"The Trick is Generosity"

The marketing departments of home builders stuck in the declining Sacramento housing market have become quite busy as of late, trying to reduce their backlog of unoccupied homes. One home builder even is offering home-staging seminars, apparently hoping people will be able to sell their homes in the "challenging market" and buy new.

Now it looks like the inventory glut has forced home sellers to think outside the box. The Roseville Press-Tribune reports on the latest twist in Sacramento home selling.

Maryal and Ken Maddux have a home they want to sell. It isn't just an ordinary home, though. Well, it is for now. But by the time work is complete, the home will be like new. New carpets, landscaping, and exterior paint are just some of the improvements. And they're all coming in free or discounted.

The trick is generosity.

With the help of their Realtor, Ronda Giangreco, several businesses have lined up to help spruce up the house. In turn, Ken and Maryal will donate 10 percent of the proceeds from the house's sale - probably about $3,000 - to Foothills Habitat for Humanity...

The Madduxes have wanted to move to a new house for some time. They used to live in Tennessee, and as lovers of the outdoors, they want a bigger back yard....

So, when it came time to get serious about selling, most of the nonessential stuff was packed into the large trailer of the RV the couple uses as a backup house. They met Giangreco at a wine-tasting event one night, and not long after posted a Lyon Real Estate sign. Their house appraised for $385,000.

However, Giangreco, wife of Gold Country Media General Manager Mike Giangreco, was worried. The housing market was slowing. Homes couldn't be sold in a day anymore, she said. "You can't do the same thing and expect to get the same results in this market," she said. "You need exposure..."

The idea of giving some of the proceeds to a charity was Ken and Maryal's idea. They regularly give to charities when they can afford to, usually ones helping animals or cancer research. Giangreco thought the idea was perfect - it added an extra sense of emotion that appealed to buyers. She suggested Habitat for Humanity, an organization she'd seen firsthand when she lived in Nashville...

However, that wasn't enough. Having seen shows like "Trading Spaces" and "Extreme Makeover: Home Edition," Giangreco tacked on the idea to have businesses come in and fix the place up. It was, in part, for charity after all. And after checking with Lyon's legal department, she found the idea had never really been tried before.

The idea worked. With a little work, Giangreco has already lined up three businesses - Morris Landscaping and Amadieo Stone from Auburn and Design Refined from Meadow Vista - to help with the project...

Giangreco isn't just promoting the house, though. She is also giving to the cause, as she is taking a cut in her commission from 3 percent to 2.5 percent.

The Sacramento Housing Market & Skydiving

What's that falling? Is it a skydiver or the Sacramento housing market? From Marketplace:

TAMARA KEITH: It's a baking hot Sacramento Saturday and a couple of dozen parents and kids have gathered in a vacant lot to watch sky divers, with their colorful parachutes, float to earth. It's all part of a plan to lure buyers into a set of model homes in the Woodbury Glen development just steps away.

ANNOUNCER: And here he comes, your last diver carrying the Standard Pacific Homes flag.

This event was heavily advertised in the local paper and on the radio. Jackie Shipley is VP of sales and marketing with Standard Pacific Homes, the builder behind this community. There was a time when stunts like this weren't necessary, but with all the doom and gloom talk about a bursting bubble, Shipley says in recent months buyers have been more apprehensive...

A year ago, there were waiting lists and lotteries just to get a chance to buy a new home in the Sacramento region. Now the tables have turned. Most home builders have standing inventory, completed homes sitting empty.

Valerie Condie is director of sales for the California division of Lakemont Homes. She recently launched a promotion offering up to $100,000 off the high-end properties in the Waterstone at Morgan Creek community. She says incentives help some buyers get past their jitters about a volatile market and rising interest rates. And, she reminds folks, those rates could be worse...

That may be so, but home shopper Tony Prekash says he sees no reason to rush.

TONY PREKASH: Right now buyers have the upper hand. You can say OK, well, you're giving me 70-grand for upgrades or closing costs or a combination of both, but the other one is giving me 100-grand. I'm going there.

Confessions

The Marin Real Estate Bubble blog declares it 'Confess the Truth Week' and has a great summary of the recent bearish comments by the housing industry.

Elsewhere in the bubblesphere, the Bubble Markets Inventory Tracking blog is running a great series of posts called 'City in Focus,' which includes some local cities like Stockton and Elk Grove. Here's a snippet from the Elk Grove post:

I do believe we have a new champ in the "% reduced listings" in the cities profiled in the "City in Focus" series. Sacramento is running neck to neck with San Diego down this real estate downturn, registering its first year to year negative median price in June, much like San Diego. But it looks as if the slope may be a bit steeper for Elk Grove compared to its counterparts in the suburbs of San Diego.

Population 2006: 130,000
Listing per population ratio 1:85
7/25: 1,525 listings
7/25: 706 (46.3%) reduced listings

Honey, the home builders shrunk the backyard!

From the Sacramento Bee:

Amid a confluence of economic factors, homes on lots smaller than 4,000 square feet have become, along with condominiums, a new standard in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. As land values have soared -- in some cases developers are paying up to $1 million an acre -- and home prices have sailed past many incomes, builders and buyers are increasingly finding refuge in homes that occupy slivers of expensive land.

About 40 percent of new-home sales this year in the six-county region involve houses on lots smaller than 4,000 square feet, according to the Gregory Group, a research firm and home-builder consultant in Folsom. Five years ago in El Dorado, Placer, Sacramento and Yolo counties it was a mere 1.5 percent.

Fast-growing Natomas, north of downtown Sacramento, especially has become rife with large homes packed onto less than a 10th of an acre. Increasingly, such smaller-lot homes have become the price of admission for first-time homebuyers in the capital region.

"As funny as it sounds, you can get a 3,000-square-foot home on a 4,000-square-foot lot," says Barry Grant, territory president of KB Homes North Bay division, which includes Sacramento. Nearly all the homes at the firm's Hamptons subdivision in Natomas are under 4,000 square feet...

"It's all about what you can afford," said Wil Mar, a first-time homebuyer who has only a "strip of dirt" behind his new home in Natomas' Hamptons subdivision. A technical support specialist for a cellular phone company, Mar says he's happy to be a homeowner in Sacramento. But he sometimes longs for the bigger home lots he says are selling in New Mexico. "Here," Mar said, "everybody is being crushed into little tiny spaces."

A 'Balanced Market?' Try $230,900.

From the Sacramento Business Journal:

Homes in Sacramento are 59 percent overpriced, according to a recent analysis. Sacramento trailed only six cities -- five of which are in California -- in a study of 100 housing markets by Local Market Monitor, which compared selling price to "equilibrium values." The equilibrium value was compiled based on such factors as economic and population growth, vacancy rates and construction costs. The report found the median price of a home in Sacramento to be $366,900, compared to an equilibrium price of $230,900, a 59 percent difference in price.

CNN has a nice chart here. Hat tip NNJ RE Bubble.

Another study lumps Sacramento into the top 10 coldest markets in the country.

Veros has released the results of its quarterly forecasting of the nation's real estate markets, revealing the top 10 hottest and coldest markets for the next 12 months...The markets that show the least home price appreciation over the next 12 months are expected to be: Rochester, -4%; Worchester, -2%; Sacramento, -2%; Memphis, -1%; Dayton, -1%; Grand Rapids, 0%; Boston, 0%; Cleveland, 0%; Detroit, 0%; and Fall River, MA, 0%.

"Like a Rock"

Do rocks make soft landings?

Like a rock: California home sales plunge as prices rise

Apparently there's a limit to what Californians will pay for the American dream and that stops short of $600,000. The median price of an existing home in California increased 6.2 percent in June to $575,800, according to a survey by the California Association of Realtors. There weren't a lot of buyers at that level.

Home sales statewide plummeted by 26.3 percent compared to June 2005, which, the Realtors note, was a record month for sales. In the Central Valley, the median price of a single-family home was $362,960 last month, up 2.1 percent from the previous month and up 2.6 percent from a year earlier, according to the Realtors.

But Central Valley home sales dropped more sharply than the state as a whole, down 34.5 percent from June 2005.

Sales in the Sacramento region fell even further, down 38.7% from June 2005. California is now where Sacramento was back in November or December of 2005.

'Scary' Incentives

From ABC News:

Home builders don't like to talk about it, because it only makes it harder to sell houses. But because of an increase in the number of homes for sale, a majority of builders now offer incentives to close a sale. In Sacramento, Calif., recently, Meritage Homes offered "Zero Closing Costs; Zero Payments for 3 Months." And another firm, Centex, advertised an "Offer You Can't Refuse," which meant up to $125,000 in savings..."I have builders who are advertising right now -- 'make me an offer' -- which is definitely scary," said housing analyst Ivy Zelman.

A 'Bitter Pill to Swallow' for 'Hungry Agents'

The Sacramento Bee checks up on area real estate agents.

[I]n a trade so often marked by optimism, they're steeling colleagues for the unpleasant but necessary task, they say, of persuading homeowners to quit balking and lower prices. But not to "rock bottom," they add, which invites insulting offers from emboldened buyers.

"As agents, we have to do that, said Tina Ledbetter, a Roseville resident who's been in the business 30 years. "But it's a hard pill to swallow."

Amid the lagging sales prices and 14,600 homes for sale in El Dorado, Placer, Sacramento and Yolo counties at the beginning of July, Ledbetter and other top sellers recently advised 80 colleagues on survival techniques as today's tougher market increasingly winnows out the weak and unprepared. Some agents said they're already seeing associates departing for more lucrative work...

Ledbetter told agents they should be basing their asking prices on actual sales prices received elsewhere. That's the opposite of the boom-era and still-common practice of basing prices on others' asking prices. What Ledbetter's advice typically means is lower initial asking prices.

In a sales report last week, Mike Lyon, head of Lyon Real Estate, estimated that only one in seven homes for sale in El Dorado, Placer and Sacramento counties is priced to sell.

Odds & Ends

• DataQuick has released June median price figures for California. Here's how the Sacramento region fared on a year-to-year basis:

El Dorado: -0.10%
Sacramento: -1.33%
Placer: -7.22%
Yolo: 3.70%

• The Sacramento Business Journal looks at Trendgraphix figures for June & the first half of 2006.
• NPR interviews the author of Fortune Magazine's Housing Dead Zones article. Sacramento mentioned. Worth the listen.
• The Sacramento Bee reports that area rents still haven't budged much over the last quarter.
  
• KCRA has an update on the Folsom repartments story. Now toxic mold?

Sacramento Area Flippers in Trouble

Watch out Sacramento flippers! Your property just might end up on the "flippers in trouble" gallery. Max, the blogger who produces the Sacramento Real Estate Statistics blog, has just launched a new blog which tracks the declining fortunes of Sacramento area flippers. Looks like a great resource.

Also newly added to the blogroll is Paper Money, "a blog dedicated to tracking the decline of the greatest asset bubble in US history." Hat tip goes to Bubble Meter.

Pig Turd Alley

Rodeo Drive, Park Avenue, Pig Turd Alley?

Dave Dittman thinks Jay Leno should buy his house. He figures that's the least he can do, since Leno made so much fun of it in a recent "Tonight Show" segment where the late-night TV talk show host poked fun at oddities or misfires in print.

There was Leno, howling on national television about an ad that Dittman had posted in the San Francisco Chronicle. The ad listed his Amador City property, a three-story, 2,500-square-foot, old-style beauty - with a replica miner's shack as a 650-square-foot side house - for nearly $1 million - $950,000, to be exact.

Actually, Leno didn't seem to find the three-bedroom, 31/2-bath house itself eye-catching. But he loved the address: 10741 Pig Turd Alley...

"It's nice for the notoriety, although I don't know whether it's any benefit to what I'm trying to do - sell my house," said Dittman, whose now-deceased mother bought the house in 1990 for under $300,000, before the Gold Rush real estate days of 2000-05 sent California prices soaring.

Still, he added: "I'm of the belief there's no such thing as bad publicity." On the other hand, he said, there's been very little buyer interest, Leno or not, for the 24-year-old house, built redolent of the Gold Rush-style characteristic of Amador City, population 150.

Another Home Builder Singles Out Sacramento

Boy, this sure is getting to be familiar. The latest confessional brought to you by D.R. Horton.

"I know every time we've gone into a downturn in the home building industry, they've always been longer and deeper than we've all imagined," D.R. Horton chief executive Donald Tomnitz said. "So we're preparing for the worst, and we think this one will be longer and deeper than just the last six months..."

Tomnitz pinpointed San Diego and Sacramento in particular as having poor sales activity. He said the company was still having success in some other parts of the state.

'Let's Make a Smoking Deal'

The Wall Street Journal has been reading Sacramento Craigslist.

One effect of the softening in many markets is that more sellers are willing to dicker. "Let's make a smoking deal," John Nichols wrote in a Craigslist.org ad for his three-bedroom ranch house in Sacramento, Calif., this week. He is seeking $315,000 but adds, "Make an offer. You won't necessarily insult me." Although the backyard is "currently a dump," Mr. Nichols says, the kitchen countertops are granite and the dual-pane windows are new.

'Give Me a Break. What Did You Think Was Going to Happen?'

From the Modesto Bee:

Owning a home no longer puts you on the fast track to riches. After six years of rapid appreciation, home prices in the Northern San Joaquin Valley have started to sputter. Sales prices are up one month, down the next. And the length of time it takes to sell a house has slowed...

Now, houses are languishing on the market, often for months. Sales volume fell 36 percent in June in Stanislaus County compared with last year. "Seller expectations need to change fast," warned John Nelson, Modesto branch manager for ComUnity Lending, a mortgage bank that funds home loans. "Too many sellers still remember how their neighbors made a bundle selling homes last August..."

A typical $300,000 loan now costs $2,200 a month, once principal, interest, taxes and insurance costs are included for a 30-year-fixed mortgage, Nelson said. That's simply too much for most first-time buyers to pay, which means homeowners who want to move into bigger houses are struggling to sell their houses, he said. The solution? Nelson advocates dropping all home prices by 10 percent to make them more affordable...

Lewis said demand is still there for homes, but buyers won't buy what they can't afford. He said sales are off so much that times are getting tough for real estate agents. Last Friday, ReMax of Oakdale shut its doors. "We were given no notice," said Tom Van Ruiten, who was one of eight agents at the ReMax office.

Van Ruiten has been selling real estate for more than 25 years and has seen market downturns before. He recalled the early 1980s, when buyers had to accept mortgages with interest rates as high as 21 percent. So the current market slump doesn't surprise him. "With home prices going up 20 percent a year and wages going up 3 percent a year, what did you think was going to happen?" Van Ruiten asked. "Give me a break."

A Crepe?

The Stockton Record reports that new home sales are down 40% in San Joaquin County. More importantly, Sean "Soufflé " Snaith ditches the soufflé for a crepe!

Snaith, who coined the phrase "housing soufflé" to describe the cooling down of the market, now says that the housing market is more like a crepe - relatively flat. "It will remain a buyer's market, but we won't see this unraveling, which would be the case if a bubble were bursting."

Speaking of Snaith, a reader sent in a link to this article which has more information about Mr. Snaith's upcoming move.

Snaith, known for his colorful metaphors to describe economic conditions, said he will be eating some of his own "housing soufflé" - a term he coined for his quarterly forecasts to describe an over-the-top housing market coming to a soft landing, like a soufflé that stops rising after it's pulled out of the oven.

He said he bought a local home in May 2004, so his house got one year's worth of bounding appreciation before the red-hot local housing market cooled off and flattened last summer. "If I lose money on this, everybody's in trouble," he said with a laugh.

Is that a nervous laugh I'm hearing?

In other news, The Record reports that existing sales are down one-third and "the number of listings reached nearly 4,400 last month, up almost 3.5 times the 1,291 homes for sale in June 2005." "'I thought that would have plateaued by now,'" says Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton. ABC 30 says that the Fresno/Clovis area has broken a record with over 5,000 homes for sale. The Fresno Bee also has a report.

Redding's newspaper thinks the building boom may be over. Meanwhile, the Sacramento Bee and Sacramento Business Journal report on Sacramento new home sales.

New-home sales in Sacramento were down considerably in the second quarter from the same period last year, but rose sharply from the first three months of the year...Second-quarter sales were down 24.6 percent from the same period last year, when builders sold 4,143 units. For the first half of the year, builders sold 5,187 homes, down 42 percent from the 8,955 homes in January through June 2005...The average incentive increased more than $2,000 to $15,263 in the second quarter from the first quarter.

Finally, is the HELOC gravy train coming to a halt?

After tapping their home values for $22 billion in consumer spending during the recent housing boom, Sacramento-area residents have slowed their use of home-equity borrowing at twice the rate of Californians as a whole, according to a new report. The use of home-equity loans or home-equity lines of credit for everything from buying new swimming pools to paying off credit cards fell by about 10 percent from January through April compared to the same period last year, reported DataQuick Information Systems, a La Jolla housing consultant. The pullback means consumers may curb spending on retail mainstays such as furniture, boats and cars, as well as expensive remodeling projects, all of which could impact the economy.

The cooling market is cooling spending jets. The pace of consumer spending will slow as the housing market recedes from its recent highs, according to the preliminary findings of a study conducted by the USC Lusk Center economists. Mortgage refinance activity had dropped sharply in recent years. There is every expectation that it will continue to drop leading to a downturn in consumer spending on discretionary items including foreign vacations, luxury furnishings and entertainment, according to the report.

Ding Dong - YOY Price Declines Arrive in Sacramento

It's official. For the first time since 1997, median sales prices for homes in Sacramento County declined on a yearly basis, according to the Sacramento Bee.

After five years of fast-rising home prices in the capital region, an increasingly entrenched slowdown in sales and a pileup of resale inventory is taking its toll. For the first time since the late 1990s, median sales prices for homes in Sacramento and Placer counties have slid into negative territory compared with the previous year...The milestone development in three of the region's counties marks the capital area and San Diego County as California's first major metropolitan markets with year-to-year price declines.

Sacramento County, as the region's biggest real estate market, saw collective median sales prices of new homes, condominiums and existing homes dip to $368,000 in June -- down 1.3 percent from $373,000 in June 2005. That was the first year-to-year decline since October 1997, according to DataQuick. Placer County registered a June median sales price of $452,000, down 6.2 percent from $482,000 in June 2005. The county's last year-to-year price decline was in January 1998...

Analysts said the new figures represent the latest fallout from months of rising interest rates, prices that surpassed area income levels and a fleeing of the market by speculators. It clearly marks the end of a sizzling market in which Sacramento County alone saw 66 straight months of double-digit price increases over the previous year.

Expect a more detailed article to appear in tomorrow's newspaper.

"Desperate" Housesellers

From News 10:

After five months of trying to sell her Stockton home, Margo Ray decided it was time to resort to more drastic measures. But when realtor listings, newspaper ads and a slashed asking price didn't close the deal on her $440,000 home, Ray knew her Treetop Drive house needed a new and different kind of showcase. Now, Ray is the only homeowner in Stockton trying to pitch her home on local radio.

Ray paid for 30 radio ads praising her home and all its amenities. The commercial plays this week in hopes of bringing out perspective buyers to an open house this weekend. "It's very weird," said Ray. "And when my children heard the spot, they said, 'Wow, this is pretty weird.'"

Ray put her home of 19 years on the market back in February, but the five-bedroom, three-bathroom home just couldn't seem to get noticed in Stockton's buyer-friendly glut of homes for sale.

Also from News 10:

A Rocklin woman whose three-year old home has been for sale for months is turning to an auction in hopes of selling it. Star Von Laue has listed her three-bedroom, two bath corner lot house with three realtors and reduced the price three times in her effort to sell it. After more than six months without closing a deal, she's turning to an auctioneer...

Max, over at the Sacramento Real Estate Statistics blog, looks at Sacramento flippers in trouble. OCRenter reports that Sacramento continues to lead the pack of housing markets with the highest percentage of reduced listings, now at nearly 43%. Finally, here's a snippet of data from the Sacramento Housing Bubble blog, which tracks foreclosures in Sacramento County:

4/1/2006: 98
4/8/2006: 106
4/15/2006: 109
4/22/2006: 109
4/29/2006: 119
5/6/2006: 125
5/13/2006: 130
5/20/2006: 136
5/27/2006: 148
6/3/2006: 154
6/10/2006: 164
6/17/2006: 180
6/24/2006: 191
7/1/2006: 203
7/8/2006: 212
7/15/2006: 225

June MLS Sales Dive 52%, Depreciation Reported

John, over at the Sacramento Real Estate blog has some early MLS numbers for June.

June’s real estate market in Sacramento county has shown considerable slowing from last year, with a slight depreciation in home values. 1216 residential units sold through the MLS in June, down 51.7% from last year. Meantime, the number of expireds was up 391%, from 188 last June to 923 this June. Together, these two figures gave us a tenfold increase in the expired to sold ratio, from 7.5% last June to 75.9% this June. Inventory is currently at 8.4 months.

Read the entire post.

Sacramento "Market Slide Was So Sudden"

From a broker's press release:

Northern California home sellers suddenly face liquidity issues in a falling real estate market...In Sacramento, Placer and Eldorado Counties we see about ninety to one hundred net pending sales per day against an average of about two hundred and fifty to three hundred new listings. On average, there are greater than three hundred daily property price reductions, and for the last few days that number has eclipsed four hundred.

Why is this important? Had one religiously followed the daily real estate market activity over the course of the last two years, and fully understood what they were following, it would have been possible to anticipate a market correction. If one's belief was strong enough they could have sold the market short, at the very least they could have liquidated at the top of this market cycle.

But what does one do now if they need to sell, and they are one of the fifteen thousand strong that have listed their property for sale with a Broker? Do not despair; first understand that many of the listings that you as a seller will be competing against have been listed too high for the present market conditions. This is evidenced by the fact that on average there are greater than three hundred daily downward price adjustments as previously mentioned. Moreover, the actual market slide was so sudden that it would be hard for many to comprehend what happened and to adjust to the new real estate environment...

The Central Valley is the enigma, and in contrast to forecasted gains anticipated in other areas of the state, the market has sharply declined, essentially wiping out two years of gains. Thus the reality is that whether we like it or not, the Central Valley's real estate market is faced with some real liquidity issues. Even though the decline in prices is not reflected in the published median price statistics, the decline really exists. As a result of the liquidity issues it will take some time to be a realized decline, versus today's wholesale markdown in prices, or unrealized decline.

Snaith Needs to "Unload" His Home

Time to test out that soufflé theory. Sean Snaith, whose sunny soufflé analogy is a permanent fixture in local articles, has to sell his home. The Stockton Record has the dirt:

Some California homeowners, if the Munroe-Hatamiya analysis is correct, are into the same pattern with their home equity. Sure, the Valley becomes less affordable as home prices rise, but the "wealth effect" means people who own homes spend money - home- equity loans being one example - and that helps fuel the retailing and service sectors of the economy. It's kind of your basic house of cards if Munroe, Hatamiya and a bunch of other economic soothsayers are wrong about the soufflé analysis.

One of them is Sean Snaith, director of UOP's Business Forecasting Center. If Valley housing collapses, Snaith would suffer some very real economic pain to go along with some of the esoteric economic formulas he and other economists use.

That's because Snaith has a home he needs to unload. He's headed to Florida where he'll take up a similar position at a much larger college, the University of Central Florida in Orlando. He's been here two years and probably secretly wishes he'd gotten the job six or eight months ago, before the inventory of homes for sale shot up, prices softened and buyers became the market bosses. He will now have a real life opportunity to test the soufflé theory of Valley real estate.

"The Days of Instant Equity are Over"

From the Bakersfield Californian:

Record-shattering house prices have helped send national foreclosure numbers plunging well below historical norms in recent years. But the days of instant equity are over. The real estate market's torrid pace has slackened. Interest rates are on the rise. Introductory rates for exotic loans are ending. And tens of thousands of homeowners are starting to miss mortgage payments.

About 530 Kern County properties entered some stage of foreclosure during the first three months of 2006, according to a recent report from RealtyTrac, an online marketplace for foreclosure properties. That's a 15 percent jump from the same period last year. California as a whole saw an 86 percent spike during that same time with more than 29,500 properties entering some state of foreclosure in the first quarter of 2006. Nationally, foreclosures were up 54 percent, according to the study...

In 2004, 58 percent of Bakersfield home buyers took out adjustable-rate mortgages and roughly 20 percent opted for interest-only loans, according to a study by Credit Suisse First Boston. Some have also been spending 50 percent and more of their monthly incomes on mortgages, far above federal recommendations...

It's a national problem that's of particular concern in hot markets like California, said Allen Fishbein director of housing and credit policy for the Consumer Federation of America. Leveling prices and rising interest rates mean homeowners can't refinance as easily if they get into trouble, Fishbein said. Some people are refinancing with new adjustable rate loans that end up costing them even more in the long run, said mortgage banking attorney Alan Wolf. "We have some dynamics here that are pretty scary," Wolf said.

June 2006 Inventory

Sacramento inventory continued its impressive upward trajectory, according to three inventory tracking sites. Since the beginning of this year, inventory has grown at least 62%.

Sacramento Housing Bubble:
5/31/2006: 14,822
6/30/2006: 16,329
+10% in June
+62% in 2006

Bubble Markets Inventory Tracking:
5/31/2006: 14,824
6/30/2006: 16,505
+11% in June
+64% in 2006

Housing Tracker:
6/1/2006: 10,087
7/1/2006: 11,324
+12% in June
+65% in 2006

(Note: The three sites use different sources for their numbers. Please see the individual sites for more information on methodology and areas of coverage.)

This graph shows housing inventory for the Sacramento housing market as reported in the Sacramento Bee since February 2005. The June number will be included when it becomes available.


For more inventory fun, check out the Sacramento Real Estate Statistics blog.

'The Astute Buyer is Going to Sit and Wait and Watch'

At least the Bay Area housing market is not as bad as the Central Valley, says the San Jose Mercury News.

As Bay Area home sales boomed during the past decade, the spending spree extended to Central Valley towns where workers willing to brave hours-long commutes could buy sprawling homes for the price of some one-bedroom Silicon Valley condos. Now, it's a far different market. Communities like Los Banos and Tracy are experiencing a real estate slowdown more pronounced than the one under way in the Bay Area, partly as a result of rising commute costs, creeping mortgage rates and home prices that might have soared a bit too high.

Prices are sliding from the peaks they reached last fall, and the number of homes for sale has more than tripled in some areas. Visitor traffic to new home builders' sales offices is off by nearly a third since last year, and builders are offering thousands of dollars in incentives to get buyers to sign on the dotted lines. "It's definitely a buyer's market," said Steve Smiley of Hanley Wood Market Intelligence, a home building research firm. "You're going to see the incentives stick around for a while..."

Sales of new and resale homes in the vast Bay Area bedroom community formed by San Joaquin, Stanislaus and Merced counties were down 29 percent in the first five months of this year compared to the same period in 2005, according to DataQuick Information Services. That's a steeper drop than the 19 percent decline in the Bay Area.

But what's more sobering for home sellers in inland counties is how many homes are piling up on the market. In San Joaquin County, home to communities like Tracy and Manteca, nearly 4,000 existing houses were for sale at the end of May, about 3 percent of homes in the county and nearly 250 percent more than the amount in May 2005, according to Trendgraphix, a real estate research company in Sacramento. The same trend is true in Stanislaus and Merced counties...

Donna Baker, an agent with Preferred Real Estate Group in Tracy, said many prospective buyers who work in the Bay Area are shying away from homes in Tracy now, given how much the commute would cost them. "People are making decisions now to stay over the hill because of gas prices,'' she said. That and the fact that sellers are dropping their list prices little by little means that "the astute buyer is going to sit and wait and watch. There's no sense of urgency like there was before."

Brian Gentry put his four-bedroom, 2 1/2-bath house in Los Banos up for sale by owner in April at $585,000. Since then, he's dropped the price by $20,000, hired a real estate agent to help him market the place, and is offering $4,000 toward closing costs. "Then we're throwing in, of course, all the window coverings," and the new stainless steel refrigerator, plus offering a bonus to a buyer's agent who can close the deal fast, Gentry said. There are enough competing "for sale" signs in his neighborhood, where many people commute to Silicon Valley jobs, that "I can see two just from my lawn..."

With new-home builders offering generous incentives, sellers of existing homes, like Gentry, are feeling the pressure, especially when prices of the new homes are not much higher than those of the existing homes. To his list of concessions, Gentry recently added a $1,000 bonus for any agent who can bring him a buyer that can close the deal by Aug. 15.

Gentry, his wife, Cindy, and 3-month-old daughter, Chloe, are planning to move in August to the new house they just bought in the Merced County town of Atwater. Cindy will commute to her teaching job in Los Banos. Brian, who for years commuted to a Bay Area job as a regional operations manager for a staffing company, will stay home with the baby for several months.

Though he can afford to pay both mortgages for a while, Gentry said he's anxious to sell the Los Banos home, which the couple paid $310,000 for in 2003. The couple got one low-ball offer a few months ago, but nothing recently, Gentry said as he pointed out the neatly landscaped yard and the spacious formal living room -- all kept immaculate in the event that house-hunters pop in. "All you've got to do is say the right word," Gentry advises prospective buyers, "and we'll talk."

"No Takers"

Columnist Bob Shallit writes about Sacramento's declining housing market:

Motivated seller: Speaking of a slowing housing market, developer Mike Klein is fretting about low demand -- so far -- for a project we previously dubbed the first "subdivision" built in east Sac in decades. The project has just four units -- attached, two-story town homes at 52nd and J streets. But that's quite a few for a part of town that hasn't seen a new multiple-housing project in decades. The homes were completed a month ago. They have sort of a combo Craftsman-and-row-house feel.

Klein planned to market them for $525,000. "And they probably would have sold immediately if I had built them last year," he says. But times have changed. He started them at $499,000. No takers.

The price has come down to $474,900 and now $449,900. What's his next move? He may offer buyers some incentives. Like a free plasma TV. Or, he says, he may just rent the places..."until the next good market."

100,000

According to statcounter, Sacramento Land(ing) received its 100,000 hit sometime early this morning.

A big thanks to all the readers and contributors to this blog!

A "Lot Less Work" at Building Permit Offices

From the Central Valley Business Times:

Compared to 2005 there was a lot less work for many building permit offices around the Central Valley this past May. Region-wide, there were 3,342 single-family building permits issued in May 2006, compared to 4,525 in May 2005, the California Building Industry Association says [pdf]...

Bakersfield’s hot housing market cooled compared to a year earlier. The number of single-family housing permits issued in May was 553, a 30.3 percent drop from May 2005. Other Central Valley metro areas, with percentage drop and number of permits issued in May 2006 are:

Fresno, -27.2 percent (319 permits)
Hanford, -18.3 percent (67 permits)
Madera, -28.8 percent (141 permits)
Modesto, -32.6 percent (300 permits)
Stockton, -20.8 percent (350 permits)
Sacramento, -41 percent (917 permits)

'Major Correction' in Land Prices

This is an article from May that slipped past my nets. From the Sacramento Business Journal:

Sacramento's white-hot residential land market has cooled dramatically in response to declining new-home sales. Veteran land experts, who asked not to be named, estimated the price homebuilders are willing to offer is generally 10 percent to 20 percent less than it was a few months ago. Homebuilders normally balk at paying boom-time rates when sales wane. In this case, the drop in value could be greater because the price of dirt reached unprecedented heights during the boom market of 2002 to 2005...

Land professionals report that some builders are renegotiating prices on options or other tentative purchases from the past year or two. Some builders have simply backed out of pending land acquisitions rather than pay the original price. They say they won't buy more land until prices get more "realistic."

"Buyers are shopping for more competitive deals," said Randy Grimsman, a long-time land broker with CB Richard Ellis. "There are deals they would have scooped up last August that they won't scoop up now." Land appraiser Dave Jarrette of Giannelli & Jarrette LLC, said, "This is a major correction, because a lot of prices went up so dramatically during the past couple of years."

Although, the evidence hasn't materialized in the form of recorded transactions, "it is in the process of happening," he added. Jarrette estimated that prices for the "best" approved lots probably peaked at about $150,000 last year, up from $120,000 in 2004. The same kind of parcel was priced at about $75,000 in 2001, just before the boom started.

Business Week's housing blog has an interesting related post.

The cost of land is an increasingly important factor in the prices of homes...[H]ome prices are likely to be more volatile in the future. They'll rise more abruptly and fall more abruptly as well in reaction to changes in demand. Here's why: Since land looms so large now as a factor in home prices, fluctuations in the price of land matter more now than ever. And what affects the price of land? Well, since the supply of land is pretty much fixed, the only thing that can affect the price of land is changes in demand for it. That goes back to things like job growth, demographics, and speculation. If demand drops, the price has to drop, too...

Land's Share of Home Value by Region of the U.S., 1984, 1998, and 2004:

Sacramento 0.376 0.394 0.638