Saturday, May 01, 2010

Sacramento Real Estate Market - May 2010 Water Cooler

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

46 comments:

ash said...

RV6Flyer -People were getting rich in real estate long before the bubble and they will continue to do so.
It is all about location

Totally agree its all about location but during the bubble years you could have made some great money selling less desirable locations.

I had 2 condos in the 95826 area like this-

http://www.zillow.com/homedetails/9005-Montoya-St-APT-2-Sacramento-CA-95826/25890279_zpid/

bought them for $40k in '95, '98 cash- sold them for $190k + 205k in 2004 + 2005.

I miss those days- bought a couple more for $40k again this year. I think I will be holding these for a lifetime before we ever see the bubble values again.

husmanen - thanks for your emphasis on the El Dorado Hills market- I can't believe how cheap it is getting up there.
I went on a tour to look at dream homes up there in 2005 and the homes were valued double what they are today. I am now saving a good deal of cash and will look at foreclosure deals on dream homes in the next couple of years-. - It is so much fun finding deals- with so many short sales up there I know they are coming.

I wish the government would get out of the way and just let Real Estate in valley fall hard - the pain would end quickly for the US economy and Investors like me can soak up the inventory fast with cash.
I feel like the government is essentially 'fixing' the housing market- its funny that the government punishes other industries in price fixing but for them it is ok.

I miss the action on this blog by the way- c'mon people where are you @?

Wadin' In said...

Hey Ash, the fact this blog does not get the action it received a few years ago just means it is getting closer to the bottom. When no one wants to buy, it is time to get in. Below is an update on Sun City Lincoln and what has happened from 2006-2010

I looked for a home to purchase for my mother in Sun City in 2006. Prices seemed high at $250-$300/sf. All the Used House Salespeople said prices would never come down in Sun City. It was different here! Everyone wanted to live here. And you needed to include the value of the nice club house and pools!

I remember one Vallejo UHSP put her mother into 5 properties in Sun City that year. One was at 518 Silverwood Ct., MLS # 90085861 (today). Mom paid $405,000 on 1/25/06 and the daughter has been trying to flip it ever since. Mom put $80,000 down, and has been paying the mortgage for 4 years. I am not sure if it was ever rented, but it always looked vacant whenever I went by it.

Today, it is still for sale, listed as a short sale. The price is $258,000. Mom kissed off her $80 grand down payment, plus another $80,000 in carrying costs. The lender is taking a hit for $80,000 on a loan underwritten with 20% down.

Thank the Lord (warning: sarcasm) the daughter made 5 commissions getting her mom into the houses and will make 5 commissions getting her mom out of the houses. Never mind the fact she ruined her inheritance for herself and all the siblings. She must have learned from the CAR that real estate always goes up!

Thank the Lord I had Max Stats (Sac Real Stats blog) on my side! After comparing the costs, my mother rented a house for of $1150/mon over the last 4 years!

Whew! She saved over $120,000! That is $30,000 a year. Her retirment income is $36,000/year.

RV6Flyer said...

From prior thread:
"If the house in the link was going to sell, what do you think he could get for it?"

He thinks it is worth $1.4MM, I say $995,000.

the pope said...

If you missed out on buying at the peak of the market then come on up to Vancouver BC, where it's as bubbilicious as it gets. Check out the Rollercoaster:
http://vancouvercondo.info/coaster

Thats the last 35 years of house prices in Vancouver - the early 80s bubble gives a nice high starting point.

RV6Flyer said...

With the $8000 home buyer credit expiring, do you think all the first time home buyer type houses will drop in price by $8000 to compensate? Will there be a mass wave of price reductions?

David said...

No mass wave of price reductions right now. This is the high buying season, after the weather warms up and before summer vacation. The industry will try to hold out, then some will cave. It will come in a trickle, not a wave.

husmanen said...

Not sure about the price reductions, haven't seen any reports lately on the potential impact.

Having said that, it doesn't sound far fetched that prices would drop when a subsidy is removed.  I did observe a number of price reductions about a week before expiration. Now that I think of it I remember a few being reduced around $12.5k and a larger quantity around $1k.

husmanen said...

Ate lunch today at Nopalitos on H Steet, on jury duty. Drove through East Sac and Midtown, boy brings back some good memories. Just love the community feeling.

Location, location, location.

norcaljeff said...

husmanen, how'd you like the bums? how many hit you up for some "change?"

husmanen said...

norcaljeff. There are a lot of people asking for money around the court house but I didn't see any by Nopalitos, which is at 55 and H near Sac State just before the tunnel under the RR tracks.

When I lived in midtown one of my buddy's got car-jack in front of my house, people stole things from my side yard and broke into my car a number of times. But when I lived in East Sac I didn't have any problems, but the Sacramento Police Dept Crime Analysis Mapping website tells a little different story.

Pretty cool site:

http://maps.cityofsacramento.org/website/sacpd/

RV6Flyer said...

The bums are not that bad. There is one guy who has been living near 38th and J for many years. He is very clean and never asks for “change” and is very respectful. A random transient may come though the neighborhood on a rare occasion, but the never seems to stick around. Midtown is a different issue, but the bums congregate in commercial areas or parks and stay away from most residential streets. As a neighborhood, we hired Paladin Private Security to patrol between 39th and 49th streets and this has really stopped all rif-raf. No more garages getting broken into, no more cars getting broken into, ect. All of that is normal urban living anyway. You don’t leave anything in your car and you add extra measures to lock your garage. San Francisco has plenty of bums, but it doesn’t make it a less desirable place to live.

I have lived in the burbs, big cities, and the country. They all have different issues, but the one overriding factor in the nice areas, is community. Strong community makes safe neighborhoods, better schools, and higher home values. A gated community full of square stucco boxes with garages in the front does not make you safer. I know my neighbors very well, even those blocks away, and we all look out and support each other. Do I live close to Oak Park where the crime map is off the chart, you bet. Does it make me nervous, not one bit.

Also, treat bums and thugs with respect and they will respect you in return.

RV6Flyer said...

Will California go the way of Greece?

husmanen said...

RV6Flyer. Excellent question, funny this came up at one of my kids softball games this week after the fluctuations in the stock market. Here are some thoughts:

Similarities:
• Huge budget deficits
• Lots of social programs
• CA like Greece must get its house in order before Feds/EU will help

Differences:
• Greece’s economy is highly government based, CA has a very diverse private sector economy.
• If I remember correctly, if there were no CA public employees we would still have a massive deficit because of all the programs we have. The employees basically administer the programs. In Greece a large percentage work directly for the government (ca 40%).
• Tax evasion and corruption are very high and generally acceptable by the general public, although tax “planning” is acceptable outright fraud is looked down upon and the Feds really don’t like it.
• CA’s economy is much larger than Greece’s, which could have greater negative impacts if things continue to go awry.

Just some thoughts. In the end I think the differences are too great to provide exact parallels but there are plenty of lessens to be learned about getting your own house in order.

husmanen said...

Just saw one of the houses on my 'short-list' sold by the bank to a 3rd party at auction.

The auction started at about 50% of the loan amount and increased about 10% before it was sold ($250k less than the loan amount).

It is a great house and fits all our criteria and will make someone happy. Now we have to see if it is a flipper trying their hand, very risky as the auction price is at or a little above many of the current houses for sale in the area.

norcaljeff said...

Sac Biz Journal is reporting 45% of all mortgages in the Sacto area are underwater now. Let the games begin!

husmanen said...

Here's the link...

http://sacramento.bizjournals.com/sacramento/stories/2010/05/10/daily12.html

"In the Sacramento--Arden-Arcade--Roseville market, 44.8 percent, or 222,076, of all residential properties with a mortgage were in negative equity for first-quarter 2010. An additional 4.4 percent, or 21,865, were in near negative equity."

"...Mark Fleming, chief economist with CoreLogic. “The typical underwater borrower is likely to regain their lost equity over the next five to seven years.”

Wow Mark what's 'typical' or do yo mean 'average' and could you show me the data and assumptions that back up these claims?

sacramentia said...

I think CA is more like Spain. Couldn't let the currency appreciate during the boom and can't depreciate the currency now. Long slog of asset deflation ahead.

And the last stat I saw showed >50% of Sac mortgages underwater with aggregate equity <10M. The only data point I can't find is number of homes without mortgage, however nationally it is about a 1/3.

Had dinner last weekend with a friend who is strategically defaulting ~700k underwater. Can't blame him but I always figured he'd be the last man standing. Crazy times.

My bet is the next downleg starts late summer after the state makes the cuts for next fiscal year.

Buying Time said...

"My bet is the next downleg starts late summer after the state makes the cuts for next fiscal year."

Yes I am very curious to see what happens this summer/fall. Right now we seem to be in a bit of a plateau (see the asking price charts over at Max's Blog sacrealstats), which also happened last spring.

With the economy gradually healing, things could easily go either way.

husmanen said...

Anybody want to help Wasserman out ...

"Has your house trapped you in Sacramento's unemployment?"

http://www.sacbee.com/static/weblogs/real_estate/archives/2010/05/richard-florida.html#ixzz0ndRrg5jd

husmanen said...

BT. I see more cracks now in the upper end than ever before.

Are you saying 'things could easily go either way' meaning we could have a steady supported increase in house prices starting this fall? Or continue with a plateau. Or downward X percent?

I agree about seeing signs of the economy healing and regarding home prices some areas of Sacto/CA are back to fundamentals, but not all - definitely a mixed bag. Not like in 2005 when it was like shooting fish in a barrel.

To get a sustained plateau or even increases we have to have:

* Improved overall economy
* Improved local economy
* Continued restriction of supply
* Increase in demand
* Decrease in unemployment
* Decrease in potential foreclosures
* Increase in move-up buyers

Many of those points are not moving in a direction to support near term increases.

husmanen said...

So has anyone here bought a house at the court house steps?

Or know someone that 'made' a deal to get a house at the court house steps?

Anything to share?

husmanen said...

Great article by the Irvine Housing Blog:

The Cash Value of Real Estate Explained

http://www.irvinehousingblog.com/blog/comments/the-cash-value-of-real-estate-explained/

sacramentia said...

Hus, Good article on investing for cash flow. I don't like all the numbers but he does a nice job explaining how to analyze an investment.

husmanen said...

Could this data point about the increased demand for rentals push up rental prices?

Or is there sufficient supply?

Or ?

http://weblogs.hitwise.com/heather-dougherty/2010/05/rentals_benefit_from_weak_hous.html

husmanen said...

We have discussed the potential for price reductions after the fed tax credit expired. Here is some data from Trulia for the Sacto area, changes from the previous month.

Looks like the removal of the credit did have an affect. Average reduction is 10%, taking with it $12 Million in non-market value.

May 2010 Price Reductions

Rank|City|State|%w/Red|AvgRed%|TotRed
44….| Sac| CA..|15%..| 10%.|$12,254,998

http://info.trulia.com/index.php?s=43&item=88

husmanen said...

Very interesting article about the Sac County market and purchasing homes at auction.

Investors storm housing market
Absentee, cash buyers pounce on deals - Sacramento Business Journal

http://sacramento.bizjournals.com/sacramento/stories/2010/05/17/story1.html?b=1274068800^3354381

Of course, rental parity is mentioned as well as in March, 25% of Placer County buyers and 36% of El Dorado County buyers and 27% of Sacto buyers were absentee.

I guess the CA average is in the low 20%s.

In the last couple weeks I have began discussing a potential auction purchase from a person that has bought at the auction steps for over 20 years.

Incredible stories! Sometimes making a boat load and others where purchases almost caused bankruptcy and total failure.

PeonInChief said...

Tenants Together has updated its Tenants and Foreclosure report. You can read it here.

http://www.sacbee.com/static/weblogs/real_estate/2010%20Report-%20California%20Renters%20in%20the%20Foreclosure%20Crisis.pdf

patient renter said...

Good housing commentary from Chris Whalen:

http://tinyurl.com/24oc5af

smf said...

Let me see if I get this straight:

During the bubble, investor demand for housing was higher than average. This created the oversupply of housing.

Now investors are coming back, with an even higher proporition than during the bubble.

And this is called a 'recovery'?

husmanen said...

PR. That was a very informative article/segment. Thanks!

husmanen said...

DQ Data

Median Prices………

City….| Mar10.|Apr10
EDH...|$431k..|$420k
Folsom|$375k..|$340k

Looks like the March bump didn’t continue in April for EDH and Folsom even with all the stimulus market manipulation. Because of the mix of homes in these areas I would have expected the Median to be higher, there must be great pressure to drop prices and demand on the ‘lower’ end of the ‘higher end’.

May will be very, very interesting!!

http://www.dqnews.com/Charts/Monthly-Charts/Sac-Bee-Charts/ZIPSACB.aspx

husmanen said...

Bidding Strategy. I copied this from Irvine Housing. Interesting, I may incorporate these strategies in my next bid. Oh, and the article mentioned not to even try bids <15% less than asking - doesn't work.

http://www.irvinehousingblog.com/blog/comments/buying-and-selling-during-a-decline/

... The first offer... is the best offer. The buyer should lower the opening bid as follows:

* If actively bidding on the property, the buyer should make all offers expire in 3 days, and these offers should be delivered on a Tuesday. The buyer should not allow the seller to think about things over the weekend. If the buyer is still interested in the property after the offer expires, resubmit a fractionally-lower offer (1% is a good rule) on the following Tuesday (make them sweat over the weekend). The new offer should not be so much lower as to lose consideration, but it should be enough lower so that the seller gets the message they need to accept the offer before it drops further.

* If the seller makes a counter offer, the buyer should retract the offer and resubmit a lower one. This works the same as the time decay offer above. After the buyer has lowered an offer a few times, the seller may panic and take the offer before it goes any lower. This is what buyers are after.

* Buyers should lower their offers 1% each time they speak with the seller’s realtor. Every time the seller’s realtor communicates with the buyer, the realtor will pressure the buyer to increase their offer. If the buyer lowers their bid each time the realtor speaks, the buyer sends a message that the realtor pressure is not working, and it is, in fact, hurting the deal. Buyers should lower their offer 2% if the realtor uses one of the standard lies mentioned above.

* If the realtor tells the buyer there is another bidder on the property, the buyer should immediately withdraw their offer and tell the realtor to call if the deal falls out of escrow with the other buyer. Since this statement from the realtor is almost certainly a lie, it will cause them to have to explain to their client why the only buyer around has pulled their offer.

sacramentia said...

That sounds like a good way to get either a house nobody wants or one at a price nobody wants.

mopar777 said...

I agree with Sacramentia. This tactic will work only on starter homes and marginal investment properties. If the property is desirable and priced right, a bidding war will erupt. The duplex I bought in Fair Oaks last fall had a total of 72 offers on it!

husmanen said...

Sacramentia. I think the “wants” part you mention has a lot to do with price while staging, descriptions etc only go so far. When houses sit for a long time ‘price’ determines the ‘want’ factor. Of course, in price I lump location, schools, traffic, taxes, basically everything.

Mopar77. In areas I look at there are still bubble dreamers. Some homes I look at are priced right (rental parity) and go PS very quickly. The method above would not work in cases like that or in a ‘normal’ market.

About a year and a half ago I tried a similar method on a bank owned property in American River Canyon. I contacted the agent when the price dropped to 20% of what I calculated the value would be. Initially the agent laughed and said ‘not going to happen at that price’.

Then after 100 days on the market, the bank dropped the price and he called me back. The house finally sold for about 1% over my bid, sadly it didn’t work out for my family at the time.

BTW, I still have contact with the agent when something of interest arises. No hard feelings, just business.

patient renter said...

I'm sure everyone saw - Case-Shiller is accelerating downwards again.

Word Verification: sublet

husmanen said...

Here is the Case Shiller link:

http://www.standardandpoors.com/spf/docs/case-shiller/CSHomePrice_Release_052506.pdf

patient renter said...

Balance sheet bingo continues.

norcaljeff said...

24 listing just hit my email today! wow, biggest yet. Foreclosure wave is hitting in full force!

Deflationary Jane said...

I'm going to side with Husmanen on this one.

List was 189k, I offered 160k. If I had been told there was another offer being considered, I'd have moved on. If it wasn't going to happen at my price, time to move on to the next property. My agent kept me far away from the seller's agent - smart guy.

Nothing but rental parity mattered to me. In the end, I got it for 142K.

Patience and not being bullied does pay off.

patient renter said...

DJ - I was going to ask if you might put together a blog post with tips on everything you learned through your buying process. Since I'm not even looking yet it's something I know little about, but I'm sure others could learn from your experience as well.

RV6Flyer said...

So I am refinancing for hopefully the lowest rate I will ever see again. Locked in at 4.00% fixed for 15 years with CalPERS. No points. Could have gone with 3.875 for 3/4 point, but didn't make that big of a difference.

Any state workers, keep an eye on the market, next big rally in the bond market, I would lock in.

Appraisal came in by the skin of my teeth...4% higher than my purchase price in 2008, but I have put some cash into this place in the last two years.

husmanen said...

Norcalljeff. I too am getting a large amount of houses sent to my email.

Many are reductions but there are quite a few that are new and at more realistic prices. A couple are right at rental parity.

Very interesting.

husmanen said...

This is second hand information but I thought I would share to see if anyone else has heard of a similar case.

Not paying on loan for 2 years. Bank takes house back and then lets previous 'owners' rent the house at market rents. Basically the defaulters get to stay in the house.

I am not sure of any specifics and have asked some follow up questions but this would be an amazing twist to the market.

Wonder if they could get 'first offer' rights if the bank decides to sell. With two years of potential savings of the loan payment they could easily have 20% down for current market prices.

Weird and wild.

patient renter said...

This sounds like the "right to rent" proposal advocated by Dean Baker, though in this case the government didn't need to get involved, which is nice.

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