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Professors Predict, Realtors React

Smokin Moose

Fallen Cannabis Warrior
Humboldt State University Economics Professor Erick Eschker, who also chairs the Economics Department, created a major kerfuffle with a report that has housing prices plummeting downward as much as 40 percent. Titled "It's A National Housing Market," the piece set off a quick reaction from local realtors, who took out full-page ads in both Eureka dailies that said, in essence, that the lowered housing prices make this a great time to buy.

Eschker arrived at his conclusion after noting the historical bond between rental costs and housing prices, which have diverged near-exponentially since around 2003. Realtors, accustomed to the steady upward march of home prices ( and commissions ) were quick to pooh-pooh the relationship and thus the prediction, but other studies since the October report have arrived at similar conclusions using entirely different criteria.

The general line from the realty camp has been to sniff at the report as a "theory," usually stated with a contemptuous lilt and ivory-towerific imference. But theories are commonly used to explain real-world, observable phenomena such as weather, language, gravity and yes, housing prices.

For his part, Eschker remained affable in the face of a mixed-metaphorical rebuke by the Eureka Reporter that he was "full of hot water." He said he understood the concern, but was firm in his contention. Even Tom Hiller, president-elect of the Humboldt County Board of Realtors, acknowledges that a "correction" was overdue.

Eschker said his calculations haven't factored in nouveau trends such as the estimated 850 to 1,000 homes used all of in part for marijuana cultivation in Arcata, which displace up to 2,000 residents.

For that and other reasons, Jacoby's Storehouse-located Real Estate Agent Phil Howard disputed Eschker's results. "I think his report is naive," Howard said. "I think he had the right conclusion with the information he had, but there's information that isn't available. He neglected this effect of extra income in the community from [Proposition] 215."

For the Arcata-based agent, the effect of indoor medical marijuana operations was a major factor in keeping local housing prices comparatively stable. "It does artificially drive up rental and housing prices. And there's a built-in disincentive for reporting that information. There's a huge economy of construction people who take cash," he added, describing one element of the Arcata gray market.

"Whether true or not, there is this perception of an economic tolerance [for marijuana production]," which is continuing to draw out of the area growers arriving to purchase or rent local homes. Howard noted that were pot to be out-and-out legalized, the local housing market would suffer a dramatic drop.

Similarly, Howard said more attention needed to be paid to the effect of other, less-controversial in-home businesses like local eBay retailers - a small economic engine that wasn't being adequately tracked.

Currently, the Arcata, Bayside and Fickle Hill areas include 43 homes for sale with a median asking price of $415,000. Of those, 14 sales are pending with one under contract. Seven homes were sold since the end of October. Howard added that the local market was definitely favoring the buyer however, and that most appeared to be taking their time before making offers.

Source: Arcata Eye (CA)
Copyright: 2007 Arcata Eye
Contact: editor@arcataeye.com
Website: Arcata Eye :: The mildly objectionable weekly newspaper for Arcata, California (pagesetter)
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