Saturday, January 26, 2008

Sacramento Real Estate Market - January 2008 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.

77 comments:

Perfect Storm said...

Scanning realtor.com and noticed zip code 95838 Claire Ave, there must be some builder who is smoking some good stuff, they want $375k for a stucco crap box.

Were right on track for a 50% decline by 2009.

Jennifer said...

You are so right. I had not checked out "Flippers in trouble " for a while. Anatolia is getting hammered. They are already at 40 percent! Surely the decline there will be more than 50 percent!

Bakersfield Bubble said...

Sacramento developers defaulting in Bakersfield:

From the Bakersfield Californian:

inpd said...

Million dollar question.

Your year to year analysis is great.
If I understand your site there is 18.2%
drop year to year and 25.4% from the
high.

The key question is: is this the start
or the end of the downturn. It's too
hard to guess how low it will go, but
knowing if its the start or end of the
downturn is feasible.

Cmyst said...

Based on myriad factors that Lander posts in his links on the right side of this blog, I am tending to agree that the bottom will not be hit until after 2011.
There is so much good advice out there, and most of it says that you actually CAN judge when the bottom has been hit and that we are nowhere near it. Further, once the bottom is here, prices will hover there for quite some time -- maybe years.
I'm impatient and this has aggravated me no end, but I have finally accepted it. My rental is fine. There is no sense in buying a house that will depreciate -- it is like throwing away money that frankly, I have less time to recover this late in my productive working life. When prices hit those fundamentals, I'll buy. The only exception is if a PERFECT house for me (less than 2000 ft2, lot size around 10,000 ft2, new roof, new HVAC and ducts, painted inside and out, mid-century modern style in stable and safe zip, not in floodplain, and closer in) comes on the market for under 200K.

wimpyVO2max said...

cmyst -- I think there may be another dimension to consider. Here's the question: Which is better?

Buy now for $300k at 5.75% 30-yr fixed, or

Buy 3 years from now at $240k at 8% 30-yr fixed.

You may be right, the bottom might not hit until 2011 ^but^ IMHO I think the low prices will be accompanied by high interest rates. This is speculative on my part and I don't pretend to have the answer; but it might be worth your while to crack open a spreadsheet and run models of total paid out (prin plus interest minus taxes saved) comparing today's price at low rates versus a lower price in the future at higher rates.

Also, very much speculation on my part, but I think today's prices will again be revisited in about 8-12 years. -- wimpy

smf said...

Buy now for $300k at 5.75% 30-yr fixed, or

Buy 3 years from now at $240k at 8%30-yr fixed.

Rewrite the calculation to indicate that a house that is now priced $300K will be about $150K in 3 years, then recalculate. If you think home prices are almost at the bottom, you have another shock coming.

but I think today's prices will again be revisited in about 8-12 years.

There has NEVER been in the entire bubble history a return to bubble pricing. It is a once-in-a-lifetime situation. The high prices we saw will never return when adjusted for inflation.

Tyrone said...

Buy now for $300k at 5.75% 30-yr fixed, or

Buy 3 years from now at $240k at 8% 15-yr fixed.

If you can save $10K/year, you'll have $30K to add to whatever downpayment you've already saved up. Then pay the damn thing off ASAP.

laureleaw said...

"Buy now for $300k at 5.75% 30-yr fixed, or

Buy 3 years from now at $240k at 8% 30-yr fixed."

In California it is better to buy for a lower price at a higher interest rate. The reason is that the property taxes are set at the lower amount forever, while the interest can be lowered if the market interest rate goes down.

It is true that the property tax will be lowered by the county if the housing market goes down, but that reduction is temporary. If you buy at the lower price, that is the assessment base as long as you own the home.

Jacob said...

Yea, you can always pay off the house faster or refinance to a lower rate. But once you buy you cant get your money back if prices fall.

I wanted to buy in 08 but don't see the point now. I will wait another year and see what happens.

Just save as much as you can and put that torwards the home so your payment is even less (even with a higher interest rate).

Home prices are down say 25% from peak, but that is only homes that sold. i.e. homes that arent selling even at 50% or more off and are just rotting on the mls don't count.

The last auction I heard about was for I think 1200 homes and they started at 50% off the loan amount and only 17 sold. So the other 99% were over priced even at 50% off.

The market doesn't care how much it costs a builder to make a home, or how much the land costs, it doesnt care how much the bank is owed on the mortgage. It only cares about the perceived value of the asset.

Few people even want to buy right now (many want to buy at a fair price but we are not there yet). Of those people that want to buy, few can afford to, and of those that can afford to, they might not be able to get the financing.

50k median wages, when 150k is the median home price we might be at the bottom (but will likely over shoot the bottom).

Oz said...

You really need to ask yourself how much prices will fall from here. We're now 2.5 years into the decline, and the median SFR price in the greater Sacto area is 25% - 30% down from its peak reached in Q3 2005. If you think the aggregate median price drop from the peak in Q3 2005 will be 50% (literally cut in half), I'd say you're dreaming -- at least as to anywhere other than areas where you wouldn't want to live anyway.

Are we within 10% from the bottom? Very possible. The problem with trying to catch the bottom is that you won't know it's occurred until it already is past. Currently, there is a great selection of inventory out there. That won't be the case once things turn and buyers all are moving back into the market; the jewels will be taken.

If you're buying with the idea of reselling within 3 or 5 years, forget it. If you're buying with the idea of putting down stakes for a longer term of 8 to 10 years, etc., then with the majority of the decline already priced in, with these rates, and with this selection, it could be a very prudent move to cherry pick a good property at this juncture.

inpd said...

Great discussion guys.

I should add I and others buying a home
as a *residence*, don't
think or hope to time the bottom
perfectly, only buy within about
5-10% of it.

I just don't want to be left
stuck in a home for 10 years
because I can't afford to sell
it!

G Spot1 said...

Interest rates don't move in a vacuum relative to prices. As rates rise, the cost of buying goes up for everyone. This is important, because the reason the prices of the last few years was a bubble is because prices stretched beyond what people could afford under "traditional" lending standards. Prices will fall until they are in line with affordability.

Thus, any further pressures on buyers' affordability are going to push prices down further. This would include a rise in interest rates (or, gasp, a recession that depresses family incomes...). In other words, if a buyer can make a payment on a 300k house at 5.75%, but can't pay 300k if rates are at 8%, that seller ain't getting an offer at 300k. He will have to lower his price.

People forget this because in recent years, there were plenty of buyers who could pay top dollar regardless of the interest rates. Not so much anymore....

Perfect Storm said...

50% decline is exactly what will happen, the market will return to the historical average of 3 to 4 times median income, which is a 50%decline.

Were right on track for a 50% decline by 2009.

Perfect Storm said...

The Sacramento market has tanked 30% already without a recession and we all know that's coming, what will happen next is obvious.

Were right on track for a 50% decline by 2009.

paranoid renter said...

With the imminent recession I'm wondering if we will start seeing a lot more migration from the Bay Area to Sacramento since people can sell their house in the Bay, move here and survive on money from interest/odd jobs. That might help stabilize the home prices in this area.

Jacob said...

Prices are already fown 30% and that is with the media and reic people just recently admitting that there was a bubble (but of course it is over and we have hit the bottom -- We seem to hit the bottom each month lol).

Many homes are not selling even at 50% off. We will definitely hit 50% and check out flippers in trouble to see some that are already there. We will probably hit 75% off.

I am looking in Roseville / Rocklin / Lincoln and a few months ago there were homes just above 300k but still nothing below. Last month there was a few, and this month when I checked there were 11. I am looking at 4/2 2500ft2 homes so it is nice to see some around $250k-$275k now. Still the yards are too small and HOA are too much so those can drop to $150k and the ones I want can drop to $300k.

But the bottom line is there are more sellers than buyers. Once enough sellers (mainly banks and builders that overbuilt) figure that out, the real carnage will start.

smf said...

"The problem with trying to catch the bottom is that you won't know it's occurred until it already is past"

Big BS flag called.

In a housing bubble, you know when the bottom has been reached after you have had stagnant (not lower) prices occur for a while.

The house I bought in 1994, did not start appreciating again till about 2000.

So last time people had 6 years to figure out whether the bottom had been reached.

Cmyst said...

See? Loads of info.

*I would rather pay less for the house even if the interest rate is higher. I can not renegotiate the price of the house once I borrow the money for it, but I can refinance for a lower interest rate.
*My tax bill will be smaller if I pay less for the house. This is not inconsequential.
*It's not necessary to have the nerves of a Wall Street day trader to "time the market" in housing. It's simple: when houses are valued at 3 x median income and it is as cheap to buy as it is to rent (counting in PITI), IOW houses are valued at about 10 times the yearly rent. No big deal if you don't buy at absolute bottom, because the values will hover in that vicinity for a very long time.

This is historic, IMHO. It's one of those events that you pass the lesson learned down to your kids. Some day there may be other small RE bubbles, but another doozy like this won't happen for at least 2 generations. And since it sure wasn't impossible for houses to triple in "value" in 6 years, why is it impossible for them to lose value? Of course it's possible. This housing bubble is just one part of a much larger mess. The Powers That Be are quickly running out of options.

Perfect Storm said...

"We will probably hit 75% off."

I remeber people telling me that the market may and I mean may reduce 5%, and were actually advising people to buy in 2006 even with inventory increaseing by 100 homes a day. I would tell them the market will correct by 50%and other areas by even more. I suspect that the people who have advised individuals to mortgage their souls have somehow remained immuned from any back lash from what I can only call victims at this point, due to their grifter smile and false charm, but as the years go by these individuals should be held with the highest contempt and I would only hope that people will realize they are only in it for the commission. However their are good realtors out there, but I feel they would at least tell their client that price decreases are inevitable, but if you feel comfortable buying now then so be it.

Were right on track for a 50% decline by 2009, and will now error on the side of a 75% decline.

sacramentia said...

Wow - 75%! I called perfect_storm crazy with the 50% decline prediction, but as time rolls on you may be right.(and I'm crazy)

I am just absolutely stunned at the level of financial irresponsibility from so many people. I really expected more.

Jacob said...

Nationally maybe we do 20%, I dunno. Places like NY, LA, Bay Area will hold their value better cause they have the $$ salaries with good companies.

What does Sac have? We got HP in Roseville and Intel in Folsom and wall to wall Wal-Marts, McDonalds, and Starbux inbetween.

And for the people that commute to the Bay, as gas prices keep going up that will get a lot more painful. I doubt we will get many more people that want to do that.

Some homes I see are already 30-50% off and still too high even at the reduced price.

I see some nice homes in Rocklin with a lot of land that were bought in 2000 for like $250k, and they are listed for $800k.

And even at 75% off we are still in trouble case:

A) Builders over built, way over.
B) Neg. population growth for CA.
C) Few high paying jobs.
D) Apparently I am the only person I know that saves a penny. Everyonf else I know just spends spends spends.
E) Financing standards will increase.

So even at 75% there will still be people with homes that cant sell or rent them. Then what do you do with it?

2008 and 2009 will be interesting. I am waiting for the people with good credit, standard 30y fixed loans, who can afford the payments, to just start defaulting because they owe so much more than their home is worth.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

Several posts mention 30% down from the peak. Did I miss some recent stat? This is new to me.

norcaljeff said...

Are we within 10% from the bottom? Very possible. The problem with trying to catch the bottom is that you won't know it's occurred until it already is past. Currently, there is a great selection of inventory out there. That won't be the case once things turn and buyers all are moving back into the market; the jewels will be taken.

I get the feeling that Oz is a realtor, or in the RE biz. Either way, most of this paragraph is BS. We could be within 10% of the bottom, but I'd rather miss the bottom by a few percent than buy now and have it fall another 20-50%. The inventory isn't going anywhere anytime soon folks. Builders need to build to make money so that will continue. They aren't just going to turn the spicket off. And real estate isn't like the stock market, it won't jump 30% overnight like Google might so this comment posting about missing the bottom and trying to inject fear to the readers is irresponsible. We're losing jobs nationally and Sacto will not be immune. Once jobs are lost the market will go even farther south. Starbucks is so bad off now they are actually closing stores for the first time ever. And don't worry about interest rates anytime soon. They are falling and as the stock market goes south and the economy tanks, rates will further erode.

STOP ROSEVILLE CRIME said...

I've been seeing a lot of new residential crime occurring in Roseville lately. Not sure why but it's on the rise. My home was burglarized on Thanksgiving and I starting tracking it and it's happening 2-3 times a week in just my part of town.

Perfect Storm said...

Ah yes is Oz a realtor or a mortgage dork, not sure. I do hear the suttle hints that now is the time to buy in his comments, plus Oz has only been around it appears for a couple of days.

Were right on track for a 50% decline by 2009.

wimpyVO2max said...

smf: There has NEVER been in the entire bubble history a return to bubble pricing.

Never? The Dow regained it's 2000 high in only 6 years. The Nasdaq? I concede that one will take decades... but it will be over 5,000 some day once again. The 1929 Dow bubble was regained in 1956, but probably would have happened sooner if WWII didn't get in the way.

Real estate and stock markets always go up over the long term (decades) because the underlying currency loses value. It's a basic economic theory that paper monies always inflate over time. The $20k house of 1950 is now worth $200k will be worth $1 million in 2xxx.

laurelaw had a great point about Prop 13 and locking in a lower valuation -- so yes, on that point alone it is better to wait for lower prices even if higher interest rates occur.

a_builder said...

Look out below it's gettin' worse!

El Dorado County Public Works Department issued a STOP WORK order for the Lennar project on Latrobe rd due to FAILURE TO PAY fees (to the tune of $200K which seems like chump change to me for a huge builder like LEN)

LENNAR is BURNING their sub contractors- in arrears 2million plus to one of their stucco subs who went out of business!!

Reynan & Bardis has leans and isnt paying subs....

Serrano is quiet- very very quiet lately....

inpd said...

Great discussion. But lets read
each others comments carefully before
posting.

> Never? The Dow regained it's 2000 high
> in only 6 years ...

The poster was referring to inflation
corrected prices.

Those $500k homes sold in 2005 will
eventually hit $500K some time, but
the point is that $500K in 2005 dollars
is not $500K in 2015 dollars.

For example that $500K home in 2005
will have to be worth $810K in 2015
assuming 5% cost of money to have
the same valuation in 2005.

Jacob said...

Several posts mention 30% down from the peak. Did I miss some recent stat? This is new to me.

See here: http://sacramentolanding.blogspot.com/2007/12/dataquick-sacramentos-median-home-price.html

And here: http://sacramentolanding.blogspot.com/2008/01/asking-price-breaks-20-yoy-threshold.html

Also if you look at flipper in trouble there are some people 50% down with no sale.

And there was a large auction of like 1200 homes starting at half off the loan amount and 17 sold (cant find the link).

So what is selling is down about 30%. The rest that is not selling is technically down even more but since it hasnt sold it doesnt effect the median.

What's amazing is that even at 50% off the homes are still out of whack from fundamentals and people cant afford them.

For the last several years people were buying with cheap money also and now it is even harder to finance even if you could afford it.

75% down here we come.

Buying Time said...

a builder

Thanks so much for the heads up. I have been eyeing that development run by Lennar (Blackstone) for some time. The HOA & Mello Roos is outrageous so we were waiting for prices to come down to compensate.

Ironically I just saw a photographer taking a picture of the entrance yesterday....perhaps they are going to do a big marketing push to turn things around....ha!

anon1137 said...

I liked this quote from the recent Reuters story on November pending home sales:

"The underlying trend in sales remains downwards because people are unwilling to borrow money in order to finance the purchase of rapidly depreciating assets," said Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, New York.

Pretty blunt. I don't think his comment was pre-approved by the NAR.

Patient Renter said...

Oz said:

"The problem with trying to catch the bottom is that you won't know it's occurred until it already is past."

UNLESS the bottom is nice and wide and flat, which they usually are. Go look at a historical graph (Shiller). And while you're looking at graphs, check out the Credit Suisse graph showing a mass of ARM resets scheduled through 2011. There will be no "bottom" until that stuff has played out (meaning, not till after 2011, 2012).

All: I agree on the Realtor/broker guess regarding Oz.

Jacob: Thanks for those links. I must not have been paying attention when those were posted.

inpd said...

After looking at the analysis on todays entries in this blog I tend to believe we are not within 5-10%
of the bottom.

But what's a new Californian to
do? Should I just rent for the next
year or two. This apartment is driving me a bit crazy!

HOUSE2008 said...

I've been tracking a whole subdivision out in Laguna that in 2005 many of the homes sold for 500k-540k range. Now MANY (twelve at last count ) are selling for 300-375k. NOw what's that approaching? 50% right. There still not selling! In fact, one is stealthly trying to do a lease to own for x-amount & sell it for 300k with a 8000sf lot to boot! So hoe many people are going to be willing to lose 300K in their lifetime. I suspect that these homes will eventualy go 235K by this October..

inpd said...

This is the 2nd million dollar question:

Two parts:

a) When did this bubble start
b) What did homes for various suburbs
costs.

For b) think of 2000 sq ft homes in
Davis, Lands Park, Pocket, Midtown etc.

I would imagine that homes will correct to prices before this madness happened plus an appropriate amount of growth

Gwynster said...

inpd,

there are some great rentals out there. You just have to find an area you really like and watch it. CL prices are often just wishing prices.

If I can find a 4/3 2500 sqft house on a golfcourse for 1695 a month, imagine what you can find.

I will say to be careful and interview the potential landlord because there is nothing like handing over a large deposit and then finding the NOD in the mailbox 2 months later.

Restless1 said...

50% decline on some of the new projects that people were lining up to buy three years ago. Less than that in most established areas. Bottom in this year or 2009. Then several sideways years after that. Bottom is approaching because market is now in a panic capitulation. Foolish however to think that the real estate market won't bubble over again, probably between 2015 and 2020.

Sippn said...

Missed Landers cite of the Business Journal yesturday, but read it today.

Builders have significantly cut inventory.

You will see a bottom in new home prices very soon if you haven't already.

Don't confuse that with median price drops due to foreclosures or smaller homes being built.

Tyrone said...

I was going to summarize some homes for sale in zip code 95864, and on house #2, I cannot believe what I'm seeing. This is the kind of crap that is artificially propping up "prices", unless I'm mistaken about the transaction.

#1: 900 Watt ave, 3bd/2ba, 1827 sq ft
Sales Price: $295,000 -36% from peak
List Date: 7/27/2007, ACTIVE
Sale History
05/09/2007: $357,027
12/19/2003: $462,000
06/14/2000: $243,000


#2: 3617 Tolenas Ct, 3bd/1ba, 1098sqft
Sale History
09/21/2007: $890,000
06/28/2006: $494,000
09/06/2001: $281,500

Tax Bill: $2,605.63
Due Date: 12/10/2007 UNPAID
Assessor show sqft at 3400sqft. Perhaps they built a McMansion.

Another Tolenas McMansion...
3677 Tolenas Ct, Assessed Value $1,043,000
Amount Due: $2,455.57
Due Date: 12/10/2007 UNPAID

Crazy stuff.

Sippn said...

Tyrone -

Arden Park is busy with tear downs of 60 year old block homes - they are typically priced and sell from about $900k-1.6 mil, one newer one just went pending @ $2.2 mil.

wont said...

GWYNSTER --

we are looking to rent in Davis. What's your most favored source of information? Craigslist?

TIA...

inpd said...

I think Sippn is on the right track.

New home prices may bottom out soon
because sellers are discounting greatly
to move their inventory.
Right now you can get new homes in
Roseville West and Natomas (2000 sq ft)
for under $300K with many nice upgrages
(see Dembly park for example).

BUT the wave of foreclosures will keep
resale of existing homes low. Also,
individuals don't have stock holders
so many sellers will wait and wait
in the hope some one will buy there home
above market price.

Just keep on low-balling these existing
home sales and they'll get the message.

STOP ROSEVILLE CRIME said...

El Dorado County Public Works Department issued a STOP WORK order for the Lennar project on Latrobe rd due to FAILURE TO PAY fees (to the tune of $200K which seems like chump change to me for a huge builder like LEN)

This isn't surprising. I've posted links on here before about Lennar's sales tactics. They used to negotiate deals with subs and then AFTER the work was done say they would only pay 50-60% of the actually negotiated price. Bad business practice and unethical. Once things turn around these guys will get blackballed.

You will see a bottom in new home prices very soon if you haven't already. - SIppin
Funny thing is he's been saying this since 2005, so for 3 years he's said we're hitting the bottem. Unreal, you'd think he would quit but like most RE's on here, trying to inject scare tactics on people sitting on the sidelines. I guess a broken clock is right 2 times a day, if he keeps predicting the bottom he'll evenually hit it, even it it's 3 years from now.

wannabuy said...

In a housing bubble, you know when the bottom has been reached after you have had stagnant (not lower) prices occur for a while.

I'm with SMF on this. The bottom will last for a long time. Its NAR bs that it will be over quickly.

Don't worry about catching the home at or near the bottom is true. But with the drops of the next few years. We're not looking at a 25% price drop, we're looking at 50%.

$300k to $250k? Nope. Its $300k to $150k or maybe generously $200k.

Lets compare.
$300k at %5.75 is a bit...

But $200k, after saving another $50k (due to renting being much cheaper than buying), is $150k of debt.

We won't see 11.5% rates. That's what it would take. Anyone who waits for a home might pay the same monthly payment as today. But that will be a 15 year loan versus a 30 year. ;)

Construction will start again as soon as land prices drop enough to justify it. The 'gold rush' mentality is coming to an end.

The old wisdom is buy when its hard to get a mortgage only when its tough to get a loan. For only then do you negotiate a fair price. Wait. Wait at least two more years. That won't be the bottom. But by that point, sellers will get the picture.

Predictions of a decline of 25% in SAC should be laughed at. We haven't even begun to see the foreclosures enter the market.

Got popcorn?
Neil

Gwynster said...

CL, the Davis Enterprise, and patience. I've gotten some really nice offers by putting an ad in CL stating what I want. Remember that prices will be going down even more in 4 months. You can usually get quite the deal by taking over someone's lease in May.

Jennifer said...

I know we have been discussing home prices coming down to meet rents. BUT... the rents are coming down too. Just saw a few rentals on CL in Wilton JTS ranch. These were 1+million dollar homes now renting for $2000. That is cheap!!!!

I guess I will be renting for a while!

STOP ROSEVILLE CRIME said...

Don't forget about the Feds officially marking Natomas as part of a federal flood zone this past week, no more building out there. Those of us who use our heads and don't listen to the hype (Sippin) knew Natomas was on a flood plain. It floods out there with any type of rain fall We also know about EG and Laguna. We otta see another 20-40% off the current prices of Natomas. Better take the sharp instuments away from owners out there.

Diggin Deeper said...
This comment has been removed by the author.
Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

What's interesting to me about the whole flood zone thing is that climate experts are expecting less annual snowfall and snowpack in the sierras, which means much more water flowing at the lower elevations during and after storms. This doesn't bode well for flooding concerns.

HOUSE2008 said...

Yahoo! Went to revisit a local builder to see if their price point has moved any & wahla! There is a get this, 100K incentive to the buyer to use any way they like. 0k closing & 90 discount on the house. Now the house plan me wife & I like is 476k. With that incentive in mind *sniff* it smelling pretty good Buuuuuut not good enough. I laughed as I heard the mantra stated on this site. "everything else can be negotiated later, except the selling price".

Jessh, I now have SACRAMENTO LAND(ING) as a consious thought in my head! Is this good or bad? lol.

Anyhow, went to several builders & they all were having a stiff upper lip and making the best of it but I'll wait till they go through a few more quarterly earnings before I buy. So the trade off seems to be that one can buy a moderatly priced home in an unknown area or buy in an established area at a high price. Kinda sucks. Isn't there something in the middle?

Patient Renter said...

"Isn't there something in the middle?"

Probably not right now. You have the right idea, just wait a while more.

inpd said...

Very good point. There is nothing in the middle now.

Right now you can buy 2000+ sq ft homes
in Roseville for $300K brand new or
for $275K buy a similar home in Natomas
that is 1-5 years old.

Alternatively you can buy a 1000 sq ft
home in an established area like
Land Park, East Sac for $500K.

I was hoping that some of the
established but not as nice areas
(such as Curtis park with their
crappy schools) would drop quickly.
They are dropping, but sellers are
just denying the inevitable: no one
is now going to spend $500K for a 1000
sq ft 1930's home with all its charm
and problems.

waiting_for_the_fall said...

those $300k brand new homes were going for $175-$225 in 1999.
I expect them to drop to that level, or lower, in the next year or two.

inpd said...

Your right ... kind of ...

The Mace home ranches in Davis did indeed sell for about $200K brand new (1800 sq ft one level) in 1998.
I verified this.

But the new (at the time) Winncrest
homes in the pocket (south lands park)
sold for $188K brand new in 1988
(2000 sq ft)

So was the 1988 home overpriced or
the 1998 home underpriced? I've not lived here long enough to know.

When was the last rise/fall sequence in home prices in terms of years. Maybe 1998 was a deep trough and its unfair to compare prices to that level or maybe 1988 was a high and its unfair to compare prices to that level.

Gwynster said...

"Description
Seller is broker. Added on patio room is as-is. Will give roof cert. Nice, neat, clean semi fresh paint in/out. Large lot priced to sell. 1st loan is a heavy prepay it is a 5/25 loan 5 mons old bal about 300k. Lease option ok higher price 5000 option money."
MLS #: 80008640

translation - "I'm screwed, can't finish my projects and not worth it even if I did. I will do anything to help you buy my albatross".

Gwynster said...
This comment has been removed by the author.
Tyrone said...

Stockton featured on 60 minutes...

linked at Calculated Risk:
House of Cards.

Chris said...

Homes in Land Park are now listed at $320-410/sq ft, down from about $380-500 at peak.

Here's an example of an attractive home selling for about $370/sq ft. (1570 sq ft, asking $559K)
ss
http://tinyurl.com/2yvq6h

(TinyUrl.com is great for linking to long URLs)
---------------------

"Alternatively you can buy a 1000 sq ft
home in an established area like
Land Park, East Sac for $500K."

Tyrone said...

Alternatively, you can wait for things to bottom out, at which point, 2707 Marty Way (http://tinyurl.com/2yvq6h), won't be worth more than $300K. Pay more than that and you're just a fool.

inpd said...

What makes this situation soooo
tough is that:

a) There has been a bubble.
Similar homes (1500-1800 sqft)
to the Marty Way home cost $185K in
2000.

b) But, Sac homes were undervalued.
Where else in CA could you buy a home
in 2000 that was one mile from down
town in a beautiful old neighborhood
like lands park for $185K?
Sac is not LA buts is a reasonably
sized city which is nice.

> Alternatively, you can wait for things
> to bottom out, at which point, 2707
> Marty Way (http://tinyurl.com/2yvq6h),
> won't be worth more than $300K. Pay more
> than that and you're just a fool.

Chris said...

Oh, I have no intention of paying $559K for 2707 Marty Way. But, for someone who wants a nice place to live for ten years or so, it would likely be a good buy in the mid- to high-400s.

But I say that because it's a nice home in a nice neighborhood, not because I have any illusions about real estate being a good investment anytime soon.

Chris said...

inpd:

Be patient. Prices in Land Park ARE falling and will almost certainly continue falling for the next year or so.

For example, check out 2705 17th St. It needs a little work but it's still a rather spacious home for that 'hood. It was listed at either $529K or $519K (I forget) about four months back, sat, sat and sat and is now listed at $429K!!!!

I think the dam will burst in the next 3-6 months, with enough sellers caving such that all of them will have to follow suit, with us potential buyers seeing 1%/month drops in prices.

HOUSE2008 said...

Everyones right in that home prices will drop but has anyone ever heard of marking home prices UP prior to a "sale". Give you one subdivision as an example as I go around & gather their sales brochures every 6 mo. D.R. Horton homes @ Sheldon ranch in Elk Grove. Back in Sept/Oct time frame they were listing their home for as follows:

Oct/07
Residence #1 $339,990
Residence #2 $349,990
Residence #3 $384,990 (my favorite)
Residence #4 $419,990

Fast forward to Jan 08

Residence #1 $404,990
Residence #2 $425,990
Residence #3 $446,990
Residence #4 $476,990

Prior to writing a long winded post earlier I had mentioned that I was offered #3 with a builders 100K "incentive" @ a 2-1 buydown with years 3-30 @ 5%. Not bad with the final sales price being 335k. Now perhaps others here can tell me why they marked UP the price of their homes even though I may get the home for LESS that the original asking price ? Whats the purpose of this?

aggiealum said...

House2008 (nice name, I guess I should register as House2008_2), my guess regarding the uptick in asking price? To make it seem like they're hooking you up with a deal. Not everyone may have remembered (or know) what the asking price was previously. As the media talks about how low the interest rates are and the skyrocketing foreclosures, some buyers may be doing some shopping. They show up to the same site you did, but when told the builder has a $100K incentive, the buyer thinks they've scored a great deal! On the other hand, incentives don't go against the recorded selling price of the home, so when the metrics of median home sale prices is released, the sale price is used, although in reality, it was a $100K less. On top of that, the city benefits b/c your property tax is on the sale price, not what you actually paid.

On the flipside, the new homes we're looking at have recently dropped their advertised asking price about $90K across the board, with an additional 10% off (although that was supposed to have ended last week, but was extended to end today).

smf said...

But, Sac homes were undervalued.

With 20/20 vision it was questionable whether we were undervalued in 2000. Certainly this belief was used for a long time to justify the rise in prices.

Where else in CA could you buy a home in 2000 that was one mile from down town in a beautiful old neighborhood like lands park for $185K?

Plenty of places.

inpd said...

Wow! I though Sac was undervalued.
Those 1600 sq ft homes in Lands park
are certainly not worth $500K-600K
as they are now, but I think
$185 was too low. The real tough
question is, what are they worth?

I think $300K is reasonable, because
lands park is beautiful and special
and its proximity to downtown Sac
appeals to a lot of people who
work there.

We'll just have to wait, but that wait
could take years (and probably will)!

> With 20/20 vision it was questionable
> whether we were undervalued in 2000.
> Certainly his belief was used for a
> long time to justify the rise in prices.

smf said...

...because lands park is beautiful and special...

Sorry, we all have heard that plenty of times before. When everyplace is special, no place is.

But yes, Landpark is a nice area, but you will find that historically there have been plenty of other places in Sacramento that were more expensive than Landpark.

During the bubble, these slight price differences were used to justify the price rise in lower priced areas.

Here in 95827, one side of the freeway was always more expensive than the other side. During the bubble, that difference disappeared. On one side of the ZIP the price won;t go down as much as the other side.

But don't say you can't see the prices go down so far. Recent stories can be found where some thought that a price correction would be slight, not the 20% we already had.

The issue will soon turn from price to quantity. So much housing was built, that there isn't enough people in the US to occupy it all.

evlunclbud said...

"What Housing Crisis? Realtors' Ads Defy Reality": despite what you may have heard about the ethics of people in the sales marketing trade, Advertising Age blows the lid off realtor advertising. Here is an excerpt:

"Ads include claims that, on average, the value of a home nearly doubles every 10 years, and 60% of the average homeowner's wealth comes from home equity. The ads drive viewers to the website, HousingMarketFacts.com.

"On the site, an "equity estimator calculator" suggests a $20,000 home down payment turns into $124,600 in 10 years for a 623% return. The website includes the same claims as the two spots and adds a few more noting, for example, that that prices have risen an average of 6% every year. Like each of the spots, the site does come with a small warning -- that local market conditions can vary and consumers should seek counsel from a local real-estate agent.

"However, in the light of the current market the 'housing-market facts' could also be read as a historical look at an overheated market rather than a good predictor of what's to come. Gary S. Becker, a Nobel Laureate, author and economic professor at the University of Chicago, said the ads leave out important information that consumers need about home ownership. 'It's a risky investment -- unless borrowers recognize that, they could be misled,' he said.

Mory Brenner, a veteran consumer-debtor attorney who now writes on debt issues from a consumer point of view, put it this way: 'Were the ads trying to lead you down a road with blinders on? I thought so. I found it objectionable and a little offensive,' he said. While without patently false statements or data, Mr. Brenner said the ads 'are misleading and not especially forthright and, in a way, the way we got into this situation [the subprime-mortgage crisis] in the first place.' He chided the association for not producing a campaign more befitting its station. 'They're not some [real-estate agent] on the corner,' he said.

Betting the farm
Others were concerned about the premise the Realtors put forth in the ads that housing values are going up. Patrick Newport, an economist with Global Insight, an economic-forecasting firm, said: 'In a lot of markets, housing prices are dropping, and in some markets -- such as Florida and California -- they are dropping a lot. If you buy a home, you take on a big risk,' especially if national housing prices drop 10%, as some predict, or if you lose your job and are unable to make mortgage payments, he said. He added that in many cases, 'renting may be a much better deal than buying a house.'

Greg Daugherty, executive editor, Consumer Reports, said he understood that the Realtors are trying to make their case to stimulate business for their members. But 'generally speaking, we don't think people should look on their house as an investment,' he said. 'Even if you double your money over 10 years, it's not a huge return compared to the stock market,' he said, citing Consumer Reports studies that back up that point. 'If you need a home, it's always a reasonable time to buy one. But consumers should not look at buying a home as a get-rich-quick, or a get-rich-ever, scheme,' Mr. Daugherty said.

Jeff Lancaster, a wealth-management adviser in San Francisco and Silicon Valley, said the ads are sweeping some important facts under the rug. 'I don't think, in general, advising people today to buy homes for financial reasons is good advice. There's very good reason to believe the price of residential housing in most communities in this country will be lower a year from now than it is today,' he said. 'You could lose money.'"

See the whole schmeer at http://adage.com/article?article_id=123374

SacramentoCrash said...

60 Minutes took it easy on this regions.

Stockton's foreclosure rate is not that bad......

Foreclosures and pre foreclosures

If you compare it to

North Natomas (FloodTomas - 95835) 996

- Westlake (West part of FloodTomas with about 500 homes +/-) 242 !!!

South Elk Grove (95757)887

Elk Grove total (95624 95757 95758) 3197

The newer areas like Weston Ranch are a day in the sunshine compared to those two bubblicious zones.

Too much greedy rapacious behavior ripping up fertile soil during the past 8 years.

60 Minutes would have had a field day with those areas.

inpd said...

evlunclbud your right of course. Realtors do more harm than good.
Had a few trying to convince
me that they are "connected" and if
I purchase through them they could get
my kid into any Sacramento school
during open enrollment. So I
Called Sacramento
unified school district and woman said
coldly "it's a lottery. The computer
doesn't know your realtor".

Which leads me to a question. What's a
good book to educate yourself on buying
a home in CA (I've bought in NY but
CA is quite different).

inpd said...

>>Where else in CA could you buy a home
>2000 that was one mile from downtown in
>>a beautiful old hood like lands
>>park for $185K?

>Plenty of places.

Out of interest SMF, where are these
large CA cities where homes were
so cheap in old-leaf suburbs 1 mile
from downtown?

A top ten CA large cities by pop is:

Los Angele,San Diego,San Jose,
Santa Clara, San Francisco, Long Beach
Sacramento, Oakland, Santa Ana,
Anaheim

and I think they were all pretty
expensive in 2000.

HOUSE2008 said...

On top of that, the city benefits b/c your property tax is on the sale price, not what you actually paid.

Ok. Now it's making more sense. But it did leave me scratching my head for a minute. Thanks for clearing this up.

Anybody else think % rates will go below 5%? My wife & I qualified at this rate but the only KNOWN is that the value of the homes are going down. Will Libor rate also?

aggiealum said...

When I was shopping for a new car, I found a forum where people posted their buying price and other perks for their new car. This was helpful b/c it helps potential buyers get an idea of what others are paying. Does anyone know of a forum where new home buyers are posting their info, even including interest rates?

Gwynster said...

I just read that the Bush admin pushed the senate to strip the FHA changes out of the stimulus package. Great news