Tuesday, October 28, 2008

Sacramento Home Buyers "Still Face An Elevated Risk of Being 'Upside Down'" in 2012

From Inman News:

Purchase a home in 67 of the nation's 100 largest metropolitan areas and you should be able to build positive equity by 2012, according to a new study comparing ownership and rental costs. The report from the Center for Economic and Policy Research concluded that prospects for building equity by 2012 have improved somewhat in 36 cities, compared with an analysis performed in the spring. In many markets, declines in house prices and modest increases in rents are helping return rent-to-price ratios closer to historical levels, the report found.

But the report identified 33 bubble markets areas where home buyers still face an elevated risk of being "upside down," or owing more than their home is worth, four years from now. One-third of those markets were in California, including San Jose, San Francisco, Los Angeles, Sacramento, San Diego, Fresno, Stockton, Bakersfield, Modesto and Riverside.
From the CEPR report [pdf]:
Given the remaining mismatch between home prices and rent levels in most bubble markets, we argue it is still unwise for policy makers to attempt to directly intervene in housing markets to maintain what are historically unprecedented high home prices. Policies that encourage occupancy, discourage vacancy, and maintain employment to stabilize hard hit communities are likely to be the best approach to assuring prices do not fall any further than is necessary to reestablish a stable housing market.
From the Wall Street Journal:
Lower home prices are luring some buyers back into the U.S. housing market, but foreclosures and a weakening economy are likely to keep downward pressure on prices for at least another year, economists say. A quarterly Wall Street Journal survey of housing data in 28 major metro areas shows that the glut of unsold homes listed for sale is shrinking in most of them. In many cases, sales have been stimulated by investors who are grabbing what they see as bargains on homes that can be turned into rentals. Metro areas with the biggest drops in for-sale signs include Sacramento and Orange County in California and the Virginia suburbs of Washington, D.C.
...
Housing analysts caution that many homes that aren't currently listed for sale may hit the market in the next year or two. This looming supply includes pending foreclosures and homes temporarily taken off the market while their owners await stronger demand. With banks chopping prices on foreclosed homes, other sellers "are giving up and taking their homes off of the market," says Michael Lyon, president of Trendgraphix Inc., a research firm in Sacramento.
From the Sacramento Bee:
[A]s auto sales erode, local governments are feeling the squeeze. "Car sales are certainly our biggest contributor to the general fund," said Roseville Treasurer Russ Branson. "Sales taxes overall are down. Property taxes are flat. So all we can do is control expenses." Roseville, home to one of the region's big auto malls, depended on car and truck sales for about 7 percent of its general fund money last year, Branson said. Local vehicle sales dropped 15 percent for the fiscal year that ended in June, according to city statistics. That ripped $1.4 million from the city's coffers and represented a $146.5 million drain on the economy, Branson said.
...
Employment at car dealers in the four-county Sacramento region has fallen by 8 percent in the last year to 12,700, according to the state Employment Development Department.
...
There are a few reasons to hope a rebound is coming, experts said. The housing market may be close to a bottom – sales over the past few months are up, even though prices continue to fall.
From the Modesto Bee:
With declining home prices, tightening credit and the collapse of several major financial institutions, experts say now may not be the best time to think about leaving your job, even if it's one you hate.
...
Suck it up and recommit yourself, said Lee Merchant, a psychology professor at Modesto Junior College. You can do that by assessing where you are in dealing with the fact that quitting will hurt you more than help you in this economy. "Are you in denial? Ask yourself if you have job options or not, because the job market is really bad," Merchant said.
From News10:
Usually you can spot the foreclosure homes through abandoned yards and newspapers in the driveway. One home in Lathrop is identifiable by its missing garage door...The garage door has been torn from the foundation, as has a regular door leading from the garage to the side yard.

11 comments:

smf said...

This looming supply includes pending foreclosures and homes temporarily taken off the market while their owners await stronger demand

Those that are waiting for 'stronger demand' will truly know what 'giving a house away' means.

*snicker*

Patient Renter said...

homes temporarily taken off the market while their owners await stronger demand

Hahaha. They've been waiting for quite a while now, eh?

Patient Renter said...

BTW: Anyone else getting a kick out of this headline:

"White House: Banks Need To Stop Hoarding Money"

Reminds me of past times of massive government interventions when holders of gold were attacked for "hoarding".

Cow_tipping said...

There are a few reasons to hope a rebound is coming, experts said. The housing market may be close to a bottom – sales over the past few months are up, even though prices continue to fall.

Yes must be Wednesday ... another day, another bottom.

Cool.
Cow_tipping.

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

If they dont get right side up by 2015, they stay upside down through 2045.
Baby boomers selling ...
There are people born after that. However people being born now, dont count. They will buy ~2045. What has to happen is, boomers selling will have to be bought by X and Y. Now All of X+ some of Y will be neended to cover the Boomers sales ...
The recent boom has taken a lot of X and Y'ers out of the market, many of them own already (me) or have bought and been tossed on their asses for defaulting (Casey Serin) ... So Gen Z needs to get into the purchase lines to cover even 1/2 of what boomers will be selling. So basically people being born now will ahve to get old enough to buy ... Boomers outnumber X+Y dont they ...
Anyway, if its not right side up by 2012-15, its upside down through 2045. And that is a nationwide average, cannot predict micro market ... maybe all the early boomers in NY will sell and run to FL and buy in the down market in miami ... then comes the crunch ... miami goes up, NY goes down ... and boomers get stuck selling into a dropping NY market and buying a rapidly rising FL market.
Anyway, recover by 2015 or down till 2045.
Cool.
Cow_tipping.

Deflationary Jane said...

New short sale in the heart of landpark
1711 9th Ave, Sacramento, 95818 for 589K - not that they'll get it but nice too see a little bit of reality hit.

As I posted in the water cooler, a UCD dept was just told they had to reduce their headcount by 8% this year and 12% next. That'll leave a mark.

J said...
This comment has been removed by the author.
Jacob said...

If they dont get right side up by 2015, they stay upside down through 2045.

Fine by me either way. Let's get to the bottom and stay there and people can think of houses as homes instead of investments.

Credit will continue to be tight for a while and even when it loosens it won't be to the 2002-2005 madness of anyone with a pulse (or was that even required) gets a loan.

So I don't see the excess getting absorbed anytime soon.

RV6Flyer said...

1711 9th Ave, Sacramento, 95818

Nothing like buying a house for $625,000 at the very top of the market using 100% financing, then refinancing and rolling the 20% 2nd into the first plus loan fees for a combined $630,000 1st. Now this is where is gets good, two weeks later contact National City Corp and ask for a $200,000 2nd so you can afford the payments on the first.
For be best part of this little tale, the time span from purchase using 100% financing, to suddenly taking $200,000 equity out was only 9 months. 20% appreciation in less than a year. Unless the inside has been gutted, I don't see where that money was put back into the property. They drive some really nice cars and have a fantastic shiny boat though.

Tyrone said...

Is Sacramento's woeful housing market bottoming out?

No. Ask again in two years.
.