'Maybe This is the Bottom'

From the Sacramento Bee:

After weathering one of their toughest periods in a decade, Sacramento-area home builders closed 2006 with a bang, boosting year-over-year quarterly sales of new homes for the first time since 2004 with steep price cuts and giveaways that often totaled as much as $150,000 per house.

The aggressive sales tactics, designed to clear excess stock off builders' books by Dec. 31, drove fourth-quarter sales 58 percent higher than the same time in 2005 and 25 percent above the third quarter of 2006, according to a report released today by the Gregory Group, a Folsom-based real estate consulting firm.

Lower median prices -- ranging from $353,689 in Natomas to $498,365 in Elk Grove to $524,001 in Roseville -- helped drive the 2,445 reported sales across the region, with prices dipping 4.7 percent below the same time last year. Only El Dorado Hills -- $863,684 -- and Rocklin -- $609,820 -- reported higher median sales prices than last year.
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Placer County showed the quarter's biggest year-over-year sales gains as builders cut prices and offered huge incentives at large master-planned communities in Lincoln, Roseville and Rocklin. In Roseville, for example, fourth-quarter sales prices fell 11.3 percent from the same time in 2005 -- but the number of sales jumped 654.1 percent, from 37 to 279, according to the Gregory Group. Similarly, 11.3 percent sales price declines in Yolo County sparked a 245 percent gain in year-over-year sales.
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It also marked an end to the rising inventory of unsold new homes that have swamped the market since 2005. According to the Gregory Group, 3,925 homes were for sale at the end of 2006, compared with 4,598 the previous quarter.
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But even as builders celebrate a strong finish, 2006 still saw the fewest new home sales since 1998 in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. Builders sold 9,588 single-family homes and condominiums during the year -- 4,500 fewer than in 2005.
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"Maybe this is the bottom," Paquin said.

(In April 2006, Mr. Paquin predicted that sales in 2006 would be "even with or slightly less than the 14,094 homes sold last year.")

Whether he's right is still the key issue looming over a market that saw home prices double in five years. Paquin cautioned that one good quarter does not make a trend, and analysts nationally have differed over whether the downturn is ending. Recent reports of sales declines by several national builders prompted analysts to say the new home market may remain challenging "for the foreseeable future."

UPDATE: Chart Here

Also from the Bee:

Suzie Rivera's dream of home ownership may soon be within reach. The 53-year-old housekeeper for a local hospital lives in a rental home -- a neat, two-bedroom dwelling on 39th Street in Oak Park. Her daughter, Margarita, age 9, lives with her.

"I'd like to buy a house, not so much for myself as for my daughter," Rivera said last week. "Home prices are climbing so fast that by the time she's an adult, she won't be able to buy one."

Update: The Sacramento Business Journal also reports on new home sales:

But as sales perked up for new homes, prices generally fell. Paquin said that suggests builders are cutting deals...Incentives such as upgrades to appliances or floor coverings, which don't show up in a home's price, are making the true cost of a home even lower.

It's a rare situation when homebuilders can take heart in climbing sales and buyers in falling prices, Paquin said. "Look at Yolo County," Paquin said, where the average price plummeted by about $65,000. "The interesting thing is how rapidly it's going down. Buyers may be saying that, whether it's hit bottom or not, the prices are good enough for them."