CALL FOR ACTION

Real Talk, The Napa Valley Register

Real Estate Article by Charles Bogue

President Barack Obama presented a picture of “gathering clouds and raging storms” as he took the helm in what could be the most challenging time a president has entered office in a history of 44 transitions. As he eloquently laid out the task before the nation he clearly placed the resolution of what we face not in the hands of the government but in the hands of each of us, to evaluate our actions of the past and redefine our expectations for the future.

The multiple applications of his address affect many audiences, from foreign governments to the victims and perpetrators of our economic collapse at home. It proposes a worthy exercise that we examine our role in a future of limited government entitlements and renewed commitment to personal responsibility.

Said our new president, “What is required of us now is a new era of responsibility-recognition on the part of every American that we have duties to ourselves, our nation and the world.”

Given the current economy, the nation and world may need to wait as most Americans are confronted with dropping housing values, tight or non existent credit and rising unemployment.

Evidence of the severity of our economic condition is supported by recent market reports.
The decline in the median home price by 38 percent from December 2007 to December 2008 confirms a California real estate market at its lowest point since February 2002. Bank owned foreclosure properties make up 58 percent of the sales statewide in December 2008, up from 27 percent one year ago.

Reflected in these numbers is Obama’s assessment that “our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices.” Personal food for thought as we salvage fractured investment portfolios and seek reasonable risk opportunities in a new reality: “the challenges we face are real. They are serious and they are many.”

As each of us charts a new personal course within today’s economic realities, the president offers further advice that “our time of standing pat, of protecting narrow interests and putting off unpleasant decisions - that time has surely passed.”

Experiencing a loss of faith in our trusted financial institutions and advisors, Americans have misplaced their compass as they seek to replenish their damaged security values and covet their remaining assets.

The question posed by Mr. Obama Tuesday morning was “not whether government is too big or too small but whether it works”. Having just completed a year of cumulative stimulus and bailout programs the size of which we cannot compute, the president imposes on our government the same test we must impose on ourselves if we are to survive. “Spend wisely, reform bad habits, and do our business in the light of day.”

The success of this effort is yet unknown but the quasi nationalization of banks, brokerage companies and even auto makers has changed the historical notion of the government as “those guys”; the suggestion that government is an entity other than ourselves is over. As government charts a new course we too must chart our own; as our president clearly stated “this is the price and the promise of citizenship.”

Charles Bogue is a Broker with Coldwell Banker Brokers of the Valley in Napa. He can be reached at phone: 258-5221 or e-mail: cbogue@cbnapavalley.com

SMALL IS BEAUTIFUL

Napa Valley Life Magazine – Feb/March 2009

Real Estate Article, by Charles Bogue

It is said that the only constant thing is change. Evidence abounds in our United States and Napa Valley alike as the political transition takes hold in Washington and premature warm days blanket the valley floor with belts of mustard between the vines.

Though we have seen little evidence of winter this year, it is the small and simple signs like mustard in the fields and bud break on the vines that give us visual reminders of nature’s process of renewal - and the opportunity for renewal within ourselves.

Just as the change of guard in our national capitol brings hope for a brighter future, the annual pruning of the vines brings hope for a new and superior crop of quality grapes.

The similarities between politics and nature extend even further as one considers the current scaling down of our national economic largesse and the grape grower focus on quality over quantity. There seems to be a new truth common to both economy and agricultural productivity: size is not the solution.

“Small Is Beautiful, Economics as if People Mattered” by E.F. Schumacher was first published in 1973. The British economist had served as the economic advisor to the British Coal Commission after World War II and became a worldwide spokesman for creating self-reliant economies by using human scale technologies. His premise, much the same as what we are confronting today, suggests in the preface to his book that “we need to reconstruct the meaning of ideas like wealth, knowledge, work, economics, development, and progress”.

E.F. Schumacher suggests that a world “moved powerfully towards consolidation, gigantism, and globalization” leaves us disconnected from our sense of purpose and our ability to identify with the institutions that come to manage our lives.

Facing the economic fallout from big business and big government, we now find the effects of the downturn spreading to all aspects of society. As a high tide floats all boats, low water puts many aground. Thinking, or perhaps hoping, that our bucolic Napa Valley would somehow be immune to the nation’s mortgage meltdown we find now that in our privileged communities 41 percent of the home sales for 2008 were either a bank owned property or a bank negotiated short sale (excluding the City of American Canyon).

This dominance of distressed sales pulled the median priced Napa Valley home down 27 percent from November of 2007 to November of 2008 and made it even more difficult to refinance or sell owner occupied homes that were not in default or facing foreclosure.

A situation that has created a year of pain and tragedy for so many homeowners has resulted in a unique market opportunity for qualified home buyers. Long-term wisdom might look back to this moment in time when record low home prices converged with the lowest mortgage rates since Freddie Mac first tracked the data in 1971.

Taking advantage of interest rates below 5 percent, first time home buyers, property investors and homeowners seeking to refinance are flocking to lenders. Suspecting that this price/interest rate window may be short term in length many buyers are seeking to lock in 30 year fixed rate money secured by discounted bank owned foreclosed properties. Because all properties are affected by lower prices and a weak economy, great values are to be had in all areas of the market including those homes not affected by foreclosure.

The low home values create a particular buying opportunity for those seeking to reduce their housing costs by “right sizing” to less space and reduced maintenance. Included in this group are those seeing a unique opportunity to buy the wine country getaway or the desert condominium at a price that had escaped them as values soared out of reach from 2002 to 2005.

The number of homes on the market for sale in the city of Napa has dropped from 453 in January of 2008 to 381 in December of 2008. This decrease in inventory is reflected in the drop of “months of current inventory” over the same time period from 17.4 to 8.1 months, indicating a likely shift from a heavy buyers’ market towards a balanced or possible sellers’ market were foreclosures to decline and credit to be made more available.

The convergence of low prices and low interest rates answers the technical question of this being a great opportunity to buy property in the Napa Valley, but likely a drive through the vineyards will be what seals the deal. Economist Schumacher summed it up well as he addressed his chapter on The Proper Use of Land: “Among material resources, the greatest, unquestionably, is the land. Study how a society uses its land, and you can come to pretty reliable conclusions as to what its future will be.”

Thanks to the history of our County Agricultural Preserve zoning and the efforts of The Land Trust of Napa County in preserving open space, this is a test we can not only withstand but where we can excel. From apartment dweller to proprietor of a hillside Tuscan villa, residents and visitors alike are drawn to the vines and to the earth to which they are attached.

Change is taking place whether we like it or not. To be a part of our valley is to be a part of nature itself. There are no bad seats on this bus. There are only three guiding words in real estate: timing, timing, timing. As we move through the months ahead, the time to own a part of this unique valley might never be so great. If you don’t want to be the one to look back, you may want to look out.

Charles Bogue is a Broker with Coldwell Banker Brokers of the Valley in Napa. He can be reached at phone: 258-5221 or e-mail: cbogue@cbnapavalley.com