Friday, January 01, 2010

Sacramento Real Estate Market - January 2010 Water Cooler

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

54 comments:

norcaljeff said...

Who's buying in '10? Might be some deals out there but I'm hearing from more than one agent that there's some serious inventory getting ready to be dumped on the Sac market shortly.

paranoid renter said...

I think the serious inventory has always been there. What will prevent it from being "dumped" is the need by banks to recognize those losses. Smaller banks can do it as they go bust, but bigger banks won't be able to. The accounting rules and the purchase of toxic stuff by the govt might change things moving ahead, but I don't see foreclosures en masse without some kind of financial crisis accompanying it. So, I'd say it's pretty unlikely. Things will continue to trickle just as they have the past couple of years.

waiting_for_the_fall said...

The deals might look good now, until a few years goes by and you realize if you waited, you could of got another 10 or 20% off the price.

patient renter said...

Who's buying in '10?

I'm signing a new lease in 2010 :)

Word verification: mishigg - which is prescient as Mish isn't expecting a bottom until 2012 (if I recall).

Wadin' In said...

I am tracking two houses that were foreclosed in 2007 and purchased using FHA (3.5% down) financing in 2008. The prices were
$335,000 (4/2008) and
$383,000 (10/2008).

They are listed on MLS today as short sales. The new asking prices: $275,000 and $344,900.

Price drops of 18% and 10% respectively over the last 20 months or so.

Whats $40,000 to $60,000 among friends? That is only $3,000 per month. Why be concerned about a house being foreclosed on TWICE in the last 3 years?

paranoid renter said...

Mish isn't expecting a bottom until 2012 (if I recall).

That actually makes sense because real-estate moves in 14 year cycles -- since the downward trend started in 2005, it makes sense it would bottom in 2012, and then again peak by 2019.

Today I went by the Elliot Homes development in Roseville. Most of their new homes are sold. That speaks volumes for the recovery.

husmanen said...

Wadin' In. Speaking for price drops, I caught myself saying something like "yeah, that was my bid, but I expect prices to drop at least 10% more". Then I thought, what the hell am I saying, going against my own logic.

Got to let it go and get in the observation mode again. It does get tempting though, 2012 prices today is still what I want (I think everyone knows that doesn't mean higher prices).

sacramentia said...

Where do you guys look to find open houses?

I always just drive around, but wondering if there is a better way?

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

I too just drive around, but I check MLS too, however the latter is does not always identify an open house when there is one planned.

Jacob said...

I go here:

http://www.movoto.com/real-estate/homes-for-sale/open-house-roseville.html

You can search for open houses by city. It has been pretty reliable. This way you can also look at the homes online to see if it meets your criteria before bothering to go check it out.

wimpyVO2max said...

Massive housing bubble in China. Same story: overbuilding, too much easy credit, flippers.

http://www.businessweek.com/magazine/content/10_02/b4162030091917.htm

husmanen said...

Just got word that the house we put a bid in on last year sold for 5% less than our bid, I suspect a cash buyer. I still think it will go down another 5%.

The house needed a lot of TLC and the bank did not want to deal with the loan requirements to fix things. There must have been more wrong than my personal inspection. Glad we missed that one.

Another good thing, it is a comp killer. Now I have sales of three (3) homes in one of the area I have been watching that are at rental parity. 2010 will be very interesting.

sacramentia said...

"just got word that the house we put a bid in on last year sold for 5% less than our bid"

Maybe an inside deal. I'd double check.

smf said...

Or the agent wanted to play two parties against each other for higher bids.

Had it happen to friends last year, when a house came for sale at $550K. They were told that another (higher) bid was on the table and that they should offer $570+.

They didn't play the game, and later it was noted that the house had sold for $550K...

husmanen said...

I can double check but from what I know the process went like this.

1st. A higher cash offer was accepted, then they backed out

2nd. A higher bid with a loan requirement was accepted, but then they backed out

3rd. Requested our bid again, but took a lower cash offer. They other agent mentioned several times the amount of work, and we concurred it was a lot, but much could have been done over time.

Not upset, and it solidifies my concern that the amount of work was too much in the end for us.

I believe the bank saw this too and it was better for them to have a lower price for a cash offer than a higher price for one with a loan in which they would be required to fix a number of things.

smf said...

I can see that happen, too. Though often, when someone states that they were outbid in a house (even with a bid higher than listed price) it is not implied that the house may have actually sold for less.

husmanen said...

Wow, here is a hit to a bank.

8061 Marches Way, EDH

06Jan2010
Notice of Sale Amt: $1,130,213.99
Opening Bid Amt: $471,750.00
Sold Amt: $528,000.00

A $602,214.00 loss.

OUCH!!!

Now that doesn't happen everyday.

Deflationary Jane said...

There was a house I looked at listed for 160k for 900 sqft. Overpriced by 35k but maybe worth putting a bid in on. We go inside and the owner who lives across the street is working on it, tells us it's already sold.

I congragrulated him and told him to take the offer and run then gave him the spreadsheet I had of the houses surrounding his that are have NODs, NTSs, or that have already gone back to the lender and I wander off to the next house.

My agent stayed until I left and asked him what he got. Of course my agent gave me the dirt when we hooked up at the next house. The offer was 177k cash. My bs meter went off but hey no skin off my nose.

Fast forward 8 weeks later and the sale recorded at $160k sold with 3% to buyer, FHA.

People were bidding up just to get their foot in the door then hammering the seller down in negotitations. So when the used house person tells you houses are being bid on at over list price, bear this in mind. People may be offering over list but that isn't what they are closing at.

TwoWheelsBetter said...

Land Park, once thought impregnable, is collapsing. A lengthy bike tour and subsequent research reveals numerous foreclosures, with some homes selling for 40-50% off peak prices.

One stylish 2,000 sq ft home that Zillow says peaked at $868K in late 2005 could not sell at $500K and is apparently headed to foreclosure.

Just one of many.

husmanen said...

In case you haven't read the study that is often cited regarding walking away (its a great read), here it is:

"Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

http://www.sacbee.com/static/weblogs/real_estate/SSRN-id1494467.pdf

norcaljeff said...

A few properties I was really interesting in and seriously considering dropped in price. I'm amazed how these homes are still falling in value.

And I'm actually a little scared of the number of businesses going belly up. The is no not a single Quizno's located on Sunrise Blvd, the longest and busiest road in the area. I talked to the last owner of one of the local Quizno's and asked if he thought some of the shops recently closed would open and again soon and he laughed, then said I'm not sure we'll make it either. Just noticed a popular night spot in Roseville, Paradise Grill, just closed up shop as well. Some of these strip malls are completely empty. It's truly amazing.

husmanen said...

And the prices in EDH keep going lower...

$350k
3063 Ridgeview Dr,EDH
Bank Owned

With 20% down, 30yr at 5% that makes a PITI of about $2,000 per month. That is rental parity!

Now if only rents would remain stable.

smf said...

So when the used house person tells you houses are being bid on at over list price, bear this in mind.
Yep! I wrote about this, too. This was a bidding war, were our friend bid $20K over...she refused to play the game and the house ended up selling for list price.

Land Park, once thought impregnable, is collapsing.
No place is impregnable ...witnessed by the HELOC foreclosure in our block. The house sold for over $400K in 1999.

sacramentia said...

along the lines of prices not being what they seem, I tried to buy a short sale for list price a while back. Broker wouldn't even take my offer. Later I found out that additional fees were being paid to the realtor. I don't even trust the short sale prices anymore.

patient renter said...

3063 Ridgeview Dr,EDH

I used to live down the street on Moonstone. Something tells me that price is a lure, but still, nice progress.

husmanen said...

Ridgeview could be a ruse, we will see. A few comps in the area:

3112 Ridgeview sold for $430k.
2017 Moonstone sold for $410k.
1169 Turquoise sold for $416k.

A few others that are for sale in the area include:

3527 Ridgeview for sale (PS) $329k.
527 Powers for sale (PS) $375k.

Of course, that is cherry picking, there are plenty of houses that are for sale for considerably more in the area, some have even sold.

We will see what happens.

BTW, 2432 Telegraph hill in EDH is now down to $354.9k. My guess is it will be closer to $315k, could be higher though, possibly, well maybe… we’ll see.

sacramentia said...

Here's a cnbc article on short sales and money transferring outside of escrow:

http://www.cnbc.com/id/34877347

The short sale prices are not accurate.

husmanen said...

Flippin' in the higher end? Worth the risk... possibly.

2010 Outrigger Dr, EDH

* Shortsale $399k in Fall 2009
* Unknown actual sale price
* Current price, not short sale or bank owned...$549k

Haven't been in this one but it was previously described as needing some work. Looks good now.

Say you bought it for $400k put $50k into fixing it up and can sell it for $549k. Nice profit at $100k.

But the risk has to be very great. Wonder if we will see this one on the Flippers in Trouble blog in the future?

norcaljeff said...

Husmanen, I spoke to an appraiser friend of mine who said EDH is in a freefall due to their higher than ave energy costs. Seemed strange to me but when he showed me the monthly differences in prices, it made sense. It's also affecting the appraisal prices of EDH v. Folsom and other areas. It's crazy, but every penny counts in this new economy.

husmanen said...

norcaljeff. Yes, PG&E sticks it to its customers, but the shareholders are happy. I have compared PGE & SMUD in a tier by tier analysis for summer and winter averages and peaks using the same amount of total kWhs.

PGE loses bigtime, on a peak summer month PGE is over 2X the amount of SMUD.

These rate differences are in my calculations for comparing EDH and Folsom. If the appraisers are including this, it is a step forward.

Still bodes well for my major metric - rental parity.

I have seen more houses in EDH reducing prices, but in the last week Folsom has been picking up the pace dramatically.

smf said...

EDH was originally a 'rural' town close to the city, with a chance of great views at some places.

Development made the vast majority of EDH just another suburb, with a long commute. The rural, small town feel is basically gone.

If prices are compared prior to the bubble, it should be clear that EDH was also slightly cheaper than Sac metro area.

Jacob said...

but every penny counts in this new economy.


In this new economy where you have to actually pay for things with your own money?

sacramentia said...

husmanen, how many KwH are you using for your comparison?

husmanen said...

Sacramentia, I am using 1833 kWh for my comparison for a max month, AC blowing in a 2500 sq ft house. I have seen bills from friends and family of mine with monthly costs of $600, $800 and $900. Because of the holidays, my parents had $300 in a <2000 sq ft house (100% electric and kept at 64F).

With that calc I actually get 178% greater cost in EDH than in Folsom, so almost 2 times.

My tiers were taken from SMUD and PGE websites in 2009 and electricity bills from friends/family in both areas, they may need to be updated.

In 2009, SMUD has one less tiers (4) than PGE (5). SMUD's lowest tier tops out at 700 kWh at $0.0931 while PGE's tops out at 495 kWh at $0.12. The average cost for up to 1000 kWhs is about $0.12 for SMUD and $0.17 for PGE.

The top tiers is where the two really diverge, SMUD has $0.1748 for anything over 1,000kWh while PGE has $0.35 for 1,000kWh to 10,000kWh.

In no tier is PGE less than SMUD.

RV6Flyer said...

You know, you can always get solar and/or purchase gas from somebody besides PG&E. You will still pay for the privledge of having your gas piped to you along PG&E's pipeline, but it can still be a bit of cost savings during the winter heating months.
At those rates, solar begins to make economic sense pretty quickly. In SMUD serviced areas, not so much.

sacramentia said...

I hear this a lot and don't get it? I have a 4000ft home in EDH and my monthly power ranged from 656 to 1389KwH over the last year. That's $103 to $289. Thermostat is 68 during the winter and 78 during the summer. Gas bills ranged from $27 to $289, but are inverse of the electric since A/C is elec and heat is gas.

I don't think those are uncomfortable temps and just don't understand how people are running up $900 bills.

I'm not arguing that PGE is more expensive, just that it is not a reason to avoid EDH. The cost is probably the same as avoiding EDH since you'll burn more gas driving up the hill...

If I had a $900 bill, Solar would be going in quickly because at .35/kw it will payback better than any other zero risk investment.

Louie said...

Looking at the Recent Sales section of the Bee this morning, I saw something unusual. In the Galt zip code, there were 21 sales listed; 6 appeared normal, the rest were all for 3,880,500 each! And they looked like neighboring homes due to the addresses (most were on either Blackhurst Dr, Stoneygate Wy, or Maugham Wy. No addresses were repeats). What gives? Will these values inflate the aggregate "sold" avg. in the market?

husmanen said...

Sacramentia, thanks for sharing some actual data.

I mentioned your numbers to friends and family that live in EDH and Cameron Park this weekend at a party and they were very impressed. A few thought they could get their numbers to your levels if they had a lot of shade covering the home in the summer, no one home during the day (kids/working from home etc) and no pool.

Also, if the home is built in the last five years it probably has some pretty good insulation and an efficient HVAC system.

I also pressed the party goers to get me some of their actual data. We will see if they actually do.

husmanen said...

SACBEE...

Cheaper homes lure buyers who could spark Sacramento-area economy

http://www.sacbee.com/topstories/story/2492107.html

Wonder if they looked at what the house would rent for, Instead of comparing the prices to other areas of CA or the bubble?

sacramentia said...

Husmanen -

There are several Oak trees and a lot of shade in the Summer, My AC systems are 12 SEER ( great for 99-average today), and my home was built in '99.

I work from Home so the house is climate controlled 24hr/day, but there is no pool or hot tub. A pool would probably add $100/mo on average to the power consumption. An electric hot tub another $80+.

If I didn't have so much shade in the summer I would invest in enough solar to get under the punitive power rates.

All that said, next time around we're going for a smaller home since we don't even use the space we have now.

Lucky said...

I am going to be moving to Sacramento from Canada, but before I do (1 year away) I want to buy a house.

I am looking for higher end product, but don't want to spend more than $600,000. Lincoln, Roseville, Rocklin, etc are all nice areas. EDH seems like it has more value - is this true?

Where would you suggest to look? I have the luxury of time and don't need to rush in to any decision - but I can jump in to something if it is the right deal.

I like, for some reason, the Twelve Bridges area as my wife and I toured some houses there with some local friends and got a good feel from them.

Would you locals suggest I search by myself or should I find a good agent? I was a real estate agent years back, so I understand their value at times. The problem is that I am pretty demanding and would want someone that has that 'barracuda' (for lack of a better adjective) personality. If the agent has a good grasp of the area and knows all the players, they are ideal. I definately don't want to pick an agent out of the phone book.

Also, do you locals search with redfin? what other pages do you use?

Lastly, any great deals on new construction or are those all chewed through by now?

husmanen said...

Lucky. You want to buy before you move? Why in a rush?

Unless you know the area very well it is a good idea to rent a home to get a good feel for the neighborhood, services, traffic/commute, noise, HOA Levels, schools etc. (sacramento.craigslist.com).

There are many upper-end homes for rent in all the areas you mention, ranging from $2000-$6000+ per month.

Value in Areas. More value in EDH is relative, each area has its advantages and disadvantages. As, we have discussed earlier in this blog, PG&E is a disadvantage to EDH. Two advantages are schools and topography, it is not flat.

Agents. Can't help here as I have a unique 'deal' with an old friend were I do 90% of the work for a reduction of the 'cost'. They basically get me in to see a house and they submit the bids. This method does not help in getting access to so called 'pocket' homes though.

Search. www.metrolistmls.com as they identify if a house has gone pending. Also, I use a few automatically generated email notifiers from redfin, ziprealty and various agents.

New construction. I have no idea.

Tip1. What ever you decide you should also look at the foreclosures in your immediate area. A good site is www.realtytrac.com, from their free service you can get a good idea of what is in the area. Warning, could be an eye opener.

Tip2. Check out averagebuyer.blogspot.com

husmanen said...

Investment property?

3011 Driftwood Cir, EDH, CA 95762
Asking rent $2095/month

Purchased in Dec 30, 2009 for $570k.

With 20% down ($114k) at 5% interest that equates to a monthly PITI of about $3,200 per month.

Still negative on the rental parity but close. Sounds like a lot of risk involved. But what a great neighborhood, views, lake, open lots, not HOAs or Mello Roos. Nice.

Lucky said...

Husmanen --- i think your first question is the one I need to answer first. (You want to buy before you move? Why in a rush? ) You are right, why buy when I can rent? I am used to owning a home, I don't like the idea of paying someone else mortgage when I can be paying mine.

Another reason why I would buy is that I need some stability and don't want to be moving often. BUT, i will be giving the renting idea some more thought. If I can get a good deal on what I am looking for, I would be happy buying... but I'm not going to rush for a bad deal.


I will check out craigslist and metrolist more often too.

Thanks for the rest of your suggestions. Your tips will be helpful.

husmanen said...

I have just met with some friends that said they have now decided to walk away.

They put $100k into their house, it is now underwater by over $100k and they guesstimate that it will be worth at lest $50k more in the near future. Their hours are cut back at work and benefits cut, plus a recent medical emergency that cost $5k (great PPO).

They looked at rents, current comps, the job market etc and could not come up with a way to get above water, let alone the house be close to their loan value in the next 15 years.

If they walk now, their credit gets hit and they immediately start to repair it. They estimate that the total hit for 7 years will be about $10k in extra costs due to poor credit. That is a far cry from their current 'losses'.

They also estimate that they will save on monthly expenses as their future rental will be about $1000 less per month, even with bad credit.

The contract clearly states, if they walk the bank gets the house. If this happened after 29.5 years of payments the bank would be happy as hell, now not so much. Two edged sword.

I wish them the best and don't believe they are alone.

wilk916 said...

Hus said:

"I have just met with some friends that said they have now decided to walk away."

I have gone through this exact logic with my in-laws who bought their McMansion new from the builder in 2005 (JTS's The Ranch in Wilton... what a flop). They've lost easily $200k beyond their down payment and own their own retail business so times are tough enough without renting from a bank for twice fair value. However they still feel emotionally indebted and will sacrifice their long term finances for it. I don't get it, but I'm guessing they are not alone. I don't think strategic defaults are ever going to become the norm. People just become too emotionally attached to their homes. Now, when that option ARM recasts this summer they might not have a choice, but as of now financial logic does not carry much weight...

sacramentia said...

Lucky,

The areas around Sac all have different personalities. Definitely rent before you buy just to make sure you like the area.

Right now 600k is a funny number in EDH. It gets you a really big tract home or an older custom home. 800k+ and you have a newer nice big home, <500k and you have all the house that should be in a tract in my opinion.

Maybe in a year today's 800k could be had for 600k. AngelaDameri.com is selling most of the nice stuff these days in EDH. (disclaimer: I have not worked with her at all, just stating facts)

husmanen said...

Looks like we got some spam. As our conversations are pretty top secret, it could be in response to Google's actions in the last week.

paranoid renter said...

The advertised rent for my apartment is finally down $100...after staying steady for the last several years (it has NEVER gone down).

The house that I was planning to buy in Feb 2004 for 370K without backyard done, is now selling for 260K with the backyard. [These had peaked at about 550K.] Glad I did't buy and glad I found this blog.

I remember going through a lot of agony as I watched home prices go sky high thinking I had been priced out. And I'd get support from all the folks here.

I think we're about 1/2 way done with the real estate mess. Still another half to go. Starting to see volume build up on ZipRealty -- as always mostly foreclosures and short sales.

husmanen said...

For the last 3.5 years my rent has remained unchanged. Similar models come out for rent, those that are priced like ours rent rather quickly. Those higher languish for months, just sitting vacant, then the price goes down and they rent.

I watched one very nice rental drop 25% in asking rents in three (3) months.

Seems like the principles of supply and demand work well with rents. Which would then lend itself to a strong metric for home valuation. If you can't cover PITI then its overvalued.

HOUSE2008 said...

"The Serious inventory" can't be dumped becasue if the banks do move them over to the loss side of the ledger their capitol requirements will have to be adjusted also. Thus in order to do just that, the banks are giving a pittance on saving account % rate. A backdoor taxpayer bailout to the tune of 300Billion a year. Less % rate to you & me the more for the banks & they don't have to ask congress. Er or am I wrong???

HOUSE2008 said...

Wilk916:"I don't think strategic defaults are ever going to become the norm"
"but I don't see foreclosures en masse without some kind of financial crisis accompanying it" For who?

But recently Katie Couric just aired a segment about walking away.
What the US Govt CANT do is default on our debt publicly. China holds some 1T of our debt & is now using it against us politically. Now if the "Govt" were to "encourage" h/o to walk away what would it do to our balance sheet relative to China if this bacame acceptable on a very large scale? That is to walk away. Forget Clintons reassurances to Bank of China.

k said...

I heard banks are flipping houses. they buy houses from each other, fix it up, and list on MLS as regular sales. WTF? government gave our tax dollar to bail out banks and now banks uses our $$ to pump up the price. This is not right.