"Falling Fast" in Sacramento?

From MarketWatch:

[S]ome builders, such as Centex Corp. and Hovnanian, have started taking writedowns in connection with land options. In general, when builders take writedowns to walk away from land options, it is a sign that either land values are falling or demand in that market has dried up. In past cycles, declining land values often were a sign that a market was falling fast.

Until now, home-building executives said the pullback in demand was largely confined to markets where sales had been overheated and home prices had skyrocketed during the past few years, such as Washington, D.C., parts of California (especially Sacramento), Phoenix and parts of Florida. They blamed speculative buyers for much of the pullback, saying investors had exited the market, causing less overall demand and more inventory. These hotspots continue to see the sharpest pullbacks, but other markets also are slowing.

Majestic Research analyst John Tomlinson, in his monthly report that tracks new-home sales in 40 major markets, found sales fell year over year in every market during February and March, with the average decline being 25 percent.

Washington, D.C., Los Angeles/Long Beach, Tucson, Ariz., Sacramento, San Francisco, and Phoenix saw the biggest declines with sales falling 22 percent, 50 percent, 50 percent, 46 percent, 30 percent, and 37 percent, respectively. However, even markets that hadn't been weak previously - such as Philadelphia, Dallas, and Las Vegas - softened in the quarter, with sales falling 30 percent, 15 percent, and 13 percent, respectively, he said.

"Almost every single major market that we track is showing pretty significant year-over-year declines in sales," Tomlinson said. "It's much more broad-based" than it was prior to February.

Rising inventory, slowing sales and bigger incentive packages all signal a correction in the housing industry, Tomlinson added. But time will tell if this will lead to big dropoffs in home prices, "which I think most people are most afraid of," he said.

So far, builders' efforts to offer more incentives and discounts have "failed to move the needle" in driving sales, Tomlinson said. As a result, he said some may need to resort to bigger price discounts.