Wednesday, June 18, 2008

DataQuick: Sacramento Home Prices Plunge Nearly 35% YoY

Another record price drop. From the Sacramento Bee:

Sacramento County...showed a 30.8 percent gain in sales over the same time last year...But those gains cost sellers dearly. Sacramento County's median sales price of $225,000 is almost 35 percent less than the same time last year. The median sales price - where half cost more and half cost less - hasn't been so low since January 2003.
Statistics by county via Home Front

From News10:
Chuck and Donna Rhodes recently bought a home in the Plumas Lake area of Yuba County, 25 miles from Donna's job and 35 miles from Chuck's. At the end of a recent work day, the two were working at home on what to do about the sagging price of their house. "The retirement is what bothers us because this is where the bulk of our money is and we can't retire unless we can sell it for at least what it was paid for and hopefully a little bit of appreciation on top of that," said Donna Rhodes.
From the Appeal Democrat:
Despite a loss of 60 positions, Yuba County's 2008-09 interim budget will grow slightly to fund millions of dollars worth of projects, including road improvements and the general plan update. The Health and Human Services Department and the Community Development and Services Agency will feel the greatest hit, losing a combined 59 positions, seven from layoffs.
...
Yuba County's major blow in revenue came with the downturn in the housing market. The county estimates it will lose between 3 and 6 percent of tax revenue in the next fiscal year.
From USA Today:
Borrowers are turning back to [credit] cards because "the spigot has been turned off on home equity lending," says Mark Lauritano of Global Insight, a research firm. In a recent USA TODAY/Gallup Poll, one in five consumers said they'd been using their credit cards more in the past year. Within this group, 44% are paying for necessities they couldn't otherwise afford.
...
"A lot of the clients we have work in the construction field, and there's not a lot of construction going on," says Diana Navarro, a housing counselor in Sacramento. "They've been using their credit cards for (everyday) expenses."

29 comments:

Mystere said...

Hrm, might want to balance your 'reporting' a bit. From the same Bee article that you cite in the first excerpt above:

"For the second straight month, the Sacramento region showed year-over-year gains in home sales as falling sales prices and growing numbers of discounted bank-owned homes prodded bargain hunters off the fence.

DataQuick Information Systems reported that 3,420 closed escrows for new and existing homes closed during May in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

It was the highest sales number in 20 months."

The article is oriented toward the jump in closed escrows in the region, as referenced in its title. Always a good idea to include such a 'tidbit' of information that actually is the main focus of the writing.

Diggin Deeper said...

So using the median high of $387,000(?) we're just under 42% off the high.

Does that seem right as we've moving down at fairly rapid clip now for months?

smf said...

Myst:

When a good chunk of those low priced homes are going to 'investors' still, the problem has not been solved.

It has only morphed slightly from the original housing problem, which was rampant speculation.

Sippn said...

Lander was correct :) each editor chose different facts to use as headlines...

In resale SFR, prices down 36%, sales up 47%

In resale condos, prices down 30%, sales up 60%

Sac county only.

You could say

"Prices down 36%, sales still suck in El Dorado County"

Its the under $250K stuff that is flying off the market. SO much so that local realtor associations are fining members for improper lockboxes and restricting access to other agents (its getting testy out there, isn't it)

Ollop said...

"Its the under $250K stuff that is flying off the market."

In this segment it makes buying a decent deal (on a cash flow basis) compared to renting. It is the segment I've been considering in the West Sac (Southport) area.

As smf pointed out, there is still a large number of specuvestors who think that buying the sub-$250k house is a sure path to real estate riches. The excesses haven't really be wrung from the system.

Patient Renter said...

The excesses haven't really be wrung from the system.

Exactly. We don't have a real, non-bubbly market until the investors are gone. So the significance of sales numbers isn't what it seems.

Diggin Deeper said...

Maybe that's the case but my wife has real buyers who actually want own a home at those levels. She also has investors who want to buy but they seem to want more than the market is willing to give at this point. They go on the back burner and actual home buyers go first.

I have hard time just handing this total Sacramento market over to speculators. They're there but they're not dominating one realtor's book at ths time. It easy to just encompass the entire county and say that's the way it is....wrong! That's not the way it is. That's the way some of you want it to be....

Not every market is a bubble. Some markets are true bull markets based on fundamentals. Some are bear martkets based on the same. The differentiation between the two is the difference between watching your 401k dump or make a modest return in the face of deteriorating results.

Get over the speculation part of this market. Some parts are very attractive based on cashflow, other parts still suck. Find them and you'll find a true investor who's done his or her homework. And they are going to make money in spite of all the poo pooing to the downside.

To continue to say that this market is speculative in all cases is going with the herd and unfortunately the herd is usually wrong.

smf said...

When a $250K house (or less) is in an area you'd want to live in, then bottom calling may be in order.

But so far, I have seen this frenzy in marginal, be afraid to live in areas.

Investors will always exist in a market, but I bet the historical level is not even close to 40%.

And the other shoe will drop soon, since I have seen the beginning of short sales in higher end areas.

Patient Renter said...

To continue to say that this market is speculative in all cases

I must have missed where someone said that.

Patient Renter said...

Investors will always exist in a market, but I bet the historical level is not even close to 40%.

During the period which brought us the bubble the speculation level was around 25% (if I recall). So I think it's fair to say things such as sales and prices won't get back to normal until we have much fewer investors.

Diggin Deeper said...

Pr...

The point should be very clear...speculation will occur in any market whether it's tulips, uranium, oil, real estate, whatever. To just attribute speculation to an increase in sales with more pain to follow may be true for the unprepared, but for some that won't be the case at all.

If you do your homework, there's no reason, when homes have already fallen over 40% that a
homeowner, yup, the ones that really want to live in those homes, can't come out on top.

I'm not suggesting that it's a good time to buy only that astute buyers do have a chance at homeownership with all risks accounted for.

Is that important? It may be to some and others will not take the risk.

All we hear on this blog is speculation, speculation, speculation, bubble, bubble, bubble, with poor results to follow. The bubble has burst and some will find the rubble well worth culling through...

Patient Renter said...

The bubble has burst

We seem to have a difference in opinion of what a bubble is.

I see "bubble" as a subjective term used to describe a market effected by some amount of speculation, relative to whatever is "normal". Speculation represents false demand, and since we still have speculation occuring above normal levels I consider the market to still be in a bubble. To the extent that speculation remains above normal/historic/traditional/average/etc levels, prices will remain somewhat inflated.

Megan said...

Prior to the last 7 years, home ownership percentages were much lower. This means there were more renters than owner occupants. Applying logic would conclude there were lots and lots of speculators owning homes and renting them out.

Many of these investors, speculators, or whatever you want to call them are just facilitating transactions and moving inventory. They know how to buy homes in foreclosure, make them marketable, then flip them to owner occupants. I too think the who speculator rant is done.

Husmanen said...

Speculation continues if we see abnormal levels of investors basically buying homes not intending to live in them, but to sell them later (often short term <3 years), turning a profit from the change in the market. From antidotal information, I have from my real estate agent and reading various blogs, this still occurs, short term flipping. We can wish the ‘speculator’ rant away but if it walks like a duck and talks like a duck, well it is a duck… or specuvestor.

In my simple comparison, rents (annual) versus home price ratios are still the not there to make it ‘reasonable’, not to mention median income versus median price. It is not about definitions (speculator or investor) it is about the numbers working out, i.e. not going negative per month on a purchase if you had to rent or sell a newly acquired home. If the numbers are off by great margins then you are speculating, if not well, we will see.

Also, before we see any stabilization in price the rate of price decreases has to stabilize, before this the decreases have to slow… right now the price decreases are still increasing. Buying a decreasing asset at market rates is not an investment.

Transactions can and do occur, most have been knife catchers and the value of their homes have decreased significantly since purchase, i.e. six months ago. Moving inventory is great because it sets a new temporary bottom, which will stabilize once the rent/ home price ratio is in check. Yes, there are areas that have met or soon to meet the definition of investment, but there are many that have not. Time will tell and I have time….

Deflationary Jane said...

You know, I was reading so old posts today and getting really misty eyed about leaving. I was even going to miss Sippin, who owes me a few drinks **winks**.

Then I came home and read this and frankly, I'm not going to miss this at all. I'm really tired of the masters of the universe telling me that I'll have to accept unreasonable valuations. It's like the joy has been sucked out of this city. I used to love it here (well not Davis but definately downtown) but these games leave little room for actually living. So I'm doing the only sane thing left - I'm taking my ball and going elsewhere >; )

FYI The trustees service I use which alerts me to county auctions had been running a pretty steady 54, 53 properties for a moving two month period since Jan. I checked it again today out of curiousity and it's up to 80. That's for a single zip.

Many properties have been coming on the list and getting last minute postponements for 30 days at a time. They skate along for a few months then finally complete and go back to the bank. But more keep coming on. I don't know if people are borrowing from relatives, hanging on by their fingernails to get a S/S or draining the 401k.

A part of me wonders if the banks are waiving the transfers a month at a time in an attempt to throttle the REO market. But it doesn't really matter why it's happening. Saturn just keeps devoring his children all over again.

alba said...

loved your posts DJ...good move! Best Wishes!

DD, finally, showing your true colors, eh?

when buyer's purchases hold for a day, and when sellers sell for $1 profit, we'll have a stable market. Until then, better keep tabs on Paulson!

luca said...

deflationary Jane- moving now is lame- the best deals of your life may come up in the next 2 years - Carpe Diem!

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

A little spirited conversation brings those in the background forward. Husmanen and Megan thanks for adding in!

Speculation in this market is old news that continues to be old news as is the RE bubble itself.

Flippers Gone Wild? I doubt it.

As for Paulson, all talk and no show so far...but well worth the warning. As for true colors, nothing's changed except the RE market has dropped 40% plus.

PeonInChief said...

DJ--

In many cases the mortgage servicers are trying to eke out a bit more money from the homeowners. So they drag out the foreclosure for as long as there is some money to be had. And the homeowners aren't getting good help--in many cases they'd be much better off if they took the mortgage money and paid off their credit cards, dumped a bunch of money in a retirement fund (it can't be touched there) and found a new home to rent. Instead they try to pay on a mortgage that's hopeless.

I do wonder what will happen to rents when investors are such a large percentage of the market.

Patient Renter said...

moving now is lame- the best deals of your life may come up in the next 2 years - Carpe Diem!

Luca, FYI - Lessons about bubble bloggers:

1. Most of us just want to buy a home to live in. Yes, one is enough.
2. Many of us despise specuvestors since they contributed to the bubble.
3. Most of us have witnessed an entire profession of economic "experts" get wrong what a bunch of lowly bloggers got right, over and over again.
4. Most of us have been ridiculed by friends, family and peers about things that "can't happen", but actually did.
5. Most of us are jaded from 3 and 4.
6. Most of us don't care about sweet deals (ala specuvesting), we care about normalcy.

Deflationary Jane said...

7. the "deals" are far better outside of sacramento >; )

Megan said...

"Most of us have witnessed an entire profession of economic "experts" get wrong what a bunch of lowly bloggers got right, over and over again.

The problem is: many of the naysayers were saying houses were overvalued in 2001 and refused to buy until prices went lower. "We're in a recession, you're stupid to buy now, ect, ect." Well prices went up and now they have come down, but they will never come down enough. There will always be some reason not to buy. I was one of them too, but have finally conceded and can't be happier about it.

It's the goldilocks syndrome of bubble bloggers.

smf said...

"Flippers Gone Wild? I doubt it."

Yet the evidence is there for those who care to look for it. I have not developed this idea of continuing high level of speculation from thin air, but from news and RE reports.

Ask anyone, and a good percentage still believe that while the prices are down now, in a few years (5 in my case) the houses will be worth much more.

I was quoted $200K+ appreciation on the house we recently bought by the majority of those involved in the transaction.

Mark my words, there are plenty of investors out there who bought a $150K house that firmly believe that soon, that house will be worth #250K.

The other problem that has not been discussed, but it just started to come out, was the population problem.

You see, local governments used formulas to estimate population growth. And with so much speculation and construction happening, it turns out that they overestimated population growth.

And we know what that means.

Deflationary Jane said...

SMF,

They overstated growth _and_ income estimates. I can't wait for the 2010 census.

Diggin Deeper said...

smf...

Good point on the population thought...

Here's another...

While we've seen the median price fall to $225,000 and likely to go lower from there, where in California can you find a population metro center this size that offers a median priced home at that level or lower (population 1 miilion plus or more)?

We've seen outmigration data looking backward. High home prices probably played a major role for that outmigration. What happens when you take away that price deterrent?

I think if prices fall to the 50% level, you'll likely see an influx of people coming Sacramento. Maybe even enough to sop what excess we have today.

James said...

Jane, where ya moving to?

smf said...

DD -

I certainly hope so.

Patient Renter said...

I think if prices fall to the 50% level, you'll likely see an influx of people coming Sacramento.

Not necessarily. It's not like Sacramento prices are dropping in a vaccuum. Prices across the state are dropping as well. Besides, there's no notable local employment to support an influx of people.