The housing market’s Mr. Objective
John Karevoll keeps a cartoon on his bulletin board that shows a man exclaiming: “It’s all one big crapshoot.”
The caption: “Occasionally Ted is struck by a blinding moment of clarity.”
The residential real estate market has always been a matter of extreme interest to Californians, but rarely more than now. After years of boom and bubble, the market is deflating fast. A growing number of pessimists are sure the fallout will be lengthy and nasty. A dwindling band of optimists think it won’t be too bad.
Karevoll, the chief analyst for DataQuick Information Systems in La Jolla, thinks it’s all one big crapshoot.
The kinds of loans that have been made in the last five years, especially the popular interest-only mortgages, “don’t have enough history to predict we’re going to sail past this or that the sky will fall -- or anywhere in between,” Karevoll says. “No one knows.”
Another reason for the conflicting opinions: It’s difficult to obtain good housing numbers. Neither the federal government nor the states gather foreclosure data, for instance.
The California Assn. of Realtors and the National Assn. of Realtors compile statistics, but with their vested interest in a stable market and high sales volume, they’re perceived to be biased.
“Ninety-five percent of the real estate information out there is dripping with agenda,” Karevoll says. “It’s hawking a viewpoint or wants you to reach a conclusion.”
That gives an opening to companies such as DataQuick, a subsidiary of the Canadian firm MacDonald, Dettwiler and Associates Ltd.
Karevoll, 56, spends a portion of his day compiling proprietary reports for banks, title companies, consultants, academic institutions and builders, and another part of it talking to reporters. For the media, including The Times, he’s the guy who can pinpoint a shift in prices or place a trend in context.
“If data has emotion or ideology, there’s something wrong with it,” says Brad Inman, founder of the Inman News real estate website. “I’ve never thought of John, or his data, as having either. He’s Mr. Objective.”
On a normal day, Karevoll gets about 20 calls from reporters. When the monthly sales or quarterly foreclosure numbers come out, that can swell to 100.
Every night, DataQuick uses public records to update its databases. Karevoll plugs in at 5:30 most mornings to see what’s new.
“It’s not something that gives most people goose bumps,” he says, “but to show you how twisted I am, I find it all interesting.”
Here’s an example: During the latter stages of the boom, nearly 80% of the mortgages obtained in Southern California had adjustable rates. Presumably, people were buying the most house with the smallest monthly payments possible, figuring that appreciation would bail them out.
When the perils of that policy began to sink in, only 49% of home buyers got adjustable-rate mortgages as they sought the safety of a fixed rate.
But what’s this? The ARM percentage is creeping up again, hitting 54% in July. It could be a statistical aberration or a forerunner of a recovering market. “There is pent-up demand out there,” Karevoll says.
He’s an immigrant to the land of housing obsessives. Born in Minneapolis to a Norwegian father and an American mother, he moved with his family to Norway when he was 12. He spent more than two decades there. In the mid-1980s he came back to the U.S. to work as a financial writer, ending up at the Riverside Press-Enterprise.
He and his wife, Kari Enge, live in Running Springs in the San Bernardino Mountains near Lake Arrowhead, where fire is a constant worry.
During one big conflagration a few years ago, firefighters made their stand only a few feet from the data maven’s deck. He and Kari watched the action on television from the safety of Palm Springs.
The couple bought their house in 1991 from a man in bankruptcy and foreclosure. They took over payments on the loan, brought it current again and acquired the deed. They then watched it lose value for the next five years in the last great slump.
Most communities suffered in that era, but some places bore the brunt. Karevoll, working from the data, labeled Palmdale the foreclosure capital of the U.S. “They hated my guts for about five years after that,” he says.
A couple times a week, Karevoll slips down the hill to fly ultralight planes out of Perris. This gives him an overview of the market, literally. He was able to watch the building frenzy of the last few years, and then he was able to watch it come to a screeching halt.
In some tracts, the infrastructure is laid out, the concrete slabs have been poured, but there’s only a stray house or two. The rest will be built in a few years or, if you’re a real bear, never.
Karevoll has his critics. Charlie Ryan, an airline pilot then living in Ventura, took issue in May 2005 with the analyst’s assertion that “indicators of market distress are still largely absent.” Ryan argued in an e-mail to Karevoll that the prevalence of interest-only loans was in itself an indication of distress because it meant people couldn’t afford more-conservative mortgages.
“Statements like this will come back to discredit you in the coming years,” Ryan wrote.
Two years later, the downturn well underway, Ryan sent the whole exchange back to Karevoll, adding, “Thankfully, I sold as your firm was recklessly cheerleading.” Ryan now lives in Maryland.
“The drumbeats of doom are relentless,” Karevoll acknowledges. Some of the names he’s called on the Internet can’t be quoted in a newspaper.
Karevoll tries to ignore the blogosphere, saying, “Good questions get raised there, but I don’t think they get answered.” In any case, he adds, “predictions of imminent doom started in 2001. If you listened then, you were out a bucket of money.”
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(BEGIN TEXT OF INFOBOX)
His personal data
Who: John Karevoll, chief analyst for real estate research firm DataQuick
Age: 56
Birthplace: Minneapolis
Education: Degree in media studies from Hogskolen i Volda, Norway
Ambition: Hiking all 211 miles of the John Muir Trail from Yosemite Valley to Mt. Whitney
Concession he made to his wife, Kari, in return for getting permission to fly ultralight planes: Ballroom dancing classes
Second home: An apartment in Oslo, where he and Kari spend several months a year. They also inherited a small farmhouse north of Oslo.
Political cause: Trying to reverse the privatization of public land. “If I drive to our local high school to watch a basketball game and stop on the way to enjoy the view, I can be ticketed and fined $5,000 or put in jail for six months.”
