Saturday, April 14, 2007

Sacramento Housing Market: Inventory

Sacramento Area Inventory Growth per SacBee/TrendGraphix:

Month-over-Month (March v. February)

2005: +6.9%
2006: +4.5%
2007: +9.6%

Year-over-Year (2007 v. 2006)
January: +18.4%
February: +15.5%
March: +20.6%

As always, you can get the latest Sacramento housing inventory statistics at these sites (also available on the right sidebar): BMIT, SacRealStats, Hardtack, and Housing Tracker (and here).


Sittin' Out This One said...

Hey, wait a minute....Sippn told us just a day ago the listing velocity is not accelerating.

Sippn, we need to talk. Of course a month does not a trend make. So maybe we should talk next month when we can call the trend.

Sippn said...

Yes, I fell on my sword at 8:51 this morning at Sac Real Stats. I was previously referring to the charts of April 8, but I don't know why all these guys data don't match each other, the guy at Trend Graphcs won't return my call. I've seen enough typos on his charts (-10% instead of -1%) to believe he needs supervision.

But yes the listing inventory velocity is about the same - look at the 3 monthe trend line, subprime problems likely caused a temporary bump.

Garth Farkley said...

The touchstone "months of inventory" number is also accelerating again. Lyon now has the sales posted for February 2007 and we've hit a new high for this current bubble/crash.

Lyon Feb'07 Sales Numbers

105 ElD
259 Pla
759 Sac
72 Yol

1,195 Total Feb07 Sac Metro sales

12,947 Feb07 Inventory

12,947/1,195=10.8 months of inventory in Sac Metro Feb07

Using Bubble Markets Inventory numbers and Lyon sales figures for Sac Metro area in Feb'07 we see just shy of 11 "months of inventory" (divide Feb inventory by Feb sales). That's a leading indicator of more and faster price drops ahead. Realtors traditionally say 6 months is a "neutral" market that favors neither buyers nor sellers.

We can expect even faster price reductions this year. Of course, this is before we even get hit with the incoming teaser-ARM resets.

For Sac Metro RE prices the only questions are when will we hit terminal velocity and is that a parachute in our pack or an anvil?

Ground Rush--Google it!

Perfect Storm said...

We can expect even faster price reductions this year. Of course, this is before we even get hit with the incoming teaser-ARM resets.

Right on garth,

Inventory is going through the roof and we have not even hit peak ARM resets yet. Per the Credit Suise graph peak reset will be in November of this year for subprime and ALT-A reset will be some months after. Sacramento will be a national leader in foreclosures, its going to be bad and the economy is going to tank. It is what it is.

Housing/Mortgage Doom 2007.

a_builder said...

And all the builders keep on buildin'!

Check out Serrano, (EDH)All the builders there are building like crazy, Lincoln(Even JTS released 3 more frames in Lincoln Crossings, inspite of the 70% empty inventory in the tract!)Surely the corporate bean counters are aware of current inventory levels yet they keep on truckin'
I do know this: Certain builders are offering MASSIVE incentives in lieu of price reductions... And Toll recently lost 5 out of 7 "sales" in Serrano because the buyer's mortgage companies either got cold feet or went outta business...

fishtaco said...

I think the thing that is going to kill the market this year (and what started the downturn last year) is the reluctance of the first time buyer. Without the first timer, the market stalls out. It really screws up everything and until they feel confident in their investment the market is not changing.

Sittin' Out This One said...

a_builder & fish taco,

You are both correct, but for different reasons.

It appears, for example, about 9 of the last 10 JTS sales all used 100% (well, actually closer to 110%) sub prime financing. That financing will soon be history as the sub primers go out of business.

That is why the 1st time home buyer will be sidelined. They have no down payment ability. They market has to sober up, now that the sub prime elixer is gone. There will be a big headache in the overhang for a long time.

Perfect Storm said...

"about 9 of the last 10 JTS sales all used 100% (well, actually closer to 110%) sub prime financing."


The funny thing is that I keep hearing that subprime was only for the poor, subprime was used to finance homes in all areas of Sacramento, rich or poor. Yes the first time home buyer is pretty much out of the picture, by the time they pay for rent, car payment, food, leisure activities, and all the other stuff they look in their wallet and see nothing left over.

The fabled fence sitter first time home buyer is just that a myth, and it is going to be that way for a long time. A long time means years not realtor long time of oh next month things will change. Realtors gauge time using a similar conversion to dog years. To them two months is really a year and so on.

Garth Farkley said...

sittin' out,

As Mish says, in a deflationary cycle rates are low but.... No one wants to borrow. Even if they did, no one wants to lend. That is when the credit bubble pops. And that is exactly what's happened here.

The fed loses power because they control the rates and the reserve ratio, but they can't force people to borrow or lend at any price when the savings/desperation psychology starts to grow. They are pushing on a string.

Grab your ass and hold on. It's going to be one hell of a hard ride even for us bubble sitters/loser renters. I believe Mish when he says we are headed for a recession based on a) inversion as measured by 13 week T-bill versus 10 year note; b) negative growth of money supply as measured by M'; c) housing starts nationwide continue to fall. When you take a) and b) together they have predicted a perfect seven out of seven of all official recessions in the last forty years. Or was it eight out of eight? Recession--Mish it!

Based on the enormity of the worldwide credit/asset bubble I fear worse than the normal business cycle when we hit our inevitable bottom--and soon. It's not different this time and we haven't reached a permanently high plateau. Even a satellite will eventually see it's orbit decay. Look out below.

Gwynster said...

I made the mistake of stopping at a open house. The realtor was in his late 20s. He looked at my card and then the questions about the economy insued.

He griled my on demographic changes and sample data and finally conceeded that Woodland was going to feel some pain. But no matter what, Davis is different.

I just rolled my eyes and had him start to write an 270k offer on the 370k. I "changed my mind" at the end. The look on his face of his wife who was keeping him company was priceless.

I think I have a new hobby >; )

Coltster said...


I did the same thing this weekend- had some fun with lowball offers:

On the blog there is a sacramento kid who had no money that got 2.2 million worth of loans to buy fix and flip several houses.

One of his houses was in north highlands and he bought it for $330,000 - lol

it just went to forclosure auction for $217,00 2 months ago.

Now it is back on the market for $199,000 today! haha!

I put in an offer for $140,000 for fun -

have fun with the low ball offers, I am tooo - lol

wait n c said...

Any one know of a way to get inventory by zip? I would like to compare it with sales (as reported by the Bee) to get a months inventory by zip. Cause I think the areas we are looking in are still in the 4 to 5 months of inventory range.....

Coltster said...

wait n c:

You can go to and type in the zip code and will tell you how many houses in the zip code are for sale in the mls.

Sittin' Out This One said...

Wait N C,

You can go here

and get all the defaults listed by zip code for the whole county. It is very interesting how much disparity exists.

Sippn said...

From the BJ (I forgot about this)

"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. "

The Bee also had this information for their Friday article but chose instead to focus on inventory.

Sittin' Out This One said...

Sippn said

"...look at the 3 monthe trend line, subprime problems likely caused a temporary bump..."

Are you saying inventory went up because of of sub prime woes? I believe inventory went down in early 2007 because the last sub prime deals were pushed thru before the financing product ended. I can tell you multiple stories about future FB's urgently buying with zero down and $50k cash rebates, because 110% financing was going away.

And what is temporary about the sub prime mess. That is a long term problem which will effect the market and drive future inventory much higher over the next 3-5 years.

Sippn said...

Sittin, I know of 2 persons with loans in process that were delayed due to 1 lender changing guidelines (daily) and another due ot the closing of one subprime lender, loan moved to another which was delayed further due to "unusually high volume" from compeititors closing.

A third couple I know is trying to purchase in the $300K range, has a zero down loan ready they are offering on REOs. So far, the banks (homeowners) will not accept their offers because they are not putting money down. Their offers are full price.

So yes, I think that subprime lender failures have delayed closings on some purchases and are partially responsible for some of the downturn in February and March, part of which can be salvaged by other lenders, but with delay.

How do you explain the builders having an improved quarter, I don't know but I speculate that when you are a builder with 100 escrows open at a lender and the Realtor has 2 with the lender, 2 somewhere else, etc, guess who gets priority?

Sippn said...

It is possible, by the way, for inventory to increase, while sales volume increases also.

It depends on the rate of foreclosures, rate of building, season, etc.

We need to watch all indicators to understand the market, not just the ones that tell your story or mine.

Perfect Storm said...


As for the home builders having an improved quarter are these numbers derived from contracts signed to purchase a new home or closed escrows. As we all know that the contract signed for new homes does not account for cancelations, so we all know those numbers need to be taken with a grain of salt.

Maybe I am wrong? Also, what happened to the pending sales you kept talking about or is the new home sales for the first quarter your focus now?

For me the subprime and Alt-A meltdown will last for a long time and we are just now seeing the fall out.

Sippn said...

Good point PS, so I'm looking at my only sources for pendings, that are 45 days behind, but better than nothing.

Sac CO - Jan and Feb slightly behind 2006, but improving (closing the gap)

Placer Co - Jan/Feb better than 2006 - hey look there! Dang that almost got away from me.

But sorry for not foreseeing the subprime meltdown, I'll send in the brain for service.

fishtaco said...

It is difficult to look at the housing mess and try to see the effects of different factors (like subprime, etc.) It is pointless. Every neighborhood, city & county will be slightly different. Some will hold-up better and others will get slaughtered. Some people feel like it is a good time to buy, but many more do not. In the end, bad times for one area will affect other surrounding areas. Negative feelings about housing have infected many and there is no doubt that inventory will hit record highs by this summer. Until a bandwagon of folks feel like buying houses again, this thing is far from over and forecasting with an isolated piece of monthly data is a hopeless waste of time.

HappyinSF said...

Sippn -
Not foreseeing the Sub Prime meltdown? And here I thought you read this blog. Seems we've been getting all the gory details right here for at least a year, with daily reports of closures and plenty of reasonable speculation about where that trend was going. Maybe you shouldn't just dismiss everything out of hand from now on and move at least a bit more towards the middle.

lexi said...

I think that the foreclosure problem will be drawn out for years. I am qualified for quite
a bit more than I can actually
afford.. how many people are buying with money down and good
credit today that will be tomorrows
victims of the market when they
realize they can't afford it or
they have a illness, job transfer
etc and the market went down and
erased the equity they thought they
could count on to pay the cost of
selling it.

Sippn said...

Happy in SF.. I mean prior to January end when I was asking for more pending data, but its been obvious since then that sub prime is a problem.

drwende said...

Looking only at the specific house type I track (3/2, approx 1600 SF, West Sacto -- a sector appealing to specuvestors)...

1. Hovnanian (Forecast Homes) is now dumping unsold new homes into the MLS to compete even more directly with resales. And they're undercutting resale prices by about $40/sf.

2. Not one house with my criteria has actually sold in the past 3+ months. Either the listings go inactive or the house remains listed. Some are relisted and go inactive a second time.

3. More than half of these listings are now short sales or bank owned. Even banks wanting to get out of property management can't price them low enough to pique buyer interest.

It's a little scary when 2- to 5-year-old houses lower their prices $100k from the peak (about 25%) and still can't find buyers. I think there's still another $50k to go down... and then with average 4% annual appreciation, you have another 12 years before the nominal price returns to the peak level. Inflation adjusting makes it all much worse.d