Wednesday, October 04, 2006

Price Decline Central

An update on yesterday's post. A look at Moody's's press release shows the Central Valley to be well represented:

Metropolitan Areas That Will Suffer House Price Declines

% House Price Decline

#3 Merced: -16.1%
#4 Stockton: -15.7%
#9 Chico: -12.6%
#10 Fresno: -12.5%
#14 Redding: -11.8%
#18 Bakersfield: -11.1%
#22 Sacramento: -9.9%
#33 Visalia: -7.3%
#55 Yuba City: -2.6%
#60: Madera: -1.8%
The study predicts a price trough for Sacramento in the second quarter of 2008.

Update: 'Now it's payback time.'

From News 10:
An economic research firm predicts the first national decline in home prices since the Great Depression, and several northern California cities lead the way...The report's authors actually use the word "crash" to describe the forecast for several northern California markets, including Sacramento, Stockton, Vallejo, Redding, Chico, Merced and Fresno...

The report's authors lay much of the blame for the falling values on out-of-area investors who drove up prices in recent years to levels that can't be sustained by the local economies. "Prices in places like Stockton, Merced and Sacramento were pushed artificially high by investors," said Celia Chen, Moody's Director of Housing Economics. "And so now it's payback time."


Anonymous said...

what rubbish!

There is no decline in house prices in Sacramento, while there may be a somewhat slower market, and we emphasize "somewhat", prices are going even higher, and you can bet your bottom dollar they will soar like an eagle in the next six months!

If more houses and condos are on the market, that is good, and means there will be more buyers in the market! Right not everyone is in back to school mode, but right after Haloween, the buyers will be back, with gusto, count on it!

We need more highrise condos, more homes in the suburbs, more levees to protect those homes, and more farmers to give up their farmland so we can build more, more, more, ever more! We need more growth.

The buyers are there, they just are in limbo for a bit, and some who do not have kids in the back to school movement are either in Jamaica or Acapulco! They'll be back and when they do, look out!

You can take this to the bank!

Who is this guy Moody, and what does he know anyway?

Anonymous said...

Moody's is an investment service - been around for at least decades, but I have not seen them with any expertise in real estate.

They need some rationale to back up their forecasts, not just a bunch of grad students and fresh MBA's running computer models (I R 1 2)

Anon 1:08 is too optimistic. But he's less optimistic than most of you folks are pessimistic. I'm expecting a flatter market.

Anonymous said...

Moody is off a little bit, Sacramento will have price declines of about 20% to 30%.

Happy in SF said...

Anon -
That was all just a joke right? I guess ignoring the YOY declines and the double digit decreases in some areas, and saying "prices are going even higher" makes it true. Keep drinking the kool-Aid dude.
...But.."Soar like an Eagle"..o.k, o.k, I get it, this was, in fact, a joke.

Anonymous said...

well then again,

maybe not,

maybe instead of an eagle, it will be more like a vulture sitting on a fence post...


you guys ought to read some of the rubbish posted in some of the Sac Blogs concerning the "pent up" need for condos...

yep, Moody is WRONG...prices have already dropped that 20 to 30% for some areas...and like was discussed earlier, the more desireable joints in the fab 40s, Curtis/Old Land Park will not drop as much...

JR said...

Anon 1:43, (and can some of you create some names, just to distinguish yourselves from each other?)

Your point is the one that is on target: prices have already retreated 20% in many areas. Rocklin, in my neighborhood, where I can give you names and addresses. Lincoln & Plumas Lakes, with large GLUTs of homes and lots, the builders have dropped prices 20% so far and will keep dropping until the profit level is at a reasonable 10%, instead of an insane 30% (and they have a way to drop).

So Moody's was optomistic. Prices will drop 20% from today, where they are already down 20% from yesterday.

Anonymous said...

Called JTS 9-3-2006 (Lincoln) they said they only had a few houses left and would not be reducing anymore..since their last reduction they have sold all but a few..Hmmmmm

Anon 1:43 said...

Plumas Lake?

Is that the burb they are building on the flood plain on the way to Marysville that will completely flood in the next 10 to 20 years? If so, it is very aptly named. Those guys should be giving away boats with each home.

Like someone ACTUALLY believes a Realtor or Builder? If so please contact me, ASAP, I am selling shares of the Brooklyn Bridge.

Yeah, the market for houses in Lincoln is really booming!

Anonymous said...

anon 2:59

Yeah...the same way Developers developed Sac and Natomas , they will also flood ..?)(*&*&^^%$$

Anonymous said...
This comment has been removed by a blog administrator.
tom stone said...

the moody's prediction is a joke,our loocal paper,the santa rosa press democrat spun it as positive news,claiming that since we are n0w 6.7% down from the peak median,the market will rebound soon.we are actually down well over 10% already.when looking at what actually sells,two things are clear 1)it better be immaculate 2) the $ per sq ft has the median has dropped 6.7%,you get more home,and it is in better shape,all before the first wave of reo's has hit.

Anonymous said...

Tom, havent the first reo hit alrealy..I talked to a Bank/Mortgage co.that had stacks of foreclusres on their desks, he said usually they would have 10 or so , now they have 100's, by the way these are homes that have already been to the auction block and DID not SELL, now they are bank owned.

Anonymous said...

I lurk in these blogs now.

I have designed residential bldgs. in SAC for a long time. So I can see where the market is heading.

Several stories.

Big HB, converts aparts. project to condos in 2005. In early 2006, their marketing people tell them 'no more condo' demand in SAC. Condos go back to aparts.

Then I have a conversion of an attempted 1979 condo project, they had them as aparts. since then, since they couldnt sell them as condos then. If you fail once, you can do it again!

It is hard having meeting with people when you cant tell them to not waste their money and time.

Happy Renter said...

I think Anon 1:08 goes by NONEWARENA on the Sac bee blog. He/she is the only one out there that uses phrases like "soar like an eagle", and says silly things like prices are going even higher.

Anonymous said...

"If more houses and condos are on the market, that is good, and means there will be more buyers in the market!"

Don't you mean if there are more houses and condos on the market, there will be more sellers? Supply doesn't create demand my friend. If they build it, we won't necessarily come. This isn't the "Field of Dreams." Well, maybe in your case it is; So keep "dreaming!"

RosevilleRenter said...

I agree, Happy Renter. The first poster is NoNewArena from the sacbee blogs. He's a major troll and should be ignored. Better yet delete his insincere and inflammatory posts.

Karl Marx Brothers said...

ok ok

RELAX already ! geez people, the 1st anon poster was just a sarcastic statement, take it EZ.
If you cant recognize a little humor, turn off the computer & dial up the prozac dose.

Karl Marx Brothers

Anonymous said...

Anon 2:53 said "...Called JTS 9-3-2006....sold all but a few..."

Wow, now why don't you call George Bush and check on the search for weapons of mass destruction in Iraq? Consider the source my friend. JTS has been finding Greater Fools and creating FB's for 9 months now. If you believe them, your already one, soon to be another.

JTS will sell all their homes eventually, but this joke about raising prices is pathetic. They are cutting $50,000 every two weeks...check their own adds in the paper. And now, previous JTS buyers (or FB's) are starting to sell BELOW JTS and/or considering deeding back to the lender. It is a blood bath out there. About 140 homes, with maybe 3 owner occupied and about 14 renterd. Over 30 listed for resale and probably 40 in a "catatonic state", considering renting, but can't see $36,000/yr negative!. 50 were owned by the builder a few months ago. "Sales" are falling out within a couple of days after people run the numbers with the $1/sf Mello Roos load. Prices dropping below $150/sf.

I visited the Estates at Lincoln Crossing last weekend. It was very, very quiet. If they sold 2 houses, it would be a big surprise.


Oct 4 Fed Vice Chair Kuhn: "housing starts may be closer to their trough than to their peak.." based on what demographic factors suggest is the sustainable level of new construction"

He considers an abrupt correction "unlikely" (Moody’s)
Zandi (Moody’s Chief Economist) “ the model doesn’t take into account the supply of previously occupied homes available for sale because they don’t have enough reliable data on that….”

So Moody’s made a prediction but didn’t use the inventory data you see. They don’t know how much builder inventory in each market. They don’t know which builders have pulled land options. They may not be considering gas prices or potential interest rate reductions.

What do they think about Atlanta’s 90,000 homes on the market?, Phoenix’s ?

They’re opinion is similar as their opinion of Sacramento with 17,000+.

But its News and the News you folks want to hear. It reminds me of the Roman Coliseum and you readers are the blood thirsty audience – doesn’t matter who lives or dies, as long as there is blood!

Anonymous said...

re: throw them to the lions

So, another Jim Jones koolaid drinker shows up? Either that or someone who thinks starting a Club Med in Baghdad would be a real cool idea!

These guys should start their own Blog, "Confuse, Delusional and in Denial in Sacramento"

JR said...

Anon 8:22 says,

'Oct 4 Fed Vice Chair Kuhn: "housing starts may be closer to their trough than to their peak.." based on what demographic factors suggest is the sustainable level of new construction"'

Point well taken. The peak was June 2005, 16 months ago. So lets say we are "closer to the trough", which indicates in maybe 12 more months, we will be at or near the bottom.

That is exactly what we have been pointing out to you. Prices have dropped 20% in the last 16 months, and they will probably drop another 20% in the next 12 months as momentum builds in the correction.

So when you get to the bottom, then what? Do you think we suddenly see 20% appreciation again? No, we will see a flat market for at least 3 more years. Today's Flippers will get tired of holding onto homes where they are forced to pay $30,000 a year in negative cash flow, FB's will be rolling thru their second or third rate adjustment, unable to refi at current values and unable to make the new loan payment.

The only buyers will be looking for solid value and affordability, having shown great patience during irrational exuberence. Investors will buy only for cash flow return, because there will be no appreciation.

So yes, Anon 8:22, your posting is right on the money.

Gary Anderson said...

Well Reno is number 2 at 17.2 percent. This does not of course, count inflation. This is also too conservative. The crash is on. The correction, a major one, must come.

drwende said...

Wait until 2019 and listen for the specuvestors bragging about their $10,000 "profits" on selling for $410,000 the houses they bought in 2005 for $400,000.