Sacramento New Home Sales Hammered: Sacramento Down 59%, Yuba Down 93%

New home sales continue to be the leading indicator of a declining market here in Sacramento. Are any other overheated markets out there experiencing such sharp drops?

Regional YOY Sales Volume Down 57% for 1st Quarter:

New-home sales were 57 percent lower in the first quarter of this year than the first three months of 2005, extending the trend of a cooler market that began last year...

Homebuilders in Sacramento, Yolo, Placer, El Dorado, Sutter and Yuba counties sold 2,081 homes from January through March 2006, compared to 4,812 in the same three months last year, said Greg Paquin. He owns The Gregory Group, a local company that analyzes the market...

Sacramento County saw a 58.6 percent decline, from 2,660 to 1,101, with larger drops in Elk Grove and Natomas but increased sales in Folsom. Yuba County saw the sharpest percentage drop, down 92.8 percent in a year from 497 sales in first-quarter 2005 to 36 in the first three months of this year...

The conventional observation is that the sales downturn is partly the result of rising home prices, along with escalating interest rates. But the mix of bad weather, slow processing of land for development and news reports on declining sales are putting a damper on deals, said Brendan O'Neill, executive vice president of operations for Beazer Homes in the Sacramento area.

Incentives Triple & Discounts Noted:

The decline has builders sweetening incentives, which nearly tripled from early 2005 to the first part of this year...

Builders are feeling a bit pressed, however. They are increasing incentive gifts to make deals. Paquin said the average concession in the quarter was $10,465, compared to $7,207 in the fourth quarter and $3,600 in the first quarter of last year. More builders are cutting prices too, he added.

Construction Activity Drops:

Declining home sales were responsible for a simultaneous drop in the overall construction volume for the region. New homes had been the main force in the building market since 2002...

Meanwhile, overall construction in the region has dropped this year. During January and February, the most recent data available, the value of building permits issued in Sacramento, Yolo, El Dorado and Placer counties was $576 million, down from $726 million for the same period last year, according to the Construction Industry Research Board.