Wednesday, September 02, 2009

Sacramento Real Estate Market - September 2009 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.

56 comments:

David said...

We recently moved from a rental where the landlady was foreclosed on. She claims she never knew about the Trustee Sale until two months afterward (no, we didn't believe her). She also collected rent for those two months. Under California law, is this a fraud/theft crime or do we have to go after her in small claims court?

Buying Time said...

Here is a good blog resource for info on tenants rights in California:

http://tenantsforeclosure.blogspot.com/

sbg said...

Is anyone seeing an increase in foreclosure properties on the market, now that we are nearing the end of 90 day moratorium? Also, what is your thought on the $8000 federal credit? Will it be extended and how would that affect the Sacramento market?

robert said...

David,

Just to clarify, did she collect rent for 2 months after the Notice of Trustee Sale or 2 months after the Trustee Deed was filed?

Did she return your deposit or a portion thereof?

robert said...

I kind of have the same question as sbg. How many foreclosures are making it to market and being listed on MLS. My guess, not many. Just go to Google maps, choose advanced search, select real estate option, bring up the map of your choice (zip code, street, etc.). Once you have the map check the foreclosure box on the left. I did this for a small area, then compared with MLS. The result, many MANY NOD's, NOS's and REO's NOT listed.

My general opinion, distressed properties will only trickle on to MLS for years to come. Collusion between the government, NAR, banks, Wall Street, and all the other players will keep it such in order to protect themselves and keep prices high. Isn't that a joke....government is working to keep prices high, out of line with incomes, and generally unaffordable. This does nothing for new buyers.

Ok, the $8000 credit. It will probably be extended and increased. Again, just guessing. Is it of value to first time buyers? My feeling is it's a subsidy to the home builders, lenders, and real estate industry. They all know you have a tax credit of $8K in your pocket, so the price is that much higher. It's only there to prop up prices which is of no use to new buyers trying to enter the market for the first time and buy a new home. Oh, and better plan on staying in that house for 15 years, otherwise Uncle Same wants that credit back (minus $500 per year for years you live in it).

Cash for clunkers was a good example. Think you got $4500 off that brand new car? Think again. The dealers on the lot saw you coming and just just jacked the price up on the new vehicle. On a regular day you would have probably got the same deal on your clunker trade in given they were so desperate to sell units. All C4C did was keep already over inflated prices on cars high. Oh, and you paid full sales tax (not income tax on the $4500)...meaning you didn't get to subtract the trade in from the purchase price.

Ok, I got way off track. Bottom line people....the last crash in 1990 took 6 years to recover with 1-2% declines per year from 90-96 after the initial 25% hit. And back then we had lending standards. This time is different. This time it's much bigger and we're only 2-3 years into it. I'd be willing to bet anyone here 100 of my devalued US dollars that there will be no significant improvement until 2015.

David said...

Robert, she collected after the house was sold from under her on May 20, the date of the Trustee Sale. No, we have not seen a dime. I have to decide whether to include the rent portion in a small claims action or file a criminal complaint for fraud/theft.

robert said...

Wow David! That means she was collecting rent from you for a property that she didn't own for two months. What a criminal.

Incidentally, if she told you the house was "sold from under her" that's a lie on her part also. She knows the sale happened because she stopped making payments.

Pull the county records to see when the NOD was filed. Then back date your suit to that day. She should of stopped collecting rent the minute she quit making the mortgage payment.

If you turned her in to local authorities for fraud and she were convicted, then your case in small claims court would be a slam dunk. So, do both. Enlist some media attention with one of the local TV stations as it might encourage law enforcement to act.

Sad thing is she's probably broke and even if you get a judgment, you may not see a dime. Once you have a judgment you could send her to collections. But, is it worth your time.

If she didn't give you an itemized list of repairs, then your claim for return of the full deposit is a sure win. Then again, she didn't even own the property when you vacated, so maybe you could go after the new owner for the deposit (bank, lender, etc.).

Yours is a very interesting case. Hope you press criminal charges. Probably not worth your time and easier to get on with your life. Keep posting on your progress.

David said...

No doubt she was in default already when she signed the lease with us. Worked out in our favor, with some free rent and $5K Cash for Keys from the bank. I know the deposit is a slam dunk in small claims court, and the rent is, too. She does have other properties so she's not broke yet. I just need to know if I should split the case and file a criminal complaint about the rent. That may prompt her to attempt to make restitution, which I would likely accept to get it over and done with.

robert said...

David, here's something that might actually be useful. Voluntary Legal Services of Northern CA. (916) 551-2102

http://www.vlsp.org/

No charge legal assistance for a wide range of issues if you cannot afford an attorney. Pretty sure they qualify you based on income, but can't remember.

I used them once back when I was a starving student to clear up a minor legal problem.

robert said...

David, if the bank made you whole with some "cash for keys" and you got some free rent then why waste your time with a civil suit. Get on with life.

You should still turn her in for her criminal activity. Her action of renting to you when she had stopped making payments is all the more offensive.

Hey, if you do end up with some extra cash, donate a little of it to Voluntary Legal Services for the next guy who's in your position and maybe not so lucky.

patient renter said...

sbg: Regarding the "first time" homebuyer credit, there's a good chance it will be extended since the industry lobbyists are out in full force. Many analysts predict that the program will run out of steam soon though (as it already appears to be doing) since there are only so many "first time" homebuyers. So eventually the effect should dwindle.

IMO, all that the program does is draw demand forward and waste obsene amounts of money ($60,000 cost for a $8,000 credit).

husmanen said...

Rental parity is one of my metrics that I keep to track the market and use in calculating a potential bid.

Although not directly applicable, since I collect data on home rentals, I did speak to two coworkers on Friday and they both succeeded in getting their apartment rent reduced.

Coworker A got his reduced 10% and Coworker B signed a lease for another year with two free months rent and a 10% reduction. Coworker B did a good job negotiating.

Looks like there is a lot of pressure on the apartment rental market. I will have to revisit my home rental parity numbers and keep a closer eye on it.

Giacomo said...

Robert said: "Collusion between the government, NAR, banks, Wall Street, and all the other players will keep it such in order to protect themselves and keep prices high."

"Collusion" seems a little strong; tacit collusion at most, I think.

Probably it's more accurate to say that these entities have a common interest in having prices decline very slowly -- in a way that won't panic consumers (causing them shut down altogether) or, in the case of financial institutions, force them to reconcile their losses all at once.

And you left out a major set of "co-conspirators": all the citizen homeowners who are desperately clinging to high valuations.

Giacomo said...

NODs seem to be on the rise in my neighborhood.

Anecdotally, I've just seen a new listing for a local house (spec-built in 2006 and never sold) that was taken by the bank a YEAR AGO this July, and has been sitting empty all this time. This seems too slow not to be intentional.

The asking price, while 40% off the original (absurd) 2006 figure, is still a good 20% over comps.

robert said...

Giacomo, you said '"Collusion" seems a little strong; tacit collusion at most, I think.'

I agree with you. It feels more like a group think or attitude that propping up prices is the way to proceed. Unrealistic if in the end wages and salaries are not in line with housing costs.

Husmanen pointed out it is a great time to be a renter. Deflation in the rental market does not bode well for price increases or stabilization in the purchase market. A declining rental income stream is a disincentive for investors thinking of purchasing. Declining rents and freebies are an incentive for renters to stay put, especially if monthly rent is much less than PITI on a comparable home.

Diggin Deeper said...

"Probably it's more accurate to say that these entities have a common interest in having prices decline very slowly -- in a way that won't panic consumers (causing them shut down altogether) or, in the case of financial institutions, force them to reconcile their losses all at once."

How true...maybe it works if prices do stabilize and rise, but without the jobs/consumer picture improving, dramatically and immediately, that hardly seems possible.

With the trickle effect we've seen over the past 6 months, I'd bet the leverage is building on the ratio of new foreclosures, to those being reconciled by the market. The net result is that weaker banks fail under the burden, and the bad debt is absorbed by more stable balance sheets...Kind of like a bottom's up, controlled destruction of our banking system. Given enough time, most of that bad paper will be held by the megabanks, while the local and regional banks fade away.

The current prediction of 500 banks failing during this downturn is probably way too optimistic.

Diggin Deeper said...
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Diggin Deeper said...

http://www.msnbc.msn.com/id/32756481/ns/business-real_estate

Treasury: Millions more foreclosures coming

"Barr said that "even if HAMP is a total success, we should still expect millions of foreclosures" as administration and industry efforts continue to stabilize a crisis-stricken housing sector."

and here's a follow-on

Home Prices Could Fall by Another 25%: Whitney

http://www.cnbc.com/id/32773345

"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."

one more follow-on

Job openings down 50% from the peak in 2007

Six unemployed people compete for every available position

http://www.marketwatch.com/story/job-openings-down-50-from-the-peak-in-2007-2009-09-09

No jobs, no consumer, no real estate recovery

Giacomo said...

"Home Prices Could Fall by Another 25%: Whitney"

Listening to a MSM panel discussion on this story, I heard some pundit say that prices could NEVER fall that much more -- because that was below traditional income/price ratios. LOL, NOW the bottom callers want to invoke invoke the income/price relationship! Never mind that (A) crashes typically overshoot to the downside and (B) the income/price relationship assumes a stable environment, not one with rising unemployment and an unsteady economy.

Diggin Deeper said...

Giacomo:

Exactly!

The problem seems to be that pundits are desperately trying to benchmark opinions based on past events or times...yet there's been no time in our recent history that's produced what this recession has delivered.

In the last couple of days the Fed , the Treasury, and 80% of private economists polled for the Blue Chip Economic Indicators have declared the recession over...yet we shouldn't expect the jobs picture to improve anytime soon, nor can we expect the consumer to restart the engine that drives growth. And it appears the home foreclosures won't peak until the end of next year...while nearly 50%of all mortgages are underwater.

Recovery?

It's no more than a slippery slope when approximately 70% of GDP depends upon personal spending, and over half of past growth was tied to real estate and construction spending...

Gotta love the spin...if not totally deceptive, it remains entertaining, nonetheless.

husmanen said...

Recently I have seen a few, not a lot but a few, homes come on the MLS in EDH and Folsom that are at pre-bubble prices.

If they sell, and not bid up, this will put pressure on the other REOs, thus breaking through the trend line and going negative. This Has not happened yet, especially in large numbers in these areas. Notice, organic sales area pretty much non-existent.

Historically we have overshot the bottom on every bubble, but then again we have never had this much government and market manipulation.

I will be watching...

Diggin Deeper said...
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Diggin Deeper said...

"Historically we have overshot the bottom on every bubble, but then again we have never had this much government and market manipulation."

It's been reported recently that working age people in California that have jobs, now have the shortest workweek on record. If true that won't do much for the real estate affordability index in our area.

In July consumer debt was reduced by $21 Billion, 3-4 times more than expected.

Also, as an aside, corporate insiders are selling 31 times more of their own stock than they are buying. The track record of corporate insider transactions has been spot on as an indicator of corporate health going forward...

Kind of perplexing...we're in the midst of a jobless, spending-less economic recovery, where workers work fewer hours, pay down their debts, while corporate America confirms there's no faith in their immediate future.

Green Shoots? Go figure!

All the intervention and manipulation going is a shell game, hiding the pea until the consumer finally comes to life. And if they don't?

For those that missed the "60 Minutes" segment, here's a You Tube take

http://www.brasschecktv.com/page/705.html

patient renter said...

CR had a little tidbit on Sacramento, sales breakout:

http://www.calculatedriskblog.com/2009/09/distressed-sales-sacramento-as-example.html

husmanen said...

Comp Killer in EDH

$594k.

2563 Shadowfax Ln, El Dorado Hills, 95762

Pricing is year 2000 plus a little for inflation. Over two (2) acres, beach entry pool, two (2) houses on the lot. No HOAs!

Just keep ‘em coming!!!

http://www.metrolistmls.com/cgi-bin/GetOneR.cfm?MLSNum=90069524&iRow=2&nRows=2&yAddr=T&yMy=F&yAsc=N&iSort=1&nJL=7

sacramentia said...

Hey, if you're into living next to the Cemetery, then Shadowfax is a steal!

husmanen said...

Yeah, I saw the cemetery, a little run down but they have been dead a while and probably not many relatives left. Not sure when they moved it from under what is now Folsom Lake. But it probably does decrease the supply of buyers, thus decreasing price.

Anyone think the price should be lower?

Data is data up when looking at the numbers. The price should still end up influencing the whole.

Also, East Lawn Memorial park doesn't seem to decrease the home values in the fabulous 40's. But then again Folsom Blvd could be enough of a barrier for some.

husmanen said...

As we have discussed before, as the mix of houses being sold changes from Sub-Prime to Alt-A/Option ARM the median will go up.

If I remember right someone said the media would be all over this as a sign the housing market has hit bottom and is recovering...fast.

Could this be a local media link that would qualify?
http://www.sacbee.com/static/weblogs/real_estate/archives/2009/09/median-price-st.html

RV6Flyer said...

TED spread now the lowest since 2004. Is the economy really doing that well???

http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

husmanen said...

A very interesting article in the NY Times that puts owning a home into perspective, like old school stuff (20% down etc), you know more than 8 years ago – ancient history. A number of rules are identified:

(1) Start with the Basics (20% down & % of Gross Income)
(2) Consider Your Income
(3) Bow to Unknowns – career changes
(4) Map Out Expenses – maintenance of 3.6%-4.5% per year
(5) Buy Best or Cheapest, not in between
(6) Stretch the House – plan to live in it longer
(7) The Eight Hour Rule. “… When all else fails, however, you can always fall back on the eight-hour test. Whatever the size of your mortgage, you have to be able to sleep soundly at night. So if an impending loan has you stretching for the Ambien, it’s a pretty good sign that the loan is a bit of a stretch as well. “

The last one is my favorite.

http://www.nytimes.com/2009/09/12/your-money/mortgages/12money.html

RV6Flyer said...

http://www.businessinsider.com/henry-blodget-the-greatest-suckers-rally-in-history-play-by-play-2009-9#february-2-1930-market-recovering-faster-than-expected-1

1930 bear market rally - a compilation of New York Times articles. Very eerie.

sacramentia said...

husmanen, that was a good article.

Sold in '05- Bought in '09 said...

A little off the current topic but anecdotal evidence of the local economic climate:

After successfully avoiding Wal-Mart for at least the last six months, I stepped into the Roseville Super Wal-Mart this past weekend. The store was empty. Not just of people, but merchandise. The last time I was there (and every time before that), ALL of the wide major isles between departments had displays stacked down the middle, dividing them into two narrower isles. This Sunday there were NONE of these displays ANYWHERE in the store. No Extra Cheap DVD’s, no Super Dorito Piles, no Mountains of Halloween Candy. This one store appeared to me to have drastically reduced its inventory. It was almost pleasant to be able to walk around the store without banging into merchandise or other shoppers. Has anyone else noticed this at other Wal-marts?

- CD

David said...

Got our Fair Oaks appraisal -- hold on to your hats.

Ten percent BELOW 2002 sale price, $173 ppsf. Well maintained 4/3 Pheasant Knoll tract house with pool, extra deep 3-car garage and off-street parking for 4 more cars.

Also $18K below our bid and almost $30K below asking price even though we put our bid in the first week it was on the market. We'll see how the seller reacts. Case-Shiller index is going to plummet with this one.

David said...

Oops, typo -- should be $164 ppsf.

husmanen said...

Wow, thanks for the info from the 'front lines'. In a desirable area AND 10% below 2002 sale price.

I usually count on the bubble beginning in this area sometime in 2001. You could be getting very close to pre-bubble prices. How does the rental parity work out?

Also, sounds like the appraiser is doing some due diligence. Wonder if it is connected to the recent change in rules for appraisal?

patient renter said...

Fair Oaks! Sounds like we're getting there. Certainly good progress :)

David said...

Can't help you with the rental parity until I run it through an adequate calculator. Got a link?

IMHO, we could rent a better house for the same money. I say that having spent a great deal of time looking at comparable rentals. We need to buy for a lot of reasons that have nothing to do with parity, so the value for us is skewed toward ownership.

The appraiser's blurb says it was done following HVCC guidelines, but it's an FHA loan so is not bound by them.

David said...
This comment has been removed by the author.
husmanen said...

David. I think you have enough info regarding rental parity from what you wrote. I did some poking around and, if I am correct, my rental parity guess on the house you are referring to would be about $2600/month. What do you think? My guess is a big WAG but that house and area are wonderful. I concentrate on EDH and Folsom (very selected areas) and I have to wonder if its worth it sometimes.

Personally, I sometimes use a 10% adder to rental parity for a unique property that I plan to be in for a long while. But if you did have to move and did not want to sell the house, the rental parity is what you would need to pay for the home while you were away, at a minimum PITI (Principle Interest Taxes and Insurance).

If my guesses are close, it appears you are within striking distance of rental parity, especially if you use my fudge factor of 10%.

Another metric is house gains before the bubble with increases per year based on inflation. You have data from 2002, which is just at the start of the bubble. If you reverse the bubble gains for 2002 back to 2001 and then increase the price by inflation per year (compounded) you should get a good idea what prices may have historically ended up in 2009. Given that metric and my guesses I think you are doing well.

Wish you the best of luck and keep us informed.

husmanen said...

David. The HVCC guidelines are the new guidelines that went into effect on 01MAY2009. Here is the link:

http://www.freddiemac.com/singlefamily/docs/030308_valuationcodeofconduct.pdf

These guidelines have not been popular with many since they are supposed to remove influence on the appraisal.

Your case is a good example, just think of how many appraisals came in at exactly the asking amount in years past?

David said...

Yeah, I read up on the HVCC. Most of it is a scam in the guise of consumer protection. The big banks all own an appraisal firm. They skim off half the appraisal fee and force appraisers to take smaller fees than they are accustomed to. Turn down the low fee and you're out of a job -- because of HVCC, there is no more work for truly independent appraisers.

Banks got the law written this way to maximize income as described above as well as to codify as legal the process we used to call "steering".

The upshot of all this is that appraisers are now underpaid and overworked in addition to being 100% beholden to the banks that own their firms. That's why you are getting appraisers from anywhere within a 200-mile radius who don't know diddly about your neighborhood.

I like to think the result of our appraisal is a fair representation of current market conditions, but it seems the whole world is complaining -- except buyers. You ought to hear what the people trying to refinance have to say about HVCC.

David said...

Regarding how industry insiders feel about HVCC, please see http://sandiegohomeblog.com/
2009/06/06/the-hvcc-and-the-
appraisal-mess/

I split the URL into three lines because it won't display properly on my screen.

Don't forget to read the comments, especially those from David (not me) and Chris Jones. I did not realize it was imposed by regulation (not law) as part of a settlement brokered by NY attorney general Andrew Cuomo.

smf said...

At this stage, I find it hilarious that some were trying to flip a home still in 2008.

This house was purchased in July 2008, then remodeled.

MLS #90045750

Deflationary Jane said...

here's a even worse one
MLS#: 90073217

husmanen said...

DJ, I love the garbage bag on the far left in the first picture.

Recently sold for $116k, it must have looked really bad before.

BTW, a REO flip on my street made about $80k in 30 days without paint, landscaping, carpet, just a sale - not bad.

Diggin Deeper said...

Special Report: How the Government is Setting Us Up for a Second Subprime Crisis

http://www.moneymorning.com/2009/09/23/subprime-crisis-2/

"In a “Review and Outlook” piece, The Wall Street Journal reported that the FHA’s reserve fund dropped from 6.4% in 2007 to about 3% today, putting it dangerously close to its mandated 2% minimum. That translates to a “33-to-one leverage ratio, which is into Bear Stearns territory,” the newspaper report stated, referring to the now-failed investment bank that had been a central player in the original subprime mortgage crisis."

It's enough that Fannie and Freddie ended up insolvent, now the FHA (Ginnie Mae) which is funding a dominant portion of new US mortgages is apparently in financial trouble. As reported, nearly 13% of all FHA mortgages are behind by 30 days or more...The leverage (33-1) used leaves little room for future mortgage failures. Looks like another house of cards is about to need a major cash infusion just to stay afloat.

Deflationary Jane said...
This comment has been removed by the author.
Deflationary Jane said...

Husmanen

Actually, I looked at it last summer and it wasn't bad at all. Nothing a 203K streamline wouldn't take care if you couldn't go straight FHA.

I see these all over. People buying, installing pergogranitile and expecting to make $100k over on it. What they don't realize is that they overimproved for the neighborhood so they slowly lower the price.

When that fails, they get some renters in to cover the monthly nut but the only people that will rent in those marginal zones either aren't financially stable or they begin destroying the place. Sometimes you get both and the cycle down accelerates.

I've gotten bored watching it all unwind. It's like being told the same joke over and over to the point that any humor it had previously has faded from memory.

husmanen said...

DJ. I understand about this getting old, but I just can't let it go ... yet.

A good example that keeps me looking is when the rental parity is off by bubble standards, like MLS# 90073419. 118 Hingham , Folsom, 95630.

I believe this house rented for $1850/month about a year ago. It went into preforeclosure and the tenants moved. It sat for a long time with a $399k price as a short-sale.

Now suddenly it is not bank owned but they are asking $469k. With 20% down, 5.25% for 30 years the PITI on that thing is almost $2800 per month. Just think that 20% down is nearly $100k with fees.

Over $1000 per month difference to own than to rent. Even with interest deductions you are paying at least $600 more per month.

Actually, yes this does get old.

Diggin Deeper said...

"Over $1000 per month difference to own than to rent. Even with interest deductions you are paying at least $600 more per month."

I wonder if true inflation is getting in the way of those numbers as we may be moving away from the deflationary environment we've experienced over the last couple of years? If that's not the answer, then Folsom, EDH, and frothy outlying areas need a good dose of reality.

Even your low figure of $600 would suggest a price that's closer to original asking price as a short sale.

That one's going to sit awhile...

Diggin Deeper said...

Home sales drop 2.7 percent

http://news.yahoo.com/s/ap/20090924/ap_on_bi_ge/us_home_sales_7

"We suspect it is just a temporary blip in the improving trend rather than a sign of renewed weakness," wrote Paul Dales, U.S. economist at Capital Economics.

Another "kool aid" drinker...

David said...

I believe this one is running 100% Kool-Aid in her veins:

“I’m not alarmed by the softening in sales,” said Celia Chen, a housing economist at Moody’s Economy.com. “The trend is still very strongly up.”

from http://www.nytimes.com/2009/09/25/business/
economy/25econ.html

husmanen said...

Wow! International spam. Makin' the big time.

norcaljeff said...

Americans fleeing the sunny states: "The mobility rate is lower than it has been in years," said Robert Lang, a demographer with Virginia Tech University. "There's a recession and a housing bust. People can't sell their homes in California and move to Las Vegas or sell their condo in Florida and move to North Carolina."
"California also saw a decline in the number of people coming to partake of its sand and sea. A mere 1.3% of California residents moved in from out of state in 2008. That's off from 1.4% in 2007."
"For years, Americans have been fleeing the Golden State. The population kept growing only because of foreign immigration and births."
"The same job problems plague many California cities, especially Central Valley towns like Stockton, Fresno and Merced. Construction-related job losses helped send state unemployment to 8.7% by December 2008 from 5.9% a year earlier. Today, some cities report breathtakingly high unemployment rates: 30.2% in El Centro; 17.6% in Merced; and 17.2% in Yuba City."
http://tinyurl.com/ydvhlev

RV6Flyer said...

http://finance.yahoo.com/tech-ticker/article/346438/No-Way-Has-Housing-Bottomed-Says-David-Levy?tickers=^gspc,^dji,l,hd,len,kbh&sec=topStories&pos=9&asset=&ccode=

Good interview on why housing hasn't bottomed.