Tuesday, November 27, 2007

Sacramento Housing Affordability Index - Q3 2007



The index is now at 17.2%. More on the NAHB/Wells Fargo Housing Opportunity Index here.

42 comments:

Max said...

Clearly the bottom is in, and everything will be back to normal in 2008. We're coming back, baby! ;)

Diggin Deeper said...

Now if we could just import 10-15,000 homebuyers into the area, who would actually live in these homes, we would be out of the woods.

Gwynster said...

I need to find my numbers but we expanded the housing stock by 9600 in the period july 05-06. We know they kept lustily building into 2007 and we had a standing excess prior to 7-05, so it's worse then we think.

so what we really need is approx. 35,000 people to move into the area and find jobs. Figure 2 salaries per home, ouch... we're going to create 20,000 new decently paying jobs (FTEs) in an area facing an economic recession?

What's left is to price the existing stock to a point where a single person could afford to buy... and you have a long-term effect on household creation and dissolution.

My friends, we have one hell of a conundrum on our hands.

sacramentia said...

retail numbers were good over the weekend. The dollars are coming back across the border as investments, GS release a report that will help the cause for another rate cut. The party will continue....Invest in green energy because this party is going to have $4 gas.

sacramentia said...

gwynster - The number for 2007 is ~6000 new homes in the Sacrmento MSA.

RagingWire (tech) is going to add 40-50 jobs next year, these are good ones too.

Diggin Deeper said...

No conundrum at all..flat out bogus numbers to begin with from NAHB/Wells.

It's getting tougher and tougher to wade through the slant.

OMG...last night my wife announced she's thinking of going back into real estate and specializing in the high end only. She's was successful during the last downturn and figures, with all the real estate agent rubble out there, now is time to pounce. At least she's not interested in buying quite yet. Hmmmm...guess I'll have to change my tune around the house....NOT

smf said...

"No conundrum at all..flat out bogus numbers to begin with from NAHB/Wells."

And here I sit with THREE new multi-family residential projects in my hands! All apartments.

Sippn said...

G - no standing excesss prior to 7-5, but thats when it started.

Check out Calculated Risk today - excess inventory of existing homes close to 4 million nationwide, typical is about 2 million - but I think most of them are in Florida:). How sensitive is the market to the credit crunch? - the 2 month credit crunch easily added 200,000 to the number.

Excess new homes actually dropped in quantity YOY nationally, but # months rose as sales volume dropped - mostly in the South. (there's FL again!)

Seriously, builders were building >2x your number prior to 2006 here, job creation and pop increase have steadily been over 20K annually, mostly bay area and so cal transplants historically, bringing their equity. Don't ever expect 3x income pricing here.

Diggin Deeper said...

"job creation and pop increase have steadily been over 20K annually, mostly bay area and so cal transplants historically, bringing their equity."

And you're implying that most of these transplants actually live on the premises just because their name and Sacto address is on the tax roles?

You're playing right into the hand of the segment that caused the overbuilding problem in the first place. Job increases? Yup, and they were basically to support the overbuilt infrastructure that had no business being there in the first place.

Talk quantity and get it right, talk quality and fail in the assumption.

As far as 3x income, maybe not, but this show's not over yet.

Affordability...only matters if people are willing to buy. Time will tell.

Diggin Deeper said...

Home sales at record low, durables orders fall

http://news.yahoo.com/s/nm/20071128/bs_nm/usa_economy_dc_1

"Median home prices tumbled 5.1 percent from a year ago to $207,800 and inventories of unsold homes rose 1.9 percent to 4.45 million, equivalent to 10.8 months of supply at the current sales pace."

Looks like affordability is getting better but the inventory numbers are widening out each month. The credit crunch may have been a little more severe than we thought. At 4.45 million the problem either more than doubled the 200K estimate reported above, or the original numbers were shy by over 5% to begin with. Now if all that excess were in Florida...?




And we really should safely assume that the credit crunch is over?

smf said...

"job creation and pop increase have steadily been over 20K annually, mostly bay area and so cal transplants historically, bringing their equity."

Then the BAY and SoCal market should have reflected LOWER housing demand with LOWER prices, but they didn't.

"And we really should safely assume that the credit crunch is over?"

Not till housing becomes affordable again.

Gwynster said...

Inmigration is down, outmigration up, deaths down slightly and our birth rate is huge.

Sure sure Sac Co increased by 11,000 from 7/05 to 7/06 but it came from 21,000 births!

Sippin, you keep winding up for the kick and I'll keep pulling the football away >; )

smf said...

"Sure sure Sac Co increased by 11,000 from 7/05 to 7/06 but it came from 21,000 births!"

PERFECT!

Sounds like it is time to get the second home for the kids toys. That way your primary residence stays clean.

sacramentia said...

Something doesn't add up with the growth and vacancy statistics. If there really are 8% of the homes vacant in Sacramento, then I should be able to pick a few random neighborhoods, walk down the street and see 1 vacant for every 11 occupied. I did yesterday - It's just not reality - where are all these vacant homes?

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

I knew you had the numbers that mattered...Gwyn

Smf...better yet, we could rent out all the excess when the kids hit their teenage years. It would play hell with depreciation, but at least the inventory gets used up. The rent the parents pay will definitely offset the grief factor those kids will give you at that age. And we could create a new cottage industry with real jobs...Apartment Chaparones,

smf said...

"the street and see 1 vacant for every 11 occupied. I did yesterday - It's just not reality - where are all these vacant homes?"

Depends on where you go to check and how you check. Did you knock at every door to verify occupancy?

The newer developments are where the vacancy rate can be huge, as some of them have up to 50% speculator purchases.

DD -

Did you just give a solution to saving the housing market? ;)

Diggin Deeper said...

Fed: Growth eases, home demand "depressed"

http://news.yahoo.com/s/nm/20071128/bs_nm/usa_fed_beigebook_dc_1

"WASHINGTON (Reuters) - Economic growth slowed in October and the first half of November as a glut of homes available for sale pushed home prices down and tighter credit took some would-be buyers out of the market, the Federal Reserve said on Wednesday."

Deja Vu!

Here's where we start the slow let down phase by the Fed...

Next month the rhetoric moves up a notch, easing in a little more severity, but fully anticipated, contained, and contolled. Then future reports thereafter continue to add in just a tad more downward bias as we march into '08...care to guess where they're going?

Deja Vu!

smf said...

To try to maintain anonimity, we are now redoing an office for a nationwide homebuilder in Sacramento. They will try to lease half their office space that we did but a few years ago.

Shows how much confidence they really have in the market.

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

Consider this...

Freddie Mac loses $2 Billion, cuts it's dividend in half, and announces that it will sell $6Billion in preferred stock(at 8.25% int.)to shore up it's reserves. They basically tell the market that if things don't change they will be unable to continue to repurchase mortgages at the current level.

What they are really saying that no one wants to hear is...

"We're broke and we cannot continue to buy qualified paper at the rate we're being asked to buy it"

If Freddie and Fannie are not the buyers of last resort on conventional mortgages under $417,000, who's the savior here...Countrywide or CitiBank or Bank of Abu Dhabi? If the answer is the US government, then Big Ben had better fire up the presses because it's becoming very clear that he can't print the dollar fast enough to keep our financial system afloat.

How does this affect affordability? How many more qualified buyers are now swept off the table because there's not enough in the coffers of our "guaranteed" loan entities to purchase these notes?

Let's see if this makes any sense. I'll buy your mortgage note for 6.5% but I'm replacing some of my emergency liquidity requiremnents with 8.75% preferred paper?

rant off!

Diggin Deeper said...

Should have been 8.25% and not 8.75% in the last sentence...

sacramentia said...

"Did you knock at every door to verify occupancy?"

I didn't have the energy to be that intrusive. Just looks for signs of homeowners. Cars, Stuff, lights on, etc.. vacant homes tend to look vacant. I bet the actual vacancy rate is more like 3-4%.

I know statistics are statistics but sometimes it makes sense to leave the keyboard and go take a look.

smf - I really like your comments, but 50% investor spec purchase in one year is interesting but even if every one of these sold in 2006 wer left vacant the rate would only go up about 50 basis points (0.5%)

Real said...

Gwynster Said - "Sure sure Sac Co increased by 11,000 from 7/05 to 7/06 but it came from 21,000 births!"

While I am thankful that we did not have any deaths in Sacramento County over the last year to offset the 21K births, as implied by Gwynster's logic, I tend to think sippin's reasoning is sound on SoCal and Bay area movement to Sac. We are a net beneficiary of the migration of the equity rich over the past 10 years and we will continue to be as long as Sac prices are materially less than the Bay Area and SoCal. Denying this fact is just plain out stupid.

Jacob said...


Gwynster Said - "Sure sure Sac Co increased by 11,000 from 7/05 to 7/06 but it came from 21,000 births!"

While I am thankful that we did not have any deaths in Sacramento County over the last year to offset the 21K births, as implied by Gwynster's logic, I tend to think sippin's reasoning is sound on SoCal and Bay area movement to Sac.


Is this just realestate math? 21k births - 0k deaths = 11k?

So obviously we had 10k deaths here.

So now all we have to do is figure out how to sell homes to babies. If we can get them in a 60y mortgage early enough...

We still get a few people moving here from the Bay, but it isnt for our great jobs. And if those people are still commuting when gas hits $4, the $5... We'll see what happens.

citykitty said...

Thank goodness for all of those SoCal & Bay Area homeowners who, alone among American consumers, avoided using their homes as ATMs and therefore are "flush with equity." Also, isn't it lucky that prices in those areas haven't gone down at all, and that all of those people living in large, cosmopolitan cities are now just dying to buy a house in "Sacatomatoes."

Sacramento is SAVED!!

Gwynster said...

Real,

You should read the comments more more and fire off your mouth less.

From two threads earlier:
---------
"Table 5: Estimates of the Components of Population Change for Counties of California: July 1, 2005 to July 1, 2006

Sacramento County 11,138

Woot! That looks pretty good, now lets take a closer look:

Births 21,396
Deaths 9,883
subtotal 11,513

Net International Migration 7,083
Net Internal Migration -7,458
subtotal -375

So inmigration vs outmigration is a wash but hey! in 20 yrs or more those babies will need homes."

sacramentia said...

gwynster - I really respect your posts and you are part of the reason I've become addicted to this site...

but, with all those births a portion of the population also shifted from living at home to needing their own home - the 19 to 20 or 22 to 23 ( I really don't know the age).

As long as 375 moved out of their parents home we are in the positive.

And what about all the divorces where you reduce the number of people per household.

Your data made me go count houses yesterday and I think there is more to the story.

Gwynster said...

"As long as 375 moved out of their parents home we are in the positive."

I think you might be confused. Inmigration is people moving into an area. It will be a composite of all age groups. Outmigration is people moving out of an area, all ages.

Gwynster said...

Oh and USC is a lagging indicator as they pull data, in part, from IRS records. So if our inmigration number is turing negative in 05, it's really reflecting a downturn which occured approx 12 mo. earlier.

What I really find interesting is that tax records and sales records via the MLS are showing widely different prices. This could be a big issue.

Diggin Deeper said...

We debate about the effects a few hundred people could make, birth/death ratios, and other stats that affect our supposed growth. It's easy to make a blanket statement that we're growing 20,000 people per year and they're coming here with equity. At face value, and left at that, it looks pretty good. But the REAL numbers are telling us that Sacramento population growth is static at best.

Taking on SoCal or BA migration is not a good answer. Ever drive by the bus station downtown? Looks to me like the Bay area and SoCal just might be sending us some negative equity as well. Capitol cities are magnets for those in need and they drain the economy rather than add to it.

Importing equity from other areas is a "one off" event. They come, they buy, and IF they live in the home, equity is consumed. If they don't live on the property, and have invested for future returns, the net effect on the local economy is basically zero growth.

The only way population growth is acheivable and sustainable is through stable, well paying, job creation. If jobs don't pay, people don't stay.

Is that happening?

Cmyst said...

diggin, you have a good point.

About 10 to 12 years ago, I was seeing a lot of BATs up in the Grass Valley area who had retired up there. During this bubble, I saw a lot of people living in houses that they were renting Section 8, especially in that newer subdivision off of Meadowview and I-5, that had moved here specifically for that reason from Oakland. I even posted about how run-down that area was getting, with missing window screens, holes in walls, filthy carpets, and junked cars on the street. That entire subdivision, and homes were selling for mid-300's to 400's there, is trashed now.
I'm sure there were folks like BT has met up in EDH that are more productive BATs, but people have got to realize that there is an opposite side to that coin.

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

"Denying this fact is just plain out stupid."

Relying on it, without ALL the facts, might leave one brain dead.

PeonInChief said...

Bay Area migration to the Valley tends to happen in spurts. There was a big migration in the early 1980s and another one in 2000-03. It happens because long-term residents either get priced out (tenants) or decide that they can sell their dumpy little house in Fremont and buy a megamansion in Rocklin for all cash, with money left over for an SUV.

Then prices rise here and the outmigration from the Bay Area ends. Those who come here expecting to commute to jobs in the Bay Area find that it's a nasty, difficult commute and either move back to the Bay Area or find jobs here. (This tends to flatten the median income, as jobs here pay only about 2/3 of equivalent jobs in the Bay Area.)

DH works for the state, so we'll stay until he retires, but many Bay Area migrants found that they couldn't take the summers here and either returned to the Bay Area or moved on to Portland or Seattle.

It will be interesting to see what happens when state workers start to retire in large numbers, as many of them bought their houses years ago and, even with reduced prices, would make pots, were it not for the fact that incoming workers can't afford those prices.

sacramentia said...

Gwynster -

What I am saying is that the evidence doesn't support your conclusion. If your model is correct, then 8% of the homes would be vacant. That is not the case, so therefore, your model is broken.

Gwynster said...

Not my model Shrew, pick on the US Census. After all, you're smarter then them right?

Diggin Deeper said...

I don't thinks it's as simple as walking down the block and counting vacancies. There are finished new homes vacant, homes under construction vacant, condos converted to apartments vacant, foreclosures vacant, finished condos vacant, condos under construction vacant, etc.

Gwynster said...

Peon,

My focus is just Sacramento Co. since it's a large enough area that I can get constistant data across multiple years. What I really care about is Yolo but it trends like a rural county and estimates get spotty. I could give a fig about ED and Placer. It reminds me too much of OC, just a personal opinion, so I really don't eyeball that data much.

Our growth was 1999-2000 which was for 1997-1999 (lagging indicator and all that). It's been steady to declining since. People from other areas may have bought here in large numbers in 2000-2003 but they didn't come here to live, they just pick up housing as speculative investments. If they did come here during that time, we'd have seen a nice spike in IRS returns in 02-05 showing a spike in household creation and inmigration numbers.

Most people are still scrubbing data from 06-07 but I expect some interesting returns.

Remember, In God we trust, everyone else bring data >; )

btw: if you have a grump with USC, here is a direct link to their publication on data collection for ACS.
http://www.census.gov/acs/www/Downloads/tp67.pdf ***PDF warning, 432 pgs***

sacramentia said...

Gwynster - No name calling! I'm probably wrong - don't worry about it :)

This whole board is focused on single family home values. The USC Housing Unit rates doesn't really tell an accurate story because it lumps in all the apartment buildings, rvs, boats, etc.. A homebuyer just looks at homes.

The model of using Housing Units composite data doesn't work right. If it did, a random sampling of neighborhoods would produce results within a margin of error. It should be that simple.

The 7.8% vacancy number is all housing units, 2.6% is vac. rate for homeowners, and 6.5% for rental units in sac county. The single family home number is probably somewhere in between, which is what is relevant to homes prices.

According to USC, under construction doesn't count as vacant until the finished floors are in.

Gwynster said...

"This whole board is focused on single family home values."

How nice of you to come here and tell us what we care about.... really, I'm touched >; )

That said, I'm not happy with USC's vacancy data either but at least they have some.

That doesn't change the fact that we had 21k births and 10k deaths in 05-06 and inmigration/outmigration was a wash out. Couple that with 9600 new housing units and we still have a problem.

Diggin Deeper said...

Who cares?

It's too easy to get bogged down in minutia when the over riding trend, with enough solid indicators(numbers), point to the confirmation of that trend.

Anything more or less is argument for the sake of argument.

40 good jobs at Raging Wire doesn't make a damn bit of difference, if 20,000 good jobs are needed to pick up the real estate slack... unless we're forced to revisit the "It takes a Village" concept...