Predict the Prediction

At last year's Sacramento Region Housing Forecast, Michael Lyon, Sacramento real estate's "wunderkind," predicted double-digit appreciation in 2006 for all four Sacramento-area counties. So far, things have not gone according to plan, however. Even as measured by Mr. Lyon's own statistics, appreciation, let alone double-digit appreciation, is nowhere to be found.

Median price change between December 2005 and August 2006:

El Dorado County
- Predicted: 10%
- Actual: -1%

Placer County
- Predicted: 10%
- Actual: -5%

Sacramento County
- Predicted: 12%
- Actual: 0%

Yolo County
- Predicted: 11%
- Actual: 0%

Tomorrow, Mr. Lyon is again scheduled to make a presentation for the 2007 forecast. So Sacramento Land(ing) readers, what will Mr. Lyon's 2007 forecast look like? Predict the prediction by clicking on the comments link below.

Moths to the Flame

From the Sacramento Bee:

New homes on the horizon
Despite slow market, outside builders have big plans for region.

It might seem the worst time to start building houses in the Sacramento region with prices dropping and so many homes for sale. But a pair of deep-pocketed newcomers -- divisions of a U.S. timber products giant and a major Japanese conglomerate -- are positioning themselves to make sizeable new splashes in the region's home building market.

Analysts, citing the region's growth forecasts, say more are likely to show up, continuing a trend that has seen waning market share for locally owned builders and increasing dominance by publicly traded home builders and subsidiaries of large corporations.

"With every down there's an up," said David Ragland, vice president for community development of Los Angeles-based Pardee Homes, which plans 4,000 new homes in the coming years in Natomas, Rancho Cordova and north Stockton. "Personally, I would like to see the upside last a little bit longer. But there are opportunities in a down market as well."

Also new to the local market is Irvine-based MBK Homes, which plans to start constructing the first of its planned 600 homes in the region within weeks in Citrus Heights. The 66-home Camden Place is scheduled to open next spring south of Greenback Lane off Auburn Boulevard.

Clinging to 'La-La Land'

From the Sacramento Bee:

Real estate agents have spent much of the year complaining that homeowners were in denial, clinging to the notion that they were selling into a red-hot market and refusing to cut their price despite daily evidence to the contrary. Many are still resisting. Mike Lyon, head of Sacramento-based Lyon Real Estate, says the market may decline another 10 percent -- and still sellers aren't convinced. "

"About half the sellers are out in la-la land," he says. "That's better than before. Half are serious and are starting to reduce their price. I still think only 10 to 20 percent of the market is priced to sell."
...
One huge issue that most sellers don't pay attention to: New-home builders are exempt from such personal distress. "They have the ability to discount more than you do," Lyon says. "They look at it more from a business sense, and it's easy for them to cut prices because they're not in love with their homes."

Any glance at real estate advertisements or a visit to model homes will show what he means. At William Lyon Homes in Elk Grove recently, sales representatives were handing visitors to their model homes an imitation credit card. "Our gift to you ... $40,000," it states. Developers who once paid closing costs, threw in free window blinds, landscaping, washers, dryers and plasma TVs are now cutting prices outright. The combination of incentives and price cuts can top $150,000 in some cases.

Builders, who are still putting up more houses than there are buyers, say they are discounting heavily in attempts to "find the market."

Central Valley = "A Treacherous Real Estate Ditch"

Another blurb from Business 2.0:

Bakersfield, Fresno, Merced, Sacramento, Stockton

Five of the cities on the Bottom 10 list are from this region, making the long rural stretch of Highway 99 between Sacramento and Bakersfield look like a treacherous real estate ditch. Home prices shot up here by as much as 60 percent during the past two years as big homebuilders, squeezed out of the Bay Area and Los Angeles by lack of space, arrived in search of raw land at bargain prices.

Problem is, the Central Valley's base industry (agriculture) creates the lowest-paying jobs, and chronically high unemployment rates persist throughout the region. "A market where housing has increased by so much so fast when unemployment is that high is unsustainable," says Frank Owens, who sits on the board of Fresno's builders association. "This market is going south."

Waiting List of Home Builders

From the LA Times:

California's housing production plunged 47% last month as builders curtailed construction while working to whittle down their existing supplies of unsold homes, data released Friday showed. Builders obtained permits for 11,590 houses, condominiums and apartments in September, according to statistics compiled by the Burbank-based Construction Industry Research Board. By comparison, 21,717 permits were issued in the year-earlier period. September's permits were the fewest issued for that month since 1996...

Permits for single-family houses experienced the biggest drop in September, plummeting 57% from a year earlier. Production in two of the state's biggest new-home markets — Riverside/San Bernardino and Sacramento — fell by more than 60% [pdf report]...

Meanwhile, builders are holding off on new construction, said Wes Keusder, a builder and chairman of the California Building Industry Assn. Obtaining a permit is the first step in the construction process. "Last year we had a waiting list of buyers interested in our homes before they were even built," Keusder said. "This year, however, it seems as though we're the ones who are waiting."

Business 2.0: Where Not to Buy

"These 10 overvalued cities have run their course, and home prices are expected to drop over the next year."

#1 Stockton

A huge price run-up in the past few years seems to be an outgrowth of the booming home markets all over California. But this agricultural-support city seems to have little reason for high housing prices otherwise. It has mostly low-paying industries and ample space for new development.

#2 Merced

This is a small, sleepy San Joaquin Valley town that has also benefited from the general run up of California home prices. One big positive factor Merced has going for it is the opening of the 10th campus of the University of California.

#4 Fresno

Yet another valley city with an economic base of low paid agricultural industry workers, Fresno real estate rang up impressive price hikes during the boom. Today, the potential for more growth seems very limited. The landscape is mostly uninspiring, the weather unfavorable and the cultural amenities negligible.

#7 Bakersfield

Oil wells, cotton fields and pecan and almond growers, as well as country-western music, make this valley city seem more like an outpost of southeastern Texas than the left coast. It shares with that area many of the factors that work against high real estate prices: low paying jobs, hot summers, uninspiring scenery and plenty of room to expand.

#8 Sacramento

California's capital city has a reputation for unexciting living. An erstwhile agricultural town that has outgrown its origins, Sacramento has transformed its outlying tomato fields into tract house developments. Searing summer heat, choking photo-chemical smog and a paucity of cultural life work against the town's ability to attract the affluent. Even the governor lives in Brentwood.

Hat tip: Matrix

'Time Will Tell'

From the Sacramento Bee:

Struggling U.S. home builders are monitoring the Sacramento-area housing market for signs it will become first to hit bottom and lead an industrywide rebound, a leading analyst said Thursday.

"Eyes are on the Sacramento market," said Boyce Thompson, editorial director of Big Builder and other industry magazines based in Washington, D.C. "There have been some interesting reports coming out specifically about Sacramento and about Washington, D.C., indicating that those markets may be first to reach bottom and eventually to come back up..."

Yet even as the Sacramento region's builders struggle with falling prices, unsold inventory and cancellations by buyers, many believe they will sell off excess supply within months. "Your market may come back a little earlier than others because you actually fell a little earlier than others," Thompson said. " But time will tell whether that's the case."

Sacramento Housing Bubblette?

From the Daily Bulletin:

Regional economist Jack Kyser of the L.A. County Economic Development Corp. noted the contrast between the California market and the national one.

"There are definitely bubble markets nationally," he said. "We have bubblettes in California - folks are worried about Sacramento and the Central Valley - but we don't have anything like Las Vegas or the Florida condo market."

Kyser said two factors were keeping California housing relatively strong.

"Our economy is doing well and the population is still growing," he said. "The demand is there. Yes, it's a shift to a buyer's market where prices may flatten some, but anyone looking for a blowoff like the early '90s, forget about it."

Hat tip: HB Blog

"More Than 10%"

From the Wall Street Journal (also here):

In some areas, prices are only just beginning to fall back toward realistic levels, says Thomas Lawler, a housing economist in Vienna, Va. He believes that prices could fall more than 10% from their peak levels in markets such as Sacramento, Calif.; San Diego; Las Vegas; Reno, Nev.; Phoenix and parts of northern Virginia and Florida.

Double Digit Soft Landing?

DataQuick's dqnews.com has posted their September numbers for California (archived here). From the Sacramento Business Journal:

All four counties reported lower median home prices, including a 16.5 percent decline in Placer and 15.6 percent in Yolo. Sacramento and El Dorado counties fared relatively better, with price drops of 6.1 percent and 1.8 percent, respectively...

Several area cities reported double-digit price decline, including a 27.1 percent tumble in West Sacramento to $350,000, according to the monthly report. Lincoln and Roseville prices plummeted 18.4 percent and 17.9 percent, respectively.

Only a handful of local cities reported slight increases in home prices, paced by 2 percent in Rancho Cordova and 1.7 percent in El Dorado Hills.

CAR September 2006 Results

The California Association of Realtors has released their September numbers for single family home sales.

Sacramento Region
YoY Change in Sales: -37.9%
YoY Change in Median Price: -3.8%
Change from Peak Median Price: -6.3%

Sacramento Housing Market - Price Peaks

A lot of price predictions have been bandied about here on this blog and in the media. I thought it might be useful to see just exactly when prices peaked so that going forward we can compare the current prices to the peaks.

**Note on DataQuick figures: In January 2007, DataQuick revised all of its data back to 1988. I will add updated peak price figures when/if the Sacramento Bee publishes them. Unless indicated by (**) , all dqnews and Sacramento Bee numbers below are the old unrevised figures. Accordingly, comparing the peak prices with current prices published by the Sacramento Bee and dqnews.com may be somewhat misleading.


Sacramento County

Median price - resale single-family homes & condos, new homes
Source: Sacramento Bee - DataQuick
Price peak: $387,000** (August 2005)

Median price - resale single-family homes & condos, new homes
Source: dqnews.com (archived at car.org) - DataQuick
Price peak: $378,000 $390,000 [revised] (November 2005)

Median price - resale single-family homes
Source: Sacramento Bee - DataQuick
Price peak: $372,000 $374,000** [revised] (August 2005)

Median price - new homes
Source: San Francisco Chronicle - DataQuick
Price peak: $476,500 (December 2005)

Median price - MLS
Source: golyon.com - Trendgraphix/Lyon Real Estate
Price peak: $395,000 (August 2005)

Median price - MLS
Source: John Lockwood
Price peak: $399,499 (November 2005)

Average price - MLS
Source: golyon.com - Trendgraphix/Lyon Real Estate
Price peak: $428,000 (August 2005)

Average asking price - MLS
Source: golyon.com - Trendgraphix/Lyon Real Estate
Price peak: $517,000 (May 2005)

Average home sold price per square foot - MLS
Source: golyon.com - Trendgraphix/Lyon Real Estate
Price peak: $254 (September 2005)

Average sold price per square foot - MLS
Source: Agent Bubble
Price peak: $258 (July, August, September 2005)

Average sold price per square foot - MLS
Source: John Lockwood
Price peak: $254 (September 2005)


Sacramento County + West Sacramento

Median price - resale single-family homes (MLS)
Source: sacrealtor.org - Sacramento Association of Realtors
Price peak: $392,750 (August 2005)

Average price - resale single-family homes (MLS)
Source: sacrealtor.org - Sacramento Association of Realtors
Price peak: $425,655 (August 2005)


Sacramento Region

Median price - resale single-family homes (MLS)
Source: car.org - California Association of Realtors
Price peak: $394,450 (August 2005)

Price sold per square foot - new & resale homes
Source: Radar Logic
Price peak: $252.78 (September 6, 2005; 28-day aggregation)

Zillow Home Value Index
Source: Zillow.com
Price peak: $419,074 (Q2 2005)


Placer County

Median price - resale single-family homes & condos, new homes
Source: Sacramento Bee - DataQuick
Price peak: $525,000** (December 2005)

Median price - resale single-family homes & condos, new homes
Source: dqnews.com (archived at car.org)- DataQuick
Price peak: $519,000 $515,500 [revised] (August 2005)

Median price - resale single-family homes
Source: Sacramento Bee - DataQuick
Price peak: $502,000 $504,000 [revised] $505,000** [revised again] (August 2005)


Yolo County

Median price - resale single-family homes & condos, new homes
Source: dqnews.com (archived at car.org) - DataQuick
Price peak: $490,000 $489,000 [revised] (December 2005)

Median price - Resale single-family homes
Source: Sacramento Bee - DataQuick (through May 2006 only*)
Price peak: $436,500 (November 2005)


El Dorado County

Median price - resale single-family homes & condos, new homes
Source: dqnews.com (archived at car.org) - DataQuick
Price peak: $507,250 (March 2006)

Median price - resale single-family homes
Source: Sacramento Bee - DataQuick (through May 2006 only*)
Price peak: $475,000 (September 2005)


Additional Price Resources:

Median price paid per square foot, median price by zip code
Source: dqnews.com (archived at Sacbee.com) - DataQuick

Asking prices (Average, median, and average price per square foot)
Source: Sacramento Real Estate Statistics blog

Asking prices
Source: Housing Tracker (old & new)

Realtor Associations (Monthly MLS Reports):
Sacramento
Placer (click "Documents Resources" on left, then scroll down)
El Dorado

"If"

From the Sacramento Bee's opinion page:

Downtown Sacramento has no high-rise condominiums, but the proposed Towers project near the river would be the largest of its kind on the West Coast -- if it gets built. If. The downtown isn't poised for a slow housing evolution, but a sudden transformation with an enormous economic ripple effect. Surely Towers developer John Saca is praying for a few more downtown enthusiasts to commit to buying units in his 53-story project. If he presells half of its 799 units -- and he is close -- crucial financing kicks in. The project presumably gets built. And despite this cyclical downturn in the housing market, downtown's skyline changes forever.

Dreaming of a 'Soft Landing' in Stockton

From the Stockton Record:

Thank heavens for the stock market. Just when our false sense of wealth was waning along with the real estate market (as in, "What do you mean my house isn't worth a half-million?"), the Dow flirts with 12,000.

The "wealth effect" is back. The "wealth effect" is the economists' code language for feeling rich when you're not. And rich is how a lot of American homeowners felt, especially if they also were Californians, as they rode the real estate wave upward in double-digit bounds for five years or so...

It's a recession, as the saying goes, if the other guy is out of work. It's a depression if you're out of work. By extension, you're in a real estate soft landing, slowdown or what ever euphemism you like, if your neighbor can't sell his house. The bubble has burst in real estate if you're trying to sell your house and can't. That was the situation for the 4,733 San Joaquin County homeowners who had houses on the market in September. Or if you were among the 898 homeowners who received foreclosure notices in the third quarter, a figure up 178 percent from the same period in 2005. Those numbing realities should knock a few digits off your "wealth effect" number.

From the Wall Street Journal:

Some 2.33% of mortgages were delinquent at the end of the third quarter, the highest level since 2003, according to Equifax and Moody's Economy.com. Among the areas that saw the biggest jump in the delinquency rate since the end of last year were Stockton [3.15%] and Merced, Calif. [3.30%], and Las Vegas-Paradise, Nev...

The increase is particularly notable because bad loans normally climb when the economy weakens and job losses rise, leaving more borrowers unable to make their monthly payments. By contrast, the latest increase appears to be more closely tied to looser lending standards, borrowers tapping their equity and slowing home-price growth. "We're seeing rises in delinquencies and loan losses that are unrelated to what's going on in the job market," says Mark Zandi, chief economist of Moody's Economy.com. "It's very unusual."

Several articles about the Stockton/San Joaquin housing market appeared in the Stockton Record over the last week:

-S.J. rental market booming

The rental market is better now partly because the area is seeing a rising wave of foreclosures, she said, as people who bought homes with flexible loans tied to interest rates are caught with higher payments after rates rose. And there are a lot of people who haven't hit foreclosure yet who are in trouble, she said.

There is a plethora of houses for rent on the market these days, owned by investors who bought when values were jumping 25 percent to 40 percent per year during a five-year period that ended last fall. Since prices began dipping, the investors have been unable to "flip" the properties for a profit, she said, and they need to rent the houses to get some kind of cash flow.

-S.J. home sales hit 'soft landing'

A new quarterly study shows that new-home sales in San Joaquin County took a nearly 33 percent dive from the third quarter of last year to the recent third quarter, but prices slipped 2.3 percent.

"Things clearly couldn't keep going at the same pace," said Greg Paquin, president of the Gregory Group, a real estate information and consulting service in Folsom. "We may have hit the soft landing..." Paquin said some markets, including Sacramento, have seen a worse downturn.

-S.J. home sales down; prices up

The most striking news from the new report was that the number of houses on the market dropped countywide, said Jerry Abbott, president and co-owner of Coldwell Banker Grupe. So how much did inventory drop?

"Only five houses less, but it is less," he said.

Even better:

"...prices rose slightly overall, despite being down from a year ago."

Yes folks, the San Joaquin County median home price increased by $4,000 (1%) from August to September. I guess the party is over for all you doom-and-gloomers. Oh wait. What did you say? Something about prices falling? That little green chart in the top corner? Oh, O.K.

Change in median price from September 2005 to September 2006:

Stockton: -8.8% ($25,000 loss)
Tracy: -2.8% ($15,000 loss)
Lodi: -4.8% ($20,000 loss)
San Joaquin County: -5.9% ($25,000 loss)

Another Day, Another Condo Project Cancelled

From the Sacramento Bee (or here):

Plans for an eye-popping housing and retail project in midtown have been shelved, the result of an overly ambitous design and a declining residential market..."We shot too high and it cost too much," said developer Mark Friedman, whose Loftworks partnership was plannning to build on facing parcels on the southwest and northwest corners of 16th and O streets...

CADA [Capitol Area Development Authority] boss Paul Schmidt says he's optimistic he can interest another developer in the facing parcels. Given the current housing market, he said the site might be more suited for apartments, rather than a condo project with for-sale units.

From the livinginurbansac blog:

I'm not liking this trend of projects being canceled due to construction costs, couple that with a slowing housing market and this could be real trouble for more projects. This couldn't have come at a worse time given how much interest there is in developing in the central city.

Update - From the Sacramento Business Journal:

In addition to the rising cost of materials, Friedman said the partners were concerned by the downturn in the housing market. They had expected people to be able to sell their homes so they could buy a condo in midtown, but with so many houses flooding the market, making it difficult for people to sell, they were afraid they wouldn't have enough buyers. The condos were to be priced at $325,000 to $480,000.

"We didn't consider raising the prices to make the project work," he said. "I don't think that is realistic."

D.R. Horton, the nation's largest homebuilder, came to the same conclusion last month as it canceled plans for a 21-story, 259-condo development downtown and another high-profile project, 203 condos on the banks of the Sacramento River at the Jibboom Street power plant. D.R. Horton cited the declining housing market for the moves.

Something Happened on the Way to Heaven

From registeredrep.com:

One client of Scott Hanson, co-head of Hanson McClain in Sacramento, Calif., had everything mapped out to take full advantage of the booming California real estate market. She would sell her house in the Sacramento area for a bundle, move to a quiet part of Nevada and buy a cheaper house -- and fund her nest egg with the leftover money.

But something happened along the way: The California real estate market began cooling. The client put her house on the market for $725,000 about a year ago, but found no buyers. She finally decided to cut the price. Still no buyers. She cut the price again, and then a third time -- the house is currently listed for $640,000. “It still hasn't sold,” Hanson says. The client is now in a serious bind -- either she'll have to sell the house at a vastly reduced price that will barely buy an adequate home out of state and have nothing left for investing, or she'll have to stay put in the hope that home prices move upward again soon. Either way, she now realizes she has far less money for retirement than she imagined.

Hat tip: The Housing Bubble blog

Troubled Towers, Alms Granted

Friday Update - Sacramento Bee:

Higher interest rates and a softening home market may be holding back some buyers, Saca said. "Some people may have planned to use home equity to pay the deposit," Saca said. "A lot of people don't have that kind of cash laying around. But we expect the market to turn back in our favor soon."

The sales slowdown may also reflect a change in buyer psychology stoked by negative news about the weakening housing market, said Bob Bronswick, president and chief executive officer of Coldwell Banker Residential Mortgage's Sacramento-Tahoe region. "A lot of people are sitting on the sidelines, waiting to see what will happen next," he said.

From the Sacramento Bee:

California's slowing housing market has dampened sales at Sacramento's largest high-rise condominium and hotel project, although its developer expects sales will improve next year.

John Saca's 53-story project at Capitol Mall and Third Street, the Towers, has presold a little less than 50 percent of the 799 units to date, and sales in August and September have been particularly slow. "Our sales are slower than I'd like," Saca said, "but I think that things will get better when the housing market improves."

Also from the Bee:

The Sacramento City Council approved an $11 million subsidy Tuesday to developer John Saca for construction of a lavish downtown hotel that is part of the Towers project...Council members voted unanimously in favor of the subsidy, lauding the project as "iconic," "dynamic" and part of a downtown resurgence that "will take Sacramento to the next level..."

"People ask me, 'Why would you want to give $11 million to a developer?'" Councilman Robbie Waters said. "I look at it as an astute investment..."

Saca said the hotel needed the money because of rising construction costs and a slumping housing market. "This has been a very difficult project," Saca told the council. "Without support of the city and city staff I'm not sure this would happen."

KCRA also reported on this story. Hat tip Patient Renter. Prior posts on this story here and here.

Rents Suppressed as Tired Sellers Flood Rental Market with Homes

From the Sacramento Bee:

Sacramento-area renters continue to pay some of California's slowest-rising rents, even as the monthly payments have risen sharply the past year in most of the state's other major cities, according to an apartment industry researcher.

The reason: more supply than demand in a Sacramento region that built thousands of new apartments in recent years. The area's 94.2 percent occupancy rate -- barely up from 93.9 percent a year ago -- is the lowest for all of California's 23 largest metro areas, according to Novato-based RealFacts, which tracks trends in the apartment industry.

Industry experts also report a growing surge in single-family homes being rented as owners tire of trying to sell them in a sluggish housing market. That trend has actually led to lower rents in some cases and is likely to play a significant role in keeping apartment occupancy rates lower.

"I've actually seen rents go down," said Sheri Lutrrell of Sacramento-based Pacifica Management, which leases houses. "Even my real strong markets like Gold River, I'm lowering them $200 or $300."

Janet Regan, a broker with Citrus Heights-based Horizon Properties and president of the Sacramento chapter of the National Association of Residential Property Managers, said some home sellers are giving up. "We use to have all these different reasons why people put up their houses for rent. Now it's, 'I can't sell my house,' " she said. "These are people who have moved to other cities and other states. They're stressing."

According to RealFacts, the region's average monthly rent at apartment communities was $948 in July, August and September, a $24 increase from the same time last year...Rents have risen just 2.6 percent the past year in El Dorado, Placer, Sacramento and Yolo counties, and 1.3 percent in Yuba and Sutter counties, RealFacts reported...

The combination of supply and demand factors is pushing the region toward a fourth year of slow-rising rents, even though analysts have maintained through much of 2006 that the trend is nearing its end.

Misery Loves Company

From News 10:

The seller's market is no longer. Buyers now have the upperhand, demanding upgrades, free landscaping and lower prices from new home builders. But what still stops some deals from closing is when the buyer can't sell his present home.

"There have been cancellations for that reason and that reason alone," says Judy Bennett of Roseville's Westpark development. "People are very nervous about that. They don't want to be left with two mortgages."

So Westpark's builders are getting creative. Lennar, Pulte and Centex are joining forces to offer a "We Stage Sacramento" exposition this coming Saturday. The point is to help would-be home buyers become home sellers...

"The days on market have increased greatly. We're seeing now anywhere from 120 to 160 days average for houses priced from 500 to maybe 800 thousand," Norris says. "That's huge."

By joining forces, Lennar, Pulte and Centex home builders hope the exposition will create business. "It's wonderful. We're all going to succeed together," believes Bennett.

Sacramento Foreclosure Activity Up 99%, Placer Leads State with 203% Surge

DataQuick reports on 3rd quarter 2006 foreclosure activity. Unsurprisingly, Placer County, which has lead the state in price depreciation, also saw the largest surge in foreclosure activity (on a percentage basis) from the prior year.

Notices of Default
houses and condos

County/Region

2005Q3

2006Q3

%Chg

Sacramento	697	1,388	99.1%
San Joaquin	323	898	178.0%
Placer	146	443	203.4%
Kern	361	741	105.3%
Fresno	372	789	112.1%
Madera	55	104	89.1%
Merced	132	282	113.6%
Tulare	117	268	129.1%
Yolo	48	101	110.4%
El Dorado	45	120	166.7%
Central Valley Total	2,417	6,017	148.9%

From Bloomberg:

"Price appreciation is evaporating,'' Andrew LePage, a DataQuick analyst, said in an interview. "That gives people fewer options to get out of a pinch...''

At the NeighborWorks HomeOwnership Center in Sacramento, California, the not-for-profit group's 12 workers are spending an increasing amount of time helping homeowners whose loans are in default, rather than focusing on the agency's goal of counseling people before they buy homes, Executive Director Pam Canada said.

"Certainly, over the last year, we've had an increase in the number of calls and requests for help from people who don't see the light at the end of the tunnel,"' Canada said. Such requests have risen 50 percent in the past year, she said. When prices were rising, "the home was always the place to go for financial salvation. They could always sell and get out from under their loan. That's not happening anymore.''

'Prices are Dropping Every Day, and They're Not Little Any More'

The Sacramento Bee has September's DataQuick numbers:

Home slump deepens
All eight area counties report fewer sales with lower median prices.

"Prices are dropping every day, and they're not little any more," said Mike Toste, a Coldwell Banker real estate agent in Antelope...While worrisome for sellers, the downward trend is heartening for buyers. Many in the real estate industry have tried to pry them off the sidelines by citing low interest rates, an abundance of home builder financial incentives and a record inventory of houses for sale...

"We can see the prices coming down," said Diana Wallace, a Sacramento resident who hopes to buy houses to rent out for retirement income. "I feel sorry for these people. But I want a deal. I want to get the best value I can. "But I hope they don't drop too much because I have a home myself..."

Single-family detached homes in the region's four most populated counties are well below their 2005 peaks, according to DataQuick:

• El Dorado County's September median of $434,000 compares with a September 2005 high of $475,000.

• Placer County's $454,000 median sales price compares with an August 2005 peak of $502,000.

• Sacramento County's $350,000 median price in September is off its August 2005 peak of $372,000.

• Yolo County's $411,000 median is below its November 2005 peak of $436,500...
  

DataQuick reported sales of 3,558 homes and condos during September in the eight-county region. That was 234 fewer sales than August -- and 2,328 fewer than September 2005.

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

From the Sacramento Bee:

Home prices fall across entire region

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

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

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

That means many people who bought houses during the summer and early fall of 2005 -- the last months of the region's unprecedented five-year housing boom -- own homes that at the moment are worth less than they paid for them.

Is there anybody out there who thinks -14% YoY is indicative of a soft landing?

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

No Miracles For House Auction Sellers

The Sacramento Bee has a follow-up to Sunday's auction article:

Auctioned homes' values are pounded
Gavel drops six times as bargain hunters bid below list prices.

At least six Sacramento-area homeowners who hired auctioneers to sell their houses are in escrow today after a dramatic live Sunday auction that also proved unable to sell six other homes. The results marked the region's first major venture into home auctions as a real estate downturn heads into its second year and the market slows under the weight of 15,000 unsold houses...

In the hotel conference room late Sunday afternoon, sellers and their families sat tensely as a staff dressed in formal wear unleashed a rapid-fire auction that lured buyers to offer bids in $10,000 increments. The homeowners whispered nervously, held hands over their mouths and sometimes shook their heads no as real estate agents probed them to consider flexibility in their minimum prices.

Buyers, meanwhile, largely exercised discipline as they sat up front and held to their limits. During the hourlong auction, it took only minutes to move some houses that previously had sat on the market for months. Six sellers accepted the highest bids, but there were no emotional bidding wars to make sellers' dreams of miracles come true...

Some bids were $100,000 under previous asking prices, reflecting the growing power of buyers in a market that sellers controlled for years...

...[One] house that sold had a high bid of $435,000 -- $100,000 below its listing price...

Seller John Chargin was among the half-dozen who declined to accept a high bid -- in his case, $450,000 for an Elk Grove home he listed at $549,950. But Chargin, who wants to sell the house quickly after relocating elsewhere in California, remains upbeat about his prospects. "I think I'm going to sell this house from this auction just from getting so many people through it," he said Monday. "There is no way in this market I would have gotten that many people, so we'll see."

Another house that didn't get the minimum Sunday carried a $470,000 listing price and a high bid of $360,000. Zillow.com and Reply.com value the house between $424,000 and $472,000.

Prior post here.

Bay Area Goes Negative

From dqnews.com:

Bay Area home prices fell on a year-over-year basis for the first time in more than four years last month. Sales were at their lowest level in five years, a real estate information service reported.

The median price paid for a home in the nine-county Bay Area was $611,000 in September. That was down 1.5 percent from $620,000 for the month before, and down 0.8 percent from $616,000 for September last year, according to DataQuick Information Systems.

Worse than it Appears

From the Associated Press:

...[B]uyers are demanding cash payments and other incentives that may be artificially propping up sales prices - suggesting the market downturn could be even more pronounced than has been reported...

Buyers are taking the incentives, and economists say the practice could be inflating reported prices and distorting our view of a market already suffering from higher mortgage rates and a sense that the market is enduring a significant correction...

When sellers use incentives to reduce the actual price without cutting the reported price, "then the reported prices are an overstatement of the true net selling price," said Lawrence White, Deputy Chairman of the economics department at the Stern School of Business at New York University. "So that very likely means that the real drop in home prices is greater than what the standard sources, like the National Association of Realtors, have been reporting..."

In calculating the much-watched home price statistics, cash and non-cash perks are left out, implying that true prices are even lower than the statistics indicate. Non-cash incentives, such as improvements paid by the seller, also have an effect since any add-ons change the quality of the houses but aren't reflected in the prices - or for that matter, the statistics.

"It's simply not reflecting the pace of change in them," Mortgage Bankers Association Chief Economist Doug Duncan said. "If you look at the federal statistics on price, it's not adjusted for the quality change," he said. "So if you take the house and list it for $250,000 and you add a finished basement and granite countertops, is it still the same house? Not really."

In the current slowdown, sellers and builders are moving beyond kitchen remodels to offering just plain cash. "An economist would call that a price cut," Duncan said. "That's not captured in the data."

Home shoppers seeking price cuts have an abundance of options...D.R. Horton offered buyers $120,000 in savings last month at the Tuscan Estates in the Elk Grove area near Sacramento. A Pulte development near there advertises homes valued between $456,000 and $654,000. And Beazer Homes USA Inc. offered no monthly payments for six months at Fieldstone Meadows in Folsom, Calif.

Ripples

From the Sacramento Business Journal:

A cooling housing market and the upcoming election appear to be two reasons that business is flat for some retailers, they say. Retailers and others add that uncertainty about the economy and rising interest rates also are making consumers more cautious about spending on their homes than they've been in the past few years.

"I would say our customers these days are a little bit more prudent in their spending," said Thomas Arbuckle, chief executive officer of Earthworks Custom Landscaping Inc., which specializes in landscaping for new homes. Landscaping a backyard typically costs from $15,000 to $50,000, depending on the size of the yard and the features, such as waterfalls and lighting systems.

Now that housing prices have cooled, consumers are more cautious and not as confident about the value of their homes, he said. "My customers used to say, 'We made $250,000 on the sale of our home,' " he said. "Five years ago, we had 15 to 17 projects going at one time. Now, we're running between two and four at a time..."

Elizabeth Lake, general manager of the Ethan Allen Design Center on Madison Avenue, said election years and a slower housing market tend to put a damper on business. The full-service interior design shop offers furniture, upholstery, accessories and other items for the home.

"It's been a rough quarter for our district," said Lake, who added the Madison store will close when Ethan Allen opens a new outlet in Roseville. "It's been very, very slow, and I think it's a combination of several things ... the housing market being down; interest rates are up; and it's an election year, and that seems to affect people. "The economy seems to be so unstable," she said. "People are insecure, and (what we sell) is a luxury, not a necessity.

'Big, Sharp Slowdown' for Central Valley?

From Inman News:

Ken Rosen a professor of real estate and urban economics for the Haas School of Business at University of California, Berkeley, said the prolonged surge in real estate sales and prices was artificial in some ways because lots of buyers were purchasing homes as investment properties rather than as primary residences.

"That was a false boom in many markets. A lot of investors were buying houses who weren't planning to live in them. We built too many houses because people weren't planning to live in them -- we overbuilt. It made the economy look stronger than it was," said Rosen, who is also chairman of Rosen Consulting Group, a real estate market research company...

"This is the worst speculative bubble in residential housing that we've had. Lending standards were much too loose, interest rates much too low. We're overdue for a correction," he said. "In the end, mean house prices will be 5 to 25 percent lower in some markets, with a national house-price decline in 2007 and 2008. That puts (prices) back to levels they should be at..."

While Rosen said that the national economy as a whole might avoid recession during the real estate slump, some states and regions may suffer more during the housing slowdown. Florida, for example, is at a higher risk of an economic recession, and he expects a "big, sharp slowdown" in California's Central Valley and in Arizona, Las Vegas and Washington, D.C. Generally, the areas that were most overbuilt are at the highest risk of economic problems, he noted.

Sacramento Bee: Denial, Upbeat Talk, and Price Cutting Not Working

From the Sacramento Bee:

Patrick Maloney aims today to distinguish his house from 15,000 others on the market with a tactic typically used to sell cattle and farm machinery. He's called in an auctioneer.

"I'm trying to get out quick," says the Sacramento resident moving to San Luis Obispo. Last month Maloney put up a for-sale sign asking $293,000. But so far it's attracted only lookers..."I can see the handwriting on the wall," he says. "I don't feel like sitting here six months or paying a house payment on top of rent in San Luis Obispo. I thought about renting it out, but I'm not the landlord kind of guy..."

It's finally come to this in Sacramento's weakened real estate market. Denial that the boom has ended isn't moving houses. The upbeat talk of real estate agents hasn't worked. Even price cutting isn't working for many as thousands of houses languish on the market. Almost on cue amid the quiet desperation, auctioneers have begun elbowing their way into the sales scene...

"A lot of sellers have dropped their sales prices $10,000 and no one cares," says Keith McLane, principal of West Coast Home Auctions and former Sacramento land buyer for Texas-based Richmond American Homes.

From News 10:

Thousands of homes are up for sale in the Sacramento area, but buyers aren't snapping them up like they used to. Now a group of frustrated and desperate sellers are auctioning their homes hoping to hear the words "sold to the highest bidder..."

Keith McLane of West Coast Home Auctions has been in the business for more than 10 years and says home sellers are getting frustrated with the real estate market slow-down. "A lot of people are finding very difficult to sell their houses now," McLane said. "We've had sellers that have been in the market for three, five, six months and they're saying, 'Get me out.'"

Sacramento's NPR station also had a piece on home auctions. Listen here.

Home auctions As the housing market cools, home owners are trying different ways of selling their homes. Are auctions a viable option?

Also: Flippers in Trouble Turn To Auctions

The Sound of Silence

From the Modesto Bee:

Permit Me
Building hits the wall as window closes

Clamorous construction sounds are fading in the Northern San Joaquin Valley as the once booming building industry slows. Half as many new home building permits were issued this summer compared with the summer of 2005 in Stanislaus, San Joaquin and Merced counties. And the region is on pace to build far fewer homes in 2006 than it did in 2003, 2004 or 2005, according to data gathered by the Construction Industry Research Board, a nonprofit research center based in Burbank.

In Stanislaus County, for instance, fewer than 3,000 single-family home building permits will be issued this year if the current trend continues. By comparison, nearly 4,500 permits were issued last year. The drop-off is even greater in Modesto, where 16 building permits were issued this September compared with 60 in September 2005.

"We look to be in the middle of a correction," said Steve Madison, executive director of the Building Industry Association of Central California. "Obviously, we would love to be selling more houses..."

...[S]ome builders have discarded construction plans for additional Northern San Joaquin Valley developments, according to Greg Paquin of The Gregory Group real estate information and consulting firm. "Builders are giving up (land purchase) options and contracts, leaving money on the table. That's happening all over California," said Paquin, noting that land is being returned to farmers and property brokers. "Builders are re-evaluating their plans." Paquin said the development slowdown is being accompanied by lowered prices in existing subdivisions.

New Home Prices Back to 2004 Levels*, Incentives Up 218%

From the Sacramento Business Journal:

The region's median-home price -- meaning half the homes sold for more, the other half for less -- dropped 3.9 percent to $440,240, the lowest price since the second quarter of 2004...

Housing inventory in the region, including lots ready for building, reached 4,598 in the third quarter -- more than five times the 875 homes and lots in second-quarter 2004, the lowest point since 2000. About 20 percent of the current housing inventory is completed homes waiting on buyers, [Greg] Paquin [owner of The Gregory Group] said...

*Not including incentives, the average new-home price dropped to the lowest level since third-quarter 2004 in Sacramento, Placer and Yolo counties. From the second to the third quarter, the average price dropped almost 5 percent in Sacramento and Yolo counties to $444,088 and $494,781, respectively. New-home prices fell 3.6 percent to average $538,094 in Placer County. El Dorado home prices continued to rise as new high-end homes opened in Serrano. But overall sales in the county still dropped 59 percent as the average price reached a record $769,293...

The average incentive of $14,916 in the third quarter was 218 percent higher than in the third quarter of last year. The perks reached up to $50,000 for new homes and $125,000 for existing homes, according to the Gregory Group.

Sacramento New Home Sales Headed For Eight-Year Low

From the Sacramento Bee:

New home sales lowest in eight years
Builders keep cutting prices to lure reluctant buyers as the region's spring pickup eroded over summer

A spring surge of Sacramento-area home buying ended abruptly during the summer months, heightening a slowdown likely to pull new home sales to their lowest levels since 1998, figures released today show...

The Gregory Group reported sales of 1,956 new houses in July, August and September in six area counties, a 37.4 percent drop from the previous three months. Sales prices are 3 percent to 5 percent lower than last year.

Actually, Yolo County's sales price is down 11.1% according to the Bee's chart.

In the first three quarters this year, home builders have sold 7,143 new houses in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to the Gregory Group. That's down 43.1 percent from the same period last year and puts the region on track to sell fewer than 10,000 new houses for the first time in eight years.

"It's a sluggish market and that's the world we live in today," Paquin said. In 2004, area builders sold 17,155 homes and condominiums, he said.

Metropolitan Sacramento has had the state's steepest drop in the number of new permits for single-family homes, said Alan Nevin, chief economist for the California Building Industry Association. Permits reflect builders' intentions to build more houses...

On top of the slow sales, about 20 percent of new homebuyers backed out of contracts during the summer, according to Hanley Wood. That's compared with about 4.7 percent during the same three months in 2005.

Not So Fast Elk Grove

The Sacramento Bee has an update on the so-called "fastest-growing" city in America:

Boom now barely an echo
Permits for new home construction in Elk Grove plummet to single digits.

Only two years ago, as home prices soared and buyers frantically snapped up new houses, builders worked at a manic pace. The city of Elk Grove issued hundreds of single-family building permits each month, hitting a peak of 553 permits in May 2004.

It wouldn't last.

Last month construction slowed to a trickle, the result of both a market slowdown and the virtual build-out of major housing developments initiated before mid-2000, when Elk Grove became a city. The city issued only seven single-family permits in September -- the first time in the six years since incorporation that such permits fell into the single digits.

Upcoming Events

Saturday, October 14, 2006:

Michael Stitt of Valley Sierra Mortgage Planners, a division of SAC 1st Mortgage, will present a free workshop, "Why It Still Makes Sense to Buy versus Rent," from 10 a.m. to noon at Roseville Maidu Public Library, Rocky Ridge Drive in Roseville. Information on the local and national real estate market and the history of property appreciation and interest rates will be provided. For more information, call (916) 367-7100.

Any roving citizen-reporters in Roseville?


Wednesday, November 1, 2006:

Sacramento Regional Housing Forecast, North State Building Industry Association
When: Wednesday November 1, 2006
Time: Program begins at 3:00 p.m.
Where: Sacramento Convention Center 1401 J Street, Sacramento
Speakers:
- Elliot F. Eisenberg, Ph.D, Housing Policy Economist NAHB
- Harry C. Elliott III, President, Elliott Homes
- Michael P. Lyon, Chief Executive Officer, Lyon Real Estate
- Greg Paquin, Founder & Chief Executive Officer, The Gregory Group

Price Reductions Graph

Zip Realty looks at the percentage of homes on the market where the asking price has been reduced. Coverage of Folsom, Citrus Heights, Roseville, and Natomas.

California Housing Bubble Blogs

It's time for another field trip. A lot has changed since our last field trip over six months ago. We'll be sticking to the home state this time around. So climb aboard and brace yourself. You are about to enter the California BubbleZone. Emergency exit here.

Southern California Housing Bubble Blogs

"Newer" sites:

• Irvine Housing Blog - Bubbles, crashes, and even some schadenfreude!
  


• This Old House Flip - Investigating detailed examples of flippers attempting to quickly make a profit buying and selling the "American Dream" of owning a home in the San Diego County area.
  


• OC FlipTrack - Tracking the housing bubble in Orange County with a strong focus on Irvine. Everyone wants to live here, there are many rich people here, real-estate never goes down, renting is for suckers, immigration is driving housing demand, OC jobs pay well, they aren't making any more land, and Gary "fifteen percent is pretty much in the bag for Orange County in 2006" Watts is my idol!

• Manhattan Beach Real Estate Bubble - Tracking the housing correction in the high-end SoCal market.

• Forsaken Craft - A smorgasbord of housing bubble information, with an emphasis on the Inland Empire.

• What Bubble? - Socal Housing Bubble - news, tools, opinion

• Real Estate Comments - Someday I'll buy a home in the South Bay area of Los Angeles. That will be after home prices get sane. Traditionally, homes in this area sell for 6X to 8X of median salaries (hey, its a nice area). In the bubble it reached up to ~10X. That's crazy and will correct.
  

The Veterans:

• Professor Piggington's Econo-Almanac for the Landed Poor - Southern California housing bubble news and analysis

• Southern California Real Estate Bubble Crash - Southern California is experiencing a bubble like never seen before

• South Bay Beaches Housing Bubble - Your humble reporter is standing with jaw wide open watching the astronomical bubbleminiums being built in the South Bay area of Los Angeles, with bubbleminium prices to match. I'll do my best to capture the real estate mania in my neighborhood.

• bubbleinfo.com - The insider's guide to North SD County real estate.

• Bubble Markets Inventory Tracking - Tracks housing inventory for several California markets.
  

Back from the dead: Flip This

Suspended Animation: The Boy in the Big Housing Bubble

Northern California/Central Valley Housing Bubble Blogs

"Newer" sites:

• Sacramento Area Flippers in Trouble - Trouble in River City
  

• Sacramento Real Estate Statistics - In-depth statistics about the Sacramento area real estate market.

• Bakersfield Bubble - Discussions and posting on the Bakersfield Bubble Market
  

The Veterans:

• Marin Real Estate Bubble - A place for residents of Marin County, CA and others to express their views regarding the real estate bubble and in particular the Marin real estate market
  

• Sonoma Housing Bubble - Pulling the cork out of the wine country real estate bubble

• Bay Area Housing Bubble - Tracking the East Bay housing bubble.
  

• Burbed - "Forget stock options...just give me a house!" SF Bay Area home price and mortgage insanity blog
  

Help Wanted: Fresno, Merced, Redding, and Chico

Commercial Real Estate: The Next Domino?

The Sacramento Business Journal looks at the growing impact of Sacramento's sinking housing market:

Housing downturn will likely hit offices
Thinning brokerages threaten leases

Sacramento's commercial property owners, who have relied heavily on housing-related businesses the past six years, are starting to feel the heat now that the market has cooled. A national research report released by Grubb & Ellis last week indicates that almost a fifth of recent local leases are in housing-related service sectors such as real estate brokerages, mortgage and title companies. The report's authors predict the effect of a housing downturn will be modest nationally, but it has the potential to be more painful in high-growth markets such as Sacramento.

That pain may last awhile, too. One prominent local real estate broker predicts a two-year flattening of housing prices. Housing-related business made up 19 percent of leasing activity in Greater Sacramento between 2000 and the second quarter of this year, according to the survey. That puts Sacramento tied with Oakland as the nation's fifth-most housing-reliant market...

The report cites cases in Sacramento of 5,000-square-foot offices occupied by only two or three employees. The research found "as many as one-half of local mortgage companies wanting to downsize or close altogether."

"The housing market in Sacramento has been growing so fast for so long that housing-related leasing is a bigger slice of the pie," said Robert Bach, senior vice president of Grubb & Ellis in Chicago. The region's pain could be significant. "Nobody knows how far down the housing market is going to go," he said. "It looks like we're not going to get that soft landing in housing that everyone was hoping for..."

"In times like this, you have to work," said Jeff Tarbell, president of ATM Mortgage. His Sacramento office is down to 18 brokers from 23 a year ago. The veterans have stayed and the newer agents have moved on. He also owns a few buildings, and he's had a couple of small realty and mortgage company tenants that closed down in the past year. He expects to see more of that in the region. "I think there are a lot of companies where, when the lease expires, they are not going to renew," Tarbell said.

Your Home or an "Aging Industrial" Property?

From the Stockton Record:

After several months of fruitlessly trying to sell her north Stockton home in a very slow and very competitive housing market, Debra Mejia thought: "You know, I really want to do something different." She may have found it.

Mejia, who happens to be a real-estate agent with WonderAgents in Stockton, has decided to auction off her four bedroom, 31/2-bath home at 3376 Schooner Drive, overlooking Fivemile Slough. The house is a beauty, she said, and was on the market in the spring and summer at $579,000. The house actually garnered an offer, she said, but the deal fell through. Since then, she got no further action with a listing at $559,900, she said.

Because she had already bought and moved into another house, she was motivated to sell, but then hit upon an auction as a way to sell at a time of her choosing. The sale via auction should happen because would-be buyers will want a deal, she said. She has set a $510,000 minimum for the winning bid, and Mejia believes that will generate a buyer for sure...

House auctions do happen occasionally in a slow housing market but are considered a rarity - and hardly a guaranteed method for selling a house unless the minimum is extremely low and there's not substantial bidding up, said some local real estate brokers. "It is bizarre, and it's not going to generate any interest," Bruce Davies, co-owner of Partners Real Estate in Stockton, said flatly...

Another longtime Stockton real estate broker Art Godi of Art Godi Realtors said auctions tend to pop up in very slow markets where the seller is hoping to snag a bargain hunter. In this country, auctions are typically only seen as a selling tool for aging industrial properties, he said. Only in a few countries, such as England and Australia, are auctions commonly used to sell homes, Godi said.

Prices Hit the Valley Floor?

From the Chico Enterprise Record:

A study released this week by an East Coast economic research group reported housing prices will drop dramatically in Butte County by 2008. The study by Moody's Economy.com in West Chester, Pa. notes that housing prices in the Chico Metropolitan Statistical Area -- basically Butte County -- will drop by 12.6 percent by the second quarter of 2008 from the 2004 fourth-quarter price...

A softening in the Chico market isn't a surprise, according to 2007 Chico Association of Realtors President Kym Campbell of W.M. Campbell Real Estate. Campbell said she's seen dropping prices and longer stays on the market, but she's not sure about the size of the drop predicted by Moody's. "I think there's more inventory. Sellers have been reacting to the great market."

From the Redding Record Searchlight:

Redding ranked 16th on a list of the top 30 U.S. metropolitan markets expected to suffer the sharpest declines in home prices, according to a forecast released this week by Moody’s Economy.com, a West Chester, Pa.-based research firm...

Redding’s median price for a home is forecast to fall by 11.8 percent. "That’s about right," Ron Largent, agent/owner of Keller Williams Realty in Redding, said Thursday. He thinks prices could fall "another 10 percent" from where they were a month ago before leveling out...

Home sales slowed and prices fell in Shasta County in August. The median sales price was $245,000 compared with $269,000 in July and $285,000 a year ago, according to Dataquick...

One reason Redding’s prices are softening is the cooling ardor of investors. A year ago, Redding led the nation in the percentage of homes sold to investors — 22 percent — according to LoanPerformance, a San Francisco-based mortgage research firm. Through May of this year, 15.4 percent of homes were bought by investors. That was still nearly double the national average of 8.9 percent.

The forecast of a price decline "sounds like old news, or at least we’re right at the end of it," said Greg Lloyd, broker/owner of Real Estate Center in Redding. Lloyd is also president of the Shasta Association of Realtors. "We probably peaked out very early this year and I would suspect we have hit the valley floor as we speak.

Real Estate Rocket Out of Fuel?

From the Sacramento Bee:

Hobbled by ongoing pension and toxic cleanup obligations, GenCorp Inc. posted its fifth consecutive quarterly loss on Wednesday but predicted that several new contracts for space exploration could bolster the company's fortunes. However, the Rancho Cordova-based company cautioned that a downturn in the real estate market could delay the development and sale of its extensive property holdings south of Highway 50...

[GenCorp chief executive Terry] Hall was less optimistic, however, about how fast GenCorp could develop more than 20 square miles of real estate the company owns in the Rancho Cordova area. He called the environmental and permitting processes "glacially slow" and said the softening real estate market also could delay development.

Market conditions, he said, recently caused GenCorp to break off negotiations with an unidentified company that was planning to help GenCorp develop acreage for residential and commercial use. "The market has made it much more difficult to find a partner for a joint venture," he said. But he emphasized that the land remains a valuable asset. "We will monetize it when demand is strong and prices are high," he said.

El Dorado Bills

From the Sacramento Bee:

Building fees plummet in El Dorado
County officials are wrestling with a projected $3 million shortfall.

A projected $3 million drop in building fees has officials pondering the first economic slowdown for El Dorado County government in perhaps 20 years.

El Dorado County officials debated how to provide adequate staffing to handle transportation and development projects, while avoiding future layoffs in those two areas due to a slowdown in housing construction.

Laura Gill, county chief administrative officer, reported last week that the Development Services Department's 2006-07 budget projected $8.2 million in building fees. Based on the current housing market, she said, $5.4 million would be a more realistic estimate...

Richard Shepard, transportation director, said the Department of Transportation also may leave vacant 17 of 22 new positions the Board of Supervisors authorized in July.

"There is going to be an economic turndown in this community," board Chairman Jack Sweeney said. "It hasn't hit us in 20 years, but it's going to hit us this time." When housing construction slowed elsewhere in the past, the El Dorado County housing market "was bailed out by people leaving other areas and coming here," he said. "I don't think that's going to happen this time."

Stockton Headed for the "Dumpster" of Home Prices?

More local reaction to Moody's Econony.com's forecast:

• Central Valley Business Times: The Merced metropolitan area will have the steepest price decline in California, Moody’s predicts. It says home prices in Merced will crash by 16.1 percent from their peak in the fourth quarter of last year to the low point, which Moody’s says will be in the second quarter of 2009. Stockton will follow Merced into the Dumpster of home prices, says Moody’s. Prices in the Central Valley’s port city will decline 15.7 percent by the fourth quarter of 2008.



• KCRA: In Stockton, developers continue to build homes, but the National Association of Home Builders expects the number to decline almost 12 percent this year and 12 percent next year due to an over supply. "There are more than triple the number of houses, existing homes on the market as were on the market two years ago," said Dr. John Knight of the University of the Pacific School of Business...Realtor Sheri Midgley said she has already seen the change as investors have left the market. "We were having investors buying two or three a year, or even more than that, and then flipping, but the flippers aren't in the market right now," Midgley said.



• Stockton Record: "That (15.7 percent prediction) might be overly aggressively, but I wouldn't be surprised to see a 10 or 12 percent decline," said John Cecchini, sales manager for Century 21 Collins in Stockton. "We're seeing a slowdown already. It will take it another two years to get an additional decline of 5 percent..."
  
  Until recently, Marcia Ourganjian and her husband, Walter, were in the Stockton housing market, dropping out after six months of, well, much of nothing. They'd had enough would-be homebuyers come to look over their three-bedroom, two-bath Estate Drive home in north Stockton and tell the couple how beautiful the place was, with its granite fireplace, tile floors, crown molding and ceiling fans. And the lookers would walk without ever making an offer.
  
  They did get one offer: After the couple had cut their sales prices $10,000, to $435,000, someone offered $390,000 but wanted all the furnishings in the house as well. "I thought, 'Are you kidding?'" Marcia Ourganjian said. The couple, who wanted to sell so they could retire in their native country of Nicaragua, declined. Marcia Ourganjian quoted her husband's philosophy of: "I'm not going to give my house away."
  
  The Ourganjians don't know what to think about the sales market, but at this point, they are out of it for a while until they sense a better sales environment. "We're going to wait three years," Marcia Ourganjian said. "Maybe the market is going to go up. Something has got to happen."

Price Decline Central

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

Metropolitan Areas That Will Suffer House Price Declines

% House Price Decline

#3 Merced: -16.1%
#4 Stockton: -15.7%
#9 Chico: -12.6%
#10 Fresno: -12.5%
#14 Redding: -11.8%
#18 Bakersfield: -11.1%
#22 Sacramento: -9.9%
#33 Visalia: -7.3%
#55 Yuba City: -2.6%
#60: Madera: -1.8%

The study predicts a price trough for Sacramento in the second quarter of 2008.

Update: 'Now it's payback time.'

From News 10:

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

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

'Housing Downturn' in 'Full Swing'

From the San Francisco Business Times:

Wells Fargo Senior Economist Scott Anderson said he expects the Bay Area to enjoy its highest level of employment growth since 2000 this year. But a softer housing market will slow growth across the state next year...

Bay Area housing prices should fare better than the rest of the state, but Sacramento could suffer a harsher drop as investors and speculators exit the city's housing market. "The housing downturn is in full swing in Central California as speculators and investors exit the market as quickly as they entered," Anderson wrote in his overview of the Central Valley in which he also discusses the region's loss of manufacturing jobs.

From the Associated Press (via Forbes):

Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation's metropolitan areas, with the Northeast, Florida and California among the areas hardest hit. The forecast by Moody's Economy.com, a private research firm, presents one of the starkest views yet of the housing slowdown that has been gathering force in recent months.

The West Chester, Pa., forecasting firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s...

The report said the most vulnerable areas for price declines were those regions where red-hot markets attracted speculators known as "flippers" who purchased homes in hopes of selling them fast for a quick profit.

"Housing's downturn has turned even more dramatic with the rapid flight of the flipper from the market," the report said. "These investors have gone from sending home sales and prices shooting higher to driving sales and prices lower."

From the Central Valley Times:

John Rubino is convinced the current retreat in the nation’s housing market has all the signs of a bubble that’s bursting. Mr. Rubino, a financial writer and advisor, says the bursting could be so severe, that it might trigger if not an actual depression, at least a recession in the United States...

"Crazy times, as we seem to be heading into, are also full of opportunities," he says. "If you are in the market for a home, I would say wait a couple of years and you’ll able to get a great deal on your dream house." [Hat tip: Bakersfield Bubble]

In Come the Waves: Remodeling Market Falters

From the Stockton Record:

When the home-sales market is hot, the remodeling business usually is, too. But home sales began slowing last fall, and a downturn is starting to show up in the renovation sector, say local contractors specializing in remodeling.

Business is still good, just not as good as last year, said Rick Fooy, owner of Silver Fern Construction & Remodeling in Stockton. The local remodeling business roared in the previous five years along with the existing and new-home market, Fooy said, but this year, work has slowed to perhaps 80 percent of last year's pace. "I think people are a little unsure of finances," he said. "It's all about money."

Daniel Maloy, of HandyDan Construction in Stockton, said there's still a lot of work out there, but he has noted that a lot of customers are concerned about the scope of remodeling projects and pushing their lines of credit.

"Everybody's needing stuff done," he said. "They're just more concerned about what they want to spend." Many are downsizing the scale of remodeling projects, he said, and are just redoing the bathrooms, for example. He also believes rising interest rates slowed business, though not enough to hurt.

Plus, with home prices flattening or even sinking in a slow housing market, there's more concern about whether the cost of a remodeling will be recovered when the house is sold later, he said. Maloy said that long term, remodeling typically is worth the expense, he said, but it's the short term that people are wondering about.

Time to "Dally"

From the Modesto Bee:

House prices are dropping, and buyers now have the luxury of picking and choosing from a wide array of homes. That's a welcome switch, for buyers at least, in the Northern San Joaquin Valley real estate market.

They can take their time comparing properties, shopping for desirable neighborhoods and bargaining for the best deals, real estate agents say. That wasn't easy to do from 2000 through 2005, when most homes sold quickly and often for more than their asking price. Buyers then simply didn't have time to dally: To get a house, they had to jump in.

Home shopping now can be more like a leisurely stroll, real estate agents agree. The median home sales price declined to $370,000 in Stanislaus County during August, and there are hundreds of homes for sale for about that price.

Think Happy Thoughts

From the Sacramento Bee:

Dreary home market has bright spots
Solid location and good pricing can still lead to quick sales

By the end of the fall sales season that began in October of last year, the conclusion was all but inescapable. The housing boom that had minted so much paper wealth and created so many mini-fortunes throughout the capital region was finished.

The downturn proved a stunning counterpoint to five years of unparalleled increases in home prices, when "for sale" signs would barely have time to go up before offers on the home would start coming in.

The dramatic decline that began in 2005 is now glaringly obvious in the numbers: 20,000 fewer homes sold in eight area counties in the past 12 months compared with the previous year. Median sales prices 12 percent lower in Placer County than a year ago, 8 percent lower in Yolo and 6 percent lower in Sacramento. Inventory at levels unseen since the early 1990s.

But a year into the downturn, there's an equally compelling counterpoint: Some homes are still selling in hours or days. Just as during the booming days, stories are being told in store checkout lines and at weekend gatherings of sales with a surprising "Wow" factor...

A round of recent interviews reveals it is possible, too, to sell houses or condominiums in just days under the right circumstances in Natomas, south Sacramento and Elk Grove.

More happy thoughts.