A Question "We're Almost Afraid To Ask"

From the Sacramento Bee:

Sacramento-area home builders can be excused for cheering the end of 2007. Now their problem is 2008. Statistics released today by the Folsom-based Gregory Group show builders closed 2007 with just 1,320 fourth-quarter sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. It was the lowest quarterly tally since the Gregory Group began counting sales in the fourth quarter of 1999. Sales for the full year were the lowest in a decade.
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Builders in 2007 sold 7,407 homes in the six-county region, the Gregory Group reported. That was 2,181 fewer than in 2006 and the fewest sales since 1997, when Sacramento was coming out of the 1990s housing downturn.
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But Gregory Group President Greg Paquin said 2008 may well be the worst of it. "We're still optimistic in Sacramento that a year from now we will have our feet under us," he said.

Q4 Sales chart
Historical sales chart

From the Sacramento Business Journal:

For much of the housing slump that has rocked Sacramento during the past two years, homebuilders failed to heed their own advice about restricting the new-home supply to spur market recovery. But that changed dramatically late last year, according to new-home analyst The Gregory Group of Folsom, which is reporting that builders were forced to shut down 10 percent of the region's new-home projects as sales sank to their lowest levels in years...The Gregory Group found that since June companies have halted sales in 34 of the region's roughly 370 new-home communities, with most of those shutdowns in the fourth quarter.
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Sales figures show no signs of the slump easing, despite recent inventory reductions. About 1,320 new homes in the six-county area sold during the fourth quarter, a 46 percent decline from last year, the company said.

From the Sacramento Bee:

During this dark winter lull of the real estate season, one question rules, and it's the one we're almost afraid to ask: What are we looking at this year? Is this bottom? Or is that next year? Is this a good time to buy, or is it better to wait? Such are questions buyers and sellers, agents and builders ask in January. We've listed here the 2008 forecasts by some of the industry's experts in Sacramento and other areas of California. They're one slice of the endless speculation of homeowners, bloggers and readers about how far we will go before this downturn levels off.
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TrendGraphix Prediction: The number of existing home sales in El Dorado, Placer, Sacramento and Yolo counties will rise 2 percent. Home values will fall 10 percent to 15 percent in suburbs farthest from jobs. Desirable older Sacramento neighborhoods will fare better. Downturn is still a long way from finished.
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California Association of Realtors Prediction: In Sacramento and Central Valley, sales and prices will drop another 8 percent to 12 percent.
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The Gregory Group Prediction: Builders will sell about 7,700 new homes in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties, about the same or slightly less than in 2007...Foreclosures will rise and peak in first half of the year. The market will find bottom.

From the Sacramento Bee:

Any way you slice it, the new state budget probably won't be kind to the already sluggish economies of California and Sacramento...[T]he governor's proposed 2008-09 budget could be especially troubling for greater Sacramento. Although he's calling for billions in new bonds for infrastructure projects, his short-term budget plan assumes a 10 percent cut in state spending and the elimination of 6,800 jobs in the upcoming fiscal year. The cuts will be spread statewide, but the pain might feel worse to Sacramentans than to other Californians.

That's because state hiring has effectively propped up the area's economy lately. In the past year, state hiring in Sacramento – totaling 4,300 jobs – has accounted for two-thirds of the region's new jobs, blunting the impact of cutbacks in construction, real estate and mortgage lending. Remove the state as a major source of hiring, and the region's economy – already in tough shape – could worsen.
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The weak housing market is Sacramento's No. 1 problem, but the state's problems "will exacerbate that," said Dean Wehrli, a vice president with Sullivan Group Real Estate Advisors in Elk Grove. "It's obviously going to affect job growth."

From the Modesto Bee:

The valley, with its historically low wages compared with other places, became a breeding ground for subprime mortgages, some of which offered 100 percent financing, unheard of in previous generations. Groans rose from Thursday's audience of several hundred when presenters spoke of stated-income loans, called by some "liar loans." "Which side of the table was lying?" asked John Olson of the Federal Reserve Bank of San Francisco, rhetorically. "Maybe both were. Some people inflated their incomes. Some borrowers were defrauded, with brokers writing in the incomes they wanted."
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Many economists in recent months have predicted a deepening disaster because of the 1.8 million subprime mortgages expected to reset in coming months. But Olson said the blame is shifting. "We're finding that it's not resets, but it has much more to do with declining home prices that prevent people from refinancing or selling," he said.
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Olson said maps of foreclosures in some Bay Area cities show distressed clusters, while those in the valley commonly spread across all neighborhoods..."Foreclosure is the freight train that runs over the homeowner," said Jeff Schrager of the No Homeowner Left Behind nonprofit organization based in Fresno. "I submit that we have a local disaster here. People are losing their homes on a daily basis."