Saturday, January 20, 2007

December New Home Sales, Prices Plunge

Some more DataFun for December 2006:

New Homes


The Sacramento Bee did something new this month by publishing a chart which separates DataQuick figures into existing detached homes, existing condos, and news homes categories. Last month, the SF Chronicle reported that November new home prices in Sacramento County had plummeted 14.6% in one year. For December, the median price for new homes plunged 16.1% in a single year. The drops were even more jarring in Yolo and Placer Counties, where medians dropped 20.1% and 24.4%, respectively. El Dorado County declined 4.3%.

Meanwhile, in sharp contrast to the Gregory Group report, the DataQuick chart shows that new home sales posted double-digit declines in December from year-ago levels:

  • Sacramento: -35.4%
  • Placer: -25.9%
  • Yolo: -39.7%
  • El Dorado: -47.0%

Existing Homes


Sacramento County existing sales and prices continue to decline, according to DataQuick. December was the 21st month in which single-family home sales declined from prior year levels (year-over-year or "YoY").
  • YoY Sales: -30.1%
  • YoY Median Price: -1.7%
  • Change in Median since Price Peak: -6.2%
An article in Rocklin and Roseville Today provides some additional information not published by the Sacramento Bee. Note that TrendGraphix tracks MLS sales only.
According to Michael Lyon the president of Trendgraphix, the statistics arm of Lyon Real Estate, "2006 was a great year for buyers and, at the same time, a reality-check for sellers. Overall, prices dropped a minimum of 10% last year and days on the market for homes that have sold now averages above 70 days," As part of the latest Trendgraphix press release he went on to say, "Sellers on average have to discount 4% below the last sold to make a sale."

Trendgraphix reported sales volume was down 2 percent in December for Sacramento, Placer and El Dorado counties and 25 percent lower than December 2005. In addition the number of pending sales decreased 6 percent in December compared to November.
...
In Sacramento County December sales decreased 4 percent from November and inventory decreased by 13 percent. Pending sales decreased by 4 percent from 942 pending sales in November to 907 pending sales in December. The average price paid per square foot in Sacramento decreased by 1 percent during the month of December to $224.
If the price per square foot figure is consistent with the TrendGraphix data found at golyon.com, then price, by this measurement, has declined 9.3% since December 2005 and 11.8% since the September 2005 price peak.

DataQuick publishes price per square foot data, but only by zip code (archived here). A glance at the December chart shows widespread year-over-year price declines in Sacramento County. Only four zip codes (out of 42) managed to register price appreciation. Nearly half of the zip codes (20) experienced double-digit price declines.

36 comments:

Sippn said...

Good info.

My guess is that Gregory group is measuring the pulse, not counting bodies. People in the industry are going to want to know the rate of contracts being signed (pending in MLS/resale) vs closings.

The reason is that closings that the BEE reports in December, went into contract in October and November.

If Mike Lyon reported like this, he would say, "Yea, my agents are busy showing and writing now, but sat home in December."

I see my home appreciated again - location folks!

Looking at Dataquicks' zip by zip report, you see plenty of swings - mostly down, but yesterday I was looking at a 4 year monthly chart of Santa Clara - even on the run up 2003-2005, there were monthly downturns of 10-15% mixed in.

Friends of mine in real estate are busy, and when you read about sales in the spring always up, its due to contracts written in January and February.

Sippn said...

Here's the Silicone Valley link

http://www.viewfromsiliconvalley.com/id298.html

arizonadude said...

Here is a link to what has happened to our great real estate martket:

http://www.azcentral.com/news/articles/0120mortgagefraud0121.html

Anonymous said...

Not sure why link got cut off, try again
http://www.azcentral.com/news/articles/0120mortgagefraud0121.html

drwende said...

You got up earlier than I did, Arizona Dude -- the link doesn't work for me, but that's the article on what's propping up median prices here in Phoenix, right?

It's propping up your local prices, too...

anon1137 said...

No argument that new home prices have fallen significantly, . . . but, for exisiting homes, 1.7% yoy price drop is nothing; -6.2% from the peak is almost nothing (and I'd bet it's less for the best zip codes). There is no bubble bursting in existing home prices in Sac.

Here's more bad news from Los Angeles:

Sales down, prices up for 2006 housing market
http://www.latimes.com/classified/realestate/news/la-homes16jan16,0,2835654.story?coll=la-class-realestate-news

Southern California's housing market lost much of its spark last year but wrapped up 2006 setting a new price record even as the number of sales hit a decade low, data released today showed.

Perfect Storm said...

“A wave of mortgage fraud is rippling through pockets of the Valley, inflating home values through scams called cash-back deals. Left unchecked, cash-back deals cost homeowners and lenders millions of dollars and could erode confidence and values in Arizona’s real estate market.”

This same situiation is happening in Lincoln.

Anonymous said...

Sacbee has December 2006 stats up.
http://www.sacbee.com/static/live/business/real_estate/dec_2006_home_sales.html

drwende said...

anon1137 -- What you're missing in your claim of a 1.7% price drop for existing homes is that it's different houses that are selling. The same price now buys a lot more house.

If you look at the trend in asking and selling prices for a specific class of houses -- say, by neighborhood and square footage -- you'll see major declines (15% or more for what I track).

Dr. Brightside said...

Thanks for your postings and links.

I believe that the Sacramento new home market bottomed at the end of 2006 and will show up in the resale numbers bottoming in the first half of 2007. My reasoning follows.

1. Starts - The lower new home starts are helping to quickly reach an equilibrium of supply and demand, and pricing stabilzation, so any news about low starts is good in my opinion.

2. Interest Rates - Rates are historiclly low and going lower. This will set up a similar situation as 2001 where housing led the economy by about six months into a recession, interest rates plummeted and then housing came back stronger than ever in spring 2002. This will happen in a more tame fashion Q4-07 or Q1-08.

3. Job growth. Though it may stall out temporarily in the first 6 months of 2007 don't panic. Sacramento job growth currently exceeds starts by a historically high margin that will lead to recovery from pent up demand. From 2000-2005 Sacramento had a SFD permits to job ratio of about 1:1 and the marketed moved along nicely because of three factors 1) Strong local job growth of 2:1 for the late 1990's 2)High job growth of the dot com and bay area 3)Falling interest rates. Those same factors are alligning again. Sacraemento had 23,000 jobs and only around 11,000 SFD permits in 2006, the bay area job engine is again heating up, and interest rates are low and will fall.

4. Pricing. New home pricing is a quicker prognisticator of market stability than lagging indicators of resale median pricing on closed homes. New home pricing stabilized at the end of the 4th quarter. Builders reversed the negative quarter over quarter trend in new home sales for the first time in two years per the recent Sac Bee article.

5. Resale Inventory. Sacramento resale inventory is down 30% since peaking in August. There will be some gain in inventory with the spring season, but and upward trend in sales should negate an increase in months of supply. Six months of inventory will indicate "balance". See this site for proof.

We are through the worst and you won't know the bottom until it passed you by.

anon1137 said...

DrW: the-1.7% is no claim, it's from DQ stats of actual sales data for existing homes (1700 homes in 12/05 and 1200 homes in 12/06). I don't see the $/ft2 changing much for the zips I track in central Sac.

Land Park (95822): -0.1%
ESac (95816, 95819): +1.1%, -5.9%
Arden-Arcade (95864): -4.9%

Anonymous said...

So Dr. Brightside,

Is this the first 1-year business cycle in history? We know that the peak was mid- to late 2005 and the market will be back in 2007.

Whatever you're drinking -- pass it around for everyone!

AgentBubble said...

Let's look at MLS stats for your areas:

95822

12/1/05-12/31/05 - 47 Sales
Average price per sq. foot - $255.68
Median Price $316,000
Median Price per sq. foot - $252.5


12/1/06-12/31/06 - 37 Sales (down 21%)
Average price per sq. foot - $235.52 (down 7.9%)
Median Price $292,300 (down 7.5%)
Median Price per sq. foot - $249.32 (down 1.3%)


95864

12/1/05-12/31/05 - 20 Sales
Average price per sq. foot - $323.05
Median Price $592250
Median Price per sq. foot - $299.11

12/1/06-12/31/06 - 15 Sales (down 25%)
Average price per sq. foot - $302.25 (down 6.4%)
Median Price $425,000 (down 28.2%)
Median Price per sq. foot - $275.51 (down 7.9%)



95816, 95819

12/1/05-12/31/05 - 32 Sales
Average price per sq. foot - $338.92
Median Price $444,500
Median Price per sq. foot - $342.94

12/1/06-12/31/06 - 35 Sales (up 1%)
Average price per sq. foot - $345.81 (up 2%)
Median Price $490,000 (UP 10%)
Median Price per sq. foot - $339.73 (up 1%)


95816, 95819, 95822, 95864

12/1/05-12/31/05 - 99 Sales
Average price per sq. foot - $304.79
Median Price $391,000
Median Price per sq. foot - $297.16

12/1/06-12/31/06 - 87 Sales (down 12%)
Average price per sq. foot - $295.54 (down 3%)
Median Price $377,000 (down 3.6%)
Median Price per sq. foot - $285.71 (down 3.9%)


These numbers are straight from MLS and include any home under the "Residential" Property Type. The sample sizes are far too small to be any indicator of our market.

Google said...

Agent Bubble, this looks different than your chart - dataquick/Bee by zip (found the link here) why?

http://www.dqnews.com/ZIPSACB.shtm

Sippn said...

Thats funny, did I really type google? I meant...

So what I'm saying is Dataquick shows some zips up...including the ones you cite.

AgentBubble said...

My numbers are taken directly from our MLS system. New homes sales are usually not included in MLS (although it's getting more frequent to see builders like JTS list their homes).

sippin--I really don't know why they are different. For example, 95608 shows 45 sales on DQ's site. In MLS, I show 43. DQ shows a median of $395K, MLS shows $360K. DQ and MLS show a high of $872,500. I would love to see DQ's list of homes to see what they are including that MLS is not.

As a comparison, here are some stats for all of Elk Grove:

Elk Grove

12/1/05-12/31/05 - 199 Sales
Average price per sq. foot - $249.21
Average price $484,221
Median Price $449,000
Median Price per sq. foot - $235.74

12/1/06-12/31/06 - 130 Sales (down 35%)
Average price per sq. foot - $215.4 (down 14%)
Average price $431,707 (down 11%)
Median Price $400,000 (down 11%)
Median Price per sq. foot - $212.94 (down 10%)

If time permits, I can run numbers for other areas if someone is interested. Just has to be in the 4 county (Placer, Sac, El Dorado, Yolo) area.

Happy Renter said...

Lander,
The first link doesn't work. Can I get a URL for the Sacbee seperated figures. Please

Anonymous said...

There has NEVER been a down market without some up ticks (if you call this news an up tick).

There has NEVER been a period of housing price increases above the norm (a bubble) that has not been followed by a correction back down (ALL of the way down) to the norm (a bubble collapse).

Unemployment has NEVER been a leading indicator of economic activity. No economic downturn has been CAUSED by unemployment. By the time unemployment rates are getting high, the economy is probably already on the mend. The tail doesn’t wag the dog.

If you’re betting on predictions of future job growth, that’s a risky game. What business would make it public that they are in trouble by saying in advance that they expect to not need more people? I plan to make 6000% on the stock market this week. Do you believe me?

Inventory has NEVER been higher in the month of January than it is now AND it has increased by nearly 1000 units so far this month. We are on track to make last summer's record inventory look small. Why would demand suddenly come up to match?

National homebuilding companies in the Sacramento area are not even close to losing money on the current batch of housing projects and will NOT stop building in any of the already financed developments (thousands of new homes standing empty now and thousands more will follow this year). The Nationals need profits wherever they can get them to keep their stocks from falling further and OUR market is still VERY profitable. Want proof? Take a look at Lincoln, West Roseville, Rocklin, Elk Grove, Natomas, etc. they're still cranking them out with no end in sight.

Interest rates are NOT low now. With most properties now losing value, a 6% mortgage interest rate coupled with a 4+% value depreciation rate = 10+%, which is NOT a good effective interest rate.

Mortgage rates will NOT go down this year, and may go UP. The longer that inflation data and general economic conditions are being spun to remain in neutral to slightly upward territory, the Fed will continue to be moribund with inflation fears and will therefore not ease rates. Meanwhile, there is considerable and growing distress in the credit markets. Credit market fires are smoldering with major problems in sub-prime mortgage default rates and the crisis is just beginning to unfold. Should sub-prime paper continue to incur unexpectedly high default levels, or if any major sub-prime lender becomes insolvent, the credit markets will react very rapidly to tighten credit and therefore drive mortgage rates higher. Additionally, lending standards have already been tightened on sub-prime and exotic mortgages, making I/O, Stated-Income, and Neg-Am Pay Option mortgages harder to acquire. The tightening on these exotic loans is a HUGE problem for this market. The entire Sacramento real estate market is dependent on the sub-prime/exotic mortgage business because the Sacramento employment market is not even close to being able to pay wages that support the current home prices in the area. Very few who work here can qualify, based on their real income, for a $500k 30yr loan. ALL of my neighbors have I/O or Pay Option loans and they are ALL sweating.

Dr. Brightside can spin the news and blow all the sunshine up our skirts he wants, but the Sacramento real estate market has zero fundamentals supporting it. This isn’t San Francisco; the supply of houses here is almost limitless, we have millions of acres of buildable land. Prices were driven up on pure speculation and flipping by outside the area investors using money borrowed on sleazy lending practices. Those investors are now over-leveraged, upside down or just gone. All that’s left in the market is us “real” people and there’s no way we can justify these prices.

Let ‘em fall.

Perfect Storm said...

Prices were driven up on pure speculation and flipping by outside the area investors using money borrowed on sleazy lending practices. Those investors are now over-leveraged, upside down or just gone. All that’s left in the market is us “real” people and there’s no way we can justify these prices.

This is so true this market is going down for the count. We are headed for a 50% decline by 2009.

Perfect Storm said...

ALL of my neighbors have I/O or Pay Option loans and they are ALL sweating.

This is half the loans in the Sacramento region the last few years. Were looking at a tidal wave of foreclosures.

Perfect Storm said...

Dr. Brightside.

1) Low starts means less construction jobs means less money for people to buy homes. Plus new home sales are at a snails pace. New home sales reported are corrupt becuase they do not count cancellations. Plus I drove throughout Sacramento today and saw new construction everywhere.

2) Interest rates don't mean a thing now that the lenders are tightening. Days of loose lending practices are coming to an end. Less money to loan means less home sales. Regional and national subprime lenders with their toxic loans are going bankrupt daily now, just check the implode meter. These loans were at least 50% of the market the last few years. 20% plus of these loans will go into foreclosure and Sacramento region percentage will be higher, more like 30%.

3)Job growth is soft, especially in Sacramento, where most new jobs are low paying. Thousands of educated people are leaving Sacramento for other states, they are being replaced by low skill workers.

4) Pricing new homes, the builders are going to compete head to head with the resale market and win. Builders will continue to cut prices, thus causing resale homes to lower prices.

5) Resale inventory in January 2007 stands at the highest point ever and blows away all prior Januarys in the history of the Sacramento region housing market. Inventory is now going up faster than most have expected.

Dr. Brightside you should post your comments on Bens Jones Blog, I think everyone there would love to chat with you.

This market is going down the drain. Were looking at housing doom 2007.

Anonymous said...

Anybody that buys a house now and for the next year, is a complete idiot. Do not believe the hype. Just sit back, save money, and watch the specuvestors and illegals all go bye-bye.

drwende said...

Anon1137 -- You're tracking the areas least likely to be affected by a bubblicious housing market. Established desirable neighborhoods have a smaller proportion of strapped specuvestors and aren't directly competing with new development.

It's the places like Natomas, West Sacramento, and Elk Grove that are competing with new developers, had a ton of specuvestor and exotic financing activity, and are seeing substantial drops in asking price.

So why, statistically, are the small drops in your areas outweighing the huge drops in mine? Because houses in your areas are selling, and houses in mine are not. The 15% declines in asking price in W. Sacto aren't showing up in the median sale prices because the houses don't sell even at 15% reduced prices.

So what's happening is that median resale prices are temporarily propped up by a lack of demand for entire neighborhoods.

Lander said...

HR-
http://media.sacbee.com/smedia/2007/01/
17/18/91-re2.standalone.prod_affiliate.4.gif

Anonymous said...

Here is the link Arizonadude was trying to post. Massive mortgage fraud in stalled new home subidivisions in AZ.

Sacremento has similar conditions and the same fraud is happening here.

http://tinyurl.com/2j84a5

There should be some big names getting arrested for felonies soon.

patient renter said...

"2006 was a great year for buyers and, at the same time, a reality-check for sellers. Overall, prices dropped a minimum of 10% last year"

These kind of typical realtor statements confuse me. Is it a better time to buy something when prices or dropping or after they have finished dropping?

Anonymous said...

There is a local home builder in town who is going to get a knock on their door very soon from some investigators. I hope they resist.

Sippn said...

Patient Renter....Grasshopper...

"These kind of typical realtor statements confuse me. Is it a better time to buy something when prices or dropping or after they have finished dropping?"

Of course it would be best to buy at the bottom - if the home you want is available.

When is/was the bottom?

If any of us really knew the answer, we'ed be out on the yacht, ignoring this conversation.

When it happens, it won't hit you with airbags, we'll have to look at the autopsy 3 months later.

Purchase - depends on where you might shop.

Lincoln - I think builder prices were already at bottom.... see profit write downs by national builders. If you're handy, look for a foreclosure, but remember, they're already picked thru by professionals 1st, then amature flippers, then on the resale market.

The flatlands (WS, EG, Natomas), maybe a little more opportunity there.

Eastern Sac County, closer in doesn't look like its going down because buyers with income are still doing what they want there - living.

My opinion will vary from others!

anon1137 said...

AB: Thanks for your input. I don't have time to compare your stats tonight but I will take a look soon.

By the way, no falling knives on this thread yet, no references to fools yet, but one reference each to idiots, tidal waves, felonies, and doom. I'd give the emotion level a 6 (on a scale of 10).

patient renter said...

Sippn

"When is/was the bottom?"

If history repeats itself, it'll be at least 5 more years.

"If any of us really knew the answer, we'ed be out on the yacht, ignoring this conversation."

Recognizing the bottom of a dropping market doesn't earn you any money. All it can do is save you from loses realized from buying into a decline.

"When it happens, it won't hit you with airbags, we'll have to look at the autopsy 3 months later."

3 months into the next cycle is fine with me.

patient renter said...

Sippn: Curious, did you post early last year when the naysayers (like you) were saying that there would be no drops at all? Would you have been wrong then and now, or merely one or the other?

Anonymous said...

I do believe that most first time home buyers are priced out. Houses are just sitting on the market month after month. I do see sales at a snails pace.

Perfect Storm said...

I do believe that most first time home buyers are priced out. Houses are just sitting on the market month after month. I do see sales at a snails pace.

You are right on with this comment, and think this is only beginning. This housing market is going down.

Matthew said...

The data you show regarding new home prices is incorrect. Those figures show the year-over-year decline in the number of escrows closed!

anon1137 said...

Re: AB's MLS stats:

It's clear that DQ is including some sales that are missing from the MLS stats. Maybe they track title transfers, which might include private sales, rather than just MLS-listed sales. In any case, I think the MLS stats also support my view that prices are still close to their all-time highs in some Sac neighborhoods, like ESac (both median and /ft2 are up yoy for Dec). For the whole batch of zips you ran, median sales price and $/ft2 are down only 3-4% yoy - that's nothing. What seems to be happening is that the curve is forming a broad, flat top - there's no steep drop yet, just a bouncing around near the peak prices. It wouldn't surprise me if this continued for awhile, as long as interest rates remain low and employment remains high. As I said, I've noticed an uptick in pending sales in central Sac and some houses that have been sitting for a long time have gone pending. Newer neighborhoods, of course, are a different story.

Anonymous said...

I think the new housing market is close to be bottomed. In Anatolia, JTS estate used to have 8 inventory home. JTS put down the price 790K -> 509K, 900K -> 640K etc, then, 5 of them sold. Builder now slowed their speed. (they are holding some of the house that already have the foundation down)
Now I see some of pre-foreclosure home in the market currently listing higher than what builder are offering.. But I don’t see another 5 years downturn. Maybe until next year after pre-foreclosure are gone. With this internet, all cycles are going somewhat faster than before.