Thursday, September 20, 2007

'I Think the Market Is Showing Life Toward the Bottom'

From the Sacramento Bee:

Sacramento's 2-year-old real estate downturn has a good chance of hitting bottom in 2008, banking and building industry analysts told struggling area builders gathered Wednesday in the capital...[N]ew home builders were told to expect months more of the slowed sales and heavy discounting that have marked 2007.
...
Last year at the same session, builders heard that analysts were monitoring Sacramento for signs it would begin leading the nation out of the housing slump. This year more sober assessments prevailed in a market hit hard by too many houses for sale, lack of buyer urgency and, lately, a credit crunch that dried up financing for an estimated 30 percent of would-be buyers.
...
Overall, Sacramento's journey to recovery has "been a longer road that I thought," said Steve Smiley, a managing director for Hanley Wood. Smiley, who watches Bay Area and Central Valley housing markets, said that despite builders' current troubles buyers probably shouldn't expect new home prices to fall a lot lower. "I think the market is showing life toward the bottom," he said.
...
Hanley Wood's Smiley predicted Wednesday that builders are likely to end this year with about 9,000 new home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's down considerably from his prediction a year ago that 2007 would end with up to 11,500 sales. Through July, builders sold 5,068 homes in the six-county region, Hanley Wood reported, compared with 6,175 the first seven months of last year. "We expect sales next year to push 10,000," he said. "The incentives will continue."
From The Union:
A developer of a south county subdivision is downsizing his original housing project to meet the demands of a changing real estate market.The one-time luxury housing development is now being repackaged as a subdivision for smaller, lower-priced homes and senior apartment complexes. “We’re kind of revisiting the demographic, because the market is going through transitions,” said Dave Snow, president of DAS Homes.
...
Snow first brought his ideas to Nevada County three years ago, when home sales were booming. Since then, the housing market has declined sharply, leading to defaults on subprime loans and foreclosures — in Nevada County and nationally.
...
Snow is bypassing his original plan of two-story custom homes with pricey doors and granite countertops priced between $495,000 to $860,000 for smaller single-story homes with tile countertops priced at $450,000 to $600,000. "There’s a lot of people just as happy with tile countertops if it can save them money," Simmons said.
...
Snow said he will keep a watchful eye on the market, and if it continues to show stagnant signs, he would have to re-evaluate his plans for the site. "Ultimately it’s my responsibility to be open-minded and meet the demands of buyers. If the community needs housing, that’s our goal. I’m not going to build a project out if there’s no buyers," Snow said.

30 comments:

Rob Dawg said...

"I think the market is showing life toward the bottom," he said.

Beer... nose... keyboard. Damn you Lander.

Diggin Deeper said...

"Hanley Wood's Smiley predicted Wednesday that builders are likely to end this year with about 9,000 new home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's down considerably from his prediction a year ago that 2007 would end with up to 11,500 sales"

Hmmmmm...Ya think?

rocklin renter said...

Beer... nose... keyboard. Damn you Lander.

It's 5 o'clock somewhere?

Smiley, who watches Bay Area and Central Valley housing markets, said that despite builders' current troubles buyers probably shouldn't expect new home prices to fall a lot lower.

Yeah, umm, right. Lets see... 2/1 sold to foreclosed rate, going to be 2/1 foreclosed to sold soon.

Yeah, prices should be totally stable dude. It's a buyer's market, no better time to buy. (sarcasm)

David said...

"Smiley, who watches Bay Area and Central Valley housing markets, said that despite builders' current troubles buyers probably shouldn't expect new home prices to fall a lot lower."

We can make them as low as we want by not buying.

Diggin Deeper said...
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Diggin Deeper said...
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Diggin Deeper said...

Inflation fears end rally, sending stocks down

http://news.yahoo.com/s/nm/20070920/bs_nm/markets_stocks_dc_60

"The U.S. has cut rates, and so it's less attractive to hold dollars. I think it causes an adjustment in all asset classes denominated by dollars." said Milton Ezrati, senior economic strategist at Lord Abbett & Co., in New York."

And treasury rates today went up?...Can't be because Ben did a dollar fly-by over the country. Aren't mortgage rates supposed to drop when he cuts rates?

Better rethink the granite Snow...the bottom hasn't been found quite yet.

Oh and by the way...that's a pretty expensive front door your giving up with the price break you're offering.....

smf said...

Personally, I am starting to believe that since things travel at internet speed now, the bottom will be here sooner rather than later.

In 2005, I first noticed the end of the rise in prices, after also noticing that the asking price was higher than the selling price.

That's when I told friends to expect investors to bail out sooner rather than later, to lock-in their gains. Hence the explosion in inventory.

Lately I have finally started to see more realistic prices, in more expensive areas.

I will expect the final death of the bubble to occur by next spring, when the last of the hold outs and those who bought foreclosed investment properties realize the futility of their quest.

With that last push, there'll be a race to the bottom. Of course, then the full extent of the excess inventory will be fully realized, causing some areas and price ranges to undershoot.

And after a few years of stagnant prices, the excess inventory will be either absorbed or demolished.

ralphk said...

Snow is bypassing his original plan of two-story custom homes with pricey doors and granite countertops priced between $495,000 to $860,000 for smaller single-story homes with tile countertops priced at $450,000 to $600,000. "There’s a lot of people just as happy with tile countertops if it can save them money," Simmons said.

Hey, to save 45,000 on a 'smaller' home with 'tile countertops' that's got to be the deal of the century. Sign me up.

Diggin Deeper said...

smf...The demolish part will be over the citys' huge protest.

Demolishing whole neighborhoods would not play too well.

They got to quit building before considering all other options.

Perfect Storm said...

“mortgage rate is tied long term treasury rate, which has gone up due to inflation fear. so instead of helping, Bernanke just put another nail in the housing bubble coffin.”

Who’d a thunk there’d be a little silver lining behind that cloud?

smf said...

"smf...The demolish part will be over the citys' huge protest.

Demolishing whole neighborhoods would not play too well."

I don't refer to entire neighborhoods, but to houses that would have been vacant and unsold for years. What would you do if a houses has not been maintained for years?

"They got to quit building before considering all other options."

If a builder does not build, it will immediately go out of business. Quite the catch-22.

SacramentoCrash said...
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SacramentoCrash said...

VFM (very f'd mortgage)

The investigation exposed how Jim Martin and his business partners at VFM Investment Group falsified loan applications and listed investors as employees of the company in an attempt to defraud lenders out of millions of dollars.
Click here to find out more!

Now, the homes that investors bought are in foreclosure.

KCRA has learned that all 20 of the Elk Grove homes at the center of the investigation are now for sale. They're hitting the market for tens of thousands of dollars less than the investors paid.

Perfect Storm said...

Countrywide "Full Spectrum" Lending is history. No more subprime for Countrywide. 159 liar loan outfits are six feet under.

Housing/Mortgage Doom 2007

Foreclosure Hell 2008

Were right on track for a 50% decline by 2009.

Diggin Deeper said...

House prices to drop much lower: Greenspan
http://news.yahoo.com/s/nm/20070921/bs_nm/greenspan_bubble_dc_1


You just can't keep the Maestro off the front page...

"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."

"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said."

A nominal 10% drop in prices across the country = ? to Sacramento prices...

SacramentoCrash said...

The bottom will not be reached until prices are at a level supported by incomes in this region.

Underwriters will use the traditional 80/20, 25%/30% guidelines when making conforming loans.

Most of the people in this area are not sitting on enough cash to go 70/30 or 60/40.

Prices have to fall back to 2002 levels because that is where income levels are right now.

RMB said...

Or 2000, 2001 depending on whether or not you believe that the non-govt worker income has actually fallen since 2000

Patient Renter said...

"expect the final death of the bubble to occur by next spring"

That's way too soon. According to the Credit Suisse chart, there are still going to be a hell of a lot of ARM resets all through 2008, with plenty in 2009, and a hell of a lot again in 2010. Although we might see the bulk of the decline sooner than later, there will be no bottom while forclosures are still piling up. The internet doesn't change this.

smf said...

Patient Renter:

I know that the effects will be long lasting. What I mean is that by next summer, you will not find anyone who believes that the market will come back soon, or that higher end properties will not devalue as much, etc.

I mark Spring 2008 as the 'end of the beginning'.

Patient Renter said...

Ah I see. Hopefully that will be the case. From what I've read of the 90s, there was indeed some point at which everyone basically gave up all hope and "common knowledge" unanimously considered Real Estate as poison.

Diggin Deeper said...

"everyone basically gave up all hope and "common knowledge" unanimously considered Real Estate as poison."

Classic contrarianism....and a perfect time to buy...There are too many sellers and buyers who've yet to come to that conclusion.

SacramentoCrash said...

Pothouses and loan fraud are part of the underlying cause of rapid inflation in prices.

What do you think?

smf said...

"There are too many sellers and buyers who've yet to come to that conclusion."

But we are getting there. Lately I have seen more houses that are approaching affordability for us.

"Pothouses"

Wasn't there a story about that yesterday?

norcaljeff said...

These "seeing life at the bottom" articles always seem to pop up on Friday before the weekend. Coincidence? And then after all the suckers buy over the weekend the bad news about foreclosures and weak sales all come out on Monday and Tuesday. What a cycle. People need to be patient, the worst is yet to come. BTW, I see 4 more auction dates have been added to the big RE auction set for next weekend. :)

Patrick Hake said...
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Patrick Hake said...

Here is an interesting marketing concept.

List a house for 6 months for $999,900 and never sell it:

http://tinyurl.com/2e3x29

Then relist the same property for $1,075,000, but this time include a $60,000 Porsche.

http://tinyurl.com/2alncq

I guess they are targeting people who who are looking to finance a Porsche over 30 years for a 25% markup.

The best part is that they bought it for $807,500, with a $450,000 down payment.

norcaljeff said...

So that $60,000 Porsche will cost $75,100 plus a phat mortgage payment. Good deal! They should have put that $450K in gold or oil.

Sittin' Out This One said...

Bottom in sight?

Foreclosures rising
Sales rate falling
Inventory rising
Credit tightening
Prices falling
Builders losing money
Land set to drop

Hmm, until these factors change in direction, you will see no bottom.

SacramentoCrash said...

Add the impact of Pot Houses on market values