DataQuick on Sacramento: Price Declines Exceed 45% Off Peak

From the Sacramento Bee:

Median sales prices of existing and new homes combined in Sacramento County fell to $210,000, the lowest since June 2002. The number of sales in the county was up 73 percent from last year and was highest since October 2005. Prices have now fallen 45.7 percent from their August 2005 high of $387,000.
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Bank repos accounted for as much as 80 to 90 percent of July sales in some parts of hard-hit Sacramento County, according to the Sacramento Association of Realtors.

One thing missing from my chart of Sacramento home prices as well as The Bee's interactive chart is a perspective on sales figures. Although not about Sacramento, Peter Viles of the LA Times provides an interesting look at the relationship between sales bottoms and price bottoms.

From the Sacramento Business Journal:

Granite Community Bank is profitable, but its real estate-heavy loan portfolio has bank regulators looking for reassurance. The bank has entered a “formal agreement” with the Office of the Comptroller of the Currency, the regulator of nationally chartered banks, that requires it to create detailed plans as it faces the potential of continued deterioration of real estate loans. The 2002 startup in Granite Bay is well-capitalized and profitable. But the federal regulators want the bank to detail how it will stay that way.
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Granite Community was started with a real estate focus, and the Sacramento region “is high on the list of areas where regulators have concerns about real estate,” [David] Kaiser [Granite Community's chief executive] said.

From the Sacramento Business Journal:

In a downtown Sacramento market with new office buildings under construction and little demand from tenants for space, AKT Investments Inc. has temporarily suspended its application to build a 24-story tower on K and 15th streets and will consider modifying the project.
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Office vacancy has been on the rise for the past year, up by as much as 2 percentage points, according to several brokerages, reflecting a downturn in the housing market and the economy in general. There have been fewer company expansions and little growth with firms relocating to Sacramento.

From the Sacramento Business Journal:

Hefty paychecks and higher-valued homes helped Roseville and Elk Grove become two of the nation’s 50 wealthiest communities with at least 100,000 residents, at least before the free fall of the real estate market. Sacramento — which boasts deep pockets in areas such as East Sacramento, the Fabulous 40s and Land Park — finished at No. 88, between Inglewood and Reno, Nev.

Of course, California’s once-booming housing market created some of the wealth factor, with five of the Top 10 cities and 17 of the Top 20, according to a just-released Bizjournals report based on 2006 data, the latest available.

From the Sacramento Bee:

[T]he Sacramento area's unemployment rate jumped last month to 7.3 percent from 6.8 percent in June, the department reported. The half-percentage-point bounce was the highest single-month increase for the region since the state started keeping regional statistics in 1990.
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"The story behind the job numbers is that the state's economic weakness is spilling outside of real estate," said economist Jeff Michael, director of business forecasting at the University of the Pacific in Stockton. "It's the same theme for Sacramento."..."Some people are still debating whether the nation is in a recession," Michael said. "For California, I think the debate is over."

From the Sacramento Business Journal:

Attorneys say conflicts and lawsuits are up, many from the difficulty in financing deals or carrying land when the economy dips, land prices fall and commercial tenants stop looking for larger offices.
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“Our construction practice has been very busy,” he [Ed Quinn, managing shareholder of McDonough Holland & Allen PC] said. “Developers are finding it difficult to pay for infrastructure improvements. There’s no question that subdivision and other types of developments are underwater and have come to a grinding halt. Disputes arise as to who ought to be responsible for costs.” He said contractors’ liens are on the rise, as are claims against title insurance policies.

From the Manteca Bulletin:

What is the best flippant way to describe the Manteca housing market in four words? The vultures are feasting. A stratospheric 52 homes went pending in the week ending Aug. 11 for an annual pace - if it holds - of 2,704 homes.

The accelerated sales pace doesn't surprise Florsheim Homes' chief executive officer Joseph Anfuso. "Those who expect homes to fall another 30 percent in value aren't being realistic," Anfuso said Friday at his company's Valley Park neighborhood in southwest Manteca. "Home (values) can not fall below rental value."
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"Foreclosures are driving everything now," Anfuso said. He had originally expected the foreclosure wave to start subsidizing by the end of the year but now expects it to extend into the first quarter. "The amount of foreclosures has surprised me," Anfuso said.

From Of Two Minds:

"Prices likely won't increase if supply vastly surpasses demand, but they will only fall so far before hitting a natural bottom, he said. California's growth rate, rental rates, construction costs and income levels help determine that level, and O'Toole said he thinks some communities, such as Stockton, which leads the nation in foreclosures, might already be near the bottom."

This is like saying that your injury will stop hurting when the pain goes away. The mantra many others and I have been repeating is that home prices will fall until they are in line with income. But I realized that is, perhaps, a gross miscalculation which I must address. I have new hypothesis: Prices will fall below the level of median income support; they will overshoot to the downside and bottom at "market clearing" prices. The reasons are high inventory, high unemployment, scarcity of credit, scarcity of qualified buyers and poor sentiment.
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[P]rices will fall to market clearing levels and that level is not singularly tied to incomes. Even in normal markets prices oscillate around the mean. After such a great distortion (bubble) it is somewhat unrealistic to think that prices will fall right back to the mean.