'It's Kind of a Tough Market'

From the Sacramento Bee:

For two months, it looked like Sacramento might finally be climbing out of its housing slump. Then the bottom fell out of the subprime loan market and threw home sellers a curve.

"It's kind of a tough market," said Pradeep Gosai, who relisted his $529,000 house in Natomas this week after turning down offers last year that were "different from what we wanted." "Now it's a lower price than last year. I hope we make it," he said.
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Builders and real estate agents attribute the unexpected March slowdown to negative publicity from the subprime lending industry meltdown and tightening of lending standards that eliminated would-be buyers.

Sacramento real estate agent Carey Covey said many first-time buyers no longer qualify for today's more demanding loans. Across the nation, lenders battered by rising defaults and foreclosures are again requiring down payments from buyers and detailed proof of income.

"They actually wanted the buyers to have a pretty good credit history and a job and some income coming in," said Covey, who now is trying to sell 42 properties repossessed by the banks.
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March closings represent sales started in December, January and February before extensive publicity about imploding subprime lending firms and tougher new lending rules.
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DataQuick Information Systems reported this week that the median price of [all] homes fell from February to March in five of eight area counties -- dropping by $20,000, to $460,000 [-13.4% yoy], in El Dorado County, for example, and by $15,250, to $340,000 [-9.3% yoy], in Sacramento County....[M]edian sales prices of existing homes remain about 6 percent lower than last year in Yolo and Sacramento counties and about 7 percent lower in Placer.
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The inventory of resale homes on the market continued its seasonal rise in March, according to Sacramento-based TrendGraphix, raising the specter of further price declines and fierce seller competition ahead. TrendGraphix reported 12,500 listings -- 1,090 more than last month -- in El Dorado, Placer, Sacramento and Yolo counties, while the Gregory Group showed new home builders have 4,268 houses in their unsold inventory, a 15-week supply.

"Inventory is still the elephant in the living room," said Gold River real estate agent Randy Dunham. "That's why we've had an almost 1 percent drop in values each of the last six months."

Price/sales chart
Inventory graphs
Price by zip chart

From the Sacramento Business Journal:

New-home sales rose 30 percent in the first three months of the year compared with the same period in 2006, a sign that aggressive pricing might be continuing to lift Sacramento homebuilders out of the depths of the slump.

New-home inventories, however, crept up after falling last quarter for the first time in two years, according to a report released today. And homebuilders aren't certain what the fallout will be from the subprime mortgage meltdown as lenders are floating fewer loans to homebuyers with questionable credit.

"Pricing is down, and that's part of the reason why sales are up," said Greg Paquin, president of the new-home analyst The Gregory Group, which tracked the first quarter new-home sales figures for the six-county Sacramento region.

The average new home in the region sold for $465,100, down 6.3 percent from a year ago. His figures show the median home price has dropped even more -- 9 percent to $423,900. Homebuilders have dropped those prices to compete for buyers.
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He noted there were a record 390 separate new-home projects within the six-county area selling homes and competing for buyers. So while sales numbers were up, the overall sales rate for the region has stayed level for the past six months. The region's new-home inventory -- everything from a completed home to a lot ready for construction -- increased by 8.7 percent. Analysts believe inventory is key to a turnaround because a large supply gives buyers plenty of options and increases competition, further dropping prices.
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What does all this mean for the rest of 2007? "That's anybody's guess," [Doug] Pautsch [Sacramento division president for Centex] said. "This year should be similar to last year. It's not going to skyrocket."