging a dose of shock therapy. One of them is quoted as saying, “Let the housing market crash!” Is he serious? It already has crashed! Get real. We just need to return to the basics now in these difficult times.

With home prices as low as they are, same experts argue buyers should be pouring in, which the government envisioned with the billions they’ve already spent. Since October ’08 we’ve not been in your garden-variety recession. We are in the aftermath of a true financial crisis, the nastiest, most protracted kind of recession in many years.

“Housing needs to go back to even more reasonable levels” says Professor of Real Estate Finance at George Mason University. “If they continue trying to stimulate the market, that’s the definition of insanity.” In a nut shell, nothing we’ve done so far has had a long term positive effect. The administration bet that a rising economy would solve the housing problem, and now they’re out of chips. DC insiders secretly admit they are deeply worried and don’t really know what more to do.

Last spring’s housing tax credits cost taxpayers some $30 billion, much of which went to people who would have bought anyway. If the credits were supposed to bridge over a rough patch, it ended with a glimpse of an abyss. With a huge current inventory, homes now take many months to sell, with even more foreclosures- the “shadow inventory”- lurking in the background as job layoffs continue.

Says housing analyst Ivy Zelman, “We’ve had enough artificial support and now need to let the free market do its thing.” I agree. Last week Shaun Donavan, U.S. Housing Secretary, said, “The administration would go everywhere we can to help the housing market”, while other officials backpedaled and distanced themselves from his views. With all the different opinions out there, what’s a person to think?

I don’t see where anything has radically changed in home buying and selling since 1963 when I got in the business. To be sure, prices are unstable and weak now. Loans are tough to come by. But there’s never been any change in defining the term “true value”.

You combine a motivated seller, a qualified buyer, a willing lender, along with a righteous appraisal, and voila! There’s your true market value. No one is going to pay more than market value for any commodity. Prices go up or prices go down based on the marketplace at any given point in time. That’s always been the deal.

Yet people are going to need a roof over their heads, right? Kids keep being born; people need bigger or smaller homes; they move, etc. Life and houses will go on forever. It’s still a simple matter of supply and demand and haggling over price. There never was a better time to buy than right now.

In all honesty, I’ve got to say I’ve never seen people and things so gloomy before either, so you’re not alone feeling that way. But this is America. We shall endure. It’s just a different ballgame today. It’s time to take a 7th inning stretch!

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.