Thursday, November 29, 2007

Sacramento Home Price Plunge Largest in 30 Years

Home prices in the Sacramento region fell by the largest amount on record, according to a report [pdf] released today by the Office of Federal Housing Enterprise Oversight. Sacramento's House Price Index (HPI) dropped 8.41% in the third quarter, the largest year-over-year decline since 1977, the year the government started tracking home appreciation for the Sacramento real estate market.

Top 5 year-over-year price declines since 1977:

2007 Q3: -8.41%
1983 Q3: -7.80%
1994 Q4: -6.67%
1995 Q1: -6.45%
1994 Q3: -6.24%

In the third quarter, the Sacramento real estate market ranked tenth weakest in the nation (out of 287 markets). Nearby Central Valley cities dominated the bottom 10 list, with Modesto at #8, Stockton at #5, Yuba City at #4, and Merced at #1.

Since peaking in 2005, Sacramento's HPI has dropped 10.1% [csv]. Prices have continued to fall at a more rapid pace than the housing bust of the 1990s. At this stage in the 90s bust, Sacramento's HPI had declined 5.3%.

From the Sacramento Business Journal:

In Greater Sacramento, home sales fell 30 percent compared the the previous year, but were up 9 percent from September. The median price of a single-family detached home in Sacramento in October was $309,260, 15 percent less than October 2006 and 5 percent less than in September 2007...according to a report from the California Association of Realtors.

From Bloomberg:
Inland California cities had six of the top 10 foreclosure rates among U.S. metro areas, RealtyTrac said. Merced in the state's Central Valley had the highest, with one filing for every 82 households, almost seven times the national average. Stockton and Modesto ranked second and third, respectively, and Riverside-San Bernardino and Vallejo-Fairfield were sixth and seventh. Sacramento ranked ninth.
From the Sacramento Bee:
By canceling a major office project in Sacramento this week, state officials sent the region a chilling holiday message: Don't look to us to bail out the economy.

Until lately, state government has been one of the bright spots in a community humbled by the housing slump. Since October 2006, the state has accounted for nearly half of Sacramento's job growth. The 400,000-square-foot CalSTRS headquarters being built in West Sacramento is one of the area's biggest construction projects.

But on Monday the Department of General Services scrubbed a proposed $520 million headquarters building for the Resources Agency. The project, approximately three times as large as the CalSTRS tower, was to be built somewhere within three miles of the Capitol and would have been one of the largest state office projects ever. The decision brought home the severity of the state's budget mess – itself a product of the worsening real estate downturn – and raised the possibility of further problems for Sacramento, home to nearly one-fourth of the state's workers.
Now the state appears to be lowering its profile in Sacramento real estate. Having requested bids from developers for the Resources building in August, the state announced Monday it couldn't proceed with "a project of this magnitude during this period of financial uncertainty."


Sippn said...

Wow, you are right.

Looking at the OFHEO data (your link) it looks as though we have been here before 2x in the past 30 years and to the top 3x. . . . with a lot of appreciation after both lows.

I think the word currently is largest but really we may be confusing it with quickest.

Why do you'all think this will mimick the last plunge when the previous only had 5 quarters of negitive appreciation?

I don't really know, but I have lost faith that the FED might either and many of the other prognisticators (whew) are also guessing.

Tyrone said...

The nightmare will only get worse and worse, and the realtards will continue to deny and lie.

Cmyst said...

Cow tipping posted this house in another thread:
1530 Belinda Way
Sacramento, CA 95822

The FIT blog shows this house at an asking price nearly 50% below the 2006 price, and it's still overpriced.

Sale History
07/24/2007: $207,099
08/18/2006: $325,000
03/01/2005: $270,000
03/13/1998: $42,000
07/01/1997: $56,000

This house is in the Meadowview area. The crime rate there is nearly 2.5 x the national average. The median household income is 51K (better than I guessed!).
The house has a current asking price of 165K. That means that since highest pre-bubble sale price of 42K, the house went up nearly 400% in "value" even at the current 50% off from high value asking price.
This house that cow_tipping found is a pretty good illustration of the insanity of the bubble.

KTM 300 said...


A 400% increase for pit bulls and cyclone fences. The increase must be part of the premium for the value added amenities. Side shows, free music, all part of the bargain.

Diggin Deeper said...

"By canceling a major office project in Sacramento this week, state officials sent the region a chilling holiday message: Don't look to us to bail out the economy."

If the state can't pull up Sacramento economically, what can?

"Why do you'all think this will mimick the last plunge when the previous only had 5 quarters of negitive appreciation?"

It won't mimmick any downturn in real estate that we've ever seen. The entire boom, and ensuing economic growth, relied on the real estate engine for it's juice. Without it, what industry or "new engine" steps in to pick up the void? There's no way to even begin to predict how low prices will go, or how long the process with take. Until some other growth entity emerges and moves this local economy forward, Sacramento, imo, just withers on the vine and prices wither right along with it. It sure doesn't appear like the state will be in any position to offer assistance.

Real estate didn't cause the 90's bust, job losses did. Real estate wasn't the driver in the 90's recovery, it responded to local demand and built accordingly. Are there massive job losses today that are depressing real estate prices? Or will the real estate fallout cause future job losses to push the market into another leg down? It appears that real estate is consuming itself, rather than having some outside force dictate where prices should end up.

sacramentia said...

U.S., Banks Near
A Plan to Freeze
Subprime Rates
WASHINGTON -- The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.

Gwynster said...

Speaking of immune areas, what's the story here?
MLS #: 70122289

That 10-5-07 sale smells like a TD back to the bank.

AgentBubble said...

MLS 70122289:

Sold 10/15/07 for $450K
Listed on 11/29/07 for $499K.

The 10/15 sale wasn't reported in MLS, so perhaps it was a private party sale between friends.

Current loan amount is around $340K.

4% commission on this, plus another 1% for escrow fees, so he'll make about $25K with a full price offer...that's before the tax man takes his cut of course...

anon1137 said...

". . so perhaps it was a private party sale between friends."

A friend who happens to be a flipper?

That house is in an excellent location, but $400/ft2 is bubble pricing all the way. This place will be worth $400K max within a few years.

anon1137 said...

By the way, you know what I'm seeing in ESac on many of these 5-6K lots? Owners are splitting them to build new homes or 2nd units. It's going on all over. You might buy a house with a nice big lot and then your neighbor builds a new 2-story house in his backyard that looks right down on your backyard. Somewhat common in midtown, but now it's moving east. Puts a crunch on parking too.

Gwynster said...


Same with Davis.

Sippn said...

I know it looks like the 'burbs to you'all but dang if your street is a number, its urban row houses!

Apparently East Sacramentans (Flat Earth Society) don't need much parking anyway, they had Mercy take out a parking lot and add a park in their new project, according to the Bee. Well, it IS a pedestrian friendly neighborhood.

Patient Renter said...


I'm still wondering, under what authority can they enact a freeze? Interest rate adjustments are THE reason that the loans were originated in the first place, because that's the only way investors could turn a profit from the loans.

anon1137 said...

Sippn - that new cardiac unit at Mercy ain't for East Sacramentans. It's the folks that live in the real burbs - SUV friendly neighborhoods - that need the coronary bypass operations.

Gwynster said...

Exactly Patient.

I'm not sure they can cut off an entire income stream like that without citing something crazy like RICO statutes.

The other thing that just kills me is that any bailout platform is wildly unpopular with the general public, extremely so. Sure we have a lot of cries for justice but most seem to be looking for legal action against the lenders, brokers and fraudsters. Instead, the GP sees this as a bailout of the lenders and irresponsible. Perhaps, the pols feel we need to stabilize the credit markets at any cost before pursuing legal measures which may be the right call. However, the voting public percieves this crisis very differently. Political careers are going to be destroyed over this.

If I were advising someone, I'd tell them to treat this like the other 3rd rail issues and let someone else take the fall.

Diggin Deeper said...

I'm thinking some form of tax increase is in the works to cover the bailout. Maybe an ongoing fee that's clipped to all mortgages written in the future, or an adder to property taxes, maybe another few cents added to the gasoline tax.

Somebody's got to pay the bill...

sacramentia said...

I don't read it as a mandate from the government, just that the government is facilitating the conversation.

The lender loses less if they freeze the rates instead of foreclosing. Most of the subprime AAA paper (makes me laugh to even write that) is sitting on the banks books because nobody else wanted it.(source: fortune article last month)

The fed is prob. betting the more they can slow the fall, the more time the economy has to work it's way out of the mess, and more time to print dollars.

I just can't get my head around why any of the homeowners that are underwater would want the bailout. Why pay for a mistake over 40-50years?

Diggin Deeper said...

"I just can't get my head around why any of the homeowners that are underwater would want the bailout. Why pay for a mistake over 40-50years?"

Put yourself in the typical shoes of the buyer who had no business buying....Basically they got in for no "blood" money, they're living better than they've ever lived before, and if they walk away, they're not taking the debt with them. Why not stay?

sacramentia said...

good point.