Wednesday, February 27, 2008

Sacramento Real Estate Market - 'It's Never Been As Bad As It Is Today'

From the Sacramento Bee:

"We keep seeing more and more horror stories about the economy," said Michael McGee of Winchester McGee Financial, a Rancho Cordova mortgage brokerage firm. McGee said higher mortgage rates aren't helping a housing market that he believes is the worst of his 36-year career. "It's never been as bad as it is today," he said.
...
Consultant Steve Dutra said higher rates will blunt the impact of falling housing prices, which analysts had hoped would kick-start a new round of buying. "With prices coming down, we were hoping interest rates would stay low as well," said Dutra, a vice president in the Sacramento office of Irvine-based John Burns Real Estate Consulting. Higher rates means "a certain amount of people will be taken out of the market," he said.
...
Alan Wagner, president of the Sacramento Association of Realtors, said he's trying to persuade potential homebuyers to jump in now before rates get any higher. "Now's the time to buy your property," he said.

Yet other analysts weren't as hopeful. Dean Wehrli of consulting firm the Sullivan Group said higher rates aren't especially worrisome – but the economic trends are. "We have to be worried about jobs again – Sacramento's job growth has slowed down so much the last few months," he said.
From the Sacramento Bee:
The Sacramento region's slumping housing scene is affecting at least one dealer in high-end wine. Roseville wine merchant Marcus Graziano, customarily a big buyer at the Premiere Napa Valley barrel auction each winter, spent just $80,000 on unusual wines during this year's sale last weekend. "Our business is still growing, surprisingly, but a lot of my clients are in home building," said Graziano in explaining why he cut back his bidding this year. A year ago he spent about $250,000 at the sale and the year before he invested $174,000.
From the Sacramento Bee:
As fears of falling home values continue to grip the Sacramento-area market, more home builders are offering limited protections against losses to help worried buyers sleep at night..."I started hearing about it maybe three or four months ago," said Hanley Wood's Kathryn Boyce. "Builders know there are a lot of people who aren't buying because they think the market is going to go lower."
...
To woo anxious buyers, KB promises if it lowers prices during the three or four months between a signed sales contract and finished construction, the buyer will get the lower price.
...
One of the Sacramento region's leading town house and condominium builders, Reno-based Pacific West Cos., is going a step further. It's telling customers that if they buy today and the builder drops prices before the development is finished – even as far out as two years – they'll be reimbursed for the difference.
From CNN Money:
Many owners simply went too far amidst the mania, over-improving their homes beyond what the local market would bear, according to Darius Baker, a veteran Sacramento, Calif., contractor. In the past his clients were more likely to opt for expensive redos even if they were planning to move, since they knew they'd recoup most of their costs. "I definitely saw a lot of tract houses built in the 1970s, in developments with three basic floors plans, get expensive renovations," he said. "We did a lot of radical projects, moving walls around, installing granite counters instead of Formica and cherry wood cabinets instead of oak."
From the Stockton Record:
Cesar Dias, a real estate agent and mortgage loan officer in Stockton, became a media star in October after he launched a bus tour for people interested in buying foreclosed homes in the area. The catchy marketing concept not only has worked for Dias - he said his business is up fourfold - it's now being picked up by other real estate agents and brokers, with at least a half-dozen such repo bus tours being staged in the Sacramento metro area alone...TV news crews from France, Japan, Australia and Holland, and even "60 Minutes," among others, went along for one of the Saturday Repo Home Tour.com jaunts....

...Dias recently decided to franchise, in a manner, his concept by charging real estate agents and brokers a consultation fee for helping them start up their own tours. There already are a half-dozen "alliances" up and running, he said, and as many are about to launch. His goal is to have 50 in place during the next 60 to 90 days."I had no idea it would be that large," he said. "Every week, every month, it's just been growing and growing."

11 comments:

mechanico said...

lander,

http://realestate.msn.com/Buying/Article_forbes.aspx?cp-documentid=6297541>1=10932

mechanico said...

Sacramento is pocketed( good areas mixed with the bad). With the housing crash, my theory is it will become less and less so.
With a few exeptions, such as land park, I think everything south of 50, is about to become greater south sac, including the pocket area. And with the crap they built in Natomas I'm ignoring that as well. I'm buying more and more into the safety of the inner core theory. But I'm having trouble defining the boundaries. As an example would you consider the house along garden highway close to downtown "inner core" or just South Natomas.

alba said...

Repo home tours should last as long as the banks keep holding on to their properties. It's not a loss until you sell.

It seems that dumping homes at public auction is the quickest, least complicated, and least expensive process for lenders. While it appears the banks are realizng a better return on their losses by having the marketing gimmick auction, I think it just allows the banks the longest amount of time, before selling. It has to be cheaper to cut and run at NTS auction time.

Tyrone said...

Higher rates means "a certain amount of people will be taken out of the market," he said.

Exactly why do they think higher rates will take some people out of the market. Higher rates will further drive prices down. Better to have lower price than lower rate.

Diggin Deeper said...

Californian Suburb Vallejo Faces Bankruptcy

http://www.cnbc.com/id/23385758

"More California cities may file for bankruptcy because they face the same toxic mix of falling tax revenue, rising payroll expenses and a slumping housing market, experts say."

Someone might want to look into starting up a California city Implode Meter blog.

Diggin Deeper said...

Mechanico...

Living in the South Natomas Garden highway area, I wouldn't consider it inner core. Convenient to the city, yes but the area is subject and has produced REO's at an alarming rate as well.

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

Treasuries May be no Safe Haven in This Stock Market Storm

http://www.moneymorning.com/2008/02/28/treasuries-may-be-no-safe-haven-in-this-stock-market-storm/

"By late January, the 10-year Treasury bond rate was yielding only 3.28%.

That has certainly changed. In just one month, that 10-year Treasury bond yield rose from 3.28% to 3.90%, giving holders of 10-year T-bonds a capital loss of about 6% of their principal. The yield was 3.85% yesterday.

Clearly, Treasuries are no longer a safe haven."

This is what I've been concerned with all along. The Fed can make all the noise it wants but if the bond market smells inflation, it will punish those holding longer term Treasuries by raising rates and forcing prices down. That includes all our benevolent creditors overseas who kindly finance our debt each month.

The Fed can't afford to lose the confidence of world creditors, yet it is powerless to control the bond market. It's a yawning event to watch the talking heads put so much faith in an institution so far behind the curve.

Once the pain reaches a certain level, the rest of the world will quit buying, and rates will spiral even higher to entice them back into the fold. In the middle of it all will be mortgagee rates moving much higher, much faster, than most want to believe.

Again, I'm not so sure I want lower housing prices on the back of higher rates...If it was a straight line proposition, I'd buy the thought. I don't think it is.

Patient Renter said...

Wouldn't Vallejo be the first ever (in CA)? I'll bet it sparks a trend.

Diggin Deeper said...

Orange County declared Chapter 7 Bankruptcy back in 1994. Cities? Don't know.

Kip said...

mechanico,
the only area i would consider the inner core would be 'the the grid'. bordered by alhambra, broadway, I5, and C street.
land park, fab 40s and 50s, garden highway: besides being very close to downtown, these neighborhoods feel much more like, say, the pocket area.