Thursday, April 12, 2007

Sacramento Home Sales Fall 32%

From the Sacramento Bee:

The biggest year-over-year decline occurred in Sacramento County, which reported 1,749 closings last month compared to 2,587 in March 2006.

March median sales prices also remained 6 percent to 14 percent below the same time last year in most area counties.
...
"The hope in the (real estate) industry was that the data would begin to show the market was stabilizing without a doubt, and now there's some lingering doubts, particularly in the Sacramento area and across the Central Valley," said DataQuick analyst Andrew LePage.

Area home builders and real estate agents also reported a marked slowdown of escrow openings in March. Many blamed both negative publicity from a subprime lending industry meltdown last month and simultaneous tightening of lending standards that eliminated would-be buyers.

41 comments:

Diggin Deeper said...

"Many blamed both negative publicity from a subprime lending industry meltdown last month and simultaneous tightening of lending standards that eliminated would-be buyers."

And if these aren't big enough problems the foreclosure rate outstripped closings for the month by nearly a factor of 2-1...3,581 foreclosures to 1749 closings. Unless this ratio turns around, the MLS will be twice as thick as the LA Yellow Pages by this time next year.

Coltster said...

Hopefully everyone starts renting who would have been buyers- rents need to go up without question to start catching up what morgage payments will be.

When it is the same cost to rent as it is to buy you will see many buyers get back in the market as it will be logical.

hopefully in a year we can start saturating the rental market and get double digit appreciation in rents.

SF rents are up 11% yoy, we will soon follow after the excess glut of flipper rentals are filled.

If you can wait to buy a house it is a decent idea as you can bleed us home owners some equity for a good while here.

Sittin' Out This One said...

D.D.

Where do you get the 3581 number. If this is a monthly total of homes foreclosed, this is really overwhelming and will crush the Sacramento market.

Please elobaorate and cite your sources.

Coltster said...

dd
where are you getting the forclosure info - those are some smoking high numbers.
I wonder what percentage of those forclosures for low class/ middle class/ and upper class homes-
that would be interesting to see who in society is getting hurt the worst-
my guess it is the working man in the cheaper houses are taking it the worst by far- am I wrong?

Diggin Deeper said...

Go back to March 31 on this blog and read the numbers on the "Uh-Oh" blog. Am I missing something here? If they're cumulative I stand corrected.

Lander said...

The BMIT foreclosure number is for the 4-county area. The 1749 sales figure is for Sacramento County only (new & resale).

Diggin Deeper said...

Lander...is it cumulative or monthly as far as total foreclosures go?

Diggin Deeper said...

I apologize for the mis-information. I'll stand down on the foreclosure figure posted. The interesting part of the "Uh-Oh" blog was that that a little less than 10% of the homes auctioned actually closed and were removed from the banks' books. The rest went back to into their inventory. I'd like to know what the actual foreclosure numbers were for Sacramento by the end of March '07. I don't think we're too far from foreclosures overtaking closings in any given month.

Lander said...

OCRENTER:

The pre-foreclosures are cumulative of all active NOD's/NOTS's. Meaning you are looking at 4 months of NOD filings (as it takes 4 months for the NOD to advance to REO).

The foreclosures are cumulative REO's. They are suppose to take them out if they are sold, I don't know how good foreclosure.com is doing keeping that up.

Perfect Storm said...

Down 32% year over year, so that means were down over %50 from peak. So basically over 50% of the buyers have the left the market. It is simple economics less demand more supply, were talking a serious down turn in the market. Anybody who buys now is making a huge financial mistake, wait for the historical averages to come back and then buy. Only buy in a market where homes are selling at 3 x median income for the area.

Were on track for a 50% decline by 2009.

Housing Doom 2007.

Perfect Storm said...

Anybody know how many NOD's were filed in March compared to sales?

The Spring Sting is about to come to an end let the summer no home sales pounce begin.

Coltster said...

perfect storm:

I can not agree that just becuase we are only selling half the houses we were at the peak of the boom that prices are going to go down 50%. During the peak everyone was buying either out of desperation to get in or an investment to make a quick buck- making far more buyers than there are now.

People buying now are actually people moving into houses.

10% more decline by 2009 (maybe).
you never know the fed may step in and give us some more cheap money :)

Coltster said...

perfect storm you would like like the really nice places in california like santa barbara where they are getting 16X the median income down there. If you can not afford a house here you should check out real estate in the mid west, where boise ia sells at only 4.5 times median income but median income is $12,000 less than sacramento's median.

Coltster said...

perfect storm is as our governah would say 'A financial gurlie man'

Gwynster said...

Colster is Real?

Diggin Deeper said...

Gwynster

I doubt Colster's "Real". At least he doesn't take information out context and then spin it to make things look the way he wants it to.

The key is how many of the lumpin are no longer part of the equation. The flippers are gone (but could return if it really gets ugly), subprimers are gone, why would anybody Alt-A Sacramento (Palm Springs maybe), and the prime market probably stays the same. Inventories are rising, foreclosures are rising rapidly, and new home builders are in a giveaway mode.

The Sacramento market defies gravity and has done so for many months. I wonder how long it takes before PS gets his 50% reduction in pricing. Unless inflation is rampant and is the real cause of the price increases we've seen over the last 5 years, there's really nothing propping up prices here other than a stubborn selling public.

Sippn said...

You will never again see median prices 3x median income in Sac.

Diggin Deeper said...

You will never again see median prices 3x median income in Sac.

The key word there is "never"...

RMB said...

Sippn,

Never is a reeeaaallllyyyy long time.

Perfect Storm said...

Considering March is 10.7% longer than February, I’d say March volume is flat.

Perfect Storm said...

Colster are you a new guy, if so how much real estate do you own? Do you think it is a good time to buy, if so buy away.

Perfect Storm said...

Overall market will go down 50% in Sacramento easy, wait for the nasty long recession. In our lower income areas like Oak Park, South Sacramento and even Rio Linda we will see a 60% decline by 2009.

How many NOD's were filed in March, anybody, anybody?

Perfect Storm said...

You will never again see median prices 3x median income in Sac.

Sippin, I sense a Freudian slip, so you agree we will have price decrease as it relates to median income. If not three then what then?

I think we will see three for sure in Oak Park and South Sacramento.

Housing Doom 2007.

Were on track for a 50% decline by 2009.

Coulster is an agitator, thats ok others may not like, it is fine by me, we need seem drama on this blog.

Coltster said...

you will never see homes go back to 3x median income prices-
that was a bargain price that will never come back.

Coltster said...

ps: I have 2 apartment complexes, some duplexes and single families- all cash flow except a couple of single families I bought in 2004. (they are just bleeding me a couple hundred each, no big deal).

ps: you asked my experience- I have been doing real estate since the 70's in the bay area and moved to granite bay in the early 90's and got a great deal on the lake.

So anyway- I see how maybe the correction in the 90's may scare you into thinking that this boom must have a much higher consequence; however, the economy is much different than before. Unemployment in the 90's brought some area's to 10% unemployed :(, Many government jobs were lost here- military bases were closed down- it was a terrible time.

Right now- employment is robust- people are spending money and letting the economy go round. Real estate prices are out of many peoples reach - but that is california- go to santa barbara and complain about their 18X median income rate- do you think that is ever going to 3X income? Before this large boom in 1998 santa barbara was just 7X earnings- will it even return there?

A house is someones most valuable asset and they do not just sell them because prices are going down in price. You will see many home owners wait out the 'perfect storm' and you will see many would be buyers during the next boom cycle wish they put in a low ball offer now or in the coming year before market conditions are not in their favor anymore.

Cheers, I love the debate to- we can all agree to disagree.

lexi said...

You know..... I'm sorry but
Sacramento is not that great.
I'd say 3x the income is right
on. Now... Carmel or Santa Cruz
that's a different story but even
they will have huge drops in prices. Personally, I believe
perfect storm is right on the money. And Diggin Deeper is right
that it's just the stubborn sellers that are holding the market up. With nothing to lure
the bubble sitters in... the stubborn sellers will have to fold.
If they don't ... who cares? not me
Who that' who says... Got Popcorn?
I did that rent verses buy scenerio
from the previous blog and looks
like I'm better off for well over a decade renting. Carmel popcorn
is my fav. And yeah, I won't regret
not getting any of these "great deals" that the realtors keep
telling us are out there. I'll
know a great deal when I see it.
It will be a little more by a couple hundred dollars than the amount I could rent the same house
for. Untill then... el paso.

Cmyst said...

Coltster posted a few weeks' back under "Anon----" and also as something like "payMyMorgage".

I'm with Lexi. I like Sacto, it suits me fine, but it's not Santa Barbara. Employment is only one piece of the puzzle. We could have 100% employment, with everyone working at Wal-Mart, and I don't think that will help sell all those 500k homes. Will we drop to 3 x the median income (which is about 50k)? Sure, we'll go way below that in parts of South Sac and Oak Park, but in most areas I think it will be closer to 4 x median income.
What it all boils down to is those that for whatever reason MUST sell.
In this category would fall flippers, liar loan ARM resets, builders, people transferring out of the area, and banks that have foreclosed on properties. So, if all the homeowners who don't NEED to sell refuse to sell until prices come back up, that's fine by me.
Will rents go up? Maybe, but I doubt it for at least another year.
There's something pleasantly diabolical with the notion that renters can be turned into home owners by a concerted effort on the part of landlords to raise rents, but I fail to see where this benefits the landlords in the long run, as they will be trading short term profits for long term losses.

Most of us have a finite income with which we must eat and pay bills. There is no joy in having a home simply to be able to say one is a "homeowner". There is no freedom in being able to paint, redecorate, landscape and remodel if there is no money in the budget to do those things after paying the mortgage. A gourmet kitchen is not necessary if all one can afford to eat is ramen noodles.

Patient Renter said...

Colster: The arguments you're making against a big price drop are the same ones that people have been making for the last year and before, saying prices won't drop because the economy is too strong, employment is strong, etc.

Take a memo: They were wrong, and if you had posted here a year ago you would have been wrong too. Prices dropped. Prices are dropping. Prices will drop. I'm not sure what magical scenario you think is suddenly going to make prices stop falling?

Coltster said...

cmst- yes I also have the name paymymorgage

I hope this blog goes on for a few years when it will be retitled 'Sacramento Landed'- probably in 6 years it will be called the sacramento takeoff again.

ps: everyone knew we were overdue for a correction- it is not even close to a surprise- just natural, I expected it way sooner.

Just will be interesting to see who's prediction is right on how far down prices go from the peak.

It would be great if this blog could poll everyones opinion on how far prices will go down. If the owner of this blog is reading that would be some prime entertainment.

Sippn said...

Coltster - I like you but some of the readers here - picture fingers in ears saying "La, La, La"

Lexi - so move to SB - I like it too but can't afford to raise my kids there.

Oak Park might fall close to 3x Sac but still higher than 3x median income of Oak Park.

Who said rents increasing 11% - wow, thats more of an increase than my ARM!

La, La, La!

lexi said...

Sippn

I'm just saying Sacramento is
hamburger trying to command
steak prices. Thanks to cheap
money they got it but they can't
hold on because in the end...
it's just hamburger. And hey,
I like hamburger but I won't pay
a filet mignon price for it. :)

lexi said...

Oh and someone said the economy
is doing great? Wrong.. it may appear that way due to the fact that our government is basically
running their check book like the
typical american and living on credit. When Clinton left office we were doing great (no I didn't vote for him) and now with the Iraq war and Bush in charge we're in huge debt. How much?$8,887,127,716,430.49 that's how
much and growing by the day. That'
translates to every American's share of the national debt of just
under 30,000 a piece. So ...no
we're not doing great. We're all
living on credit...even the US.
You can check that debt on Honorable Congressman Walter Jones
of the third district of North Carolina's site if you doubt me.

lexi said...

By the way... if you've never
been to Boise ... it's pretty
wonderful and I'm quite sure
worth the 4 times the medium
price. My niece who's a flight
attendant and flies all over said
Boise was her favorite city. Just
fyi

TheObserver said...

I think both DD and Colster are on the extreme opposite ends of the price decline debate.

Colster, 10% is wishful thinking, but as an investor I see why you are crossing your fingers for the end to be near. The problems with the sub prime crisis are just starting, and the pool of potential buyers is drying up at a fast rate. Prices have already dropped 10% with little or no negative market influences, now we have issues with re-setting arms, the sub prime crisis, foreclosures, tighter lending standards, and negative press, that will really undermine the housing market for the next 2 to3 years. If the market lost 10% with no negative factors in place, it’s going to get hammered with all of the new developments over the last 6 months. I do however think DD’s assessment of a 50% correction is a little too much, at least for desirable areas.

Since everybody gets to voice their own opinion here, I am going on the record with mine: I believe by 2010 we will see a 20 to 40% drop in prices, all depending on the area, and if I was going to throw out an average number, I will shoot for the middle and say 30% average price drop from the current prices.

I just got approved for a $408,000, VA, no money down loan less then a week ago, but there is no way I could afford payments on a $408K loan, so there is more tightening to do with the lending standards (I plan to stay under $335K as I know I can afford that). I now plan to sit back with my pre-approved loan and throw out some very serious low-ball offers over the next year, and maybe I will get my 30% deal?

Diggin Deeper said...

"Right now- employment is robust- people are spending money and letting the economy go round."

And if you read the most current jobs report boosting jobs by 180,000 that would cement your statement. Unfortunately, digging a little deeper into the numbers shows that 132,000 of those jobs were phantom birth/death model jobs as reported by the BLS. If one just takes the numbers at face value everything appears great. The media pundits applaud, the markets respond, and duping continues. And when someone on the street asks "If there are so many jobs being created why isn't the economy growing?", the answer might be, "Because its not!". And we continue to "La La La", as Sippn says, until we end up a liquidity based recession that no one wanted to see coming and real estate becomes the major fallout. 3 X income very possible... especially in Sacramento

Diggin Deeper said...

That should have been 128,000 jobs, not 132,000. This basically represents 71% of the job report's totals and will not send one dime to GDP.

Mark said...
This comment has been removed by a blog administrator.
Mark said...

"I'm just saying Sacramento is
hamburger trying to command
steak prices.'

True, Lexi, I'm from the Bay Area, where the housing prices are RIDICULOUS, but you do have a shortage of houses and enough Google-type millionaires who keep the prices high. I'm thinking of moving to Sac, and there's no way the prevailing salaries support 400-500K homes...especially with all the building going on and the wide availability of land. I expect to rent up in Sac for another couple years, wait for the blook to flow ankle-deep in the street, and then lowball desperate sellers until I buy at 2001 prices.

Diggin Deeper said...

Want to know more about the birth/death model as it applies to jobs? It's a bit frank but if you read the article below you'll get the idea.

http://www.freemarketnews.com/Analysis/65/5838/swim.asp?wid=65&nid=5838

Dig a little deeper as things aren't always as they appear.

Jeff said...

I didn't get your comments Sippin. Are you a bull or bear now, I can't tell. I just recall that most of your comments were around prices going up, not down. I don't see any evidence or information to support those claims...maybe you've changed your tune???

Sittin' Out This One said...

Sippn said...

"You will never again see median prices 3x median income in Sac."

I remember the same thing being said in 1989-1990. In 1995, we dropped below 3x median. If you look at the historical news articles, you will see all the same dynamics in action 15 years ago. There are different variables but similar results. In 2005 the Sac Bus Journal ran an article about how home builders in CA would NEVER catch up with housing demand in CA! The same story ran in 1989, just a different author.

Sippn, the pendulum swings back and forth. It always does and always has and always will. The Sacramento market has been overbought by sub prime newbies and SF Bay Area GF's. Start looking at Max's FITs chart a little more closely. All those $800,000 houses sold for $400,000 in 2004. 2004 was 3 years into the bubble market already! In 1999 & 2000, those 2500 SF homes were selling for $250,000. Yes, $100/sf. Using any reasonable measure of appreciation, they should be selling for about $135/sf in 2010. So the $800,000 home (2005) has a very good chance of selling for $337,500 (2010). That is a 57.8% decline. Prices are getting closer to that cost/sf for new homes right now.

The Observer:

Your comments are very solid. One thing you might consider is inflation and the effect on pricing and affordability. If you believe nominal housing prices are dropping each year and incomes are rising 3-4% and inflation is rising the same amount, a 5 year effect on housing costs is a 15%-20% decline just from inflation factors alone. So if you forecast 30% nominal price reductions, then inflation creates another 15% drop. Perfect Storm may just be correct after all.