Saturday, October 27, 2007

Sacramento Foreclosures Almost Triple 1990s' Record

HOPE:

[California Association of Realtors Chief Economist Leslie] Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state.
-Sonoma Press Democrat, Feb 2, 2007
REALITY:

Sacramento County Foreclosures:
2007 Q3: 2,065 (+502% YoY)
1997 Q2: 703 (90s' Record)

Sacramento County Default Notices:
2007 Q3: 4,947 (+181% YoY)
1997 Q1: 2,441 (90s' Record)
From the Sacramento Bee:
Beth Flure thought last week was overwhelming when some East Coast banks sent her 11 new foreclosed houses to sell. Tuesday a Denver mortgage servicer handed her 42 houses to unload. Then came four more. "That's just astronomical," said Flure, a Sacramento real estate agent who markets bank repossessions. "There's tons, and we're going to see far more. It's not going to stop for a while."
...
The [6,638 regional] default notices are gaining on sales. DataQuick said 7,791 new and existing homes closed escrow during the same period in those counties.
Foreclosure chart

13 comments:

Professor Shays said...

Yesterday I attended the Real Estate Educator's conference in Los Angeles. The keynote speaker was an economist from CAR. His somewhat painful presentation highlighted the economic realities of this situation. I was happy that he admitted the problems associated with providing sales data based upon the 'mean' price, and CAR's efforts to report data based upon square footage. My thought relative to this change is that 'mean' sales data isn't looking good so it is time to change the measure.

Oh and before I get gain the wrath of blog participants, I am not, nor have I ever been, a real estate agent. I'm just a guy who handled the transactional side of foreclosures (started doing that in 1972). Probably one of the few experts that is now witnessing my third, and I suspect worse, economic downturn in residential real estate. In this case, the third time isn't the charm.

Professor Shays

Patient Renter said...

Someone feel free to send this to LAY :)

Bakersfield Bubble said...

I predict this will look even worse in 2008.

Can we also bring back some quotes from Jimmy C? :)

Sippn said...

Ahhh. . . our new found source of affordable housing.

If it keeps up, the quantity is about the same as the number of homes builders stopped building in the past 2 years to put it into perspective - only cheaper.

Talked to a guy standing in front of an REO yesturday and the rent for his apartment was similar to the payments (including all) on the house he was looking at.

Its investor time.

RMB said...

Only if that payment is for a 30 yr fixed or similiar loan. From what I have been hearing the funny money is still available out there so, this guy may just be the next FB.

Gwynster said...

Sippin,

Lots of people "think" the rents and the piti will wash out. There are so many rentals vacant now, it's not funny.

But thanks for the new spin. Your old one was getting a little dusty.

buying time said...

Anyone know the average or median size of a SFH in Sacramento?

I'm thinking around 1750sq ft. But I don't have any hard stats on it. Any stats would be appreciated...even if its just "for sale" stats.

Sippn said...

It was PITI/30 year fixed!

The numbers don't have to be this close to make the market move.

You probably didn't see my comments on AB yesturday

...
big housing critic/analyst - Ivy Zellman on 1140 Saturday who said:

" Its a great time to buy a new home in the Sacramento area, . . . the problem is in resale . . . many sellers not realizing the prices they need to drop to . . . "

". . Main problem right now is getting loans . .the mortgage market. . . "

Chet Margo said...

In 2000, we bought a 2/1 starter near the campus of UOP in Stockton, CA for $128,000. Home prices had just started to appreciate after a prolonged slump. (I can recall friends in Stockton being underwater on their homes in the mid-90’s).

In 2003, the home we bought two years previously was now worth $225,000. We sold it.
By 2005, it was worth $351,000 and there was much gnashing of teeth in our home. It had appreciated 22.5% in each of the past five years!

Then the market turned.

In 2006, it was worth $325,000.
And right now, in fall 2007, it is worth $244,000. That’s a drop of 30% since the 2005 high, but still a YOY appreciation of 9.6% since 2000.

And that’s why I don’t think this market has hit bottom yet. I think a more realistic YOY appreciation rate is 8%. That means this home “should” be worth $220,000 (not $244,000). That means this home needs to drop in price by another 10%.

The scary thing is if you think the real estate market should have appreciated YOY more like 6% since 2000, then this home needs to fall by another 20% (to $192,000). And if you’re a real bear, a YOY rate of 3% means this home still needs to fall another 35% (to $157,000). That would be a drop of 55% since the high of 2005.

I know that seems absurd, but if real wages haven’t dramatically gone up since 2000, it doesn’t seem so far-fetched to believe that home prices need to fall much further to meet the demand of those who can afford to actually buy them.

Jacob said...

You also have to deal with the buyer psychology. Noone want to make an investment that will lose money, and for years buyers have been trained that a home is an investment.

So even if a home falls in line with the price it should be and is technically a good deal, it will still not sell that fast since most buyers will be very hesitant.

And I have no doublt that we will hit bottom well below what the price "should" be. Just as prices ran up too high, they will fall to low.

norcaljeff said...

It would be interesting to know the median income for this area both in 2000 and 2007. I have friends in high tech, some working for local Fortune 100 companies, making nearing the same money today as 7 years ago. I suspect there are others in the Sacto region in the same boat, or worse, so I don't see how homes could sustain a triple in price and incomes moved 10-15% at best in the same time period without a painful ending.

what a mess said...

Hello Sippin!

Could you help me understand your encounter with the renter a little better? What are the specific details? Are apples being compared to apples? Could we please see some numbers? I have provided a few questions to help with the info I would need.

1. How much is the renter paying, what area is the rental in, and how is the rental configured? # bdrms, baths, garage, Etc.

2. Price of REO home, how configured, lot size, condo, mello roos, HOA dues, etc.

RMB said...

chet,

be on the lookout for $157K. Stockton is the foreclosure capital of the US and prices are falling quickly. There is no industry in this area to support the level home prices rose to, so all the people who bought in 04, 05, 06, and 07 are underwater and will be getting worse off. As the prices fall more people get in trouble etc, it's called a death spiral and is the obverse of the virtuous cycle.