Sacramento Sales "Dropped Like a Rock"

The Sacramento Business Journal reports on dismal January sales.

Home sales dropped like a rock in January

January was not a good month for home sales in Sacramento or the state, according to a report released Tuesday by the California Association of Realtors. In Sacramento, 31 percent fewer homes were sold in January than in December, a mark that was also 32.4 percent below January 2005. The median price of an existing home in Sacramento dropped to $373,370, 1.5 percent less than the median December price, but still 7.8 percent higher than a year ago...

"The California real estate market is beginning to experience the soft landing that we expect to be the underlying dynamic driving the housing market this year," CAR vice president and chief economist Leslie Appleton-Young said in a statement. "The number of homes for sale has risen to a six-month supply, which will translate into a slower rate of price appreciation than we experienced in 2005."

Slower rate of price appreciation? Presumably this means year-over-year price increases. Sacramento's y-o-y price appreciation is rapidly cooling and should go negative in the next few months if current trends continue (exploding inventory, shrinking sales, new home firesales, rising interest rates, and five months of median price declines). Time for a new word to enter CAR's vocabulary: depreciation.

Agents Look "a Little Lean and Hungry" as Sales Evaporate in the Central Valley

Central Valley Business Times:

If Central Valley real estate agents looked a little lean and hungry in January, it might because the sales pace was down 31.9 percent from December and down 23.9 percent from January of 2005. Prices in the Central Valley also fell in January to a median of $347,070. That's down 2.5 percent from December, but still up from a year earlier, by 13 percent.

January CAR Report

Running Out of Buyers in the Central Valley

News about the Central Valley housing market has piled up recently. The granddaddy of the bubble blogs, The Housing Bubble blog, had a spate of articles last week about our region. (With all the attention, could it be that the Central Valley's "round soapy things" are poised to pop?)

Home Prices Drop in the Northern San Joaquin Valley

Modesto Bee:

After six years of defying gravity, home prices dipped in January throughout the Northern San Joaquin Valley. Homes sold for a median $386,750 in Stanislaus County, which was about $5,250 less than the record set in December...Sales prices dropped $20,000 in San Joaquin County to a median of $430,000. In Merced County, they dropped $23,750 to a median of $357,000. In Tuolumne County, they dropped $36,250 to a median of $298,750...

"We knew this day was going to come," said Mary Prieto, Prudential California Realty's top-selling agent. She said she has lowered the asking price of some of her listings. One home, in Modesto's coveted La Loma neighborhood, went on the market in the summer with a $595,000 asking price. Prieto took over the listing in November, lowering the price to $549,996. Now it's been reduced to $474,996, which Prieto thinks will attract buyers. "The sellers were asking top dollar when they first listed it. They wanted to try for a high price, like all sellers do," Prieto said. "We're going to go through this adjustment period, with sellers getting out of denial mode and into the reality of the market now..."

And like Bateman, Endsley isn't worried about a one-month drop in housing prices. "The market is coming back to normal," said Endsley, predicting that home prices will appreciate 5 percent to 8 percent in 2006.

New Home Incentives Hit the Southern San Joaquin Housing Market

TheBusinessJournal.com

It seems that the real estate buying frenzy in the Central Valley and in other parts of the state is beginning to slow down. The long lines of buyers at new housing subdivisions aren't that long. In fact, some developers are offering buyers special incentives off their initial purchases...

In the South Valley, average home prices for entry level homes have risen from about $120,000 to $200,000 three years ago. These increases have ended up pricing many first-time home buyers out of the market said Susan Welch, a loan officer for Resource Lenders in Visalia. "The hourly wage rate hasn't increased enough for most workers to afford these escalating prices. The market has gotten a little out of balance and it's time to regroup," Welch said. Part of the reason for the slowdown may have to do with rising interest rates, Welch said. "But the increases are so slight, I think it may have had more of a psychological effect on buyers more than anything else," Welch said.

Welch said that she doesn't anticipate housing prices dropping, although they probably won't continue appreciating at the same rate that they have been... "We won't know for another couple of months if this is a lull in the market or part of a longer-term downturn."

Over 50% of Fresno County's Newly Created Jobs are in Construction

ABC30:

The attempt to slash Fresno County's double digit unemployment rate has created more jobs, but is it enough? The Regional Jobs Initiative says 8,800 new jobs were created between 2003 and 2005. That's far from the 25,000 to 30,000 new jobs above normal growth they were hoping to create by the year 2009...Clearly, the Regional Job Initiative's challenge is to find high-paying jobs outside of construction, which tops the RJI's list with 4,500 new jobs created..."For the first time in 20 years, Fresno County's unemployment has dropped below double digits." But, over half of the 8,800 new jobs created resulted from the Valley's hot housing market. "Construction is not going to keep up with the torrid pace of growth that its had. It will tend to level off," said RJI Co-Chairman Pete Weber.

Building Permits Down in Placer & San Joaquin Counties

Auburn Journal:

Placer County's budget has passed its mid-term exam, but a county analyst is warning to watch for slumping revenues from a slowdown in construction...A recent slowdown in the real estate and building sector markets has resulted in a flattening or slowing of construction permit revenue receipts, she said...Statistics from the Placer County Building Department show a slowdown from last year for both single-family home development and total construction activity. In the July to January period, the number of single-family dwellings in the permit process in unincorporated Placer County dropped from 586 units to 503. The valuation of those units decreased from $164 million to $147 million - or 10.37 percent. At the same time valuation of all permits dropped 10.56 percent from $248 million to $222 million.

The Stockton Record:

Building permits for single-family homes in San Joaquin County were down even more sharply in January year-to-year than in December, a reflection of a slowdown that has some homebuilders cutting prices and offering incentives in the past couple of months. A total of 322 construction permits were issued last month countywide, down nearly 40 percent from 533 in January 2005, according to the Construction Industry Research Board, which tracks the building sector in California. That compares with a 27 percent drop from 463 home-building permits in December 2004 to 338 last December.

Builders say that fast-escalating prices are over as prices rose to levels that began putting off many potential buyers, even in this area, typically seen as one of the most affordable housing markets in this region...

The changed sales market had Oakland residents Stoney and Toni McCree checking out model homes in Mossdale Landing on Friday. The McCrees, who don't own a home now, are aware of the slower market, and they not only think it's a good time to buy, but they also intend to take six months to do it.

Affordability Continues to Decline; Running Out of Buyers

Tracy Press:

The California Building Industry Association released its quarterly figures Thursday that showed that in the last three months of 2005, Central Valley cities continue to be some of the hardest places to buy homes for middle-income families. Merced, Modesto and Stockton are among nine California cities in the top-10 least-affordable urban areas. Eighteen of the 20 least affordable cities in the U.S. are in California, with Fresno, Redding and Bakersfield climbing up the list and Sacramento about to replace San Francisco as the 11th least-affordable city in the country.

"Even with the best programs, interest-only loans and no-money-down, we're having trouble qualifying people."

Stockton Record:

The Stockton metro area is one of the least-affordable in the country and getting worse, according to a survey by the National Association of Home Builders. The survey, which measured the ability of a median-income family to buy a median-priced home in each of 160 metro areas across the country, showed that the Stockton metro area - San Joaquin County - moved from ninth least-affordable housing area in the nation in the third quarter of last year to eighth least-affordable last quarter.There may be relief in sight, with area sales prices having flattened out or even dipped in some cases since last summer, when the number of houses on the market began swelling.

James Abbott, office manager of Coldwell Banker Grupe in Stockton, said that although the market has slowed in recent months, sales prices have still been coming in at almost full asking price on average, even with some houses that were initially overpriced getting marked down. Sellers are more patient these days, though, and buyers finally are getting more time to make offers, he said.

New Home Fire Sale Watch

Lately, the Sacramento housing market (and this blog) has been inundated with reports of new home incentives and price reductions. Last weekend there was the extended "one-time" Centex sale and price slashing by DR Horton (covered here and here). What will this weekend bring?

Please contribute to this blog by keeping your eyes open for the latest "deal." Send in what you find either in the comments below or by e-mail. Make sure to post/send a link to the ad, if available. You can also send in a scanned ad (with source info) and I'll post it below.

To get started, try the Sacramento Bee. Happy Hunting!
_________________________________________________________

Thanks to reader capitalme for the reminder of the 2006 Sacramento Home Buyers Expo, going on Saturday & Sunday at the Sacramento Convention Center. Admission Free! Sorry no Sacramento Land(ing) T-shirts are available, but there is always this.

_________________________________________________________

Meritage Homes ($20,000-90,000)

This weekend, Meritage Homes is offering homebuyers an opportunity to save $20,000 to $90,000 with its exclusive "Done Deal" package available on select homes at its Sacramento-area communities. "We've designed our Done Deal package to not only save homebuyers thousands, but also to make it easier than ever to start enjoying their new home the moment they move in," said Mike Anderson, Meritage Homes division president. "Depending on the home and community, the Done Deal package may include front-and backyard landscaping, window coverings, washer, dryer and refrigerator, thousands towards closing costs and thousands towards options and upgrades.

Meritage has six local communities to choose from: ...Bentwater, the Landing and Windrift at Bridgeway Lakes in West Sacramento....

Great name, by the way! West Sacramento + "the Landing" = perfect match.
Thanks Happy Renter!

Mr. Castro Responds

Jimmy Castro, via Realty Times, has posted a direct response to yesterday's article. He also may be responding to a post/comments at a much bigger fish, The Housing Bubble blog. (Out at the Peak also has a permanent link for Mr. Castro on the right under "Housing Heads.")

Here is Mr. Castro's response in full (as his articles tend to change quite rapidly). If anyone cares to respond to any of Mr. Castro's points, please hit the "comments" link below.

It looks like I have captured a bit of attention concerning my thoughts on the market here in Sacramento. My article has made it on a blog called Sacramentolanding.blogspot.com.

Here is the bottom line - Sacramento is one of the fastest growing areas in the state. The Sacramento area has been named one of the Top 10 most desirable places to live in the United States and provides ample employment opportunities, great weather, low crime rates and a mix of established and newly developed communities. The area includes a wide variety of housing and commercial developments, including both newer planned communities like Folsom and older neighborhoods undergoing economic restructuring such as Del Paso Heights. The schools in the Sacramento Region are among the best in California and many institutions of higher education are nearby, including community colleges, technical schools and California State University, Sacramento.

The real estate bubble naysayers whine about the "bubble" as if the whole national real estate market were nothing more than another over-inflated stock exchange -- it's not. Real estate is local and I wish people scaring the buyers with quotes from stock market experts would just stop what they're doing and consider some real facts.

Fact: The top hot real estate markets in the U.S. are also the top hot job markets.

Fact: Houses are where the jobs go at night.

Fact: Without enough houses in a hot job market, your housing inventory will escalate in price.

Fact: Unlike the stock market -- you have to live somewhere. Whether renting or buying, there is an automatic necessity for the ownership of real estate -- either by a homeowner or an investor.

There is no built-in necessity for owning stocks, thus all comparisons between the two products is moot.

In the midst of the hot markets across the country (where the squealing is the loudest and most piercing) citizens of those jurisdictions must look to the local economy to determine their risks.

Here in California, where the big bubble bursting boom is supposed to bang the loudest, there aren't enough homes to go around.

For the past half decade, the shortage has been compounded each year by a shortfall of 50,000 housing starts, according to the California Building Industries Association.

Imagine if the shortage continues for the next two decades when the Golden State is expected to grow in population by 10 million people.

That's a forecast from experts at the Public Policy Institute of California who, along with other experts, recently testified before a state Assembly committee.

Population booms -- which typically don't come with busts -- are expected to swell the state's Inland Empire, San Joaquin Valley and Sacramento areas by 45 percent and coastal regions by 17 percent.

By 2030, the number of seniors will double and one in every six Californians will be over age 65.

In the next six years, Latinos will be the state's largest racial group.

And by 2011, public universities and colleges could run out of money to add on facilities required to meet the demand for college-educated workers.

They will all have to live somewhere!

Jimmy Castro, RE/MAX GoldTeam Leader/Owner JC& Associates

Placer Pops - YoY Depreciation Era Begins?

Sorry San Diego (3.67%). Sorry Marin (1.30%).

It looks like Placer County wins the race to 0%. According to DataQuick News, the median sale price in Placer County dropped -0.38% in January 2006 compared with the prior January. (This includes single family homes, condos, and new home sales.) Placer County includes some of Sacramento's eastern suburbs, including cities such as Roseville, Rocklin, and Lincoln.

According to DataQuick, Placer is the only listed county in California to suffer year-over-year depreciation in January.

Caveats: January is supposedly a "quirky" month and Placer is a relatively small market (and therefore the numbers fluctuate more than larger markets such as Sacramento County). But even so, how long has it been since any county in California experienced year-over-year depreciation? Are we finally in "hard landing" territory? Can we now officially declare that the "bubble" has burst? Stay tuned...

Agent's Plea: Don't Dump Your Properties!

Jimmy Castro, my favorite Sacramento real estate agent over at Realty Times is at it again.

2-16-06:

I highly encourage investors to hold on to their properties! The market is going to rebound and you are going to wish that you didn't dump your investment at a fraction of what it is going to be worth in the next year or two.

2-22-06:

For the wise investor/home buyer, the cautionary phrase of "wait to buy real estate" should give way to "buy real estate then wait..." [S]ellers must learn a lesson early in a normalizing market -- HOLD ON TO YOUR PROPERTY!

Maybe I need to start a Jimmy Castro-watch blog. He has so many updates, I can't keep up! And no, that frequent updating has nothing to do with keeping his smiling face on the top of the heap ;>

Sellers Feel the Pain as the Market Turns "Dark and Gray"

A seller in Tracy writes about the travails of selling a home in a rapidly changing market.

[T]hen came my greatest challenge: selling my house. Last August, when I first listed my house for sale, things were optimistic. By mid-September, everything had turned dark and gray. The 180-degree turnaround in the housing market was not totally unexpected, just very bad timing for me. I knew that the basic economics of supply and demand would eventually catch up with the over-zealous housing market. I was just hoping I could sell my house before the tides turned away from shore...

Although the process took six months, the good news is that I have finally closed escrow on the sale...Little did I know last summer that this ordeal would take so long to complete.

The problem is not the price, according to one seller who has reduced her asking price by almost 10% since August.

In many ways the house for sale on Misty Morning Circle near Mather Airport is a typical Sacramento home: Three-bedroom, two-and-a-half bath, 1,450 square feet with a backyard. Asking price: $355,000 - just above the countywide median of $352,500 in January...On Misty Morning Circle, Leslie Gordon has been trying to sell her house since August. She started at $393,000, dropped it to $375,000 within about six weeks, then took it off the market in early December. She put it up for sale again three weeks ago at $355,000. Gordon is rooting for today's first-time buyers. Several have shown interest in her home, but none has made an offer. "It wasn't because the people weren't interested, or because of the price," Gordon said, "it was qualifying" for the loan that held them back.

Sellers might want to opt for a professional "stager" to groom their homes for sale, according to an article from the Sacramento Bee.

There are no firm numbers on how many sellers use stagers, but local real estate agents say they're seeing an increase in their use. And for one reason: In today's slower market, they could make the difference between a house that sells quickly and one that sits without an offer for weeks. "The selling of houses right now is more competitive, so we want to present our house in the best light to allow it to sell a little quicker," said Charlie Brown, noting the six other houses for sale nearby. "Last year during the height of (home prices) going up we probably could have done nothing, and it would have sold in a heartbeat..."

"I'm just now a believer in it," said Ed Favinger, broker at Realty World Franklin Real Estate Group in Folsom. "It's a function of the market. Personally, I think you'd be crazy not to stage a house now..."

The couple are anxious for the home, which hit the market Thursday, to sell because they're buying another in Sun City Roseville. "Obviously we don't want to be making two house payments for too long," Charlie Brown said. "We can do that for a while, but after that two houses becomes a really big expense."

Meanwhile, a financial planner in Lodi is one step ahead. He got out last May and is waiting for the market to crash, according to the Wall Street Journal (via Tucson Citizen, hat tip Ben Jones).

Some homeowners may also be taking advantage of recent increases in home values and cashing out as the housing market cools. Christopher Olsen, a financial planner in Lodi, Calif., decided he needed a bigger home with a new baby on the way. But instead of trading up, Mr. Lodi sold his three-bedroom, two-bath house for $406,000 in May - $26,000 more than his broker's estimate of the home's value - and moved into a rental property. "We are renting for two years, waiting for the market to settle, or crash," says Mr. Olsen.

Ramen + Peanut Butter = New Homeowner Bliss

First ramen, now peanut butter. Apparently the reader who sent in the ever-popular "Ramen Guy" article has an infatuation with the diets of new homeowners. He recently sent in a link to a presentation made by Greg Paquin at the Building Industry Association's Sacramento Regional Housing Forecast. Mr. Paquin is often quoted by the media in stories about the housing market.

On page 11, Mr. Paquin explains how Californians have afforded the unaffordable.

• One in five California home buyers spends at least 50% of income on housing
• Trading up using equity from the sale of another property
• Risky mortgages – interest only, ARM, etc.
• Buying smaller sized homes and buying in more affordable regions, e.g. Central Valley, Northern California, etc.
• Financial help from family members, renting rooms, reducing 401(k) contributions, peanut-butter diet, etc.

Thanks to the reader for shedding light on these new homeowner secrets. And if you are allergic to peanuts, I hear Top Ramen is quite good. By the way, it appears that Mr. Paquin is right on the mark by suggesting these trends (page 27):

• Pricing decreases
• Slowdown in sales
• Increase in inventory
• Increase in incentives

Centex Extends "Special One-Time" Sale; Pulte "Adjusts" Prices

Did you miss last week's Centex 12-hour sale? Well this is your lucky day. Centex has extended their "one and only opportunity." This is from their latest ad:

After more than 100 buyers took advantage of a special 12-hour savings event Feb. 11, Centex Homes has decided to continue the savings opportunity through Sunday. Some buyers in the first event saved as much as $150,000 on a new-home purchase, and similar savings are possible this weekend, said Patrick D'Arcangelo, vice president of sales and marketing for Centex. "Our 12-hour savings event was a huge success," D'Arcangelo said. "Because the response was so great, and we were unable to spend quality time with everyone in the 12-hour period, we are extending the special incentives through Sunday. We still have a good selection of homes available, and we want interested homebuyers to be able to take advantage of the savings."Centex Homes' special-event incentives can be found at participating communities throughout the Sacramento region. Buyers can save as much as $150,000 on specially selected homes, including some new construction and some that are ready for move-in.

Wow, you better hurry, deals like this are so "special" they never are repeated! Centex set up this domain name for their "one-time" event: http://www.centexsacramento12hours.com/
Oh, and did I mention all those cancellations?

Meanwhile, in a sign of the times, Pulte bites the bullet and decides to just cut prices:

To reduce their inventory of homes, many area builders are offering a variety of incentives, such as completely landscaped backyards, kitchen upgrades and free utilities. They are avoiding cutting prices by offering the additional features or upgrades at no extra cost. Pulte Homes has introduced a different pricing strategy that many new-home buyers are finding attractive. Pulte has simply adjusted its prices at many of its new-home communities in the area...

"Pulte decided to focus on a simple pricing structure that appeals to the new-home buyer by adjusting pricing to what is currently appropriate for the market," said Chris Cady, president of Pulte Homes' Sacramento South division. Cady thinks the number of incentives offered by builders is confusing to buyers. "Builders are constantly chasing each other with offers," he said. "Incentives are changing weekly and customers are just getting confused. Our new pricing strategy is an uncomplicated way of giving our new-home buyers the best value for their money."

A recent survey of Pulte buyers showed they did not consider builder incentives to be as important as quality, amenities and price when purchasing a home. Buyers listed "value for their money" as the most important reason for selecting a new home...

In response to its new-home prices, Glover said, "Pulte sees a price adjustment as a reaction to the 'normalizing' of the housing climate in the area and the adjustment is the appropriate response to current market conditions..." "We are no longer in a market that is producing record high sales, but 2006 will still be a strong year for new-home sales in the Sacramento area," Cady said.

Finally, is ABC News reading the blogosphere?

Some buyers are walking away with $10,000 gift cards for furniture and electronics stores when they get the keys to their new homes..."Getting a gift certificate from Best Buy isn't a reason to go out and buy a house," Markstein said.

Centex -- one of the nation's largest home builders -- has been running full-page ads in papers from Virginia to the California coast touting limited-time offers of $150,000 off a new house. The company is hoping the steep discounts will lure hesitant buyers into their model homes and sales centers at a time when mortgage rates are rising and the growth in home values is petering out. "Our 12-hour sale is their one and only opportunity to save up to $150,000 on that new home they have been dreaming about," boasts one of Centex's ads in Sacramento, Calif. "Our sales offices will be open until 10 tonight so that everyone has a greater opportunity to tour our models and select their favorite home."

"It's Not Unraveling" (Prices Decline 5.2% Since August Peak)

The Sacramento Bee published an update to yesterday's article. Looks like more of the same trends.



An Executive Summary:

1. Sales continue to "sink."
2. Inventory is up again, as mentioned earlier.
3. Sacramento County's trend of declining prices continues.
4. Year over year price appreciation has slowed "dramatically."

From the Sacbee:

In another sign of a cooling market, existing homes sales in the capital region declined last month to the lowest level in six years. Sales in January fell a combined 29 percent in Sacramento, Placer, El Dorado and Yolo counties compared with the same month a year ago, the research firm DataQuick Information Systems reported Friday. It was the slowest month since January 2000.At the same time, the median sales price - the point where half of the homes sold for more and half for less - dropped for the fifth straight month in Sacramento County to $352,500, a 5.2 percent decline from an August peak of $372,000. That's still 10 percent higher than a year earlier.

The experts describe the market:
-returning to more even-keel environment
-"downshifting to a normal...time." *
-"It's not unraveling."*
-soft landing; softness

*Sean "Souffle" Snaith. Wouldn't 5 months of median price declines suggest that the car is shifting into reverse rather than downshifting?

5th Month of Price Declines, Slowest January in 5 Years 6 Years

Saturday Update:
The Sacramento Bee has revised and extended their prior article. New post here

************
Dataquick has just released the January Sacramento numbers.
Sacbee article here:

In another sign of a cooling market, existing homes sales in the capital region declined last month to the lowest level in five years. Sales in January fell a combined 30 percent from the previous January in Sacramento, Placer, El Dorado and Yolo counties, setting the stage for a buyers' market, DataQuick Information Services reported Friday. It was the slowest January since 2001.

At the same time, the median sale price dropped for the fifth straight month in Sacramento County to $352,500, a 5.2 percent decline from a peak of $372,000 in August last year. But the median price is still up 10 percent from a year ago.

Downtown Condo Craze Reaches Former Superfund Site

After pouring over all the evidence, I've concluded that the whole Sacramento housing bubble thing is a myth. In a "balanced" market it is perfectly normal to want to build a condo tower overlooking a former Superfund site. That happens all the time in a "normal" market. From the Sacramento Bee:

A year ago, the city of Sacramento asked for proposals from groups interested in rehabilitating the old PG&E electric plant on the waterfront just north of Old Sacramento. But what the city embraced this week is far different than originally envisioned.The City Council unanimously endorsed Tuesday a proposal by home-building giant D.R. Horton to erect high-rise condominiums next to the power plant.... "When I'm done with elected life, I may want to come and live there," said Councilwoman Lauren Hammond...

The cost of renovating the power plant was estimated in 2000 at $6.5 million, a price tag that has surely risen. But it would have been much higher if the state and federal governments hadn't already spent $5.2 million to clean up the former Superfund site.

White Collar Job Lose Commences; Declining Market in Stockton

Last week, I posted on the job losses occurring in the construction industry. Now there is news of job cuts in the local mortgage industry. The Stockton Record reports that Washington Mutual is cutting 100 jobs in Stockton. That's over 10% of Washington Mutual's workforce in Stockton.

One hundred Washington Mutual employees in downtown Stockton were told Wednesday their jobs will be eliminated as part of a cost-saving move in a declining mortgage market that will slash 2,500 jobs nationwide and close 10 loan-processing offices.

The Seattle Bubble blog has more here.

The Stockton Record also reports on the declining market in San Joaquin County.

Resale homes are staying on the market longer before they sell these days, but prices, at least in Stockton, have been holding while countywide prices slipped last month.Year-to-year sales-price increases are still up between 9 and 22-plus percent for the various communities, but that's down sharply from the heady 25-40 percent annual price jumps typical of the previous several years.In San Joaquin County, the median sales price fell from $425,000 in December to $414,000 last month, while in Stockton the median sales price slid from $387,000 to $385,000 in the same period, according to figures from the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data. Flat or sliding prices have been attributed to a steady rise in the number of homes for sale after several years of unusually low numbers of houses on the market.

Insert spin control here:

Most sellers aren't panicking, said James Abbott, office manager of the Coldwell Banker Grupe office in Stockton. "Mostly, we all have to think differently. We're in a different market now. Just because we're not getting multiple offers in one week doesn't mean that it's a bad market or that a bubble's going to pop."

The article also mentions rebounding inventory, "sharply" declining sales, and increased time on the market.

Red Meat for the Dataheads

As we "patiently" wait for the Sacramento Bee to publish housing data for January, I have a few morsels for you dataheads out there (you know who you are):

• Zip Realty has a blog with some month-to-month numbers for Sacramento.
• Reader Max has posted several inventory graphs for the Sacramento housing market at his blog.

Slowdown Blamed on the Rain in Redding, Media Hype in Roseville

The rain is to blame for the lull in the Redding housing market, according to one real estate agent quoted in the Redding Record Searchlight.

Palomar Builders Inc. single-handedly kept Redding's home construction industry buzzing last month. The mega builder pulled 66 single-family home permits in January, a one-month record for Palomar and three-quarters of the total the city's permit center issued. But while Palomar Builders is busy building homes, it's also working harder at encouraging consumers to buy into a cooling housing market. Most of Palomar Builders' permits were for its Shasta View Gardens subdivision, which shares land with Palomar's Autumn Glen subdivision, where move-in specials are being advertised. Consumers are promised guaranteed interest rates with low loan fees if they buy a home in Autumn Glen, where prices start around $350,000.

Jeb Allen, owner of Palomar Builders, said the incentives are a preferred strategy over cutting prices. "We're not going to get stuck in a big price reduction," Allen said. Redding real estate agent Wayne Martin said the housing market is in a "good place." He believes if homes are priced right, they will sell. "I don't see a need to cut prices. We are moving out of a hyperactive market, where you could just throw something out there and have a number of offers," said Martin, who owns Real Estate 1 in Redding. Martin said about six months' worth of available homes are for sale on the market today, up from four months' worth of inventory last fall.

Veteran real estate agent Rob Middleton agrees that the market is settling down. "More reality is coming back into the focus and people have enough time to breathe, look, decide and make choices," said Middleton, co-owner of House of Realty. Martin blames some of the lull in the market with last month's wet weather. He believes the recent spell of spring-like temperatures could energize home buyers and stimulate sales...

Nagel speculated that 2006 might see a slowdown in real estate, which could result in fewer housing starts. The city recorded a 15-year high with 720 single-family home permits in 2005. "If you go to Sacramento and some other areas of the state, you have seen a real noticeable drop-off" in real estate, Nagel said. "Typically, what happens in the Bay Area is followed in Redding a couple of years later and what happens in Sacramento, happens in Redding a year or so later."

As for the cooling Roseville housing market, one agent feels that the possibility of a real estate crash is mostly media-driven hype. Interestingly, this agent believes the market bottomed out last summer and is already on the rebound. From the Roseville Press-Tribune:

Craig Seydel, a realtor with Re/Max Gold, feels the market has slowed down but that's a relative to how bullish it was last year. And after a motivational seminar at Arco Arena on Wednesday, he summed up his thoughts on the feasibility of a market crash. Essentially, he's not buying the hype, which he feels is mostly media-driven."Zig Ziglar said the media have correctly predicted 18 of the last three recessions," he said.Sellers must create a virtual tour for online listings, a key, he said, in attracting potential buyers. Also, some bring in professional stagers to utilize furniture and flower and candle arrangements to spruce up a listing.Seydel believes the turnaround from the low point - which he believes was last June or July - is already under way.

"For the last three weeks of January, we got over 100 repeat visits to our Web site, where during the downturn I was getting half that," he said of his Web site, http://www.liveandplayingranitebay.com/. "There's nice weather, and people are out driving around. And (lending) rates are very attractive. Although they say they will be up in high 6 percent range through the end of this year, that's still pretty good."

Boy, I got over 600 returning visits in the last 3 weeks of January but I don't think I'd rely on that to determine where the market is. Now that I've linked to his site, perhaps he'll think the market is exploding starting today ;->

Then there is the story of this house:

A few blocks away, at 678 Young Way, investor Kevin Woody has a three-bedroom, two-bath, 1600-square-foot home that has been on and off the market since he purchased it in September. The house two doors down is on the market as well, with no one living in it. Woody's place is clean and neat, and a year or so ago probably would've been snapped up in mere days considering its proximity to the Galleria, good schools and the neighborhood.

"I've been buying houses for 27 years. I've seen the market go up and down. This house shows very well, and a lot of people have been shocked it's even still on the market," said Woody, who owns KD Properties. He typically has about 10 houses on the market at any given time. "The market's very peculiar. I watch it constantly. Roseville was one of those markets that got smoking hot, but now there's a lot of very cautious buyers out there. They all want fantastic deals."

He bought the home - which he said was appraised at $445,000 - at an auction for $356,000. The previous owner had not been able to keep up with the payments due to a creatively comprised financing deal that ultimately proved unmanageable. Between interest-only loans and second and third mortgages, those easy-in deals are increasingly less common as lenders tighten up criterion, he said. Because of this, he was able to get a good deal on the property at auction."It's gonna happen a lot over the next 12 months," he said of loan defaults. "The owners borrowed 100 percent against its value and in a typical scenario, they couldn't keep up with the payments."Since buying the property, it's been on and off the market he said, putting upgrades into it, including some additional landscaping. It's now listed for $405,000.

What Goes Up, Must Come...Down by 3.8%?

According to the latest housing price forecasts from Fiserv Lending Solutions, a provider of mortgage and consumer lending services, the median home price for the Sacramento housing market is predicted to decline by 3.8% in 2006. That is the 8th worst on a list of 379 metro areas. Other Central Valley metros with negative 2006 forecasts include:

• #5 Stockton: -4.2%
  
• #11 Merced: -3.4%
  
• #15 Modesto: -3.2%
  
• #24 Fresno: -2.3%
  
• #26 Bakersfield: -2.3%
  
• #32 Hanford-Corcoran: -2%
  
• #33 Chico: -2%
  
• #40 Visalia-Porterville: -1.1%

What Goes Up, Must Come...Up?

The experts speak...

Kelli Yates (1-30-06):

The bubble has NOT burst! Sellers and Agents have become spoiled by the fast sale of homes in the past couple of years. The current market is typical for this time of year and as spring approaches will pick up. Prices have dropped on current listings due to Sellers panicking that their homes are taking longer to sell. Hang in there Sellers and be patient - spring will bring more Buyers!!

Jimmy Castro (2-10-06):

What's in store for 2006? The unsold inventory index is expected to increase somewhat in 2006, current inventory levels should remain lean enough to drive continued price appreciation throughout the year ahead. Meanwhile, new home building will again fall short of household growth in 2006, resulting in a long-run housing shortfall that will contribute further to higher home prices. All in all, sales in 2006 are expected to decline by 2 percent while the median price of Sacramento homes will rise an estimated 10 percent.

If you are planning to buy a home or invest in Sacramento in the near future, I highly recommend taking advantage of the "stall" in the market right now. Get into a home now while sellers are willing to negotiate and interest rates are still reasonably low.

Then just three days later he changes his tune a bit (2-13-06):

What's going on with the Sacramento real estate market? Well, last year at this time there was half as many listings, and the market was on its way to becoming one of the strongest seller's markets in history. Those days are over, and instead of buyers having to decide how much over asking price they should offer, they now are wondering on which of the 20 houses they've seen should they make an offer on and for how much under list price should they offer.

Many sellers are still not in touch with the reality of today's market and are pricing their homes like their home is the only one for sale. That is why we are seeing one price reduction after another, and instead of homes staying on the market for one or two days, we are seeing 30, 60, and 90+ days depending on the area and price range.

Investors are now dumping their properties as eagerly as they were gobbling them up at the same time last year. This is one of the reasons there are so many vacant homes for sale. Instead of bringing the price of housing up as they did last year, they are now bringing it down as they create a much greater supply than there is demand.We'll see what happens as the strong spring and summer season approaches and those families looking to move before the start of the new school season begin to come out. Yes, that does mean more buyers, but it also means more sellers!

Yes, those families with kids who have already been priced-out are going to save the market! Even with this grimmer outlook, he ends with the same-old buy now, it's a "stall" language.

Travis Chatwin (1-17-06):

In the last couple of months we have seen our inventory grow to larger numbers. It is that time of year where the buyers are able to see more available properties. Seller may become a little more motivated with the competition that has come to our market. We have been consistent in homes sales yet the buyer's are definitely feeling like they are able to make a better decision now and not to be rushed into any purchase from any bidding wars. I believe we will see the market continue to climb for the year of 2006 and continue to have people interested in our wonderful surroundings!!

Last October, Michael Lyon, CEO of Lyon Real Estate, predicted the following:

• Placer and El Dorado Counties to appreciate in 2006 by 10%
• Yolo County to appreciate by 11%
• Sacramento County to appreciate by 12%
  

Then there is this bit of wisdom from the Sacramento "anti-bubble report" put out by the National Association of Realtors® last fall:

[T]he local housing market is in excellent shape with a potential for significant housing equity gains....

The Reverse Okies: Go East Young Man!

The LA Times recently reported on the flight of young professionals from coastal California into the Central Valley.

The last great frontier for upward mobility in California extends from the far eastern suburbs of greater Los Angeles to the Sierra foothills in Northern California. It is there that the "California dream" -- a place to create a new life and raise a family -- is still possible. Call it the "Third California."

That may come as a surprise. Some coastal residents regard inland California as a failed geography of rising poverty, crummy jobs and unremitting ugliness. But in recent years, more and more higher-end and professional jobs have begun moving east, and with them a new emphasis on improving the quality of life in such cities as Bakersfield, Modesto, Ontario and Riverside...

Coastal Californians migrating inland do so for many of the same reasons that earlier generations of Americans left the Midwest, Northeast and South. The cost of housing is by far the biggest factor driving the migration. Today, only 11% of the households in San Francisco and Orange counties, and 17% in heavily minority L.A. County, can afford a median-priced house. By contrast, affordability rates, though down from earlier this decade, are closer to 30% in most inland regions.

For many, this means the future lies east, and families are prominent in this movement. The under-35 population in the inland region has increased dramatically, and from 2000 to 2004, the number of children younger than 15 rose faster in inland areas that along coastal California, according to 2004 census data...

The challenges in Third California are many. Much of the job growth has been heavily dependent on population movement, which has sparked a boom in construction and lower-paying retail jobs. A sharp decline in housing construction, or even a mild slowdown in migration patterns, would leave much of the region vulnerable to a downturn...

[T]he 2000 census revealed that in Sacramento and the Inland Empire, the number of educated people were on the rise. Most intriguing, these areas experienced a nearly 40% growth in residents with graduate degrees, a rate of increase larger than along the southern coast and close to Bay Area levels.

Meanwhile, future professionals still in school better look farther east, says a Sac State columnist.

It was "The Grapes of Wrath," the novel that told of the "Okies" from Oklahoma travelling to California in the 1930s during the Dust Bowl. Some 70 years later in a twist of irony, a "Bust Bowl" is occurring from the West to the Midwest.

Last year, many members of my family became fed up with the traffic, housing costs, crime rates and overall congestion in California and declared, "Oklahoma or Bust!" I thought they were out of their minds. Leaving the fifth largest economy with its beaches and rolling mountains to return to the the dry, flat lands that most our ancestors once fled?

After visiting my, dare I say it, Okie family (they aren't true Okies, only posers), I began to understand their reasoning as I pushed stereotypes aside and started viewing the region with an open mind...

A bachelor's degree lately has begun to shrink in value, and with the average house in the Sacramento area costing over $400,000, individuals about to exit college are going to have difficulty cropping up enough cash to own any sort of property within a decent amount of time...

I found an Oklahoma City home that is 5,000 square feet with five bedrooms, four bathrooms on an acre of land for $375,000. Can I get a candy bar for that here?

I know there are downsides to living in Oklahoma. The value of land is lower and so are salaries. However, I will put it as my mother did, who has a bachelor's degree from Old Dominion University: Despite the salary differences, with an education you can make enough in one year in Oklahoma to own a small house. It may take ten years to do so in California...

I am far from packing the wagon and migrating to the state that the Joad family left in the '30s, but I will no longer rule it out. There is only so much a yuppie can do in a state that forces you to either make $60,000 a year or ... Bust!

Weekend Open Discussion

What's on your mind?

Tell us what is going on in your local area. Observations about recent news stories, open house reports, real estate water cooler talk, etc. Special brownie points for anyone that reports on the Sacramento Centex 12-hour sale!

Pottery Barn Incentives & Stockton: A Match Made in Heaven?

Stocktonians rejoice! The home builder incentive parade has reached your door! Kimball Hill Homes is now presenting buyers with Best Buy and Pottery Barn gift certificates totaling $10,000 (among other incentives)!

"That's insane incentives," said Henry Doughton, who became a beneficiary of the promotional program when he purchased a home in the Enclave at Montauban, one of three Kimball Hill communities in Stockton where the program is offered. Doughton will trade the Best Buy certificate in for a washer and dryer, refrigerator and flat-screen television for his new home.He is less sure of his Pottery Barn purchases, though."That's a lot of comforters and sheets," he said.The certificates, credit and free upgrades totaled about $52,000, "too great to go anywhere else," he said. [What about Centex?]

Unfortunately, you will have to travel to spend your money as Pottery Barn has not made it to Stockton yet. Of course, you could make a trip to the Pottery Barn in Sacramento and then buy a second home on the way back at the Centex 12-hour sale in Elk Grove!

But wait...that's not all. Other home builders have been offering tickets to Hawaii and keys to cars! Pacific Mountain Partners, builder of Citrus at Mossdale Landing in Lathrop is offering $30,000 incentives and a toolbox and blanket as welcome gifts! Woodside Homes in its north Stockton Volterra community is taking $20,000 off the list price if the buyer closes in 30 days and another $10,000 if the buyer uses the company's lender! Not to be left out, Shea Homes will be offering "unspecified" one-day incentives on Feb. 25 on its Patterson properties!

So hurry and don't delay!

The shelf life of such incentive programs will likely be short...."If builders are giving away incentives, they're going to go away soon...."

Did I mention the Sacramento Centex 12-hour sale?

GoLyon Price Charts Updated

Sacramento housing bubble watchers rejoice! I just noticed that GoLyon.com has updated their price trend charts to include November and December 2005 data. If you haven't taken a look, you ought to (link is on the right). The site contains some great information including average price, median price, average price per square foot, inventory, homes sold and homes pending, and days on the market.

They have added this language:

Please Note: Our information has changed. Lyon is the only company in the five-county Sacramento region to provide detailed Trendgraphix real estate price statistics. This valuable, proprietary information helps Lyon clients make informed decisions based on actual market dynamics. Because this data is exclusive, it also provides a competitive advantage to Lyon Agents, making them more effective and productive than their peers.

To preserve the exclusivity and accuracy of this data, you will notice that our facts and trends information is updated and published every two months.

And just when you thought they were pulling a "Santa Barbara" move!

In Come the Waves: Sacramento Job Losses Commence; Too Many Real Estate Agents

Last week the Sacramento Bee balanced a rather gloomy article with this:

There are some signs the gloom of the last few months may lift...The region is adding jobs at a respectable clip, which historically has meant housing demand won't plummet.

I responded by saying "but how many of those jobs are tied to the real estate industry?"

Well, the Sacramento Business Journal (or via MSNBC) has shed a little more light on this subject:

Construction is a big factor in the local economy and has been one of the strongest job sectors in the wake of the economic downturn at the start of this decade. In Yolo, Sacramento, El Dorado and Placer counties, construction accounts for 70,400 jobs, largely in homebuilding, according to the state Employment Development Department. Construction accounted for about 8 percent of the region's jobs at the end of 2004 -- up from 6.6 percent in 2000. Last year, construction added 3,200 new jobs, or 17.5 percent of the region's total gain. This year could be the first in over a decade that the construction job count drops, based on the downturn in sales and the layoffs, said David Lyons, a labor market analyst with the department. But construction is almost overdue for a correction; the region rode out the last downturn with no slowdown in construction, he said.

In Sacramento, a downturn in home construction has more economic impact than it would in many other places, because more companies are suppliers or subcontractors here than is typical, said Robert Fountain, an economist with California State University Sacramento. In 2004, Fountain did a study showing that the roughly $4 billion spent on new-home construction in Yolo, Sacramento, Placer and El Dorado counties during 2003 resulted in a $1.6 billion economic benefit for the support industries. Homebuilders have spent $16.5 billion here on houses, condos and apartments from the start of 2002 to the end of last year -- an estimate based on the assessed valuation of projects when their building permits were issued, according to the Construction Industry Research Board. The volume peaked at $4.5 billion in 2004, and dropped by some $680 million last year. Using Fountain's formula, 2004's $4.5 billion in homebuilder spending had a $1.8 billion impact on support industries, and last year's $3.8 billion in construction translated into $1.52 billion for the support companies, a 15 percent drop that is showing up in the layoffs. Fountain and Lyons, however, said that jobs lost to declining home construction often are picked up by rising nonresidential construction.

And this doesn't even include all the real estate agents that have been added over the last few years. With the real estate market in Sacramento landing, job losses in construction and constuction-dependent industries are now being noticed:

With the decline in new-home sales, local suppliers and subcontractors have laid off hundreds of workers in the past few months. Two of Greater Sacramento's largest private employers, Pacific Coast Building Products and Beutler Corp., are among those that have laid off workers or left vacant positions unfilled. It's an unfamiliar situation after years of a hot homebuilding market that had some companies scrambling to find enough workers, and employers say it represents more than just the usual winter slowdown.

New-home sales in the region dropped 17.8 percent last year, with a 56.7 percent drop from late 2004 to fourth-quarter 2005, the biggest drop for a quarter since the homebuilding boom began in 2002. That has led to a slowdown in jobs related to the new-home market. It's more like a pinch than a heavy blow for the industry so far. "I don't think anyone's in a panic mode," said David Lucchetti, president of Pacific Coast Building Products. But he and all those who depend on homebuilding are watching sales numbers this year with concern. No one knows what comes next. Lucchetti said Pacific Coast Building Products has laid off 50 of its 3,500 workers. The company supplies lumber, trusses, roofing materials, tile and other materials to homebuilders.

The cuts went deeper at air-conditioning contractor Beutler Corp., which as a result of the housing downturn has laid off or lost to attrition 250 of its 1,500 workers, said president Rick Wylie. That figure includes 175 workers in Sacramento. Beutler is Sacramento's largest mechanical contractor. Wylie said similar layoffs have been fairly typical for the company in winter. Last winter, for the first time ever, Beutler scrambled to keep everyone employed through the down season. While sales are going well, Wylie said, the downturn in housing sales led the company to drop that extra effort this winter.

Likewise, most of the suppliers and subcontractors contacted for this story say they have laid off workers because of the housing downturn. Most say it's the first time since the new-home boom began in 2002 that they've let go workers for reasons other than the change of seasons. Some businesses said they have not been hit, but they get hints of a downshift. For instance, Steve Benjamin, owner of Production Framing Systems, reported that he has laid off 200, but said "I don't feel like I'm down any more than I would be with the (winter) season." On the other hand, he added, "I can see the decline going on around me." And some of his homebuilder customers have asked for a break on prices to make it easier to offer concessions to the scarcer crop of homebuyers.

New homes need furnishing, which means sales for local furniture stores and other home-goods retailers. Effects on those businesses are unclear: Some attribute slower sales to changes in the housing market, while others say they've seen no drop in sales. "January's been pretty tough. We're struggling to stay even with last year," said Harris Blickstein, chief operating officer of The Room Source, a furniture-store chain based in Sacramento. For years the retailer enjoyed the effects of a booming housing market -- the large number of houses sold, their rising values and numerous home-equity loans being made. Now people don't feel as rich, Blickstein said. The Room Source isn't planning layoffs or cuts, he said. Instead, "I may spend more ... on advertising." The Room Source can weather a slowdown; smaller, undercapitalized businesses may not, he said...

Ah yes, the "wealth effect" hits the Sacramento housing market.

"It's hard for us to lay people off. Some took it hard," said Jim Colafrancesco, owner of Colafrancesco Framing Inc. He laid off 48 of his 200 workers, and may lay off 25 more if things don't improve. "I told them, You're not fired, you're just laid off.' "

Subcontractor Jay Fischer, of Fischer Marble & Tile, has laid off 50 of his 150 workers. "The people laid off will come back when sales come back," he said. Veteran framer Colafrancesco said he's been driving around, eyeing subdivisions for signs of life. "I'm not seeing as many concrete foundations, so I think February could be slow," he said.

Meanwhile, the The Bakersfield Californian reports on the glut of real estate agents:

Last December, Kern County's 4,382 licensed real estate agents shared less than 500 house sales. With so many agents and sales dwindling, competition is brutal. "A lot of them just can't be making a living, period," said longtime agent Gary Belter with Coldwell Banker. Hundreds of new real estate agents have flooded Bakersfield's hot housing market in recent years, hoping to make a quick buck. But as prices cool and houses become tougher to sell, experts say, many will abandon their new profession just as quickly as they embraced it.

It's happened before. "Real estate goes in cycles just like the stock market," said associate real estate professor Chuck Delaney at Baylor University in Texas. People try to capitalize on it. If the boom ends, many will get out and the strong will survive, Delaney said. "It absolutely happens everywhere" when the market heats up, said real estate professor Susan Wachter with the University of Pennsylvania. Agents jumped into California's market in the mid-1980s, Wachter said, before it nose dived in the early 1990s. Some brokers are making only one or two sales, she said. Others aren't doing any business at all. "That's not to say there aren't stars with the golden Rolodexes," she said.

Feeding frenzy Statewide, there are now more than 476,000 licensed real estate brokers and salespeople. That's roughly one for every 77 Californians -- that's more per capita than either physicians or public school teachers. "That's a lot of licensees for a relatively small pie," said Tom Pool, a spokesman with the state Department of Real Estate.

Locally, Bakersfield Association of Realtors membership jumped by 160 percent in five years to more than 2,100. For those who entered the industry in the past few years, houses have seemed to sell themselves. Some got lazy and just haven't wanted to come into the office, said Robin Ablin, owner-broker of RSC Realty. They haven't learned the skills needed to survive in a slow market, he said. "It's the nature of sales," Ablin said. "When it's easy, everybody jumps." But real estate isn't so easy. It's full of rejection, late-night phone calls from panicked clients and the uncertainty of where the next paycheck will come from and when... "

In for the long haul Marco Velazquez figured he'd make thousands of dollars right away after trading his steel-toed boots and Wranglers for button-down dress shirts and slacks seven months ago. [Farmer-turned-real estate agent story here] Instead, the 30-year-old ended up spending roughly $18,000 of his savings on real estate classes, a laptop computer, association fees and other startup costs. Then there were the necessities like rent and gas. "It was scary," said Velazquez, who used to make around $80,000 a year as a supervisor for a scaffolding company. But the more flexible schedule was important to Velazquez, so he could spend more time with his three children. In time, his list of clients grew. Even though the market isn't as "crazy," the agent said he isn't worried about his future in the business. He keeps regular office hours and attends a weekly caravan group. The group of agents checks out houses around town and shares what listings they have with each other. It's a great way to get information and sell properties faster, Velazquez said.

Ten agents showed up to the caravan on a recent Thursday morning. Chuck Dawson, owner of Dawson Realty, helps organize the frequent field trips and expects more agents to show up as the market gets tougher. Dawson also believes hundreds of agents could leave the industry this year...

Price Reduced: Growing Trend in Sacramento?

Damon over at the Walk-Through blog has this tidbit about the Sacramento housing market. A new tool from ZipRealty.com shows that 30.5% of listed homes in the Sacramento metro real estate market have been reduced in price.

That number puts the Sacramento area first in a list of nine regions posted at the Bubble Markets Inventory Tracking blog.

January Roundup #2: More Listings Expire, Sales Down Again

More bad news for the Sacramento housing market? Real estate agent/blogger John, over at the Sacramento Real Estate Blog, just posted some January information about the Sacramento County real estate market.

Several interesting points:

• Inventory supply is over 7 months now. Correct me if I'm wrong, but isn't anything over 6 months supposed to indicate a buyer's market?
• Residential sales are down 34% from last year.
• The expired to sold ratio is way up, similar to December. It is impressive that inventory also appears to have increased in January despite so many homes dropping off the MLS list.
• Median sale price is up 9.5% from last year. Correct me if I'm wrong, but it seems that this is the first time in several years that year-over-year appreciation has not reached double digits.

From 15 Minutes to 4 Months: Even Red-Hot Merced Cools

The Modesto Bee reports on the Merced housing market (considered by one source as the second most overvalued market in the nation by 77%), home of the new UC campus:

With a shortage of available land in Modesto and its surrounding areas, more and more of them are eyeing the Merced area as the next big thing. Over the past few years, Merced has seen the number of builders and developers jump from a modest five to a whopping 26, according to Guy Maxwell, president of Merced-based Maxwell Homes and president of the Merced chapter of the Building Industry Association of Central California. "There has been a ton of new building and development in town, and we've had a tremendous influx of homebuyers," he says.

One downside to all of the new construction is that - as is the case in much of the state - the housing market has started to cool. "A year ago, you could sell a house in 15 minutes. Now, it might sit for four months," says Maxwell, whose company builds tract homes for first-time buyers as well as rental apartment communities...

Not all of Merced's new homebuyers are planning on living in the homes they are purchasing. Some buyers are leaving them empty while others are renting them out, according to Maxwell. A lot of them are looking at the homes as long-term investments and are banking on the racetrack receiving approval and the university's expected growth in the coming years. "That steady, consistent growth is attractive to investors and buyers," Maxwell says.

"It's only getting worse:" Sacramento Foreclosure Activity Highest in 3 Years

The rise in foreclosure activity has caught the media's attention. Sacramento County foreclosure activity jumped 31% in the last quarter of 2005. Read more here, here, here, and here. You can find more data and information at the DQNews website, including this blurb:

All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California (see chart). On a loan-by-loan basis, mortgages are least likely to go into default in Marin County. The likelihood is highest in the Central Valley and Inland Empire.

Today, the Sacramento Bee came out with this artictle:

It took less than eight months for Dustin Suposs' "American Dream" to become a nightmare. He and his girlfriend, both in their early 20s, got caught up in the better-buy-now mentality that fueled the Sacramento area's housing market last spring. They bought a $365,000, 1,550-square-foot home in Elk Grove with no money down. The result: A $2,300-a-month payment that was more than 2 1/2 times the rent they were paying. By December the couple were drowning in bills and debt. Now they're two months behind on the mortgage.

Experts say the pair are part of a new trend - a growing wave of distressed borrowers just beginning to hit Sacramento and across California. In December, lenders filed 321 notices of default in Sacramento County, the highest number in nearly three years, according to DataQuick Information Systems, which tracks county property records. Statewide, lenders in December filed defaults against 5,582 homeowners, the highest since March 2004. Such notices are the first step in the foreclosure process...

Already, many working with distressed borrowers see ominous signs that suggest foreclosure activity is picking up fast. "We're seeing the early indicators that it's only getting worse," said Pam Canada, executive director of the nonprofit Neighborworks Homeownership Center in Oak Park, which educates would-be homebuyers and helps existing owners stay out of foreclosure. "We're creeping into the dozens of calls per month (from owners behind on their payments), and that's higher than a year ago, when it would have been half a dozen a month."

Calls from homeowners in financial distress "are rising rapidly," said Jennifer Harris, executive director of Sacramento's Home Loan Counseling Center. Until recently, ever-higher prices allowed people to simply sell their homes and pay off the lender if they fell behind on payments. The appreciation also meant that, within a year or two, someone who bought with no money down and used risky, expensive financing would have enough equity to refinance into a conventional loan offering better terms and lower payments.

But for the past six months, home values in the Sacramento region have generally been stagnant. Appraisers and agents report only modest price gains in a few areas and small declines in others, especially for $500,000-plus homes. "We knew the rate of appreciation was unsustainable and would have to come down, and as it comes down into the single digits it might even go negative" for a few months, said John Karevoll, a longtime DataQuick analyst.

Experts have stressed for years that home prices couldn't possibly keep rising by 20 percent a year, but many borrowers didn't heed the warning. "Everyone was anticipating getting in (a house) at any cost and then letting appreciation in the market handle it in the next year or two," said John Arvanitis, president of Sunrise Vista Mortgage Corp. in Citrus Heights. "In theory, that's great if appreciation stays at certain levels, but it's not happening anymore."

Many in the real estate industry are worried scores of homebuyers will suffer payment shock over the next two years as their low introductory interest rates expire or their interest-only periods end. Some won't be able to afford the higher payments and will have to refinance, if possible, or sell - or possibly lose their homes in foreclosures...

"As grim as it sounds," Karevoll said, "foreclosure activity has a function: It's kind of the sanitation department of the real estate market."

"Buyers will have to be enticed" by pools, outdoor kitchens, and $150,000 discounts

Celebrate! The now famous Centex 12-hour sale is hitting the Sacramento area. Mark your calendars for February 11th! Save up to $150,000 on new homes in Elk Grove, El Dorado Hills, Rocklin, and Lincoln! So turn off the TV! Drop that rake! Don't delay! Deals like this won't last! Take advantage of the "lull" in the market before prices skyrocket again in the spring!

"On Saturday the 11th, we are giving our homebuyers a special one-time opportunity to save up to $150,000," said Patrick D'Arcangelo, Centex vice president of sales and marketing. "With 13 brand-new neighborhoods from Lincoln to Elk Grove, homebuyers are sure to find the home and neighborhood they want most at unheard-of savings." [link]

Stop reading this insanely boring blog and click on this link for more details! (And don't click here to learn about all those cancellations.)

If cash doesn't interest you, how about pools, outdoor kitchens, custom cement floors, washer-dryers, flat screen T.V.s, stainless steel appliances, or granite counter tops? CBS13 reports on the ever-expanding world of "free" incentives and upgrades.

If you're in the market to buy a house you're in luck! After years of waiting in line to buy now you have leverage.

Don't you feel lucky already?

There are a lot of homes on the market, interest rates are on the rise so to get a prospective buyer interested, builders are getting creative. A flat screen T.V., stainless steel appliances, granite counter tops--are they now standard with the price of a home?

Rindy Merrifield knows in this market, even gorgeous houses don't sell themselves. But adding incentives do. "It can be incentives for upgrades. It can be $10,000-$20,000 in some cases," said Rindy. Outdoor kitchens. Custom cement floors. Washer-dryers...what used to be upgrades are now on the table. "You can always ask the builder for anything and a lot of people do," said Rindy.

A few years ago, all of this would have seemed impossible. But according to a D.C. based market research company, the value of incentives by homebuilders now averages $8,965--double from last quarter. "20,000 new homes are scheduled to go up in this roseville development. And with this many homes and the housing marketing softening buyers will have to be enticed," said Rindy. As new neighborhoods crop up in Roseville builders are throwing in preferred lender incentives and sometimes lowering fees.

"They've offered new pools. New house. New pool. Turnkey ready to go," said Steve Youngblood, Lyon manager. If you like a house and want the furniture in it--ask for it. You never know what you might be able to negotiate.

Want more? How about a chance for a day-spa gift certificate at today's "Luxury Bowl" event? Or generous preferred-lender incentives up to $65,000? Maybe you would prefer a new General Electric Co. washer, dryer and refrigerator - as well as new window coverings? ("But we're not sure how long this offer will last" in West Sacramento.) Find more great incentives here.

(Thanks to commenter HighSierraGuy for the Centex info & link.)

More Weakness in the New Home Market

Last week, the Sacramento Bee reported on falling housing starts:

...Housing construction also fell last year in the Sacramento region. Permits for 15,559 single-family, detached homes were issued in Sacramento, Placer, El Dorado and Yolo counties in 2005, down 17 percent from 18,680 units in 2004. Across the capital region, permits for 2,901 apartment and condominium units were issued last year, down 19 percent from 3,587 units in 2004, CIRB data show.

In Sacramento County, the 7,811 permits issued last year for single-family homes represented a 23 percent drop from the 10,185 units issued in 2004. It was the largest year-over-year decline among the state's top 10 counties for single-family construction, CIRB data show.

CBS 13 had this report:

...Houses still sprout overnight like pumpkins from fields that used to be rural. Yet, there are signs that the sun is setting on an overheated housing market. California home builders say the number of housing starts--permits to build new homes--dropped from more than 212,000 in 2004, to just over 207,000 in 2005--a drop of nearly three percent. It was the first drop in ten years, but everything's relative. "2005 was a great year, and a 2.7% drop is not bad at all," said John Kellogg, realtor.

Realtors like John Kellog notice a bit of chill in the air. "Last year I could sell a house in a couple of days to two weeks, whereas now it seems to be going more from a month to three months," said Kellogg.

Builders expect construction to decline as much as 11% this year as home values appreciate more slowly. "2006 will not be as hopping as those years, but definitely a solid, good year and we're looking forward to that," said Ana Helman, North State Builders Association.

Kellogg just hopes home buyers are, as well.

"They're not really sure what to do yet, whether the market's going to go down, so I think they're just testing it," said Helman.

So what happens if more and more potential buyers keep testing...and testing?

January Roundup: Inventory Up

Inventory is yet again on the rise in the Sacramento real estate market, according to three tracking blogs. After peaking in November, inventory decreased during the holidays, but subsequently rebounded in January. (note: the three sites use different sources for their numbers)

Sacramento Housing Bubble:
12/31/2005: 10,061
1/31/2006: 10,693

Bubble Markets Inventory Tracking:
12/30/2005: 10,079
1/30/2006: 10,582

Housing Tracker:
01/01/2006: 6,856
02/01/2006: 7,229

Now is the Time to "Stop the Bleeding"

The latest from Andrew LePage of the Sacramento Bee.

A month ago Jerry Wright figured a simple newspaper ad was all it would take to sell a 1,400-square-foot rental home he owns in Roseville for $359,000. Not many homes sell for less there. But he found barely a trickle of demand. "It's been very quiet," Wright said. "I've been getting very few phone calls." Last week Wright, a real estate agent, decided it was time to "stop the bleeding." He put a renter back in the home to cover his mortgage. When the market picks up, he'll consider selling again. When will that be? That's what everyone is trying to figure out.

Wait-I thought smaller, less expensive homes were still selling like hotcakes.

Until recently, home sales were on a blistering pace. But for the first time in years, a rapidly slowing market has left would-be buyers and sellers facing conflicting signals about what to do next. Buy now - or hope for a drop in prices? Try to sell now - or hope that demand bounces back in the spring?

"What's the right answer?" asked Pam Petterle, Prudential California Realty's regional manager. "It's a crapshoot out there. Nobody knows for sure."

Among those struggling to get a read on the market is Michelle Winkel, out browsing open houses in her Land Park neighborhood Sunday. She and her partner are torn between investing in stocks or a rental home. "We don't want to buy something now that could be quite a bit cheaper in a year," Winkel said.

Few areas appear as murky as the Sacramento region. Over the past six months, the four-county region has experienced one of the most dramatic slowdowns among large U.S. housing markets.

Sales of new homes in Sacramento, Placer, El Dorado and Yolo counties plunged 57 percent in the last three months of 2005, compared with both the previous quarter and fourth-quarter 2004, according to the Gregory Group, a Folsom-based industry research firm. Sales of existing homes in December fell 30 percent from a year ago, according to DataQuick Information Systems.

TrendGraphix, a local data firm, found the average time to sell a home was 48 days - the highest in four years.

The slower market, which builders and brokers say perked up a bit last month, has left home values stagnant since summer. "I've seen no rise (in values) except in a few areas," says Nolan Lum, a veteran local appraiser. That leaves agents, mortgage brokers and others struggling to craft plans for the spring. Many agents are encouraging would-be sellers to put their homes up for sale soon, arguing they need to beat the anticipated crush of competition.

Erin and Ron Steward will do just that. They tried to sell their Foothill Farms house in the fall, then took it off the market. They plan to re-list it later this month for $449,000, $40,000 less than their initial price.

"I think a lot more houses are going to come on the market in March," Erin Steward said. Others are holding off. They want to see a rebound before they throw up a "For Sale" sign. Prudential's Petterle doesn't think that's wise. She says new listings in the spring will compete with homes that have been for sale for up to six months - ones whose prices have been reduced multiple times. "Sellers waiting for spring may have to start a lot lower (in price) than they thought they would have to," she said.

One way for buyers and sellers to get a better gauge of the market is to first hit some open houses. "If you see eight people one weekend (at an open house) and then 15 the next, it doesn't take a brain surgeon" to figure out the trend, said Michael Lyon, head of Lyon Real Estate in Sacramento. Lyon and others figure that interest should pick up after Sunday's Super Bowl - and then really take off in March and April.

Scott Syphax, head of Sacramento-based Nehemiah Corp. of America, pioneer of a popular down payment assistance program, said first-time buyers should hold off until the warmer weather, when a trend likely will emerge. "If the market does what it has traditionally done - pick up steam - in the spring, then if you're interested in a house get into the market," Syphax said. "If it appears to be slow, then probably waiting a few more months will work to your favor."

...or a few years?

Most housing analysts expect modest, if any, price appreciation this year. In the new home market, where prices soared in recent years, many builders have either cut prices or offered incentives worth thousands of dollars. Jay and Grace Calman, Vallejo residents who've been shopping in new subdivisions here for months, said they've seen builder incentives worth up to $70,000. The couple, who are buying a $527,000, 2,200-square-foot home under construction in Elk Grove, got a $15,000 incentive from their builder. Jay Calman's advice to buyers: "Be patient and be willing to wheel and deal with them."

You can find more incentives here.

Incentives also are catching on in the resale market. Regina Luster, a state worker, has been trying to sell her 2,100-square-foot rental home in the Pocket since October for $559,000. She recently tried to sweeten the deal by offering to cover closing costs and lend a buyer enough to cover a 10 percent down payment. "It's an effort to let buyers know you're flexible - that you're trying to work with them and not just trying to take advantage of a market that no longer exists," Luster said.

How about a price cut?

There are some signs the gloom of the last few months may lift, though perhaps not enough to entirely halt the incentives. The region is adding jobs at a respectable clip, which historically has meant housing demand won't plummet. Another ingredient: Rates for 30-year mortgages now average around 6.1 percent - low in a historical context.

But how many of those jobs are tied to the real estate industry [Sacramento Housing Bubble blog]?

"There will be a pickup in demand in spring, just like there always is," said economist G.U. Krueger, who follows housing trends here for Institutional Housing Partners, an Irvine-based investment adviser. "Will the pickup go back to where it was last year? I don't think so," he said. "Will it come back up from the dismal state we were in during the winter? Yes, it will be much better than that."

If You Build It, They Will Come?

Yet another story about home builder incentives. Now sales commissions for real estate agents are added to the mix.

Some builders have been dropping prices on new homes in San Joaquin County recently to boost winter sales. Patrick Bill, with Preferred Real Estate Group in Tracy, said some home builders are now offering to pay sales commissions to real-estate agents who bring buyers, paying to landscape front and back yards, and giving closing-cost credits to buyers. Jerry Abbott, co-owner and president of Coldwell Banker Grupe real-estate firm in Stockton, said that until a few months ago, he hadn't seen that for at least three years because builders had such an easy time selling whatever they could build...

The piece also reports that existing home sales are down 24% in the Central Valley.

Meanwhile, a new report from the California Association of Realtors said that statewide sales of existing homes in December were down nearly 18 percent from the previous December, though the median sales price of $548,430 was up nearly 16 percent from a year ago. In the Central Valley, December sales were down nearly 24 percent year-to-year, but the median sales price of $354,790 was up 17 percent from $303,320 in December 2004.

Mortgage Company Owner: "I couldn't afford to buy the house I live in today."

The Sacramento Bee recently quoted two mortgage company owners, who shared their views on the housing market.

First article:

...Nearby resident Scott Otsuka said he supports the Crocker Park project because he's a strong proponent of compact housing. "It's something we've really needed for a while," Otsuka said.

"Especially in Roseville, which has become the place where everybody wants to be, but nobody can afford to live." Ranging between 1,600 and 2,300 square feet in size, the "work force housing" is designed for young professionals and first-time buyers, although developers say it's too early to set prices.

"It bothers me that I've got employees who are making good incomes but can't afford to live in Roseville," said Otsuka, who owns a mortgage company. "Truthfully, I make a good income, but I couldn't afford to buy the house I live in today."...

Meanwhile, in a second article, another mortgage company owner has a different view on the housing boom:

...Bob Bader doesn't know [Alan] Greenspan, either. But the owner of Arden Mortgage in Sacramento calls him "a godsend" for keeping interest rates low and sparking an unprecedented housing boom. "He brought down the rates and got the real estate market going," Bader said...