Thursday, October 04, 2007

'Under-Exuberance' for Sacramento Real Estate

From the Sacramento Bee:

The housing market should start recovering in 2009, but that prediction could get pushed back a year or longer if the economy falls into recession, forecasters told a Sacramento audience Wednesday. Analysts from Sullivan Group Real Estate Advisors, addressing homebuilders and real estate executives, said the market is expected to start stabilizing next year, with recovery beginning in 2009.

Yet much depends on the overall economy. With job growth slowing and unemployment rates rising, many experts say a recession is now a distinct possibility. "Will we head into a recession? Possibly," said Tim Sullivan, president of the firm. Sullivan Group is a market research firm based in San Diego. He said a recession "pushes everything back" in terms of forecasting a stronger housing market. Recovery might not begin until 2010 or later, he said.
...
Dean Wehrli, the Sullivan firm's vice president for the Sacramento area...said prices grew unrealistically high during the housing boom. Now, there's a danger that the market could wither to a degree that isn't warranted by the economic fundamentals. "In the same way there was over-exuberance in 2003 and 2004, there's probably under-exuberance in 2007 and probably 2008," he said.

13 comments:

Lander said...

Hat tip to Gwynster.

Sippn said...

Somebody also said," ... when the investors get here, we're probably at bottom.... "

BJ this pm:

HomeVestors of America Inc., a Dallas-based residential real estate company with 270 franchise locations around the country announced Thursday a California expansion that begins with offers of Sacramento franchises.

The company is known for its "We Buy Ugly Houses"

lexi said...

One company does not spell a housing recovery. This thing isn't
even close to being over...wait
a year and save thousands... wait two and save even more. When it
does botton it's going to flatline
for years.

Jacob said...

Yea, you need at least 2 companies to start the recover, so they can sell back and forth to each other.

Cause there arn't that many actual buyers for the current prices.

Sittin' Out This One said...

A client referred a friend to me yesterday. He rented a home which was being foreclosed and wanted to know what to do. I told him to just stop paying rent and enjoy the ride.

The irony is he lost his own home to foreclosure in December 2006.
He had a short sale arranged for $407,000 in May to protect his credit, but HSBC was owed $455,000 and would not take the hit. He let it go and moved out.

I asked him if he new what it ultimately sold for and he said, "No", so I looked it up. His old house sold in April 2007 for $369,000. The bank cutt their own throat. They missed almost a year of payments, incurred foreclosure costs, taxes, insurance, bonds, etc. which must have totaled at least another $30,000. Then they took $40,000 less for the ultimate sale price.

No wonder HSBC and the other banks are writing down billions. They can not get out of their own way.

I submitted an offer on a nice house for $398,000 last month (sold for $685,000 in April 2006). Countrywide had it listed at $467,000. They turned it down. Guess what, another bank just listed the same model for $408,000 down the street. Guess I should thank Countrywide and go offer $380,000 to the new bank.

Better yet, I should just hang out for another year: Foreclosures rising, listings increasing into October, sales down, credit tightening to a pucker......Hmmm, can't see much daylight in this market for a while.

smf said...

Somebody also said," ... when the investors get here, we're probably at bottom.... "

Let us know when they get here, then. Because what you have now is not investors, but speculators.

At current prices, you cannot hope to recover your mortgage costs with the rent that you can charge. Also remember that actual investment homes receive a higher interest rate that owner-occupied property.

The only bet this current batch of speculators (investors in your world) is banking on is higher home prices, soon.

And that is not ever going to happen again.

The prices will surely return to the levels seen at the height of the bubble, but then the price may be at 4X income rather than 10X.

10X income prices will not be seen in our lifetime.

Sippn said...

Forget all your calculators, long term investors will also look at long term appreciation (10-15 years) and rent escalation - which is expected to be at a higher rate than it has been.

Remember the Japanese investor who came here before the market bottomed and bought nearly 700 homes, 1988-1991? By the time he sold them in 2001, he was charging below market rents with no vacancy.

The numbers seem very close.

Diggin Deeper said...

"Forget all your calculators, long term investors will also look at long term appreciation (10-15 years) and rent escalation - which is expected to be at a higher rate than it has been."

Couldn't agree more! The question is... What 10-15 year period will give the highest rate of return on my investment? Do I start today or do I wait and pick up a greater return when all signs of a market bottom are in?

Sippn said...

I find it amazing that most of the bloggers here have never heard of the art of negotiation, but there are many other cultures where it is the norm.

The Japanese investor bought ahead of the bottom and sold well before the top, but did OK.

The bottom for buying from Dunmore may have been 2 weeks ago.

Diggin Deeper said...

Sippn...

"I find it amazing that most of the bloggers here have never heard of the art of negotiation, but there are many other cultures where it is the norm."

I guess if we listened to you a year ago we'd all be underwater on our "investment" no matter how strong our negotiaing position was at the time.

Negotiating power has increased fivefold since, and will likely to continue to increase well into '08 and quite possible much longer.

You're a smart guy, maybe its your time to jump in and use those negotiating skills to buy a Dunmore home....dive in.

smf said...

"The Japanese investor bought ahead of the bottom and sold well before the top, but did OK."

Don't forget those investors who lost a hell of a lot of money in their purchases.

Don't forget that the current prices in Japan are nowhere close to their high from 15 years ago as well.

Your arguments are sound. It is the current market conditions that makes your arguments invalid.

Diggin Deeper said...

The argument only makes sense when you get to pick your 10-15 year period based on one's perfect vision of history. It's selective reasoning at its best. Unfortunately, this downturn is proving to be unprecedented and caution should be used based on the reports coming in.

I haven't seen indications that investors are swooping in yet to take complete advantage of this market.

Any true real estate investor would be foolish to try and pick through the first batch of distressed properties when the overhang in the prime, alt-A, and subprime hasn't reached its peak.

What's the risk? This first wave of properties have been sitting on the market for 10, 12, 14 months and longer. Are we going to wake up one day and all that inventory will have been consumed overnight? There are probably twice the homeowners that will fail in the next 6-8 months. The inventory levels might not double but we're not asking for a long time horizon to find out what they truly will be.

I say if you've the cajones to pony up and take that chance, by all means dig right in. We've all got every right to try and call a bottom. Too bad no one seems to have gotten it right, yet.

Jacob said...

I could buy a decent home now, or I could wait a year and get it for less or get a better home for the same price.

When I see the inventory levels start to decline yoy then I will get serious about looking for a home.

Otherwise I can continue to rent for a while.

And the inventory will continue to rise until the prices fall inline with the wages people earn.