Wednesday, July 07, 2010

Sacramento Real Estate Market - July 2010 Water Cooler

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

17 comments:

Louie said...

I have an anecdotal example of how out-of-whack the housing market still is.

In February, I posted on this site about a house I was considering buying. It was a short sale, about 2000 sq. ft in the 95821 zip, with some serious updating and fixing needs (dry rot and mildew in bathrooms, broken windows, water damage in ceiling, big crack in the ceiling, pet smell). It was originally listed at about $205K, and was gradually reduced to 169K. I made an FHA-Rehab offer at 157K, but the listing agent chose to submit a cash offer of $145K.

Well, after a couple months, the bank or Freddie Mac squashed the short sale and it was foreclosed. Cash for keys of $4000 to the owner.

So, Common Sense question #1 - What did they start the bidding at on the courthouse steps? Hmmm...a logical starting point may have been, say, $150K? No, they went with $205K. And heard crickets, of course.

Fast forward to a couple weeks ago. The house finally appeared on Fannie Mae (link below). I had to figure this out myself, because despite assurances from the agent that she would let me know when that happened, she didn't. I contacted her and asked what Fannie had done to the house. Nothing, just applied some Mr Clean and cleared some junk.

So, Logic Question #2 - What do you think Freddie priced this house at? $175K? Well, disregarding all the evidence of the lack of worth, it was listed at $235K. How long will it take for this mess to unwind with stuff like this going on?


http://www.homepath.com/listingdetails.html?st=CA&z=95821&cno=067&listingid=23137582

husmanen said...

Louie. Thanks for the follow-up and the link.

I checked areas I am interested in and I see the same pattern you describe with the added note that the homes are reduced over and over again.

Regarding your common sense question #1 I have seen neither rhyme nor reason with the setting of the bid prices at auction. Sometimes the bid starts out at the loan amount, sometimes higher and sometimes lower. Lately, if the starting bid is lower it is usually about 50% of the loan amount.

Regarding Question #2. A BPO should have been performed on the house before a price was set. If that is way off so will the initial price.

I also think Freddie does not want to be accused of 'dumping' houses and having flippers buy them and resell them at a large profit. That would be money left on the table for the US tax payer.

Just some thoughts...

husmanen said...

Louie. After you mentioned your example I watched a homepath house increase its price on Wednesday and then decrease its price today - same amount.

I guess everyone knows the tricks of the trade....

husmanen said...

Auction oddity. Just watched a house go to auction for about 35% less than current market, no bids and it went back to the bank.

The house looks in good shape, great area, nice floor plan, nice back yard. Hmmm??

Could of had a lot of liens on it so no 3rd party would touch it.

Now we will see what the bank will do. It is vacant at the moment.

Louie said...

Hus, the whole "mission" of Fannie Mae just seems like a game of smoke and mirrors. They're supposed to try getting owner-occupied buyers, hence the "first-look" 15-day period in which investors can't buy the house. But what happens when they overprice a house? By the time the market signals them about the over-pricing, the 15 days is over. And if I submit a bid below asking price in the first 15 days, does someone at Fannie say "first time buyer, make it happen!" I doubt it.

norcaljeff said...

Louis, as I've posted before fannie and freedie both routinely put their repos up for sale at above market prices, even though most of their properties are more beaten up than most. Not sure why, but it's just a fact. Don't give in and especially don't pay the prices they are asking.

RV6Flyer said...

Bloomberg Chart of the Day

http://www.bloomberg.com/news/2010-07-16/housing-bubble-leaves-4-trillion-hangover-chart-of-the-day.html

husmanen said...

RV6Flyer. Thanks for the link.

An interesting note on the graph, if you look closely you will see that in the early 90s debt was less than assets. Wonder what it was like for 20 years before.

Anyway, our current situation looks scary and the actions identified to get the lines together appear even scarier.

Louie said...

My wife and I recently submitted an offer on a house that we somehow both liked. Finally!

The house is a short sale, so we could be waiting a while.

My question for anyone knowledgable with this process is: What steps will be bank take to determine the value of the home? The price was dropped about 14% about 2 weeks before our offer, which as another 4% off that. WIll they just basically look at the 3 closes homes that sold most recently? Does a representative physically come out to the property? Will they take homes that are contingent but not sold yet? If a house sold on the same street in March, and the bank is looking at things in September, will they take into account the fact that prices have dropped since March? How much power do we have to negotiate?

Thanks in advance for any help, it is appreciated.

husmanen said...

Louie. Great questions. I have heard stories from others that went through the process but I have never had a SS offer accepted. One previous SS offer I made took about two months to get back to me with 'we accepted another offer'.

Oh, also, I have tried to submit offers on SSs but was told another offer has been accepted by the bank. Then I keep my eye on the house and it goes to auction and the bank gets it back. About a month later it is back on the market with a lower price and a different agent.

Within these posts on Piggington's are some nice tidbits on SSs.

http://piggington.com/short_sale_experiences

http://piggington.com/buy_short_sale_house_that039s_already_in_contingent_status

Love to hear from those here how have actually succeeded or an agent that has gone through the process for others.

RV6Flyer said...
This comment has been removed by the author.
husmanen said...

In Vegas over the last weekend. Now that area still looks like ground zero.

The 111F heat didn't help either.

Spoke to a cab driver and he had two calls in 6 hours. Also, spoke to a local plumber while taking my morning dip in the pool and he said things are not getting worse, but boy they are not good compared to the boom. Kind of like in a holding pattern.

Nice to be back in CA for a number of reasons.

husmanen said...

Check out unemployment in your area with the Sacbee database:

Interactive: See unemployment trends for every place in California

http://www.sacbee.com/2010/07/26/2915578/interactive-see-unemployment-trends.html?appSession=989166500171737

A few selected local areas for June 2010:

Sac County 12.6%
Folsom 5.8%
EDH 7.7%
Gold River 2.5%

husmanen said...

It looks like Folsom’s REO median sales prices have taken a dive in June 2010 ($270k) compared to May 2010 ($365k). The banks could be letting the lower end go first or they are dropping prices on all, or a combination thereof.

Funny thing for Folsom though, the SS median price went up slightly in June ($375k from $372k) and so did the conventional sales ($388k from $384k).

Fair Oaks had a huge across the board decline in all types of sales in June compared to May (e.g. REO & SS to $199k from $289k and $299k respectively).

Orangevale was primarily lower in all categories with SS leading ($172k from $269k).

Land Park (95818) had an increase for REOs ($359k from $347k) while other categories were flat.

Midtown (95818) was also a mixture with REOs and Conventionals moving up ($470k from $360k and $415k from $382k respectively) and SS were down ($224k from $395k).

Check it out at:

Sac Area Assoc. of Realtors Data
http://www.sacrealtor.org/documents/about/statistics/zipcodes_0610.pdf

Louie said...

Thanks for the data, Hus.

With the exception of midtown, those numbers are pretty solidly in the down direction. The Orangevale number is particularly telling because that's an area that is not very prized or exclusive, yet real estate prices typically remained pretty high. To me that area is experiencing a dramatic corrections to levels that are appropriate.

We've submitted an offer for a short sale in Carmichael, and at this point I'm hoping the bank takes its time to allow the comps to continue to adjust downward.

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