California has been hit by two major housing “hurricanes.” One in fall 2005 and a second one this August.

Imagine Florida for a moment. When a major hurricane blows in, the area closest to the eye of the storm experiences the major brunt of the damage, and possibly the storm surge. As the storm continues its path across land, the strength gradually decreases. From a Category 3 or 4 at landfall, it winds down to a still-nasty Category 2, then 1, and finally sputters into a tropical storm.

Some areas of the state are completely devastated. Others suffer major damage. A few areas get heavy bands of wind and rain, and many areas miss the storm all together. Florida, like California, is a large state.

The California real estate market has been hit by two severe storms. But Chico managed to survive the storms with very little damage, and our recovery is slow and sure.

The first storm to hit California was in the fall of 2005. The housing market had reached its peak and was starting to decline a bit. Most of us had prepared for this. We had some equity in our homes. We had not refinanced and pulled out all our equity. We didn’t opt for the highly adjustable loans.

Then there were those that left themselves wide open. No equity at all and loans with very volatile interest rates. Many of these were new homes. The builders and lenders got too creative, even to the point of fraud.

The eye of this storm was the Sacramento/Stockton area, especially the areas with acres of new construction. They suffered the storm surge and took the biggest losses.

After the 2005 storm, legislators examined the damage and found ways to fortify us against damage in the future. FHA reform was passed. Many creative loan programs went away. Home financing returned to the basics of having to prove you could repay the loan.

The second storm has been brewing for a while. It finally made landfall in August 2008. This was a larger storm, and was felt around the world. The lending markets froze. For the housing market, this stopped any subprime lending. This included jumbo loans, needed for homes over $500,000.

In California, the eye of the storm was the greater Los Angeles area. Housing values plummeted by 40 percent from September 2007 to September 2008. Jumbo loans had been difficult to get and suddenly were gone. With most of the homes needing these larger loans, buyers couldn’t get financing.

Los Angeles had not suffered much from the first storm. In fact, the higher end of the housing market declined very little. But the second storm left it devastated.

By now, the severe damage from the first storm is being cleared away. Sacramento and Stockton are experiencing a huge increase in the number of homes being sold. Because home prices are in the lower range, money is available for loans. It won’t be long before all the foreclosed homes are snatched up and the market stabilizes again.

The second storm left damage worldwide, and drastic measures were taken to thaw the credit markets and allow money to flow freely again. Many economists say it will take two or three quarters to get things moving again.

Chico had tropical storms blow through, but suffered very little permanent damage. Our values have corrected from the highs of 2005. We have had a few foreclosures. But overall, we came through safe and sound.

Chico has held up like a tall brick building in a hurricane, strong and protected.  But what are the things that buffered Chico through all of this?

Foremost, there is a high demand for Chico housing. It is a great town! Students are drawn back as adults. Parents still buy houses for students. Our lifestyle is coveted.

When the ‘05 storm hit, our new construction was under control, with mostly local builders who could adjust to the changes.

We do not have large blighted areas (think Stockton), which are left vulnerable during a changing market.

We are not a bedroom community. We have our own economy with the university as a central force. We have not suffered major job loses.

We are not solely dependant on jumbo financing. Most of our housing fits in the “conforming” loan category. Many of our more expensive homes are purchased by people coming in with down payments.

Our Realtors and lenders care about our community. During the boom years, 2000-05, we had fewer high-risk loans and less fraud.

When I sit in seminars listening to experts go into great detail about the causes of California’s housing crisis, I think of Chico and count my blessings that we are strong.

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