On the move

Relocating from one place to another has been on going since Adam and Eve were abruptly relocated from the Garden of Eden. Man has been following the food chain for at least a few hundred thousand years. Today, a job transfer is still one of the top reasons for leaving one place and moving to another. Up until a few hundred years ago, most of us lived, worked and expired within a few miles of where we began. In a free and affluent society, moving is no longer viewed as a dreaded hardship. Discretionary modern movers relocate for a variety of reasons that are very different from our grandparents.

Demographers tell us that most of us will relocate from one community to another, six times during our lifetime. Technology allows more exact tracking of our movements. The state’s Franchise Tax Board and the DMV have a good idea about where people are from and where they are now. There recently published finding are important to those of us in the business of helping people on the move.

At last count, our state gained a total of 462,000 new residents during 2006, bringing our total population to around 37. 4 million. Half of the increase, however, was foreign immigrants (that we can count) and the other half, was from new births, mostly from new immigrants. According to the Department of Finance, California actually recorded a net loss last year of 67,000 people to other states. Since 2000, the state’s population has grown by 3.3 million people. We have had a net gain of 1.8 million babies born to residents and an increase of 1.4 million foreign immigrants but only a small 105,000 net gain of people moving to California from other states.

According to Bill Leonard, of the State Board of Equalization, “Middle income working families and retirees with pension income are leaving -- in droves. This is masked by the number of illegal immigrants and by the childbirths from those left behind. Federal census figures show that for the period between 2000-2004, the only state that had more domestic out-migration was New York, which is another high tax, high regulation state.”
More homeowners moving out of California than moving in? So what’s up with that?

Regionally, we are a higher growth area than the rest of the state. Sacramento reported an increase of 18,000 people last year. Placer County gained 9,000 souls and El Dorado County increased by 2,400 people. Not only did our population increase but according to Linda Gage, a Department demographer, our local counties gained new residents from other states unlike many other counties.

One factor that has allowed middle class homeowners to move out of state in such large numbers and prevented many potential homeowners from moving into the state is the high cost of housing. California homeowners are not moving because home prices are ratcheting down. They are moving because over the past five-years, home prices have ratcheted up so high allowing many sellers to capitalize on their increased values and move to a place with more affordable housing. California is experiencing a home equity deficit. We are exporting more home equity than importing.

In addition to high real estate prices, other factors are attributing to a net loss of middle-income families. There are now more alternative destinations. From 1945 to 1985, California was the primary destination for people moving west. Economic opportunities and quality lifestyle were more limited in other western states. Today, Las Vegas, Denver, Salt Lake and Phoenix have become major employment and/or retirement communities. The Internet also provides more destination choices. It’s now possible to work from home in Reno, with a client in San Jose, on a product that is manufactured in Detroit.

The evolution of movement continues to evolve and El Dorado County is directly in the path of one migratory wave. Over the centuries, the dominant motivations for moving have been primarily forced by wars and pestilence or greater economic opportunities. More recently, another primary reason for relocating appears to be developing. Safety and security are now primary reasons people are relocating to more rural counties. The resettlement of the mid-west, the urban flight, and the green movement are indicative of a new migratory movement.

Economic affluence and technology has provided more destination choices for movers as evident by the growth of rural counties. The net migration of middle class homeowners into California may be over but the relocation of Californians into El Dorado County seeking a higher quality lifestyle, including safety and security, will continue.

Worst is over

David Berson, chief economist at Fannie Mae, told reporters last week that the "biggest declines (he was talking about the real estate market) are behind us." "There are still some (declines) to go," he said at a National Press Club briefing, where he presented Fannie May's 2007 outlook for the economy and mortgage market. "But the worst is over."

Although key housing market benchmarks have stabilized in recent months in response to lower mortgage rates and warmer-than-normal temperatures, Berson expects sales to fall further in 2007. He is predicting a 7-8 percent drop in sales, which he said "is more than just a little bit, but not as much as last year."

If Berson's projections are on target, sales this year will be at their lowest level since 2002, while the two-year decline would be the largest since the 1989-'91 downturn. And as have others, the Fannie Mae economist attributes the slide largely to declines in investor activity. "You can't argue with their choice of investments. After all, housing prices recorded double digit gains in 2004 and 2005," he told reporters. "And now it makes sense for them to invest their money elsewhere."

Berson said that by mid-year, "most of the decline in investment activity should be behind us." By then, prices should begin to turn around, he also said. But for the year as a whole, prices will be down 1-2 percent on a national basis, he added.
Asked which markets will be in for the toughest sledding, the economist said those which showed the sharpest gains will also show the sharpest losses. But the declines won't be as great as the increases, he ventured, "so prices on average will continue to go up."

Overall, though, Berson predicted that 2007 "will be a strong year for housing, but far from a record year." And the next several years will see "slower, more sustainable growth." Because of the drop in sales and "sharp slowdown" in price gains, the Fannie Mae soothsayer is calling for an 11.2 percent decline in purchase money originations -- on top of the estimated 3.1 percent drop in 2006. Refinancings, on the other hand, will be little changed, as borrowers continue to turn in their adjustable mortgages for the fixed-rate variety at a stepped up pace.
As for loan prices, Fannie Mae is expecting long-term rates to hold relatively stable much of the year until the Federal Reserve Board begins to ease back on the economic hatches.

Free house

In the real estate business, every day is a new discovery. I never know when I get out of bed where my path will lead. Each day I meet new people, discover new properties, get frustrated with new challenges and resolve issues. One day I will be meeting an executive for lunch at a downtown restaurant discussing his move to El Dorado Hills and another day I will be stepping around horse manure while a rancher shows me his property.

When Emily called me last week about helping her sell her small rental in Garden Valley I had no idea that I would be giving her house away for free.

The 10-acre property included a small 2-bedroom, one bath home of approximately 1,150 square feet including an upstairs loft with a separate workshop and tack room. It sat on a hill surrounded by pasture that sloped down to a seasonal creek. The seasonal creek flowed into a beautiful year-round river with several swimming holes and some ideal places for gold panning. The house was in pretty good condition with a wall space heater, wood stove and swamp-cooler. The property had GDPUD water, was completely fenced, and included a fenced fruit orchard and a septic system. The house had been rented for a $1,000 a month. I had the opportunity to interview the tenant about her experience living there, which didn’t reveal anything negative about the home or the property.

My next trip was to the county offices to pull the file on the property. The county charges me a small fee for the research and copies but I have found their information valuable to potential owners. “I’m sorry Ken, said the county clerk, I can’t find any building information on that parcel number, and we don’t show any improvements, would you like me ask our Compliance Officer to check it out?” Woops! “No thanks”, I decided that I needed to do a little more research on the home before I had the county looking more diligently into my new listing. My next call was to the seller.

“Hi Emily, I just had an interesting meeting with the county and they don’t have any record of any building permits for the home or septic system. Do you by chance have any building permits?” Emily didn’t have any permits. She had purchased the home from a seller who had built an entire house without permits. According to the county, and any future lender or title company the house did not exist. How was I to sell a home that didn’t exist?

The 10-acre parcel with irrigated pastures, fencing and cross fencing, creek frontage and public water was worth $275,000. A year ago maybe $325,000. The stable, tack-room and workshop had some additional value but I priced and listed the property for the land value of $275,000. I did not include any value for the house. If someone wants the house it’s free. If they don’t want the house maybe the Garden Valley Fire Department would use it for a training exercise.
So what can a new owner do with an unpermitted house? Someone may get permits for it. The county has a procedure to obtain permits for unpermitted room additions and the occasional house. It isn’t easy and it is expensive, probably too expensive for this home. Someone may buy the property and live there. The county doesn’t normally investigate properties for proper permits. If I were 20 years younger, I would live in the small house while building another permitted house. There are a few other good building spots on the 10-acres. When finished with a new home, I might tear the existing one down, keep it as a studio, guest cottage or very nice house for a horse.

To see this unpermitted 10-acre horse property visit my web site at www.kencalhoon.com. At the bottom of my home page click on “Featured Listings” I have some pictures and additional information. Would you have ever thought that the house didn’t exist? If you know of anyone who is looking for a real estate investment, a place to build a nice new permitted home or just a 10 acre horse property please forward this to them.