Tuesday, October 17, 2006

Snap (-7%), Crackle (-12%), Pop (-14%)

From the Sacramento Bee:

Home prices fall across entire region

Three months after Sacramento, Placer and San Diego counties topped California for falling home prices, the malaise has spread across the entire capital region and parts of the Bay Area and Southern California, new September sales figures show.

For the first time since home sales prices began falling nearly a year ago, all eight Sacramento-area counties reported lower median sales prices in September than September 2005, according to La Jolla-based research firm, DataQuick Information Systems. The housing numbers were analyzed for Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

The dips were especially pronounced in Placer County, where prices of all new and existing homes and condominiums were 14.3 percent lower than September 2005. Median prices -- where half cost more and half less -- were down 12.2 percent in Yolo County and 7 percent lower in Sacramento County, the biggest part of the region's real estate market...

That means many people who bought houses during the summer and early fall of 2005 -- the last months of the region's unprecedented five-year housing boom -- own homes that at the moment are worth less than they paid for them.
Is there anybody out there who thinks -14% YoY is indicative of a soft landing?

Update: The article is no longer on the Bee website, but you can see the same data here.

32 comments:

Patient renter said...

Most of the media I read considered anything 10% or above to be a "hard landing". We've already easily surpassed that number and it's still just the beginning!

Hold onto your hats..

rocklin renter said...

HAHAHAHAHAHA

Just heard this on KFBK!

HEY TOM SULLIVAN - GUESS WHAT!?!?!?

The truth hurts.

Lander said...

Moody's thinks a 10%+ decline is a crash landing.

It seems as if the definition of "soft landing" keeps expanding downward. I thought a soft landing was supposed to be 0-5% (or -5% at most).

Anonymous said...

And let's remember that many of these sales prices are artificially inflated by kickbacks and builder incentives, so it's probably more like a 15-20% decline.

Still . . . it's going to take a much bigger spike in foreclosures and the collapse of more of these subprime lenders to get Congress to fix this broken marketplace.

And I need to see the zip code data to judge how widespread it really is.

Max said...

Notice they didn't give the actual median price. Typical Bee. 7% lower from what? :)

I believe the median in Sac last September was $385,000, so a 7% decline would mean a loss of $27,000 (pdf).

At a $358,000 median, we're back at February 2005 levels (pdf).

Lander said...

I suspect the Bee will publish the median price numbers tomorrow.

JR said...

Wow, Dr. Brightside forecasted just one week ago week on the Bubble Markets Inventory Tracking blog at:

http://bubbletracking.blogspot.com/2006/10/tracking-sacramento-metro.html

".....and I say {prices will decline} at the most another 5%, and I believe we are close to the bottom now or Q1-07, that 2007 will be relatively flat."

I guess the market blew right thru that prediction in a matter of 7 days. Any other words of wisdom, good doctor?

drwende said...

Y'know, while I'm smug about having listened to the right people, reached the right conclusion, and NOT bought during the bubble... contemplating the sheer economic wreckage about to happen is kind of sad. A lot of people are going to get hurt who were just trying to own a house or hold a job.

Anonymous said...

14%? hardeeharhar,

if it stops at 30 to 40% off the top value, whenever that was, the top of speculation, you're going to be lucky...

things are NOT selling,

Folks are not out and about looking...

People have not dropped their asking prices because there is nobody but nobody looking...

If one has to sell, they're going to take a bath if they bought at the top of the last speculative market...

Anonymous said...

Median price doesn't mean jack. All an increasing asking median price means is that a bunch of higher priced houses were dumped onto the market.

Anonymous said...

It truly is sad a lot of people are going to get hurt. I'll bet a lot of regular folks panic bought in the last days of the bubble, for fear that homes would be forever out of their reach.

What is even more sad, is a lot of people who should get hurt, won't. You can pick the profession.

Re: Congress fixing the problem - if the government does impose lending standards that were common 30 years ago, it is going to more than hurt.

sipping H... said...

Anon 5:33, you're wasting your comments on this crowd. Lets try this for the party in the garage crowd....

This year, we are selling more Budweiser than Heineken, but that does not mean that the price of Heineken has dropped to the price of a Bud.

While you weren't looking, builders are putting smaller homes on the market as well as discounting out existing. Homes over $2 mil have been sitting. The medium price dropped.

drwende said...

While you weren't looking, builders are putting smaller homes on the market

Actually, no. The "cottage" movement of smaller houses was down in Stanislaus and Merced Counties, and it peaked in 2003, after which housing stock shifted toward being larger and larger. Much of the 5-year-old housing stock is smaller than what's being sold new.

Late in the game, some Sacto-area builders shifted to putting houses on smaller LOTS, and those were going for about 10% below houses on conventional lots, but it would take a lot of resale small-lot houses to dilute the market much.

Additionally, most sources have insisted that it's the most expensive houses that are continuing to sell, not the cheapest. So go have a Bud and review your stats homework.

drwende said...

Besides, Sipping H, it's possible to track the asking prices (and, if you have access to the realtors' databases or are very patient in waiting for the Bee to print prices, the selling prices) of houses that are the exact same model in the exact same neighborhood.

If the same model sold for $400,000 in mid-2005 and $385,000 this August and now can't even get a bid on a $365,000 asking price -- and the MLS photos all show comparable houses -- the problem is not that the house is getting smaller. The problem is that what people are willing to pay for it has dropped.

Repeat this pattern a few thousand times, and that's how your median price drops.

Happy Renter said...

"This year, we are selling more Budweiser than Heineken, but that does not mean that the price of Heineken has dropped to the price of a Bud."
I love the analogy as Heineken is just overpriced Budweiser.

Anonymous said...

SacBee's Sacramento region home sales and price trends for September

Happy Renter said...

Thanks anon 6:42,
I've been waiting for those.
The Folsom median is down 13.7% with an 8.4% cut in price/sqrt.

Anonymous said...

OK let me put a Bud cover on my Heineken...

Thanks for reading folks..

Yea I'm seeing higher end stuff moving in Sierra Oaks, Carmichael, Folsom. Not so much as a large % in Placer and EL DO, but some moving. Last year thru this spring, the tract guys were closing at least 1 million dollar home per week in each high end area. They've stopped building these mostly and left this market to the custom builders. It will balance out up there. Thats part of why the medium prices dropped more in Placer vs Sac.

I one market I look at, over 1/3 of the inventory above $899K has sold in the past 6 weeks after sitting all summer.

Drwende, unfortunately, there is no "1984" computer tracking all this stuff. MLS data (SacBee, Zip, etc) is most of the resale market and a very small % of the new, mostly custom.

County recorder has all closings which is what we're talking about in today's article.

Beer is beer and any home larger than a garage with a couch, an icebox and a couch for my pit bull is just a waste anyway...right?

Happy Renter said...

"I one market I look at, over 1/3 of the inventory above $899K has sold in the past 6 weeks after sitting all summer......
Beer is beer and any home larger than a garage with a couch, an icebox and a couch for my pit bull is just a waste anyway...right?"

You're obviously a realtor who has resorted to heavy drinking.

Inquiring Minds said...

"Median price doesn't mean jack."

"This year, we are selling more Budweiser than Heineken, but that does not mean that the price of Heineken has dropped to the price of a Bud."

So what exactly is your preferred measurement? Or are you a data nihilist?

JR said...

Happy Renter,

Yes, Sippin' is clearly guzzling his beer these days. He is off his rocker. After all, he is trying to give me a "free" JTS home in the Estates at Lincoln Crossing.

Sippin, please, go back to bed. I already own too many houses. They are dropping in value by a combined $200,000/yr. Luckily, I only owe about $300,000 in mortgages and they all rent for positive cash flow and add to my retirement income fund.

Please do not assume I want to own a home in the Estates at Lincoln Crossing. Even if you gave it to me, the place is surrounded by: 1) an Indian casino (undesirables, crime) 2) County dump (odor, dust, trucks), 3) Sewer plant (please, flush twice), 4) Lincoln Airport (noise, crash risk), 5) lumber yard (trucks, noise, dust), 6)Rail line (noise, noise, & more noise), 7) Highway 65 (noise, pollution) and then, just for good measure, the builders plan to run the Highway 65 bypass thru the middle of the subdivision in 2009. That should help out all the FB's in the area who bought overpriced homes losing 15%/year in value. I will pass, but thank you so much.

Even if you gave me JTS home, I would have to pay ordinary income tax on the "gift". So let's say it came to 43% of "value". That would be $200,000, assuming those stucco boxes appraised for $500,000 (30% off asking). (I pay 43% federal and state tax combined.) I would also have to pay $1100/mon in real estate tax, insurance, Mello Roos bonds, and HOA. Combining that with a mortgage for $200,000, and a rent of $1500/month, I would have NEGATIVE CASH FLOW (All caps so you would understand clearly).

So you see Sippin, your ARE CERTAINLY DRINKING TOO MUCH these days. I do not own real estate that has negative cash flow. And neither will anyone else who is patient and waits for real estate pricing to correct by 2009.

So while I appreciate your offer to give me a JTS home, please keep it for yourself and feed it appropriately. I’ll buy it back from the bank when your done feeding it in 3 more years.....

Happy Renter said...

JR.,
"After all, he is trying to give me a "free" JTS home in the Estates at Lincoln Crossing."

Come on man, it's practically, basically, free.

JR said...

Happy,

Yes, it would be bascically free. You are right! But isn't it interesting that even a free home would essentially cost me $7-800/month negative cash when it is all said and done?

That tells you how out of balance this market is right now and how much it will correct.

It also shows you how much fun it is to tease Sippin', whether he is poppin a Heiny in the evening or mixing cream into his coffee on Monday morning. He is a good sport about all this and keeps it clean.

Anonymous said...

Anybody who buys one of those McMansion crap boxes at Lincoln Crossing is an idiot. That neighborhood is a ghost town. Soon vagrants and homeless will move into the area and use the houses as a toilet. Oh by the way the vagrants and homeless will be stacked into the Lincoln Crossing homes by the Bay Area Flippers as renters. Anybody owns and occupies in Lincoln Crossing is screwed.

Bubble Sitter said...

Anon 9:05,

Evidently, given the post above you, they can't even give them away.....!

Anonymous said...

More from the SacBee Article:

"Meanwhile, the number of existing homes for sale is falling after a July peak of 15,474 in El Dorado, Placer, Sacramento and Yolo counties. Sacramento researcher TrendGraphix said the September tally fell to 14,901.

"I think we're starting to see sellers become a little more realistic with their prices, and that's part of the reason why inventory has started to pull back a bit," said Anthony Graham, senior financial analyst at Lyon Real Estate, which owns TrendGraphix."

DUH... Inventory ALWAYS drops in the fall after peaking mid-summer (and usually by more than this). This is only a 4% reduction in a HUGE supply. The accompanying normal seasonal reduction in buyers will more than offset the slightly lower inventory.

That's it realtors, just keep clicking your heals together, and saying "there's no place like a home..."

Anonymous said...

How to prevent another bubble market?

It's not the banks (they're just co-conspirators), it's the "flippers".

The real fix needs to be via the capital gains tax (federal or state)...

For any home sale that is NOT a primary residence or an initial NEW home sale, set the capital gains tax rate at 90% for the first five to seven years of ownership.

This would kill the flipper market dead, and make homeownership for people who LIVE in the houses. Landlords would still be in business, because they normally hold properties longer and it would still allow new home construction on speculation, because the first sale of any new home would be at normal rates. At this point it wouldn't matter how lax lending rates were, there would be no profit in flipping and therefore no more real estate bubbles (at least of this magnitude).

Anonymous said...

This article disappeared on the bee website. Anyone else notice that? What's up??? It was there yesterday and I sent the link to everyone...and today it's gone.

Anonymous said...

Inquiring Minds said... "are you a data nihilist?"

Don't confuse me the the other anonymous. Data is good. What people make of the data is often funny.

Ice cream sales and crime stats have a very high correlation, but one does not cause the other.

I don't need a Monday morning quarterbacken overpaid UC PHD to tell me the market went to hell...my teenagers told me that.

Sipping coffee.

JR said...

Anon 7:26 says...

"Don't confuse me the the other anonymous."

Interesting....that is very easy....just create a user name. I can think of a few for you....but you seem to be a fairly bight guy. Dr. Brightside...oh no, that one is taken. Hmm. How about.....??

capitalme said...

Umm is anyone going to address that the bee pulled this story from the website?

Lander said...

I also couldn't find the article by searching sacbee.com. The site has been acting strange recently. Several of my recent links to them have gone dead after only a few days.

You can find the same data as the article in this chart.