PROFESSORS PREDICT, REALTORS REACT

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.