We're #1: Sacramento Tops PMI's U.S. Market Risk Index
It’s official. My bubble market can beat up your bubble market. For the first time, Sacramento tops PMI’s list of riskiest housing markets, knocking San Diego off its bubblicious perch. The U.S. Market Risk Index ranks the likelihood of home price declines in two years for the nation’s 50 largest metropolitan statistical areas (MSAs).
From PMI’s report [pdf]:
Of the 19 highest risk MSAs, eight are located in California, eight are in the Northeast, and two are in Florida. Sacramento, CA has replaced San Diego, CA as the highest risk MSA among the top 50, with a score of 604.A few smaller markets, mostly in California, are considered more risky than Sacramento. See here for a complete list [pdf].
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Six of the 10 areas with the highest rates of deceleration were in the West, with five in California. Sacramento led the trend with a 17.1 percentage point drop in year-over-year appreciation, followed by Phoenix at 15 percent and Oakland at 13.3 percent.
From the Sacramento Business Journal:
Sacramento housing at greatest risk for price dropFrom the Central Valley Business Times:
Sacramento-area homeowners beware, the local housing market has a 60.4 percent chance of lower prices during the next two years, the greatest risk nationwide, according to a report released Wednesday.
Sacramento and Placer counties edged out other high-priced markets -- including San Diego County, Oakland and Santa Ana-Irvine-Anaheim -- as the riskiest for a price reduction by winter 2009, according to PMI Mortgage Insurance Co.
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"Years of rapid appreciation have made homes less affordable in many areas, and that's not sustainable over the long term, so what we are seeing is not unexpected," said Mark Milner, chief risk officer for PMI Mortgage Insurance in Walnut Creek. "Over time, moderating appreciation will bring prices back in line with economic fundamentals, particularly incomes, bringing the market back to a healthy balance."
Continued deceleration in home price appreciation and decreased affordability caused the risk of home price declines to rise in cities across the country, especially in the Central Valley, says a report Wednesday from PMI Mortgage Insurance Co. of Walnut Creek, the U.S. subsidiary of PMI Group Inc. (NYSE: PMI).From the Central Valley Business Times:
Many of the metro areas in the Central Valley are among the most likely in the country to see price declines over the next two years, according to PMI. The Stockton area has a 60.6 percent chance of price declines, one of the most likely in the entire nation.
Standard Pacific Corp. says it will sell six homes in an Elk Grove development by auction next month. It’s believed to be the first time during the current housing slump that a new home builder has resorted to auctioning off its homes. The practice was common during previous housing slides.From the Sacramento Bee:
The home auction spectacle that began last year with impatient sellers aiming to cut their losses has expanded to home builders: The region's first auction of new houses is scheduled for Feb. 3 in Elk Grove.From the Stockton Record:
Analysts say it marks the reappearance in California of a tactic employed by builders during the state's 1990s housing bust. It also signals the real estate market's continuing slowdown as it readjusts from a five-year housing boom that ended 1 1/2 years ago.
"This is a fast, efficient way for us to close out and complete the project," said Jackie Shipley, the firm's vice president of sales and marketing. "We feel like we've had a lot of success in that community. ... It's important for us to do this and move on."
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Minimum bids will range from $430,000 to $530,000 for the four- and five-bedroom houses in a new neighborhood near Elk Grove's Franklin High School. That means bidders, expected to be a mix of would-be homeowners and investors, must meet at least the builder's minimum price to get the house.
The builder's minimums are well below market highs reached during construction of the subdivision. Early last year resale versions of the smallest $430,000 price tag sold for up to $546,000 on the next street, according to home information service Zillow.com.
Homes for sale now for rent
Owners forced to find cash flow by alternate means
The number of existing homes on the market has been plunging since summertime because of slow sales, and property managers now report a surge in the number of homes hitting the rental market. Jerry Abbott, president and co-owner of Coldwell Banker Grupe in Stockton, said many sales-market dropouts are investors who couldn't sell and now need some cash flow for mortgage payments.
Norbert Huston, a Stockton real estate broker who manages rentals, said business has skyrocketed since summer. He gets three calls per day from homeowners wanting him to rent out their properties, up from maybe three calls per week a year ago. Diane Starr, owner of Starr Property Management in Stockton, said the rental housing market is tough now, with more houses for rent than there are potential renters.
40 comments:
And it's no surprise that your friends to the East are right behind you. ;) But, but, it's different here - we are closer to Lake Tahoe that you are!!
Oh, but we have bottomed out. Just ask any realtor.
We have years of pain ahead of us.
Fresno is looking to steal the title as Bakersfield hope you two knock each other out and let them stand tall.
Foreclosures were up nearly seven-fold in the fourth quarter of 2006 and the number of notices of default, the first step in the foreclosure process, were up 145 percent compared to the figures from a year earlier, according to real estate information company DataQuick Information Systems of La Jolla.
According to DataQuick, 6,078 were foreclosed in the fourth quarter of 2006, compared to 874 a year earlier.
There were 37,273 notices of foreclosure filed in the state in the last three months of 2006, the largest number since 1998, says DataQuick
The rampant number of foreclosures is interesting, as today's Wall Street Journal swears that banks are working overtime to avoid foreclosing. Supposedly banks are offering free refinancing to strapped owners whose ARMs reset nastily, as well as making deals with owners to call the debt cleared even when the sale did not cover the full amount owed on the mortgage.
Yet there were still enough people beyond help for foreclosures to increase seven-fold. Yikes.
"Oh, but we have bottomed out. Just ask any realtor."
No need to ask a realtor. Ask some of our frequent commenters, actually some are realtors.
I think PMI has it all wrong. We simply can't be the highest risk market because we're due to bottom out here in a few months.
Last year, I spoke to a woman who worked in the risk analysis department at PMI (while at a casual dinner event at a friend's house).
She basically said that according to their projections (driven by their in-house "economists") for Northern California, the bottom was near and 07 should be a good year for the RE markets.
I pretty much told her that these so-called "economists" probably need to re-take Econ 101 as they forgot some (if not all) of the fundamentals of economics.
She didn't much like my input, and someone else quickly changed the subject.
Anyhow,
Looks like they finally took that refresher course.
Seems to me that all of the dominoes are lined up, but nothing's knocking them over. In the 90s we had a recession, with base closings in CA, high (relative to today) interest rates, and layoffs reported in the paper every day. But today we have full employment, low interest rates, "innovative mortgage products", and positive demographic trends. The DQ foreclosure report concludes with this statement:
While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today's market is negligible . . .
All signs say Sac's housing market is at risk for a fall, but so far, it's not falling. Buyers are buying, sellers are selling, prices are relatively stable (except for newer neighborhoods). I think this bouncing around near the peak could continue until the overall economy stumbles.
While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today's market is negligible . . .
The foreclosure tidal wave has just begun, wait tell it smacks the beach and starts pulling houses into the ocean. This market is toast.
Yeah since were due to bottom out in a few months then how can PMI say this. I just don't understand, could it be that realtors may be talking out of their ass.
They must be talking about the other Sacramento.
Hey Anon137, didn't McCellean and the Army Depot close in the late 90's. Not sure about Mather?
If this correct then the base closings helped the housing market.
McClellan closed 2001. I think it began downsizing as early as 1997 but it wasn't as awful as people worried since the tech sector was hiring like mad and the statistics got buried. There were 15,000 people employed at this base.
The depot clsoed in 1994. It employed 3,000.
The recession in Sacramento was already in full swing by the time these closures had any effect.
**all typos sponsored by daytime nyquil and a lack of oxygen to the brain**
Thanks Gwynster,
I knew Anon1137 was full of it.
"Seems to me that all of the dominoes are lined up, but nothing's knocking them over."
I think this is an accurate assessment. If anything knocks, or slams them over, it will be the impending tidal wave of forclosures. Just keep in mind the number of mortgages set to adjust this year.
I forgot to ask, so who wants to guess what the max bid will be on some of the houses at the Elk Grove auction? Will the minimum bid even be hit on some of them? Any of them?
Gwynster: No luck with a rental house so far via the craigslist wanted ad (I'm looking in Folsom). The problem is that nearly everything for rent is also for sale.
Patient Renter -- Ironically, to locate a rental that may not be sold out from under you, you may want to try talking to a realtor who covers the area. There are some who branched out into property management for customers and quite a few who are looking for tenants for their own properties (we rent from a realtor here in Arizona). Don't let them make you pay for finding a place -- just ask if they know people who have houses for rent and who are pretty sure they won't be selling any time soon.
I can give that a try. A lot of what I'm seeing is controlled by property management companies, who I'd rather avoid. What's the difference between that sort of service and whatever it is that a realtor company does with rentals?
I'm sorry to report but should prices correct 50% rents would still rise.
Patient,
We gave up looking and decided to stay put.
The best part was getting all the phone calls from people haven't been able to find renters saying asking if we'd please take their new, better offer. Telling them that I didn't trust them to not dick us around down the road based on our experience with them thus far felt good >; )
I'd say about half the properties we were looking at are still on the market for rent with more coming in by the day. It's going to be downright scary come mid summer.
Mr. Gwynster now wants to go the auction. He just want to watch the bloodletting.
>>>>MANDALAY MORTGAGE..... DONE!!!!! ANYBODY PICKING UP THESE FILES??? <<<<
JUST GOT WORD... ANOTHER ONE BITES THE DUST... WHO'S NEXT?by I TYPE IN CAPS January 24, 2007
Another liar loan outfit is history. Rest in peace. Not.
Gwynster:
So people were calling you back later after you had already shot down their initial offers? I read your tips about renting which were great. Overall the best things I really can think to do are to check the sales history of the home to make sure the owner didn't pay too much for it (and probably isn't under water) and to include a clause in the lease requiring that the owner NOT sell/show the home while we live there.
BTW: Be sure to report back what happens at the auction :)
Anon 1137 says "...today we have full employment, low interest rates, "innovative mortgage products", and positive demographic trends."
Yes Anon, and housing is still depriciating and homes are going into foreclosure and sales are down.
Patient Renter is right. When any one of the following happen: emplyment falls, interest rates rise, lending standards tighten or demographic trends reverse, imagine what that will do to the poor housing market!
And get this, each of the four factors mentioned above are starting negative trends.
The pain has not even started yet.
Oh, Dr. Brightside, where are you now.
What do we win?
A jacked up economy, because a bunch people went for the easy buck.
"What do we win?"
A 1 way ticket to pre-bubble prices, although, not everyone will be a winner.
Hauted Hillwood is still hallow: http://sacramento.craigslist.org/rfs/267801998.html
The Lender-Implode Meter is at 14. I remember when it was at just 5. Wow how time flys during a real estate crash.
Got popcorn?
Sippin went silent.
So, if we have full employment, low interest rates, s sound economy and housing is in this shape today? Just wait for some type of bad economic news. Any bad news. All we need is a catalyst.
Naw I didn't go silent, I lost my comments with a little "help" from a 14 year old.
You're all right on base closures, round 1 started in '88, went 4 rounds. Hit CA hard in early 90s and kept econ sluggish. You can google a link yourself (more 14 year old help).
Norcal Ray - 10 years? I think you will still see homes 2-3x value in this bottom vs. last bottom of mid '90s. At least the ones I owned.
The one I rented during a brief period in that time, was conciedentally, a tract home in an overbuilt area that went rental in the pocket. Rents reasonable, neighbors also renters mostly, lots of moving, crime nearby, section 8 housing nearby.
Got the hell out of there.
What will the increase in flood insurance cost due to the loss of 100 year flood rateing do to home prices in Natomas basin? Will this effect home prices elsewhere in the valley?
Also, I hear there are some tax increase's comming, and mandatory health insurance ect. This could drive up the cost of living alot. Could that be some of the factors that can start the dominoes?
We are thinking of buying a foreclosure if we can get a deal, but now I am questioning whether it is a good idea, as an increase taxes ect. may make it too unaffordable.
Should we wait?
Please quit deleteing posts mr sac. landing.It is a little ridiculous that you cannot let someone express their opinion.
Only deletes and one was mine to get rid of some typos.
And to be fair, Lander is nicer to you bulls then I would be >; )
This blog has a comment policy, and I actually try to enforce it. I don't usually delete comments because of someone's opinion but rather because of the manner in which they express their opinion. (think language--profanity, sexual imagery, etc.) I welcome your opinion, whether or not you are a bull or a bear. Just keep the language clean.
FYI, bear comments are deleted about four times more than bull comments (although I'd imagine there are considerably more bears than bulls on this blog).
Just to clarify, I know what a bear is (tidal waves, falling knives, housing doom, fools, etc.), but does being a bull mean you don't think all buyers are fools or that you think it's always a good time to buy? Maybe we need three categories.
"does being a bull mean you don't think all buyers are fools or that you think it's always a good time to buy?"
Actually, I think the test of being a bull is whether you're putting your own money out there and buying in the current market. Anyone can talk big about how the market's going to normalize in the spring, but it takes real bullishness to risk losing your own equity by buying right now.
anon1137 said...
"Just to clarify, I know what a bear is (tidal waves, falling knives, housing doom, fools, etc.), "
Right... bears are fools. So foolish are we that we avoided losses that would have been realized were we to have bought this time last year when the bulls were still hot on real estate. Your trolling is getting annoying.
Actually, I think the test of being a bull is whether you're putting your own money out there and buying in the current market.
Then I'm definitely not a bull. But I'm definitely not a bear either, at least not a falling-knives-housing-doom type bear.
Anon1137, you need help.
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