Sunday, December 17, 2006

Sacramento New Home Prices in Free Fall: Down 14.6% in One Year, 17.1% From Peak


Thanks to all who posted this link. Definitely worth reading the entire article. From the San Francisco Chronicle:

While Bay Area prices are grudgingly holding their own, the Sacramento residential market has been hit hard. Nowhere is that more evident than in the new-home market. The median price of a new house in Sacramento County fell 14.6 percent in November to $395,250 compared with a year ago, according to DataQuick Information Systems.

Builders are desperately unloading their inventory, offering perks such as higher-quality appliances, mortgage discounts and swimming pools. By doing so, they've created a situation where it's cheaper to buy a new house than an old one.
...
The falling prices follow a dramatic run-up in the market in which the median price of a new home peaked at $476,500 in December 2005, climbing from just $221,000 in five years.
So the median price for new homes is down 17.1% from its peak.
"When Sacramento got hot, the median price in Sacramento was about a third of what it was in the Bay Area," said Stephen Levy, director of the Center for the Continuing Study of the California Economy. "Now, it's closer to 70 percent." Levy said he believes it may take three to five years for the Sacramento housing market to recover. In the long term, he says, the market will recover after excess inventory is eliminated and a balance of supply and demand returns.

That's little comfort to people who can't wait that long...After four months, they [the Wan family] haven't gotten any offers for their home, despite dropping their price to $350,000 from $370,000..."We had a series of open houses where absolutely no one came through," Sara Wan said...They are looking for a bigger place but aren't able to buy a new house until they find a buyer for their current home...While many Sacramento homeowners have pulled their houses off the market, the Wans say they're committed to selling and plan to cut the price a second time after the new year.
...
The Wans are in a bind. They are not only competing against at least three other homeowners who want to sell their properties in the same subdivision -- they are also facing an aggressive marketing campaign by the builder of hundreds of houses just a few blocks away, where many are selling for less than $350,000....[I]t's the 537-home Beazer project that is providing the stiffest competition, Anderson said...Beazer, like other builders in Sacramento, is using incentives to lure buyers.
...
Rival Standard Pacific has slashed prices by about 30 percent since the market peaked 18 months ago. For a $500,000 home, that works out to a price cut of $150,000, according to Nicholson, the division president. The company, which usually aims to sell three to five houses a month in each subdivision, is now selling just two or three. During the market's most frenzied days, the company was moving as many as eight homes per project each month. Standard Pacific is offering below-market mortgages, price cuts, hardwood floors and swimming pools.
30% off? $150,000 price cuts? But wait! Back in June, Centex said these types of deals were going the way of the dodo bird:
[Jack] Pautsch [Sacramento division manager for Centex] said the deals reflect an oversupplied market and are likely to recede within weeks as builders slow construction.
Well, since 12 hours actually means 28 days, I mean 9 months in Centexese, I'll give him a pass this time around.

17 comments:

Anonymous said...

The developer turned around and screwed the buyers in the subdivision. Bunch of pond scum hitting the homeowners at their most vulnerable.

Gwynster said...

Well the owners are now screwing the other owners and buyers

Check out these CL listing for Section 8 housing

http://sacramento.craigslist.org/apa/249987009.html
http://sacramento.craigslist.org/apa/249148749.html
http://sacramento.craigslist.org/apa/249451041.html
http://sacramento.craigslist.org/apa/249873929.html
http://sacramento.craigslist.org/apa/247746301.html
http://sacramento.craigslist.org/apa/247401958.html
http://sacramento.craigslist.org/apa/249090695.html
http://sacramento.craigslist.org/apa/249338525.html

RayW said...

Gee...doesn't life just suck? Buy a house with the promise of future fortune only to have the financial toilet of life back-up and spill all over the floor....

Sam Tehrani said...

Opinions please!

My friend is recently in escrow to buy a house in Natomas. Its a 4/2 2300 sq. foot house for $420k.

He could not be convinced to back out of this deal. Personally with news like this I think he's making a mistake. What do you guys think?

Sam Tehrani said...

btw, it's a 1 story ranch house if that makes a difference..

Anonymous said...

Sam;

Your friend already drank the kool aid. It's too late. Just watch him or her go into the financial dump.

There is one word to describe your friend...... STUPID!

Sam Tehrani said...

Dear anonymous @ December 18, 2006 2:14:00 PM

Let's keep the name calling to ourselves.. He is still my friend despite this possibly financial blunder :)

i've seen the house and it is very nice since we're here for the holidays.

in your estimation, what price point are homes of this caliber should/will go for in 2007-8?

single story
4bed/2bath
2300-2400 sq ft
north natomas area

Anonymous said...

Does anybody know of any good Natomas housing market projections?

Anonymous said...

Housing in Roseville and Lincoln are going for similar prices, and IMO those are better areas. Natomas is still in the flood zone. I think $400K is a better price and reasonable to ask for.

Gwynster said...

OMG 420k in the flood plain? I'd rent there if I had to but I'd never buy. Natomas is quickly becoming a ghetto, just not as fast as Elk Grove.

Gwynster said...

Is it new and which division? That will greatly affect the price.

Did you have your freind see if he could find the same model for rent? That's another indicator I'd watch.

I looked at the Lenner models and they were ok. Then I drove around the development and decided the population mix there can not support the prices.

I also looked at the KB Homes and decided I'd buy one if I could relocate the builing out of Natomas. I see too many people trying to flee the area to make it a good buy.

Sam Tehrani said...

gwynster,

the house is in natomas crossing. its near acro arena. I believe the street name was Ginko.

i didn't even know about the flooding of Natomas??! how often has it flooded since the development there started?

...
I looked at the Lenner models and they were ok. Then I drove around the development and decided the population mix there can not support the prices.
...

Is lenner a home builder?

What did you mean by population mix? Ethnically or financially?

thanks,
sam

Sam Tehrani said...

gwynster,

the house was built in 2001 by beck properties.

Anonymous said...

personally for that size house I would not pay more than $350k. $420k that's absolutely ridiculous!!

don't these people know price declines are on the way. i would pay the amount, knowing that as the market declines i could still break even.

$420k for that piece of crap house.. who's ever heard of beck properties?!

Gwynster said...

Natomas, Norwood, Rio Linda, Elverta are all out in the flood plain. We had a huge flood here in 95 or was it 96? The information should be really easy to find since we were a large federal disaster area when it happened. I remember being really happy I was up on a hill in the Poverty Ridge area at the time.

All resale property is extremely overvalued right now, especially in areas with ongoing new builds because the builder can underprice any new home on a whim - and they do.

I'd find an excuse to get out of the deal if I were your friend.

My problem with the Lenner development was the financial mix. Too many beat to hell cars, screaming kids with toys and trash already on the front lawns. It felt like future section 8 homes already. Ethnic mixes are actually what I prefer. Milk-toast neighborhoods generally retain their market value but are too boring for me.

Sam Tehrani said...

gwynster,

I'll forward the info!

btw, are you saying to stay away from the flood plain altogether?

OR

if the price is right, its a good deal. If this is what you meant, what is a good deal for that size home in that area of Natomas?

Gwynster said...

I'm staying away from Natomas all together. I'm seeing too many properties in the new part of Natomas saying they'll take section 8 applicants just to get the rents.

Rio Linda used to be our 9th ward, the newer portion of Natomas may claim the title down the road.