Thursday, April 16, 2009

Price Per Square Foot: Spring Slide (So Far)

Unlike other measures of home prices, there has been no "spring bounce" (so far) when price is measured by square foot. In fact, in contrast to the previous three years, prices have neither bounced nor plateaued. Whether this descent will continue or is merely a lagging indicator remains to be seen.

19 comments:

Jacob said...

This was one chart I was anticipating for a while. I was thinking that when the slide continues even during a time when it should go up MoM could indicate that capitulation is here and the bottom would follow in 12-18 months.

On the way up, during final year when we peaked, I remember seeing some chart showing that sales increased during the fall / winter months when they normally decline. This indicated that the fundamentals were out of whack (though nobody in the business cared at the time).

Prices declining during the spring also shows the market is out of whack, this time there is too much fear and panicked selling.

Diggin Deeper said...

This ties in nicely to median bounce we've seen. Higher end homes with more sq ft are dropping in price and forcing down the price per sq ft. It's nothing more than confirmation that some areas may have bottomed while others do their part to find equilibrium. I would expect this to continue until the price per sq ft in the mid to upper end meet the price per sq ft in those areas hardest hit, with a slight added premium for location, construction, amenities, etc.

Buying Time said...

Asking prices on housing tracker continue to go up, even though inventory is still going down. That is a big deal in my book (as I mentioned on Average Buyer).

Of course some positive statistics do not make a bottom....especially in spring time....but I do believe we are seeing the end of price free fall...and will scrape along for some time.

Husmanen said...

BT the asking price increases you are referring to, can you differentiate where they are occurring, geographically or what 'tier'?

In EDH and Folsom my queries only identify a steady decrease MoM. There are some that drop drastically, setting a new bottom, but a mass movement to the new price level does not seem to happen. They slowly start to break away.

Diggin Deeper said...

Husmanen....could be that teaser prices are finally starting to show up on the mid to upper price levels. Wouldn't surprise me as they've been an effective tool in generating buyer interest in foreclosure heavy markets like Natomas and Elk Grove. You can imagine how badly the banks want to get some traction in this market when the notes they're holding for mid-upper range homes are multiple times the size of the notes for a 1500-1800 sq ft home in Natomas.

We might not see the 20-30 price offers that can occur in the lower end, but might expect to see muliples whereby prices sell over the initial asking price.

Since you're looking in that market it will be interesting to follow pricing strategies as they develop.

Husmanen said...

DD - overall the strategies have been to incrementally lower the prices until they get a buyer ($10k per week is a good average, some taking $50k off after a month).

However, there are a few examples trying the bottom up method(mostly in Serrano where the HOAs and Mello Roos fees take a big monthly bite). I too suspect the number of buyers/bids are not in comparison to the lower tiers.

One caveat, the homes that fit my criteria are few and far between, so I may very well be missing the general price strategies lately.

KTM 300 said...

I will be in the market after May. I will have a VA loan, be pre-approved and have no debt. I am thinking Elk Grove for about $175,000 to $200,000. Any thoughts? All input is welcome. I don't see house prices going up at the same time the unemployment rate is going up. And all this talk about bank profits is the result of an accounting change.

Sold in '05 said...

My Roseville listings back up the falling $/sqft numbers. But what has really peaked my interest is the massive pickup in Foreclosure Trustee Sale Notices in the local paper. Wednesdays Roseville Press Tribune publishes the required public notices warning of these. The paper covers Roseville, Rocklin, Granite Bay, Lincoln and some areas north. This fall when the moratoriums started up, the listings fell to as few as four pages and then picked back up to around five. They were relatively stable for quite a while but in the last three weeks, we have shot up to nine to ten pages of these listings. This is as many as there ever were during the worst of the foreclosures over the summer. I'm wondering if this is just a backlog being cleared following the moratoriums expiring or is there a real surge. Either way, with a large infusion of new repos coming in the next months, I think things are looking like there may be another significant down leg on prices this summer.

-CD

Sold in '05 said...
This comment has been removed by the author.
Sold in '05 said...

One more thing... this week there was a notice for a $25,000,000 default sale. It is for three large glass office buildings on Douglas Blvd in Roseville (I think they're part of the Kobra BK). One of them has Bank of America's main branch in it. I'm sure it won't happen but I think it'd be nice to see a BANK get evicted for a change.

-CD

Diggin Deeper said...

KTM

I don't know much about VA financing but the price range you're looking at will attract buyers and investors. If your thinking of putting under 5% down and asking the bank to pay closing costs be prepared to put in many bids before you get a bank to go with your offer. I've seen where first timers enter this market and price range and spend months trying to get an accepted offer. One example was a young man who had the FHA minimum down and wanted the bank to pay closing costs. He offered $240K on an underpriced listing that offered at $180K. The property sold for $200K and he was the 30th offer on the property.
Just be prepared for a little frustration in that price range.

a_builder said...

Large builder in Catta Verdera/12 bridges (Lincoln) just capitulated and sold 7 homes in less that a week (all of their standing inventory that has been sitting vacant for over a year).

6,000 sq./ft 6 bedroom/7 bath, all high end (granite,wolf, sub zero etc) on 2 acre view lots= price?
799k!!!!!!!!!! 60% decline in 2009!

Screamin' deals now on the fully furnished models with lavish pools/landscaping... I wonder what it costs to heat/cool/water a 6k foot house and twoacres of plants????

norcaljeff said...

KTM, expect to lose another 15-20% if you buy in EG in May. It's still early and EG is still an undesirable area.

Husmanen said...

This weekend was THE big garage sale weekend in Folsom, which is sponsored/ put on by local real estate agents.

I meet the current owners of a house on house I know is on the foreclosure track. They were selling quite a lot and planned to move back east in the summer. There is no for sale sign or mention of a sale, they are just moving. This us one of the many shadow inventory examples.

ash said...

a_builder- do you have a link to the 6,000 sq. ft. home in lincoln for $799 in lincoln?
I remember when they did a dream home tour up there of those homes and they were well over 2 mil

Decline to State said...

Following up on DD's Saturday post...

He is absolutely right. In the sub 300k market, you have to be patient. Inventory that is priced aggressively is attracting multiple offers and is unbelievably competitive.

That said, we had an offer accepted 20k under ask, with closing costs paid and a 1 point buydown to boot.

The difference for us? The place was a bit overpriced by the bank/listing agent, and that scared off most prospective buyers. So we waited them out, and hit it after it was listed for 90 days.

There are ways to make the market work for you, it just takes patience and a level (logical) head.

All that said, we have fully accepted that the home may decline in value further, and at a minimum will remain stagnant for years to come. No matter, renting is no longer the better option for us, and we a locked in 30yr fix at 4.5%. Booya.

Decline to State said...

I forgot something - when I mention "inventory" I am speaking of REO and private sales.

Our search excluded shorts entirely.

norcaljeff said...

Lincoln is right around the $100/sqft price now, I bet it goes lower. I'd think those 6000 sqft homes will be in the $600K range soon, if not lower. I have to drive up that way once a week, or more, and it sucks big time!

Jacob said...

I saw decent homes in Lincoln last year for around $88 ft2. 2500 ft2 range.

Sounds good.

Then add on $300/m for Mello Roos.
Then add on $150/m for HOA.

Non gated area, $150 to mow my lawn and tell me what I can and cannot do with my property? lol no thanks.