Wednesday, February 20, 2008

12-Month Price Drop Exceeds Entire 1990s Decline

It's been a while since I last posted charts based on data from the Sacramento Association of Realtors (SAR). Here's a look at January's price and sales trends for single-family homes in Sacramento County and West Sacramento. Click the charts to enlarge. To compare to other price indexes, click here.

Sacramento's median home price declined an astounding 28.2% over a 12-month period, the sharpest drop on record. That compares to a 24.1% decline over the 6-year 1990s housing bust. January marked the 19th consecutive month of year-over-year percentage declines and the 6th month of double-digit declines.



The total decline since peak breached the 30% barrier for the first time, falling 35.1%.



Like DataQuick, the SAR's median price dropped to 2003 levels (in this case November 2003).





The number of escrows closed in January declined by 1.6% compared to last January. This marked the first single-digit percentage drop since August 2005. Sales have dropped on a year-over-year basis for 32 consecutive months.



Here's a look at sales since 2001.


21 comments:

Jacob said...

Wow, those charts really speak for themselves, not sure how the shills will continue to spin it.

One year of declines exceeds the entire 90s bust... And we aren't even through with all the resets.

Diggin Deeper said...

Just to recap and put some puzzle pieces on the table:

Mortgage rates tending up having risen from around 5.25% in Jan. to close to 6% this month. This was not the intended effect the Fed sought when they starting easing rates.

Oil, commodities, precious metals sharply higher as investors use them to hedge falling portfolio values.

Financials are in deep trouble. Wall St big boys are cash strapped and have quietly borrowed $50 Billion (short term cashflow notes) from the Fed window through the middle of Feb.

Bond insurer's are faltering and losing AAA status. This is creating another wave of future write downs at the major financial institutions.

Architectural billing stats for commercial real estate post a big drop in January. Probably the next shoe to drop.

State budget deficit now exceeds $16 Billion. A month ago it was reported to be $14 Billion? Arnold pulling out the red pen.

CPI prints a 4.3% increase in inflation YoY.

Money supply has increased 15% YoY. Dollar index has fallen from 84.06 in mid Feb 2007 to 76.16% today marking a 9+% decrease in the index. Since 2001 the strength of the dollar has fallen from the 1.20 level to .75 or a 37.5% decrease in 7 years.

There are many more pieces to add but as it stands today, we're well into paper asset deflation (stocks and housing appreciation) met by tangible asset inflation.

Sacramento median housing prices off 35% from the peak? How much further can it go????

RMB said...

This is great.... Where's Sippn?....What about that realtor from Folsom -- the young kid, would like to get his input on what is happening out there. Could check with Lockewood, but he would give some CAR/NAR spin that now is a great time to buy because we are advancing to affordability, yada, yada, yada....
Will this slide stop at 50% off from the peak? I am starting to wonder???

anon1137 said...

Amazing - very nice post, Lander.

In the coming year (or two?) I think we're all going to stop worrying about buying a house and just be thankful to keep our jobs. It was the same way during the 90s slump - unemployment was the biggest fear.

Patient Renter said...

Things are moving so fast, I'm having trouble keeping all of the stats straight, particularly since the various sources show varying declines.

So SAR is showing a 28.2% drop YOY... didn't another source recently show a similar drop from the peak? Maybe I just need to pay closer attention.

Patient Renter said...

Q: I take it SAR's data is basically from the MLS. I'm not sure then if it includes new home sales or not?

mopar777 said...

Thats right 1137. Survival is starting to be the main concern right now. With oil at $100 and $3.50 gas right around the corner I'm wondering about these poor fools who just had to get away from the city and who have to drive in from places like Placerville, Camino and Shingle Spring everyday. When are these guys with the tatoos and hats on backwards going to ditch their monster truck chick magnets and learn to attract women like the rest of us do? I was at the ARCO yesterday and witnessed this woman just shaking her head back and forth as the pump approached $100 while filling her monster SUV. When are they going to dump these money hogs?

Diggin Deeper said...

mopar777

Just try and get out of a monster guzzler when you're two years into the note...ugly when gas keeps going higher...They're giving away Hummers right now and if you're into it for a couple years, your resale values are likely to be lower than a Toyota Camry for the same model year.

People are basically trapped whether they're trying to unload a car, a home, a boat, etc. Nobody saw this smackdown coming nor would they have expected it to rain down like it has. There's probably opportunity in this junk pile, one just has to be careful and not take on floating debt to get to it.

I'll stick my neck out and predict that mortgage rates will be at 8% or better within the next 12-18 months. If they're not at that level or higher, we'll have slipped into a very long and painful inflationary recession.

If we shored up the dollar by basically destroying half of what's in circulation, we'd be a whole lot better off than playing the growth "at all costs" game. The fixed income people are really going to suffer...

Jacob said...

Nobody saw this smackdown coming nor would they have expected it to rain down like it has

Many did, but nobody involved cared.

SacramentoCrash said...

Median and average prices don't mean jack.

Those "economists" and "real estate professionals" need to examine a sampling of properties using comps to figure out how far it dropped.

I can tell you that I personally have seen recent sales in bubble areas occur at 2003 pricing levels.

mopar777 said...

"I'll...predict that mortgage rates
will be at 8% or better within the next 12-18 months"

I hope you're right on that one. It'll send RE prices down another 20% in average neighborhoods. Responsible buyers with cash in the bank will finally be rewarded instead of penalized by below inflation dogs**t interest rates as we are now.

Right now I'll just keep driving around in my '98 Toyota pickup and log onto Zillow every week to see the values drop on investment properties that I plan to buy with the cash I saved up during the good times.

Jacob said...

Yea, anything that lowers the price works for me. Bring on 20% interest I got my cash ready.

smf said...

How much shall we bet that soon some RE shill will say how we have reached the bottom, since we are at the same percentage of the last drop?

"Nobody saw this smackdown coming nor would they have expected it to rain down like it has"

As noted, many did. Plus all you had to do is take a look at prior history to get a decent idea to where things are headed.

"as the pump approached $100 while filling her monster SUV."

Similar to homes, many people bought w/o taking into account maintenance costs.

Jacob said...

Looking at the charts we are almost to the bottom in terms of sales, a few more months and we should be at 0.

Diggin Deeper said...

"As noted, many did. Plus all you had to do is take a look at prior history to get a decent idea to where things are headed."

Factoring in only real estate prices and the bubble as such, I'd agree. But when you take the problem as a whole and the financial/credit crisis that's developed, I doubt few on this blog or anywhere else had a clue as to the widespread damage that's been done in relatively short period of time....

As bad as those graphs are, real estate prices are not going to zero. Maybe fewer and fewer sales occur, an additional X percent comes off the pricing, and inventories steadily increase as more foreclosures hit the market...just as there was a tipping point where prices escalated downward, dropping multiple points per month, the pendulum will swing the other way to the buy side.

smf said...

"But when you take the problem as a whole and the financial/credit crisis that's developed..."

That is true. That's why I still cannot predict where this whole mess will end up. As I noted before, this was not just a housing bubble, but a 'Global Asset Bubble'.

"...real estate prices are not going to zero."

Depends. If there is more housing than people available, eventually demolitions might be a way out. What happens when a house gets no maintenance for years?

sacramentia said...

"When are these guys with the tatoos and hats on backwards going to ditch their monster truck chick magnets and learn to attract women like the rest of us do?" That's funny ... any debt that works like a chick magnet for a single guy is good debt!

on a more serious note:
"I'll...predict that mortgage rates
will be at 8% or better within the next 12-18 months"

Maybe the 30yr fix goes up like this, but I think the short term loans will continue to come down. As the uncertainty increases, I think the premium demanded for long term money is going make the rates on 30yr diverge from the adjustable rate loans.

Diggin Deeper said...

"If there is more housing than people available, eventually demolitions might be a way out."

Nobody's figured the delta on just how many more homes there are than people to live in them. What we do know is that there were plenty of people that bought but couldn't afford. The inventory of bank owned homes, alone, paints that picture.

"I think the premium demanded for long term money is going make the rates on 30yr diverge from the adjustable rate loans."

Sacramentia....

Maybe in a perfect world with little or no inflation, that might work. What happens when you're trying to cool cost increases that begin running 10-15% per year?. The Libor and 11th District cost of funds start moving up rapidly and pretty soon we're back to resets that push payments beyond reach...You've got to be damn sure your wages are rising nearly as fast as inflation in order for the ARM to work in your favor. In the 70's and 80's that worked ok. Today I'm not so sure.

sacramentia said...

"Maybe in a perfect world with little or no inflation, that might work. What happens when you're trying to cool cost increases that begin running 10-15% per year?. The Libor and 11th District cost of funds start moving up rapidly and pretty soon we're back to resets that push payments beyond reach...You've got to be damn sure your wages are rising nearly as fast as inflation in order for the ARM to work in your favor. In the 70's and 80's that worked ok. Today I'm not so sure."

If the Fed is given the choice between high inflation due to high commodity input prices and higher unemployment, I bet on loose monetary policy. I'm also not convinced that costs are decoupled from wages, meaning we can't have global wage arbitrage and massive inflation at the same time, unless the tax system changes drastically to reverse the trend of wealth concentration.

Diggin Deeper said...

Sacramentia...I hope you're right on that. I'm guessing that you've experienced a relatively stable, low interest rate, low inflationary environment throughout your working life so far?

Left alone and on its own, inflation can quickly get the upper hand. If you look at a graph of the time it took to clean high inflation out of our economy, the cycle took the better part 4 US presidents, a couple of Fed Chairmans, and over 20 years to declare that inflation was under control.

We're setting the table with artificially low rates, and a trimmed back inflation rate. We're likely to get the same meal we got during high inflation times. Only this time wages aren't likely to fan the fire, but more likley to be impacted to a greater degree.

Without real wage increases in a higher inflationary environment, affordability could erode faster than real estate prices...

Ask your employer for a raise...you might need it

sacramentia said...
This comment has been removed by the author.