Friday, May 02, 2008

Radar Logic: Sacramento Home Prices Drop Nearly 30% YoY

From the New York Times:

At the end of 2007, areas with the highest vacancy rates in housing intended for owner occupancy fell into two categories: Rust Belt areas like Detroit, Cleveland and Akron, Ohio, and former boom areas like Orlando and Tampa in Florida, and Las Vegas. Although home prices have fallen sharply in parts of California, only the Sacramento area shows high vacancy levels.

High vacancy rates put renewed pressure on prices, of course, and also serve as a warning that the home building industry may have a long wait before it can regain volume.
From the Modesto Bee:
"The new home sales rate is nothing short of dismal," lamented Dean Wehrle, vice president of Sullivan Group Real Estate Advisors. He said Stanislaus, Merced and San Joaquin county subdivisions are averaging one sale per month...Sales have been so slow throughout the three-county region that Hanley Wood said the inventory of approved lots is enough to last until 2012.
New home prices have dropped dramatically to lure buyers, but Wehrle said homes in the region still cost far too much for most residents...He said it was "outrageous" how the region's home prices more than doubled from 2000 through 2005, rather than appreciating at a more "natural" 6 percent a year.

Though home price have fallen since 2005, Wehrle's charts demonstrated how it will take until the end of 2011 or early 2012 for the valley's housing market to stabilize enough to bring it in line with builders' current median prices. He said that means builders must continue dropping prices or stop building.
From Bloomberg:
Home prices fell in 22 U.S. metropolitan areas in February, led by Sacramento and Las Vegas, as record foreclosures deepened the housing slump. The price per square foot in Sacramento, California's capital, dropped 29.8 percent to $161 from a year earlier, according to a report released today by New York-based Radar Logic Inc., a real estate data company.
From Radar Logic:
The increasing number of foreclosures occurring throughout the country has introduced a new supply of homes and a larger segment of a nontraditional type of seller. This increasing segment of foreclosures in the market highlights a type of unusually ‘motivated seller’ who is influenced by a desire for greater liquidity rather than obtaining a higher price. Radar Logic’s analysis creates a baseline estimate by tracking sales by financial institutions (e.g. banks, mortgage servicers), foreclosure service firms, and foreclosure auction sales in order to track the trends of motivated sellers. After taking ownership of the homes, the institutions face capital constraints and incur carrying costs. If they believe prices will not rebound soon, they have an incentive to unload the house quickly and minimize losses.

As this segment becomes a larger fraction of transactions, many markets show significant differences in both price levels and price trends between motivated sellers and the rest of the market. In all 25 MSAs motivated sales show median prices at lower price points than non-motivated sales. Some markets currently experiencing large percentages of motivated sellers include Sacramento (51.7% of all transactions), Las Vegas (44.1%), San Diego (37.0%) and Los Angeles (27.0%). In Sacramento, year-over-year price per square foot declines of 29.8% are influenced by more than half of the market being motivated sellers selling for 26.4% less than non-motivated sellers.
From Time:
The black bus rivals a greyhound in size but has an interior like a limo--and it gets a few curious looks as we wander into the dense neighborhoods of Elk Grove, Calif., a quiet suburb 15 minutes south of Sacramento. Five of us--a mortgage counselor, three investors and I--are looking at 10 recently foreclosed homes....

Like many communities across the U.S. that boomed during the housing bubble, Elk Grove is feeling the pain of the housing burst...Elk Grove alone has about 2,120 bank-owned houses for sale and 1,280 in pre-foreclosure, according to RealtyTrac, a real-estate-data website.
From the Stockton Record:
Clearly this foreclosure mess has yet to run its course. That should surprise no one who paid attention in the first half of this decade and saw, for example, the median home price in Stockton jump from about $100,000 in 2000 to about $400,000 in late 2005. At the same time, more and more of the sales pressure from speculators and Bay Area transplants that fueled the run-up in prices was being financed by interest-only and adjustable-rate mortgages. In other words, too many people were speculating in homes here or buying homes they could not afford.

The good news is that home sales, which have increased each month this year, continue to climb. Granted, most of the sales are of foreclosure properties, but until those homes are sold, there is no real hope of the market stabilizing. It will take time. How much is unclear since we cannot yet tell how many more homes will fall into foreclosure.
From the Auburn Buzz:
If a deal is not reached, the bank will hold a foreclosure sale on more than a third (137 unsold lots) of the 409 lots in the Winchester development, it’s massive 35,000-square-foot country club, and its pristine 18-hole private-member golf course. In preparation for a possible sale, Winchester Country Club employees confirmed bottles of wine and other items in its gift shop have been discounted in an effort to move the merchandise before the scheduled foreclosure sale.
While the soft housing market in Placer County and throughout the nation is at the root of Myers’ financial woes at Winchester, there is speculation he failed to lower lot prices and club membership fees, which run up to $80,000 a year for non-residents, as the market softened.
From the Sacramento Business Journal:
Home furnishings retailer Linens 'N Things filed for Chapter 11 bankruptcy protection Friday and said it will close 120 underperforming stores as part of its restructuring, including its store in North Natomas and 26 other California locations.
"The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years," said Robert J. DiNicola, Linens Holding executive chairman....

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