Fortune: Sacramento is a Housing "Dead Zone"

Sacramento joins an elite group of seven cities in what Fortune Magazine calls Dead Zones. A great read for all you housing bubble watchers. This and this are also worth a read.

Welcome to the dead zone
Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

The stories keep piling up. In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials. The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers' pockets, and ignited a building boom that bolstered the nation's economy. But it's over. The great housing bubble has finally started to deflate...

With houses hovering beyond the reach of most potential purchasers, formerly frantic markets grow eerily calm. People who rush to list their homes, hoping to grab a fat gain just before prices break, take them off the market. Sales shrink as buyers float low-ball offers, and sellers refuse them. Realtors and mortgage brokers find other jobs. The bubble areas turn into Dead Zones.

[T]hings are suddenly looking very chilly indeed in four coastal cities - Boston, Washington, Miami and San Diego - as well as three Western boomtowns: Phoenix, Las Vegas and Sacramento...

The prognosis is even worse in Phoenix, where only 4,500 homes sold in the first three months of 2006, vs. 6,100 for the same period last year, and in Sacramento, where new-home sales plunged 57 percent in the first quarter (compared with the first quarter of 2005). In California it now takes six months to sell a house, twice as long as a year ago...

Sacramento, CA
Average home price: $363.3
Fair value estimate: $231.1
Percent difference: 57%
Rating: Overpriced