Wednesday, April 25, 2007

Wall Street Journal: Sacramento Inventory Up 22%

U.S. House Prices Slide As Property Glut Grows

Hat tip: Average Buyer

24 comments:

Rob Dawg said...

"Strong" employment and yet large declines in housing prices.

The +22% is "listed" housing. Nearly all new housing is not included and Sacto is very exposed to new housing.

The report, were it produced in April 1912, would read: "The onboard managers from the accounting department of the Cunard Line are pleased to report that free ice is now available on the foredeck."

cba said...

Now factor the information from this link into the equation

http://video.google.com/videoplay?docid=4094926727128068265&q=immigration&hl=en

Diggin Deeper said...

Behind in Loan Payments is 3.23% for Sac. Highest in the state (based on the graph shown) and approximately 8% higher than the national average. As far as strong employment is concerned, I guess that means predominently shirt folders, meat flippers, Taco Bell assembly line workers, and WalMart greeters...all those infrastructure service jobs needed to update the new communities.

Inventories can't continue at this pace without further pricing pressures coming into play. Continued at this rate we'll soon have 12 months of inventory and whole blocks of existings up for sale.
Something's got to give in this market. The inventory side of this market reminds me of SoCal in the early nineties. When inventory levels hit their peak, it seemed prices were dropping by multiple percentage points per month.

Patient Renter said...

The +22% is "listed" housing.

Yep, and we know that there's a huge inventory of unlisted REOs and the like.

Casey said...

cba, that tool in the video is an idiot.

Sippn said...

Well, it took me awhile to find the WSJ article. Sacramento is always listed in the "major real estate markets"

# months inventory here are large in areas of production home building, Natomas, Elk Grove, West Sac, Lincoln - not East Sac, Carmichael, Fair Oaks, Folsom, etc. some showing 3 months inventory....

But, the inventory growth is small compared to Portland (87%) Seattle (42) LA (54) CHicago (44) Tampa (62)

Considering how many investors and pot growers bought homes here sight unseen with owner occupied no doc 100% loans..... we're weathering it OK.

Folks, I know you don't want to buy, but your parents called and said they were renting th movie "Failure to Launch"

Sittin' Out This One said...

Sippn,

Your last paragraph is a bit criptic. I think many people on this blog want to buy, but are concerned the market continues to drift down...by 10% a year or so.

I assume the "Failure to Launch" reference means the housing price correction has failed to come into play? How can you deny that the market is soft and prices have fallen. The only real question is how far will the market drop?

I do think the bubble is "over sold" in many ways. People still need a place to live. But when I watch a new FB purchase 10 houses from a builder, then hire a property management firm to rent them all out, I see another downward act. Rental inventory is moving much higher every day. It will take a new FB a year to find tenants for 10 houses in Rancho.

Lander has indicated there are some stats about migration which indicate a population loss in Sacramento. That will be the real story, if that continues to hold up, YoY for a while.

anon1137 said...

Interesting article on sfgate recently about how renters used to be considered 2nd class citizens, but now they're looking like very smart investors. I would say that's especially true when you compare the prospects for the Sac housing market over the next 5-10 years vs. the S&P500.

Diggin Deeper said...

sippn:

Kind of a selective numbers game isn't it? If I choose Fair Oaks I get a lower monthly inventory supply than if I choose Elk Grove? Why not take the whole? Add in the "off listed" bank owned, FSBO's, other off MLS stats, and then take a conservative percentatge of the NOD's that will likely fail...and you might come up with the real (estate) story in Sacramento. You are basically saying that new homes and other non-MLS homes have no bearing on supply? How can you advise your clients without taking everything into consideration?

Gwynster said...

Sippin was trying to imply that we needed to quit renting to be grown ups. LOL now that I understand where he is coming from he cracks me up... I don't step up to the soapbox except for very special situations >; )

Sippn said...

Housekeeping - what is a FB?


The movie "Failure to Launch" was about an adult son still living at home at age 30+, owns a Porsche, mom does his laundry, etc. Just jabbing a couple of commenters that claim to be "renters".

The stock market is moving up.

Real estate has been moving down.

Does that mean that every stock is a good buy and every piece real estate is a poor buy?

Are you Sheep?


Diggn, I'm saying that the overbuilding of production homes coupled with easy borrowing and massive selling to speculators in those very areas have created the large inventories in those areas. Those problems are not as big where #months inventory are less than 6.

But if you were to buy a home, do you just give the agent your $500,000 and say "go find something, anything will do" or do you hop in the car and look?

Gwynster said...

ps. Sippin, does your mom still have room in the basement for me?

Patient Renter said...

"Does that mean that every stock is a good buy and every piece real estate is a poor buy?"

This is a pathetic comparison. being that the stock market is largely rigged and difficult to predict, whereas with housing it's pretty damn easy to predict what's going to happen over the next few years.

"Are you Sheep?"

Because we don't buy into your lame comparisons?

Cmyst said...

I heard something very interesting today, but I'm not wealthy enough to do anything much with the market.
What someone speculated was that a dollar which is falling in value will tend to cause a rise in the stock market as a whole, because more "dollars" will be reflected. Which may be crazy, but it was said by an economist.
Personally, I pray that my renter children do not buy, but they aren't living at home (in my own rented house) and they don't use me to afford an inflated and over-consuming lifestyle. I have, however, encouraged them to move from apartment-renters to home-renters.
And now, this second-class citizen renter is off to the Granite Bay nursery to buy some plants for my raised bed gardens. We helped out our landlord by mulching the entire side yard on the outside of the perimeter fence a couple weeks ago -- my sig other thought it looked kind of desolate, and the landlord didn't want to re-mulch yet. Our neighbors across the street happily commented to the sig other about how nice it now looks. Yeah, it's not my house, but it is my home.

smf said...

I have worked in construction design for 18 years in SAC, and have seen many residential projects disappear in the last few months.

But the problem is totally supply and demand. More supply = lower prices. Basic fact. Nothing will stop that now.

The problem lies in supply. SAC, for example, needed 20,000 new houses built. 35,000 were built. There are only so many people available to occupy all these homes, regardless of the price.

Even when you have owners like me, hoping to move up to a different home, there is not enough people to occupy these homes, regardless of price.

Diggin Deeper said...

Sippn:

Smart people don't buy stocks when the stock market's in a freefall with no end in sight. If they do, they're gambling, like they did during the dot.bomb implosion. Sheep? There was a flock!

I guess the only thing that really matters is that there's a helluva lot of inventory that doesn't get counted, slips off the roles, and adds to the totals that just won't go away.

Some articles have shown up on this blog by RE professionals that are so whacked out with misinformation(multiple offers, no inventory, robust open house attendance, sales, sales, sales, etc), prospective buyers ought jot their names downn. Would anyone a buy a home from someone so blatantly out of touch with real(ity), as some of these wingnuts? These Pied Pipers of local real estate ought to do a headcount. Because by the time they get to where they're going, they're likely to be all alone.

Gwynster said...

SMF,

They're still building in Woodland and Davis. I think there is still construction happening in West Sac too. It's slower then it was but it's still there.

The thing is we have a population that outmigrating. Our growth now is a trickle compared to 2000 to 2003 and if you follow the trend we'll be negative in 2010. That's going to mess with the market as well.

So what is going to happen to all those huge 3000 sqft monsters? Are they going to divide them up and sell them as duplexes? At $140 per sqft, you could have people entering the market in a way that made financial sense.

Sippn said...

Checking my soup, stirring the pot...... mmmmmmmm ....

Diggin Deeper said...

cmyst

"What someone speculated was that a dollar which is falling in value will tend to cause a rise in the stock market as a whole, because more "dollars" will be reflected"

If you stripped out the depreciation of the dollar since 2000, you'd probably find that the Dow could be valued below 8500 unadjusted for inflation.

Imho, dollar devaluation and low interest rates did wonders for the price of real estate across the country. One could make the argument that if we applied the same rationale to real estate today, (here you go Sippn) prices are not over priced. However, and this will cause some controversy, real wages have not kept pace with the dollar's fall. All recognized gauges for inflation have been printing 2-3% per year while the dollar over the same period has devalued 5% and more like 6% per year. Real wages have mirrored, at best, the inflation rate of the PPI, falling behind year after year as the dollar loses value at basically twice the rate. If we were in Indiana, this blog would be unnecessary because home appreciation was fairly tied to the inflation rate which was fairly tied to wage rates. But because we are in one of the high speculative markets in the country, prices not only outpaced inflation but outpaced the dollars depreciation, too. By a bunch!

To boil it all down:

Dollar's not worth s**t. Wages have not kept pace with the rate of the dollar's defaltion. And real estate prices, here, are way out whack for what today's real wages can afford

smf said...

Gwynster,

I know what you are talking about, they keep building and building.

But what ALL have forgotten is the reason WHY there were so many people coming into the Central Valley.

Remember?

AFFORDABLE HOUSING!

So what happens to growth when the main reason for said growth disappears? And they are still building expecting the same growth as before.

Gwynster said...

LOL at least I know what to get you for Xmas Sippin: I huge @ss wooden spoon.

Gwynster said...

smf

Actually this is a CA ptoblem much more then a Sacramento region problem. The draw to this area for generations was affordable housing and a vibrant job market and decent weather.

Um so how about that weather >; )

Cmyst said...

Thanks Diggin...I think.
"All recognized gauges for inflation have been printing 2-3% per year while the dollar over the same period has devalued 5% and more like 6% per year."

dvobell said...

sippin sez: "Considering how many investors and pot growers bought homes here sight unseen with owner occupied no doc 100% loans..... we're weathering it OK."

Talk about damning with faint praise...

real estate numbers continue to give sippin lemonz --

-- and he's still stirring that big batch of delicious homemade 'lemonade'...that's pretty 'Kool.'

"Hey look, everybody! We're not in Stockton! Yaaaay! Hosannah! Think of all the money we're not losing!"

re: snarky 'failure to launch' jab:
Perhaps in this the Year of Carnage 2007 it's better to bubblesit and have people suspect one is a fool than to catch a falling knife and remove all doubt...or something like that...