Tuesday, January 20, 2009

DataQuick: Sacramento Median Price Drops Below $180,000

From the Sacramento Bee:

Median sales prices dipped to $176,000 in Sacramento County last month, reflecting the dominance of bank repos in the market following a wave of 2008 foreclosures...[That] is the lowest since May 2001.
From the Sacramento Bee:
Greg Paquin of the Gregory Group, the Folsom housing market consultant, said new-home sales in greater Sacramento will total 4,695 this year, the same as 2008. But he acknowledged that prediction is probably optimistic.
From Home Front:
It was...interesting to see the links between the real estate declines that started here in Sacramento in 2005 and the budget nightmares that are now in full swing statewide as home values fall. The speakers made it especially clear that the housing crash that started in the Central Valley and the Inland Empire of Southern California is now happening everywhere in the state.
Realtor Julie Jalone:
I believe 2009 will be a repeat of last year when looking at inventory and unless the recession continues or the credit crisis worsens I predict we will have less than 10 thousand homes on the market by the end of the year. Having fewer homes on the market will dampen the downward pressure on home prices...I believe 2009 will be another year of declining prices/value although by late year I think we will see some firming of prices and maybe even some upward movement in the most desirable neighborhoods.
From the Manteca Bulletin:
Stockton-Manteca-Modesto was among the very first regions to feel the impacts of loose lending standards. This area led the nation for more months than anyone else when it came to foreclosures. It is also expected to be the first to pull out of it. The reason why the region was first going into the mess and will be the first coming out is due to growth.

The worst is either over or close to it in Manteca. That doesn’t mean there won’t be more foreclosures — there will be. It doesn’t mean prices are going to start climbing again any time soon nor does it mean that retail is going to bounce back overnight. We took a huge punch in the gut of the economy — housing — but we’re getting up for the next round and are still a strong contender. That’s not the case elsewhere.
From Housing Wire:
[H]ousing has some serious correcting to do yet ahead of it...If you want to know which markets are going to bleed most heavily through this year, then, you need look no further than those markets that are already mostly underwater relative to home equity.
...
The nation’s most troubled housing market by this measure would be the town of Tracy, Calif., in San Joaquin County....Ensconced by the 95391 ZIP code, a full 88.7 percent of outstanding mortgage debt in this area is estimated to be underwater, with 91.5 percent of all mortgages ranking as “near negative equity” by First American CoreLogic.
...
Coming in at number four? Rancho Cordova, Calif., home to the 95742 ZIP code and part of Sacramento County in Northern California — 84.3 percent of the 2,099 mortgages in the ZIP have reached a negative equity position, CoreLogic’s data showed, while an additional 83 mortgages are considered “near” negative equity as well...[Y]et another NorCal property disaster waiting to unfold.
From the CVBT:
A very grim outlook for employment in the Central Valley is found today a study [pdf] prepared for the U.S. Conference of Mayors. It predicts that by the end of the year, unemployment rates will be as high as 17.5 percent in Merced. But the report says every major metro area in the Valley will be in double digits, with more than 36,000 jobs being lost over the next 12 months.
...
The largest job loss [in the Central Valley] is predicted for the Sacramento metro area – 17,900 jobs. It is estimated that will put unemployment at 10.0 percent.
From LA Land:
Because housing is just one part of an increasingly dismal economic picture -- add to that the giant budget problems here in California -- I scratch my head every time I read a prediction that California housing prices could stop their decline in 2009. I just think there are too many factors in the big picture for a quick bounce back.
From the Sacramento Bee:
The current economic downturn has created a window of opportunity for people looking to remodel their homes and who can still afford the investment. Skilled crafts-people – once too busy for small projects – are looking for work. Lumber is bargain priced.
...
"There's never been a better time to remodel," said [George] Henley, who has been in the home construction business for 30 years. Henley and many other local contractors have experienced the ups and downs of the building market before. "It was bad in 1980, again in 1990, but never this bad," he said. "Business might slow down for building new homes, but remodeling usually stayed steady. Now, we're seeing a slowdown for remodelers, too."
From the Sacramento Bee:
Surprisingly, [St. Joseph statute seller Philip] Cates acknowledged Thursday that "sales are a little bit flat. We're wondering if people aren't talking about it anymore, or if people are light with the $10."

Home Front noted one possibility: banks, dumping repossessed properties, now account for three-fourths of home sales in Sacramento. Presumably, St. Joseph isn't part of their corporate tool kits.
From the Sacramento Bee:
"The breaking point is property value," said Kevin Baker, supervisory special agent of the financial crime squad at Sacramento's Federal Bureau of Investigation. "If it goes stagnant and declines, that's when fraud comes to the surface," Baker said. Reports of mortgage fraud from financial institutions to Sacramento's FBI office increased from 500 in 2005 to more than 3,000 in 2008, Baker said. Based on 2008 figures, the Sacramento region ranks fifth nationally in the number of mortgage fraud cases.
From the Modesto Bee:
Home values in many Northern San Joaquin Valley communities have declined more than 60 percent since the housing boom peaked three years ago. "This has been very, very difficult on our residents," said Rick Robinson, Stanislaus County's chief executive officer. "We were not a wealthy community to begin with." Robinson recalled how Stanislaus enjoyed unprecedented growth before 2006, "then our world collapsed."
...
Besides first-time buyers taking advantage of bargain prices and near-record low interest rates, [PMZ real estate agent Judi] Alves said, investors are scooping up foreclosures. "The average Joe now has an opportunity to become an investor and to add a rental home to their retirement portfolio," Alves said.

19 comments:

patient renter said...

Median sales prices dipped to $176,000

I previously voted 170k as my target (bottom) median price. Though this one statistic might settle down soon, IMO, the downturn is still nowhere near over (bifurcation abounds).

unless the recession continues or the credit crisis worsens I predict...

That's an escape clause if I ever saw one.

I think we will see some firming of prices and maybe even some upward movement in the most desirable neighborhoods

Delusional. The desirable areas have yet to suffer through the worst of their impending (and inevitable) foreclosure activity. Artificially low rates have stopped the clock on many foreclosures, but that foreclosures will occur when rates rise again is inevitable.

Why, oh why, even bother saying such foolish things, only to be proven wrong yet again come year's end?

Jacob said...

55% decline with no end in sight. 100% here we come.

Still a few optimisitic realtors calling for a second half 09 bottom. There was supposed to be one of those last year but instead we had the worst Q3 and Q4 since who knows when.

Back to 2001 prices. At least homes will be affordable once the dust settles.

Jacob said...

Theme some for 2009. http://www.youtube.com/watch?v=i2QCdPu-kmY&feature=related

paranoid renter said...

What about all the inventory that banks are holding on to and not releasing to the market?? How long can they keep holding that??

When they can't hold it any longer that's when the real fun begins.

paranoid renter said...

The upcoming increase in unemployment will cause many people up to their eyeballs in mortgage debt to let go of their house.

So far only construction and banking have been hit. Still to be hit are retail, services, engineering, government,...

This is gonna be one hell of a mess. Kind of reminds me of the scene of the crime in "No country for old men" and the sheriff telling the deputy what a mess things are. Anyone know if there's a clip of that on youtube?

Deflationary Jane said...

The banks are holding those off on level 3 ledgers, hoping they can pass them off to the 'bad bank' when it goes into effect. Until then, they have contacted some rental firms and contracted with them.

The thing is, this is deep enough that even if they can kick those lvl 3 losses down the road, it still won't be enough. That leaves nationalization and they is scaring the tar out of the markets (and rightfully so).

Jacob said...

PR I think this is the clip you want.

http://www.youtube.com/watch?v=sQiO5I56h9M

paranoid renter said...

Jacob,

Yes, that was the clip I was looking for. Thanks!

BTW, I had read an article that said renters are now protected from being evicted from foreclosed homes. They simply sign a lease with Freddie/Fannie!

They get to call Fannie/Freddie when their toilet breaks. :-)

Diggin Deeper said...

"That leaves nationalization and they is scaring the tar out of the markets (and rightfully so)."

Why not? Both Great Britain and Ireland have basically done the same. As you mentioned in a previous blog, the Icelanders already know what a bankrupt country is all about and they're pissed. Do it here, have a couple of bank holidays, and the streets will be full of protesters...

Even stalwarts like Wells and US Bancorp are holding lots of trash and their results will speak for themselves. And this "bad bank" thing is a joke...What bank isn't a "bad bank" right now. So when they do create this entity, and the loans fail, and foreclosures rise, who gets to take the loss?

It's getting to be "who's least worse off"?

Mortgage rates are already starting to respond to all the debt that's being heaped on. And they are the singlemost pivot point to government's plan. If they continue upward, as they should under normal market conditions, there's no telling what that will do to the median price here. The quickest way to destroy this market further, is to make funding and the price of credit prohibitive.

If banks won't lend, with all the money that's been handed to them, the problem is far more serious internally. My bet is that we get another wake up call sometime very soon with another major bank failing.

I tend to agree with PR's "bifurcation" statement above...The biggest slice comes off the higher end putting pressure on the median to stabilize.

anon1137 said...

What about all the inventory that banks are holding on to and not releasing to the market?? How long can they keep holding that??

I think there's one of these in one of the neighborhoods I watch. The house sold in 2007 to a young (aka, foolish) person, then came back on the market last year for the same price. That was followed by monthly price cuts, ultimately to a level below the presumed value of the mortgage. Then the owner moved out in the middle of the night. A week later a crew showed up and filled the garbage cans to overflowing. For the past few months the shades have been drawn and the lights go on and off at exactly the same time every day. There are several other vacant, stale, overpriced listings in the neighborhood.

patient renter said...

when they do create this entity, and the loans fail, and foreclosures rise, who gets to take the loss?

tax payers of course, but you brought up the important point. even if banks can dump their homes off on a government "bad bank", those homes still have to hit the market eventually.

PeonInChief said...

Housing prices will not fall 100%--that would bring them to 0. But they will probably fall another 10%.

I was actually pleased by Fannie Mae's decision. I was particularly pleased that they had a toll free number that people could call for information. And there are all sorts of ways to handle repairs--have the tenant take care of it and submit the receipt with the rent, hire a property management firm to manage the properties.

Bank trust departments manage rental property all the time, and most don't have tenants calling the trust department for repairs.

Deflationary Jane said...

DD,

I have zero problem with nationalization but the free market folks have kittens when it comes up. >; )

Diggin Deeper said...

DJ....

I for one have a problem with it... but without any other options outside of mass failures, a rabid public, and all the other negatives that would ensue, it's probably the best passifier right now.

Been watching my neighborhood and the foreclosure activity. It seems that there's a two to three month window once the move-out occurs before the sign goes up and the property is available. I think the problem also rests with those who list property for the banks. They have a checklist of tasks that have to be completed to secure the property, clean it out, take over the utils, and put it into a "saleable" category.

I can see why banks get backed up with inventory...kind of like a "where to begin" syndrome sets in.

patient renter said...

I have zero problem with nationalization but the free market folks have kittens when it comes up.

Kittens here.

There's no need to nationalize them. For the love of god just let the worthless flounding piles of garbage go under. Perpetuating the lifespan of a company that should fail is no better than perpetuating the lifespan of a bubble that should pop. The end result is worse, and the economic fallout is merely delayed.

If you saw the pictures of thousands of newly built cars piled up in storage lots on Mish's blog the other day, you should understand the foolishness of subsidizing businesses that consumers do not want and that the economy cannot afford. Nationalization is no different. In the end, the only way to prosperity is to embrace the mantra:

Bad companies must fail.
Bad companies must fail.
Bad companies must fail.
Bad companies must fail.
Bad companies must fail.

I could say this over and over all day, and we'd still have people cheerleading the subsidizing, bailing, stimulating and nationalization of bad companies. And if these things were not bad enough, they all harm good companies and productive economic activites in the same way that bailing out foolish homeowners harms good homeowners and renters.

patient renter said...

One more comment on nationalization:

Government interventions in the economy, intended to benefit one group, always harm another.

Subsidizing citizen A hurts citizen B.
Bailing homeowner B hurts homeowner C.
Stimulating generation X hurts generation Y.
Nationalizing company C hurts company D.

The free lunch axiom always applies.

Diggin Deeper said...

PR...while I am in the free market camp, there's no way that we're going to get anything but Keynes here...it's the only theory accepted by politicians because it allows them to do what they've always done...outspend the checkbook to create false sense of economic security...which imo will fail under these circumstances, and provide us with the net result you conclude...However, public unrest, and lack of confidence due to mass failures in the financial system, could produce chaos and set up a series of events that completely breaks down the stability of the nation. If I thought Chavez or Imadinnerjacket was bad, I'd hate see what pops up if the financial system completely collapses.

We're not going to outrun this downturn...we can only hope we get it spread out far enough into the future that it keeps the US and the rest of the world in check.

In the end the net result will be the same...

Deflationary Jane said...

'Bad companies must fail'. I 100%agree. F the whole socializing the losses.

That said... I could take or leave nationalization at this point. And by nationalization, I don't mean this 'stick your toes in the cool water' approach with a crappy gov backstop while retaining the original management and staff that screwed it all up in the first place. I mean all banks close, good and bad, and reopen 'US generic bank' and are run by gov employees like the post office.

Yes I can hear the collective groaning out there. But sometimes I'd rather the devil I don't know precisely because the devil I do know _is_ that bad.

So, for me it's a big change vs. death by eighty bagillion papercuts.

And as always, ymmv

Diggin Deeper said...

"and reopen 'US generic bank' and are run by gov employees like the post office."

Ouch...can you imagine the lines out the door for those who need to make a deposit in bank? It might even drive the teller... the lady with the painted on eyebrows and red boufant hairdo...to actually move faster than the snail's pace she's used to.