2006: "Year of the Hangover" 2007: ?

From the Sacramento Bee:

"In the boom-and-bust history of Sacramento's growth, from Sutter's Fort to today's metropolitan area of nearly 2 million people, 2006 was a year of the hangover. For the real estate dreamers, the fast-money speculators and everyday sellers of thousands of homes, the year abruptly crashed the housing party, ending the sure thing and the easy bet. The spring rebound, which many hoped would reignite the five-year boom in home prices, failed to materialize. Then home prices began to fall. A year just hours from ending saw an entirely new real estate cycle."
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"Who now has the crystal ball for 2007? Will it be a better year?"

Leigh Rutledge, 2006 president of the Sacramento Association of Realtors:

• "I don't see any price increases. I think we're going to have a similar year."

Scott Syphax, president and chief executive officer of Nehemiah Corp. of America, a Sacramento-based community developer:

• "Flat appreciation. And that's the best you can hope for."

• "The people that I run into who are the most unrealistic are the speculators and investors because they had a particular rate of return or amount of appreciation they were looking for, and it's sort of like the world's flat. It doesn't matter whether or not the world's round. Some of them are still not ready to accept that."

John Karevoll, analyst with La Jolla-based DataQuick Information Systems:

• "But for right now it does look like things are flattening out. We've basically come as far off the peak as we're going to be, with adjustments, you know."

• "You've got this enormous amount of inventory ... and it will go down -- it will go down by spring, significantly. A lot of these people will say, 'Well, I can't sell it for $500,000, so I'm going to sit on it.' They're going to just take them off the market. That's going to bring a bit more balance to the market."

• "There may be another percent or two of price decreases ahead of us. I think the sales counts will stay roughly where they are right now. That's kind of my 80 percent projection. If any of the dire, ominous stuff happens ... then things could get bloody. I don't think they will get bloody, but there is a chance they could."

Kathryn Boyce, analyst with Costa Mesa-based Hanley Wood Market Intelligence, a home-building market researcher:

• "I think with new-home sales, I think prices are still going to drop some and (new-home builders are) going to (cut back on) the incentives."

• "I think that the prices are going to drop more. I think the incentives, those $150,000 incentives, aren't going to be there any more. I think they're still always going to have incentives. It's just not going to be to the crazed amounts that they are right now. I think it will stay relatively the same way as it is now. We're going to stay good in '07 and probably come back up in '08."

Greg Paquin, president of the Gregory Group, a real estate consulting firm based in Folsom:

• "I would suggest on the new-home side that we haven't reached the bottom point yet, and I'm optimistic we will in 2007. ... I think next year is going to be very similar to this year. I don't necessarily think it's going to go down a whole lot more. I think new-home sales are going to be relatively the same as this year."

• "I think sales on the new-home side are going to be pretty consistent with this year. I think we'll see a little bit of a bump in '08 in terms of sales volume. In terms of pricing we may see a consistent level. Maybe a little lower next year, not significantly by any means. And then maybe net pricing is a little bit up."

From the SF Chronicle:

2008 and beyond: "It wouldn't surprise me if it took five years for sales volume to return to normal and to see some significant appreciation," he [Ed Leamer, Director, UCLA Anderson Forecast] said.

The interior areas of California, where much of the housing boom and bust has been due to new homes, will recover more quickly than the coast, he said. The sharp drop in prices in places such as Sacramento and Southern California's Inland Empire mean a faster correction is in store for those regions, he said. "The interior has a different cycle," Leamer said. "The coastal areas all had relatively small amounts of building and huge amounts of appreciation."

From the Auburn Journal:

Mark Wexler and Alice Brooks will be very busy. The palmist consultant and astrologer from Auburn suspect that this change in the stars and the coming new year will lead to many people seeking their services to find out what's in store for 2007. "Oh yeah. Everybody wants a reading for the new year," said Wexler.

The coming of a new year not only means we look back on what happened over the last 12 months, but we also tend to look ahead and speculate on what the new year will hold. Will the loveless find love? Will the burned out find satisfaction on the job? Will the housing market heat up or continue cooling off?

Many people ask these questions of Wexler and Brooks. "There's a curiosity," Brooks said. "Maybe people feel like they're on the wrong road and they need help."

Sacramento Real Estate Predictions for 2007

It's that time of year where everyone's favorite parlor game is forecasting the future year. Here's your chance to post your predictions as to where you think the Sacramento housing market is headed in 2007. What will the real estate market look like next year? Will sales and prices continue to drop as inventory builds?

For those who want to be a bit more specific with their price predictions, here are the most recent (Nov.) median price statistics:

• SacBee/DataQuick (existing): $345,000
  
• Dqnews/DataQuick (combined): $355,500
• CAR: $365,000
• SAR: $357,000
  

What will these measurements look like by November 2007? (For more information as to what these statistics measure, please take at look at the price peaks post.)

Home Price Analysis for Sacramento

TheBubbleBuster.com has updated their Sacramento home price analysis with Quarter 3 data.

2006

Sacramento Land(ing) readers: What were the most important/memorable housing stories of 2006?

What an incredible smell you've discovered!

From the Sacramento Bee:

Bob Shallit: Some horses, but of course
Sierra de Montserrat puts livestock amid luxury housing at Loomis project.

Curt Westwood's dream of bringing a bit of Napa Valley to rural Placer County is getting closer. Having recently settled a yearlong legal dispute with Loomis officials, he's begun construction on the first of 62 luxury homes that will be sprinkled amid 320 acres of terraced vineyards and oak trees.

The dispute was over livestock. Town leaders insisted on allowing horses at each of Westwood's home sites. Westwood said animals would be incompatible with his vision of an unfenced pastoral setting. The compromise: Livestock will be allowed on four of the home sites within the development, called Sierra de Montserrat.
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They'll be finished in about a year, ranging from 5,000 to 7,000 square feet and priced between $3 million and $4 million. Custom homes built by others could be "several million more," he says.

That's a lot of money for a home, especially now when, as Westwood says, the housing market "stinks."

But he's convinced it will rebound by the time his project is completed. "Downturns come," he says, "and downturns turn around."

Come on Down

The Stockton Record reports double-digit price declines for San Joaquin County:

The Price isn’t right

The median home price in San Joaquin County has dropped 13 percent since January, as free-market gravity took hold of the Valley's once-booming real estate industry.

But that still is not enough to make owning a home affordable to thousands of San Joaquin County residents. They still cannot buy a home in an area where the median home price had more than doubled from 2000 to 2004. Such prices mean the average family in the county still cannot afford 95 out of every 100 homes on the market, according to a study released last month.

In 2000, the median - or the midway point between the lowest and highest - price for a home in San Joaquin County was $133,000. By 2004, it had more than doubled to $280,000. At its peak in January, it was $385,000, according to Coldwell Banker Grupe/Trendgraphix.
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Now that home prices are sinking each month, working-class families and housing activists are talking about taking back the local real estate market. And some are predicting the floor for prices is a very long way down.

"It's looking more promising than it has in five years," said Fred Sheil, who, along with Stockton resident Larry Johnson, builds and rehabilitates homes for local low-income families. "It's going to come down to where working families can afford to buy a house again."

His optimism might be strong, but it is shared by few: The county's median home price would have to drop another 25 percent to reach the $250,000 level that would be affordable to families earning less than $50,000 a year.
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But Sheil believes 2006 is just a prelude to an even greater decline that will bring real estate back on par with the county's wages. If and when that happens, Sheil said, fewer people will have to look for help to find a home. "They've run out of people that can afford to buy a $500,000 home," Sheil said. "Who else are they going to sell to?"

TrendGraphix graphs for San Joaquin County are available here (link also on right under "Central Valley").

Housing Bubble Bloggers Make the Wall Street Journal

From the Wall Street Journal:

For years, Americans who refused to buy real estate at what they considered excessive prices were ribbed for failing to profit from one of the greatest booms in history. "Are You Missing the Real Estate Boom?" needled the title of a 2005 book by David Lereah, chief economist of the National Association of Realtors.
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Now, with the housing market in a slump, renters who sat out the boom are finally getting some satisfaction.

Continue reading here.

Hat Tip: New Jersey RE Report

Pulte New House: 88% Off

This story has it all: incentives, a change in psychology, a cancellation, the flight of buyers, and finally a fire sale auction. Think of this as Sacramento's 2006 housing market in miniature. Bob Shallit has the scoop:

Discount digs: The declining real estate market has produced some bargains. But none like this: a Pulte-built home with furnishings and toys from outdoor gear retailer Cabela's, plus lots of extras.

For $5,000.

OK, this isn't exactly a full-sized residence. It measures just 8 feet by 8 feet. The furnishings are all pint-sized.

It's a playhouse, left over from the biannual "Dream, Play, House" fundraiser held in September by the Placer County Child Abuse Prevention Council.

Six local builders created incredible tiny homes for the event. Pulte's "Mother Lode Prospector's Cabin" -- with a sluicelike slide, a hidden cave, rope swing and a miner's cart full of fake gold -- was the auction's top attraction.

It earned an award for craftsmanship and received an auction-high bid of $16,000. But the buyer had a change of heart and stopped payment on his check.

"The home was left without a home," says CAPC's Donna Wood.

Nobody has stepped up since to buy the log cabin house. So CAPC has listed it on eBay (Item No. 200059385693). Minimum bid: $5,000 (including delivery). Deadline for bids: Christmas Eve.

The home actually is valued at nearly $40,000, including the furnishings. Good deal. Great cause.

Looks like something you might find on Burbed.

Have a Merry Christmas everyone!

Another First

From the OC Register:

Home gains are now gone in more than half of California's towns. Fresh stats from California Realtors show that 52.8 percent of 356 bigger cities in the state went without year-over-year gains for November in their median price for resales of single-family homes. It's the first time winners were in the minority since Realtors began tracking this number in 1993. A year ago, only 3.9 percent of California cities were without house appreciation.

From the Stockton Record:

The November median sales price for existing homes in the Central Valley has fallen nearly 4 percent from November 2005, as a soft housing market with a soaring number of houses for sale forced some sellers to pare prices.
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The monthly report doesn't gauge the market in San Joaquin County. In the Central Valley, though, the median sales price slipped from $345,160 in October to $340,370 last month, a 1.4 percent decline. That compares with a median sales price of $354,200 in November 2005. Sales over the 12 months were down nearly 30 percent in the Valley, the report said.
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Leslie Appleton-Young, the Realtor association's chief economist, said there is a mixed market picture across the state, with more regions reporting year-to-year declines than increases. "We've seen three or more months of year-to-year price declines in areas where there was a lot of home-building activity and in those areas that are popular for second-home purchases," she said.

San Joaquin Foreclosures Triple

From the Tracy Press:

Mortgage foreclosures have tripled in San Joaquin County during the past year, making this one of the leading areas in the nation where people default on home loans. A national consumer group blames the increase in "sub-prime" loans approved as home prices skyrocketed the past few years. These types of loans - adjustable rate mortgages, interest-only loans and minimum-payment loans - often go to people who seek home ownership despite bad credit or lack of steady income.
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The [C]enter [for Responsible Lending] ranks San Joaquin County as seventh among 378 metropolitan areas in the U.S. for the percentage of homeowners who will default on these loans. It predicts that 23.4 percent of these loans in the county will end in foreclosure. Six other areas in the state are in the top 10, with Merced and Bakersfield topping the list.
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The number of actual foreclosures in San Joaquin County this year increased sharply in January and again in October. RealtyTrac, an Irvine-based company that tracks foreclosures in California, shows that foreclosures in San Joaquin County have tripled from last year. The company reported 1,228 foreclosures in the second quarter of 2006, compared with 374 for the third quarter in 2005. The foreclosure rate decreased in the third quarter, but will be higher for the fourth quarter. In November alone, 594 loans were in default compared with 139 for the same month last year.

More Pain Ahead for Sacramento Real Estate

From the Sacramento Bee:

"I would just emphasize that all real estate is local and there will be markets in this country that will continue to experience some pain in 2007," said David Lereah, chief economist of the National Association of Realtors. "It may be a 2 percent drop, a 5 percent drop. Maybe it even gets to be an 8 percent drop in that area."

Lereah said about 25 percent of the country falls into that category.

Local experts say that includes the Sacramento region, where year-over-year prices have fallen up to 14 percent in Placer County alone and 2006 sales of all homes and condos are running 14,000 behind the same time last year.

Sacramento-area sales prices are expected to keep falling, up to another 10 percent during 2007 before stabilizing, according to predictions last month by Mike Lyon, head of Sacramento-based Lyon Real Estate...In the Sacramento area, Lyon has predicted a 7 percent increase in existing home sales in 2007, an indicator of bottoming out in a region that was among the first U.S. markets to unravel after the housing boom.
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Folsom-based home-builder consultant Greg Paquin has predicted sales of 9,500 to 10,000 new homes in 2007, lowest since the 1990s and well below 17,155 sales in 2004. Paquin also recently told the Roseville-based North State Building Industry Association he doesn't expect significant price hikes for new Sacramento-area homes until 2009 or 2010.
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A year ago, Lereah and Seiders were among housing economists nationally and in California who provided outlooks for a market that in hindsight proved to be overly sunny.

Sacramento, Stockton to Remain in the Housing Freezer

From the Sacramento Business Journal:

The Sacramento area housing market will remain one of the coldest in the country next year according to a ranking of the top 100 real estate markets released Thursday. But Stockton will fare even worse.

The Fortune rankings were done by Moody's Economy.com and Fiserv Lending Solutions, a consultant to the banking industry. Sacramento ranked 85th, with the median sales price expected to decline by 3.4 percent.
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Coming in at 100th -- dead last -- on the list is Stockton, where home prices are expected to fall 7.1 percent next year.

Fortune: Forecasts for 100 real estate markets

West Sacramento Prices "Tumbled" 26% in a Year

The Sacramento Business Journal reports on November's CAR & DataQuick stats:

Report: West Sac home prices fall 26 percent in a year

Sacramento-area's median home price plummeted and sales tumbled in November from a year earlier, the latest evidence of a struggling real estate market. Home prices in the four-county region declined 3.9 percent to $365,000 in November compared to a year ago, according to a California Association of Realtors (CAR) report released Thursday. But several markets -- including Elk Grove and West Sacramento -- reported much larger price drops [Keep in mind the city data is from DataQuick and measures combined (all) sales of existing and new homes.]

Existing-home sales fell 24.5 percent last month in the Sacramento area compared to November 2005, according to the closely watched monthly report. The region's sales drop was one of the largest in the state.
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West Sacramento's median-home price -- meaning half the homes sold for more, half for less -- tumbled 26.2 percent last month to $363,500, easily the largest decline in the region.

Elk Grove, Lincoln and Placerville also endured double-digit percentage declines in median price from a year ago. Placerville fell 14.6 percent to $365,000; Lincoln dropped 13.8 percent to $420,909; and Elk Grove declined 12.9 percent to $428.000. The Realtor group cautioned that communities with small numbers of transactions may see unusually large fluctuations in median prices.

And all four counties reported lower home prices, led by a 16 percent decline in Yolo County. El Dorado County had the smallest drop, down 4.3 percent. Placer and Sacramento counties' median home prices fell 12.6 percent and 8.8 percent, respectively.

CAR report here.
DQNews/DataQuick report here (and archived here).

"Population Boom Going Bust?"

From the Stockton Record:

Population boom going bust?
S.J. Mother Lode growth rate slowdown mirrors downward trend in area housing market

San Joaquin County's population is growing at a slower pace than it has for nearly a decade. New estimates released Wednesday by the state Department of Finance showed that from July 1, 2005, to July 1, 2006, the county population grew 1.86 percent, the lowest rate of growth since the year ending July 1, 1998, when its residential base increased 1.35 percent.

Since then, population growth has topped 2 percent, with the largest increase during the same period in 2000-01, when the county grew 3.93 percent. By comparison, last year's growth was 2.53 percent.

Declining population growth is likely reflected in housing starts. Mike Niblock, Stockton's community development director, said Wednesday that there has been a definite downturn in the number of building permits for new residential construction. "I'm sure there are a lot of different factors that impact those numbers, but usually there is a fairly strong tie between housing and population," he said.

Top Business Story of the Year: "House Party Ended With a Thud"

From the Associated Press (via Yahoo):

The nation's house party ended with a thud in 2006, leaving everyone from condo flippers to Federal Reserve chairman Ben Bernanke waiting to see what would happen next.

The sudden stall in home sales, home construction and home prices -- and what that will mean for the economy -- was voted the top business story of the year by U.S. newspaper and broadcast editors surveyed by The Associated Press.

At the housing market's peak, buyers rushed to open houses, blank checks in hand. Lenders gave big-money mortgages to people who could barely afford their monthly payments. That ended in 2006, when home builders scuttled projects, walked away from land they'd hoped to develop and would-be buyers canceled orders.
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HOUSING SLIPS: Moody's Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression. One reason: Speculators fled the market. Not only did they stop buying, they put properties they owned up for sale.

Hat tip: TMTGM

(Sub)Primed for Foreclosure

From the SF Chronicle:

As many as 2.2 million Americans with subpar credit could lose their homes through foreclosure over the next several years, a new report said. California will see some of the sharpest increases in foreclosure rates among what are known as subprime borrowers because the deflation of the housing market here is making it increasingly difficult for distressed homeowners to sell or refinance....

The number of subprime loans has jumped over the past five years in California as the housing boom drew people into the market who were counting on rapid price appreciation to pay down debt.

From the Sacramento Bee:

As an unprecedented housing boom ebbed this year, consumers with blemished credit histories increasingly fell behind on costly mortgages -- faltering under the weight of monthly payments that adjust upward and prepayment penalties that block an escape.

Now, a North Carolina-based lending policy group contends that 21 percent of so-called "subprime" loans taken out in 2006 by Sacramento-area borrowers are likely to end in foreclosure and aggravate an already flat housing market. The nonprofit Center for Responsible Lending, in a report released Tuesday, estimated that, by comparison, just 4.8 percent of the people who took subprime loans before the housing boom, between 1998 and 2001, experienced foreclosure.
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However, DataQuick Information Systems analyst John Karevoll and other real estate experts say rising subprime foreclosures are likely to affect housing values in a limited number of neighborhoods, rather than in the region as a whole.
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The Center for Responsible Lending said it couldn't immediately determine the actual number of subprime loans taken during the first nine months of 2006 in the Sacramento region. But 2005 brought 26,800 subprime home loans to the region, according to another nonprofit subprime lending analyst, the San Francisco-based Community Reinvestment Coalition.
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A fall in California housing prices has also aggravated such loans, preventing people from selling the house to get out of trouble. "If the loans are less than a year to 18 months old, there's limited equity for them to refinance," said Pam Canada, executive director of Sacramento-based Neighborworks Homeownership Center, which advises people on how to buy homes and keep them. "That's what they've always done to prevent foreclosure."

One more. From the Central Valley Business Times:

Holders of so-called "subprime" mortgages are in danger of losing their homes, especially in the Central Valley, according to a report from the Center for Responsible Lending. As much as $164 billion in mortgages is at risk due to foreclosures in the subprime mortgage market, it says.

With 25 percent of the mortgages issued this year being subprime, Merced County ranks as the nation’s most risky area for foreclosures, according to the report. Other Central Valley areas are not much better, it says. Bakersfield ranks second in the nation; Fresno is fifth; Stockton is seventh and Visalia-Porterville is 13th. In contrast, Yuba City ranks 152; Sacramento 28; Modesto 205; Madera 29; and Hanford-Lemoore, 152.

"We project that one out of five (19 percent) subprime mortgages originated during the past two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the 'Oil Patch' disaster of the 1980s," the report says.

You can find the report here [pdf].

Incoming SacRealtor President: Current 'Market Change...A Piece of Cake'

The Sacramento Business Journal interviews Tracey Saizan, the incoming president of the Sacramento Association of Realtors:

We survived the market change of the early '90s, a real depression, so this current one is a piece of cake. I don't think this one is going to last very long because interest rates are very competitive, and as long as buyers are aware that the rates are good, they're going to be out buying.
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Are agents bailing out of the real estate business?

We're starting to see the number of members (of the Realtors' association) change slightly, but we probably won't see a significant change for several more months. Many of the newer members who got into real estate when the getting-in was good and had a real easy time of it were surprised by this market correction. Those who didn't plan for it financially can only max out their credit cards for so long before they realize they're going to have to get another job.

From the Lincoln News Messenger:

While buzz about the real estate "bubble" continues to suggest a metaphorical "pop," a document compiled by Placer County Association of Realtors provided by [Realtor Denise] Graziani shows an average annual median price increase of 11.5 percent over the past 10 years in Placer County.

Curious they didn't look at 1990-1996 prices.

That median price peaked in August 2005 when it reached $517,500. Since that time, median home prices have dropped 15 percent to $438,000 in October 2006, the last available numbers.

"I think a lot of people now seem to be waiting the bottom of the market," [mortgage consultant Al] Savery said while transitioning to talk about the present real estate market.

The shift in home values, he said, is greatly impacted by the economic law of supply and demand. Builders and investors saturated the market with new homes. With the housing supply and the media's heavy coverage of the housing "bubble"; housing demand has dropped 40 percent since its peak in August 2005.

Savery added that another reason the median has declined is builders have offered significant reductions for a price at or below a resale home. "A builder's profit is most affected by how fast they sell their homes," Savery explained. "For projects financed by banks, the builder typically ends up owning the final 10 percent to 15 percent of the lots outright. All they have remaining is the construction loan and this is often less than the total cost of the home and lot. "That's why they can give $100,000 off incentives, their accounting costs will allow the deep discount."

Savery and Graziani agreed that these incentives have further pushed home prices down in the past few months. "Where it hurts is the person who's trying to sell their house who bought at the peak," Graziani said. "Now, they have to adjust their prices just to compete."

The result is that homes are typically staying on the market longer, for homes priced about $750,000 there is a 24- month inventory. For homes in a moderate $300,000 to $400,000 price range, there is a six- to seven-month inventory.

Change? Adjust? Shift? First Realtor capable of uttering the "D" words (decline, decrease, drop) gets a prize!

Business Week: 15+ Years Till Recovery

"Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don't put much faith in those oft-heard assertions that the worst is already over. Prices are likely to fall further in many markets in 2007. In some others, prices may rise, but at less than the rate of inflation. A BusinessWeek analysis of the past three decades shows that if history repeats itself, it's likely to take 15 years or more for many parts of the country to get back to their inflation-adjusted peaks."
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"The biggest losers will fall into one of these groups: cities like Detroit that are suffering economic contractions; cities like Los Angeles, San Diego, and others in California where prices are extraordinarily high and have barely begun to adjust; and cities like Miami, Las Vegas, and Phoenix that have a huge overhang of unsold houses or condos."
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"[R]ight now is not the ideal time to buy or move up, even with the recent price declines. The inventory of existing homes shot up 34% from October, 2005, to October, 2006, and now stands at nine months' worth of condos and seven months' worth of single-family houses at the current rate of sales. That backlog will take a long time, and a lot of price-cutting, to clear out."

-21.8%

This article deserved its own post. From the Woodland Daily Democrat:

Yolo County, meanwhile, saw a drop of 17.6 percent in the sale of homes overall, from 306 in November 2005 to 252 last month. The median price was also down some 13.5 percent, from $480,000 in November 2005 to $415,000 last month.

The greatest decline countywide came in the sale of existing home, where a 25.5 percent decline was reported. The median price of existing homes, however, dropped only slightly by 4 percent, from $436,500 to $419,000.

New home sales, however, dipped slightly, although their prices plunged. Countywide, the sale of new homes dropped 7.1 percent from 141 to 131 over the past year. The price of new homes fell from $532,750 to $416,500, or 21.8 percent between November and November.

Another watershed moment for the local housing market? That's the first 20%+ year-over-year price depreciation figure I've seen at the county level. Does this begin the era of 20% declines? Stay tuned...

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

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

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

Builders are desperately unloading their inventory, offering perks such as higher-quality appliances, mortgage discounts and swimming pools. By doing so, they've created a situation where it's cheaper to buy a new house than an old one.
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The falling prices follow a dramatic run-up in the market in which the median price of a new home peaked at $476,500 in December 2005, climbing from just $221,000 in five years.

So the median price for new homes is down 17.1% from its peak.

"When Sacramento got hot, the median price in Sacramento was about a third of what it was in the Bay Area," said Stephen Levy, director of the Center for the Continuing Study of the California Economy. "Now, it's closer to 70 percent." Levy said he believes it may take three to five years for the Sacramento housing market to recover. In the long term, he says, the market will recover after excess inventory is eliminated and a balance of supply and demand returns.

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

30% off? $150,000 price cuts? But wait! Back in June, Centex said these types of deals were going the way of the dodo bird:

[Jack] Pautsch [Sacramento division manager for Centex] said the deals reflect an oversupplied market and are likely to recede within weeks as builders slow construction.

Well, since 12 hours actually means 28 days, I mean 9 months in Centexese, I'll give him a pass this time around.

Housing Bust Catches Lincoln Schools "By Surprise"

From the Sacramento Bee:

The downturn in the housing market around Lincoln hit the Western Placer Unified School District by surprise -- and a much-anticipated new high school has been put on hold as a result. So explained Superintendent Scott Leaman at a district forum Monday night. Nearly 300 parents and residents attended, hoping to learn what went wrong with plans to open Twelve Bridges High School. Because of the housing slowdown, Leaman said the district can't yet say when the new high school will open.
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Leaman said the district's facility financing plan specified using certificates of participation, or COP, bonds, to build schools in a timely manner, rather than waiting for an accumulation of regular funds. The strategy was based on "dramatic growth in Lincoln" for the next several years, he said.
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"Facility costs have escalated above the plan's estimated costs," Leaman said. "And the builder slowdown affects our ability to pay for additional (certificates of participation)."

Thanks to the reader who sent in this article. The reader had this to say in an e-mail:

With a sixth grade student that would have attended the new Twelve Bridges High School the first year of completion, I can tell you that I am extremely disappointed. So much, in fact, that after ten years as a resident in Lincoln, I will likely be moving to another location in the eastern valley. I am not alone. I have many friends that are coming to the same conclusion, and are trying to figure out how they can sell their homes in a down market, and as soon as possible, to establish roots in another community.
...
Bottom line is... Lincoln is falling apart under the weight of their own success. It wasn't but a couple years back that Lincoln was the fastest growing city in the state! In 2006, they earned an "All American City Award". But all that means nothing when people realize the school system may be worse than the inner-city school systems they moved away from.

'At the Moment, Nothing Will Pencil' "Despite a Mountain of Recent Hype"

From the Sacramento Bee:

...Sacramento's central city housing effort -- despite a mountain of recent hype -- took so long to germinate that downtown largely sat out one of the hottest housing markets in memory. With the real estate industry in a slump, it's unclear whether some of the ambitious projects conceived at the tail end of the housing boom will materialize. "In Sacramento, we didn't capitalize on a great market cycle," said Sotiris Kolokotronis....

The local urban market was just starting to take off when the nationwide housing downturn began. Now, developers say, sales prices have stagnated while the cost of steel, concrete and other materials continues to rise -- making it more difficult to finance already tight deals.

"Market conditions have deteriorated rapidly," said developer Mark Friedman, whose Loftworks group developed successful loft housing, office and retail projects at 16th and J streets. But the firm recently walked away from a 16th Street project it was working on with the Capitol Area Development Authority. "At the moment, nothing will pencil."
...
Friedman said he also has put on hold his plan to build about 2,000 housing units just across the river from downtown on the West Sacramento waterfront.
...
Unlike Saca and Nassi, some other developers who started planning downtown projects while the market was hot have backed out or said they're waiting to see where prices go before breaking ground.

Citing the nationwide market downturn, D.R. Horton, one of the nation's largest home builders, recently pulled out of two high-rise condo projects planned for downtown Sacramento....

Meanwhile, the Sacramento suburbs still offer so much more square footage for the money that people who might otherwise choose to live downtown don't. "We've basically got unlimited land for suburban development, which detracts from the downtown," said John Frisch, local head of real estate brokerage Cornish & Carey Commercial.

Double-Digit Price Declines for Placer & Yolo; Sacramento Down 8%

The Sacramento Bee reports on DataQuick's November numbers:

As the year ends, much of the region -- Placer, Sacramento, Sutter, Yolo and Yuba counties -- again posted California's steepest year-to-year declines in median sales prices for all homes and condos, a phenomenon that began in June. Yolo County's November declines led the state: 13.5 percent lower than a year earlier. Prices were down 11.2 percent in Placer County from last year; in Sacramento County, 8 percent.
...
Placer County's $442,500 median sales price for an existing detached home remains 12.2 percent lower than its peak of $504,000 in Aug. 2005.
...
Since June, when San Diego, Sacramento and Placer counties led California into negative year-over-year territory, more than half of the state's urban counties have followed. It means thousands who bought homes a year ago have made no gains in equity.
...
"There's no sign that the prices are in a nosedive here, nor is there a sign that it's going to turn around anytime soon," DataQuick analyst Andrew LePage said Thursday. "We still think it's likely (that prices) will wobble around here until the spring, and then we'll find out if there's been enough correction to trigger an upswing in demand."
...
But as the year ends, there are some encouraging signs for the market, analysts said, especially for sellers concerned about a glut in inventory. Sacramento-based TrendGraphix reported this week that the number of homes on the market in El Dorado, Placer, Sacramento and Yolo counties fell for a fourth straight month to 12,652. That's 1,245 fewer than October and well below the record 15,474 homes on the market last July.

It should be noted that last November, there were 9,468 homes on the market, according to TrendGraphix. So on a year-over-year basis inventory is up 34%. It seems likely that we'll start 2007 with more inventory than what we had at the beginning of 2006.

Slowest November in 9 Years

From the Sacramento Bee:

More than 3,000 Sacramento-area buyers received keys to their new homes last month, but analysts still called it the slowest November for Sacramento and Placer counties in nine years, as the region's sluggish 2006 real estate season nears its end.

November sales figures reported Thursday by La Jolla-based DataQuick Information Systems raised the 2006 total of new and existing homes and condominiums closing escrow to 38,208 in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's 16,129 fewer sales from January through November than last year, a factor that has purged area payrolls this year of countless real estate agents, loan specialists and residential construction workers.

November's median sales prices also continued a long slump that has frustrated sellers through much of 2006. Sacramento County, the largest slice of the region's real estate market, saw the median price of an existing, single-family detached home decline to $345,000 - the lowest since March 2005, according to DataQuick.

Sellers 'Missed the Boat,' San Joaquin Median Price Plunges 9.2% Since July

From the Stockton Record:

Much of the housing-market slowdown has been attributed to a spiraling of the number of homes for sale, pressuring sellers to lower prices to compete. For example, in February of last year, 777 houses were listed for sale throughout the county. That rose steadily, typically by several hundred new listings per month, to a high of 4,738 in August. Since then, the number of homes for sale countywide has fallen by about 500.

Many homeowners put their houses on the market thinking of the earlier big run-up in sales prices, she said. "They missed the boat, so they wanted to catch the last of the rise," [Natalie] Shishido, [owner of the Preferred Real Estate Group office in Tracy] said.

Also, the median sales price in the county fell from $400,000 in October to $386,000 last month, the TrendGraphix report said. That's down from a high of $425,000 in July.

From Fortune:

The area poised for the biggest fall in 2007? Stockton, Calif., where prices are expected to drop by 7.1 percent and another 5.3 percent in 2008. If you were lucky enough to have bought a couple of years ago, the 23 percent price growth in 2004 and 30 percent in 2005 should cushion any blow. But buyer, beware. If the forecast holds true, a home purchased in Stockton today for $350,000 will be worth a mere $307,917 two years from now. And that doesn't account for the additional toll inflation can take on the true value of your asset.

From the Tracy Press:

Home prices are on the decline in Tracy, which mirrors the overall decline in home prices and sales across the state. As of the end of November, the Central Valley Association of Realtors reported that the median sales price of existing homes in Tracy, Mountain House and Banta has been at $539,000 for the past six months, compared with $575,000 for the same period a year ago.
...
Meanwhile, the Central Valley between Sacramento and Bakersfield, where cities keep growing, has seen prices decline from $363,000 in June to $345,200 in October. "When you have a lot of new home building in recent years, then you have new homes in a market competing with existing homes," he [Robert Kleinhenz, deputy chief economist for the California Association of Realtors] said. "Both markets will see downward pressure on prices.

"Our forecast for next year -- and it’s a fairly conservative forecast -- is we're not through with declining sales." Kleinhenz said he expects the number of homes sold in 2006 will drop about 23 percent from 2005. That decrease in sales will be about 7 percent in 2007.
...
The Central Valley Association of Realtors’ statistics for each city show the median sales price for an existing home in Tracy peaked at about $540,000 in October 2005....The median price for a house back in October was $515,000.
...
Home sales in Tracy have declined over the past year. The association reported 1,211 houses sold in the first 10 months of 2006, compared with 1,845 houses sold in the first 10 months of 2005.

'I've Never Seen Anything Like It'

From Fortune:

North of Sacramento, Pulte Homes recently agreed to part with a 2,700-square-foot four-bedroom home for almost 18 percent off the $497,000 list price, plus an additional $8,500 in credits. "I've never seen anything like it," says Lance Pagel, the realtor on the deal. "I recently point-blank asked one developer's agent what incentives she was offering, and she point-blank answered $80,000."

Plans for 30-Story Housing Towers 'Subject to Market Conditions'

From the Sacramento Bee:

While Sacramento has big redevelopment plans for K Street, the pedestrian mall's bombed-out appearance worsened in the past week with the demolition of two buildings damaged by a recent fire in the 800 block.
...
They are both part of a collection of properties on the 700 and 800 blocks being swapped by the city and two development teams in order to ease the way for two redevelopment projects.
...
The former sports store was owned by major downtown property owner Moe Mohanna, who has joined forces with developer John Saca on a plan to build stores topped by 30-story housing towers in the 800 block.
...
But with the housing market in a slump, city officials say it could take some time before the development planned by Saca, Mohanna and partner John Lambeth materializes. Large, urban housing projects in Sacramento have typically taken years to finance and build, even in a good market.

Lambeth said the timing of the new development will be dictated by the market. "We'll have (city approvals) in the February time frame and we'll have to evaluate the market at that time," he said. "We'd like to move forward as quickly as possible, but it is subject to market conditions."

U-Turn

From the Associated Press:

Instead of using their year-end gains to invest in real estate, most online investors want to put their money back into their portfolios, a recent survey from Scottrade shows.

Sixty-three percent of investors plan to put their gains back into an online brokerage account, while only 14 percent plan to buy a house. This marks a departure from recent years when investors had shifted their money to the booming real estate market, according to Scottrade.

'This is Very New and Very Different'

From the Mercury News:

Wayne Brown gave up $40,000 in income to move from the Bay Area to Kansas. And he feels great. It got to be too much last year for the college information-technology officer: the commute to downtown San Francisco that sometimes took two hours, the housing-price spiral and the high-wire borrowing that paid for it. "I would find myself sitting in traffic," Brown recalled, "screaming at people."

When the Kansas job came up in early 2005, Brown and his wife, Teresa, sold two Bay Area homes and happily settled in a suburb of Kansas City. They have never looked back. The Browns are an example of what demographers say appears to be an unprecedented phenomenon -- even in a good economy, more people are leaving California for other states than are arriving from the rest of the country.

Between 2004 and 2005, the migration flow into California from the other 49 states started flowing the other way. Data from the state Department of Finance shows that, for the first time this decade, more people left California in 2005 for another state than the number who moved in. Mary Heim, a finance department demographer, says this particular kind of outflow will continue for the foreseeable future.
...
"Some of the people leaving are families with children because school enrollment is declining at a quicker pace than we'd projected,'' she said.
...
For 150 years, California has been seen as the Golden State of opportunity and freedom for millions of migrating Americans. Other than recessions in the 1970s and 1990s, and possibly wars, "I don't know if California would ever have been in a position where it was losing people to other states," said Hans Johnson, a demographer with the Public Policy Institute of California. "This is very new and very different."
...
A flow of migrants to other states is not a worry in and of itself -- if foreign immigration provides a pool of highly educated workers to replace them. A bigger worry is that the state's exorbitant housing prices relative to the rest of the country could act as a brake to economic growth if employers can't find workers. "It's harder to keep people here; it's harder to attract people from abroad; it's harder to attract people domestically,'' said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "It's a huge potential barrier."

Nearly half of California's homeowners spend more than 30 percent of their income on housing -- significantly higher than in any other state, 2005 census data shows. "Families just can't make it in the housing market," said Dowell Myers, a professor of urban planning and demography at the University of Southern California. "Low-income families are being priced out of rentals, and middle-income families are being priced out of homeownership, and we don't know where they are going."

'I Think We Hit a Price Wall'

From the Sacramento Business Journal:

Region's new-home construction takes biggest dive in state

New single-family home construction in the Sacramento area has plummeted 44 percent in the past year, the steepest new-housing downturn among the five major California regions. About 6,100 fewer single-family home construction permits were issued for Sacramento, El Dorado, Placer and Yolo counties through October compared to the first 10 months in 2005, according to the Construction Industry Research Board. The 44 percent drop is significantly larger than downturns in Southern California, the San Francisco Bay area, the San Joaquin Valley or the central coast.
...
John Schleimer, president of Market Perspectives of Roseville, said higher income levels in larger cities may have softened the impact there -- and hurt Sacramento. "I think we hit a price wall," he said of the four-county market. "Investors, who had been 17 to 20 percent of our homebuyers during our three-year frenzy, pulled out of the market. Another 20 percent of our population was priced out of a home."
...
And other areas have yet to feel the full brunt of a housing downturn, said consultant Greg Paquin, president of Folsom-based The Gregory Group. "We got hit first and hard," Paquin said. "The Central Valley will catch up. They started seeing the effects in the past six months."
...
Just how quickly will new housing rebound? Schleimer said the current slide will last another year to 18 months, the general consensus among analysts and homebuilders alike. They have been pointing to the region's economy, which has a low unemployment rate -- 3.9 percent in October -- and projected job growth.

When Life Gives You Lemons, Plant Almond Trees

More fallout from Merced's bursting housing bubble. From the Merced Sun-Star:

• "Greg Hostetler, president of Ranchwood Homes, the county's largest developer, said his company prepared for the slowdown by transforming itself into a major almond grower. While Ranchwood's building business is down about 30 percent this year, Hostetler said, the company is set to plant 1,750 acres of almonds in the next two weeks."

("Almond trees require at least three years to produce, with maximum nut production in six- to ten-years.") Wow! A new way to predict the duration of the housing bust?!

• "In 2005, Rodriques' employer, Centex Homes, offered her a promotion she couldn't pass up -- a chance to earn $60,000 as a construction superintendent at a subdivision Centex was building on Yosemite Avenue. A year later her job disappeared, the casualty of a "massive work force reduction" at Centex, the letter from corporate headquarters told her."

• "Chuck Falkenstein, general manager of Central Valley Concrete, said new houses made up about 80 percent of his business last year. Today that part of his business has shrunk to less than 10 percent, he said. Falkenstein said his employees are working fewer hours than they did last year, and that his business has shifted to non-housing jobs."

• "Anthony Fragassi, manager of 84 Lumber building supply on Highway 59, described business as 'nonexistent' compared with last year. Fragassi said his employees made 20 to 30 deliveries a day in 2005. Now it's down to half or less, he said."

• "This is my fourth cycle like this so I knew it was coming, but I didn't know it was going to be this bad," [Bob] Rucker [owner of Rucker Construction] said.

And this could be the quote of the week:

"Summerton [Home's] Don Gray said builders are fighting a battle against the public perception that now is a bad time to buy. 'We think that's a misconception,' Gray said. 'Prices are down about as low as they can go, interest rates are very strong. We think houses should be flying off inventory.'

So 11 positive quarters and one quarter of "slightly" lower prices and he thinks prices are as low as they can go? Perhaps Mr. Gray should consult his association's own data for Merced:

Only 4.3 percent of houses sold during the last quarter were affordable to a family earning the community's median income of $46,400 [according to the National Association of Home Builders].

Flea Market Deal Gone Bad

From the Modesto Bee:

A Salida couple is suing a group that offers real estate deals at a Ceres flea market, claiming that the company didn't deliver on promises to sell their home and get them a better one.
...
Marbella Salas said the trouble started when they met V.J. Singh, who said he was a representative for Prime Financial Group, in July 2004. Singh was set up at a card table at a weekend flea market near Whitmore Avenue in Ceres.

She said Singh's assistant approached them about refinancing their Salida home, which they'd bought in 1998. The couple's mortgage payment was $2,200 a month; they bring home about $6,600 per month from Marbella's position as an insurance specialist with AAA and Manuel's job as a department manager at WinCo Foods.

Singh followed up with phone calls saying he could help them sell or rent their home and buy a bigger one elsewhere, and only increase their mortgage payment by $200 a month, the couple said. After they agreed to buy another house in Salida in December 2005 for about $500,000, they learned that the new mortgage would be $4,200 a month.

They'd retained Singh to sell their old home, according to the lawsuit, and Salas said she thought the contract made their purchase of the second home contingent on selling the first one.

The lawsuit says Singh assured them that they could sell their first home for more than $400,000 in a short amount of time. Marbella Salas said Singh never delivered on promises to refinance the new loan for a lower payment, or to sell the first home, citing a cooled real estate market.

Paperwork submitted for the loan raised other questions. Salas said the loan documents indicated that she and her husband made $16,000 a month — without proof such as a pay stub or W-2 tax form.

Hat tip: M&M Going Quickly

Worse than it Appears

From the New York Times:

The truth is that the official numbers on house prices — the last refuge of soothing information about the real estate market on the coasts — are deeply misleading. Depending on which set you look at, you’ll see that prices have either continued to rise, albeit modestly, or have fallen slightly over the last year. But the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold. The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.

In reality, homes across much of Florida, California and the Northeast are worth a lot less than they were a year ago...In the Boston area, prices have fallen about 10 to 15 percent since the middle of 2005, estimated Chobee Hoy, who owns a real estate brokerage firm in Brookline...The market in northern Virginia is similar: prices are down 10 to 15 percent, according to an analysis by Mr. Lawler, a former Fannie Mae executive who’s based there...Prices also appear to be down in Sacramento and San Diego.

The broadest government measure of house prices is calculated by the Office of Federal Housing Enterprise Oversight, the agency that oversees Fannie Mae and Freddie Mac...But it has three big weaknesses that end up making it much less useful than it could be...Right now, all these flaws seem to be making house values look much stronger than they really are.
...
For homeowners, the lesson is not to take any of these statistics too personally. The long housing boom has caused a lot of Americans to think of housing much as they think of stocks — as an investment whose value can be tracked almost in real time. But there is no equivalent of the Standard & Poor 500 Index for real estate. Just because the government's measure shows a 10 percent increase in your area's home prices doesn't mean that your house is 10 percent more valuable than it was a year ago. It might, in truth, be less valuable than it was a year ago.

Down the Drain

From the Manteca Bulletin:

In January of 2006 Villa Ticino West received 151 sewer allocations from the city, which if left unused would be forfeited after two years. Sewer allocations give newly built houses guaranteed access to the city’s waste water treatment plant. Included with the Villa Ticino West agreement were plans for the developer to build a new fire station to cover the northwestern area of the city.
...
Jim Rachels, who spoke for the property owners of Villa Ticino West, said the developers' original plans to construct a fire station still remain, but an additional two years will be required to use all of the awarded sewer allocations.
...
Rachels said delays on the part of the city have slowed down construction of new housing...Rachels said the lack of interest in the housing market has also played a prominent role in delaying the project. "Aside from the delay, the housing market has slowed down," Rachel said. "The realities are foreclosures are going to be at an all time high."

Councilman Jack Snyder said changing the Villa Ticino West agreement would only encourage other developers to do the same. "Probably every developer is going to come into see us to ask for a continuance," Snyder said.

Mayor Willie Weatherford said three additional developers have already taken interest in extending their agreements with the city...Weatherford said the spiraling housing market would not support the construction of a large number of houses, which could jeopardize existing sewer allocation agreements. "Those builders will be wanting for us to throw them out the window and re-negotiate," Weatherford said.

Rachels echoed the concerns of Weatherford and said many developers may not want to pay the required fees to keep their sewer allocations. "If they let them go because of the climate, people may not be willing to pay for them," Rachels said.

Sacramento Housing Market Price Appreciation: 242 Out of 275

Last week, we again had confirmation that the Sacramento housing market is one of the weakest real estate markets in the country. In their House Price Index (HPI) report [pdf], the Office of Federal Housing Enterprise Oversight (OFHEO) ranked the Sacramento housing market 242 out of 275 for the rate of house price appreciation (1.37%). Just one year ago, the Sacramento real estate market ranked 41st in the country (out of 265), with a yearly appreciation rate of 19.42%. At this rate, Sacramento may soon land on OFHEO's bottom 20 list, joining the ailing markets of the rust belt.

On a quarterly basis, Sacramento's HPI declined for the third straight quarter, falling 0.89% from the second quarter. Next quarter, this lagging indicator should finally register a year-over-year price decline. Here's a look at Sacramento's HPI since 1977.

More HPI Graphs at Paper Money

Some Weekend Reading

AnalysisGuy, over at the Daily Local Home Price Analysis blog (also at thebubblebuster.com), recently released a report on the Sacramento housing market. Check it out here [pdf] or here.

The Sacramento Real Estate Statistics blog has a great series of articles detailing how home builders are undercutting the resale market:

• Priced to Sit: How Flippers Get Into Trouble
• Priced to Sit Part II: DR Horton
• Priced to Sit Part III: Beazer Homes
• Priced to Sit Part IV: Lennar Corporation

OCRenter now tracks foreclosures over at the Bubble Markets Inventory Tracking blog. There are some incredible numbers for the Sacramento real estate market, especially the percentage of foreclosures to pre-foreclosures. As usual, the Sacramento housing market tops the list at 30.4%, easily beating out fellow bubble markets Phoenix (14.0%) and San Diego (24.9%).

PBS.org looks at the housing bubble blogs: Newspaper, Bubble Blogs Feed the Real Estate Obsession.

One more...Rich Toscano looks at what triggered the early 90's housing bust. Was it job losses, interest rates, or the housing boom itself?

• Return to the 90s
• Return to Return to the 90s
• The Cause of All Busts
• Last Time to the 90s
  

Oh, and by the way, I hope the new layout here at Sacramento Land(ing) is easier to read (white background/wider reading area). SL is now fully converted to Blogger's new beta version, which has some handy new features. Most useful, in my opinion, is the "labels" feature, which allows me to describe each post with keywords. You can see a complete list of Sacramento Land(ing) topics by scrolling down to the bottom of the link list on the right. Click on a topic, and the left side will populate with posts on that topic. Generally, topics include posts written in the last 2-3 months. I may add older posts as I have time. This system is not perfect, but hopefully it will make finding older posts easier. As always, you can search for something more specific by using the search field, which resides at the very top left-hand corner of the blog.

Quote of the Week

"The days when real estate agents were the gatekeepers for the housing market have gone the way of typewriters and printed MLS books. The key to coping in today's online housing market is to provide as much information as possible and let the consumer decide."

-Steve Brown, Dallas Morning News

Buyers: "It's the Price, Stupid!"

From the Stockton Record:

With all the talk of a slow housing market, there really hasn't seemed to be much notice of a steady decline in interest rates since midsummer. New-home builders and real estate brokers say they're glad to see the interest rates down - the national average for a 30-year fixed loan stood at 6.14 percent Thursday, down from a high this year of 6.8 percent in July.

But those historically low rates don't seem to be helping much with sales, they said, because the overriding concern of home buyers seems to be getting the most value for the dollar in a market with hyper competition among sellers and sliding prices.

"They're looking primarily at price," said Beverly Marlow, owner/broker for Marlow Realty in Manteca. "That's not to say they're not looking at interest rates, but first and foremost, they look at price."

Home buyers have watched the market enough to know about the home-price escalation of the past several years, Marlow said, and they wonder whether they'll see prices continue to drop. They don't want to buy now, then see the value of their home actually drop in coming months.

Terri Milton, chief executive officer of Keller Williams Realty Central Valley in Stockton, said interest rates were expected to rise this year to about 7 percent by August. So it's good news that much lower rates are available to buyers, she said, but added, "everybody's been fixated on the market falling. They're focused on the price."
...
Meanwhile, the median sales price for new and existing homes and condominiums in San Joaquin County stood at $420,000 in October, down 2.21 percent from $429,500 the previous October, according to the real estate research firm DataQuick Information Systems in La Jolla.

'We Paid 37 Percent More Than what our Home is Worth Now'

From the Modesto Bee:

Albert Quintero's timing couldn't have been worse. He made a deal to buy a new Turlock luxury home in November 2005, at the real estate market's peak. By the time construction ended in July, Quintero's Milestone Way home wasn't worth the $874,890 he was contractually obligated to pay. Now the same model -- a new home on nearby Tapestry Way -- is priced at $639,990.

"It's really tough to swallow that we paid 37 percent more than what our home is worth now," Quintero said. "We got caught."

He wasn't the only homeowner burned by buying at the top of the market. Potentially, thousands of Northern San Joaquin Valley homes bought within the past 18 months may be worth less than their purchase price, according to county assessors.
...
Some builders have been offering new cars, fancy vacations or other goodies as incentives. "You don't want to be paying property taxes for the Mexican cruise that was included with the home, and we don't want you to, either," [Doug] Harms [Stanislaus County's assessor] said. So county assessors must subtract the cost of such incentives from the purchase price before establishing the assessed value of the real estate.

"There are so many deals going on that we're asking more questions about what's included in the price," Harms said. "If personal property was included -- like refrigerators, drapes or furniture -- or services like free cable TV for a year, then we absolutely need to know those things."

If homeowners have evidence that the value of their home has dropped, county assessors want to know that, too. "We anticipate getting a lot more phone calls about assessments next week," Harms predicted. That's because property taxes are due Dec. 11. "When homeowners write their checks to pay their property tax bills, they're going to think their home values are assessed too high." Assessed values are printed on the tax bills. "My guess is that we're going to find a pretty good number of homes that need to have their assessed market value lowered, especially those purchased within the last 12 months," Harms said.

Sacramento Housing Market Water Cooler - December 2006

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