Monday, August 02, 2010

Sacramento Real Estate Market - August 2010 Water Cooler

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

53 comments:

husmanen said...

Lander... Thanks for adding the Big Picture to the links on the right.

Wadin' In said...

The home rental market is getting very tight. Many people looking to rent, lots of houses are undeliverable (caught in F/C or S/Sales). It is getting very hard to find a suitable property. 2 to 3 applicants for every property in South Placer county.

husmanen said...

Wadin'in. Wow, I have noticed an to be an ebb and flow in EDH and Folsom. Your probably right about the F/C or S/Sale purgatory.

At the end of month, I see a ton of rentals, then very few, wash, rinse and recycle. I have even seen rents inch up, then get smacked down as they sit. I have heard the higher rents are for those who's credit has been hampered by the housing market.

On the rental note, the auction date for my rental has been postponed due to bankruptcy. This is great news for me, as the bankruptcy process takes at least a year.

The journey continues...

husmanen said...

The 10 year treasury is at 2.94 today and interest rates at bankrate.com are about 4.5% for a 30 year loan.

Looking back, I guessed that interest rates would rise in May, not so. We are probably in for a long period of low rates, but you never know.

This is great for those that want to refi.

Anybody believe they will go into the 3s?

husmanen said...

Just spoke with my agent and she mentioned that Wachovia bank is making a stand and they will not extend any auction dates - period.

That would put Wachovia in the leading position to flush through their REOs. Theoretically they could get a better price sooner if the market continues its gradual slide to economic fundamentals.

Then if other banks start making this stand then it could be a major game changer, directly impacting home prices.

I have heard this type of news before, so far no real changes. Wait and see....

RV6Flyer said...

"Anybody believe they will go into the 3s?"

If the fed starts up the quantitative easing machine again, possibly we could hit 4%. 15 year fixed is down to 3.75%. Kicking myself for not holding out a little longer on my refi. If deflation takes hold, it could happen. Pimco is calling for a 25% chance of this happening.

Wadin' In said...

How tight is the home rental market? In South Placer (Rocklin, Rosville. Lincoln) there are only 67 houses with 4 or more bedrooms listed for rent on Craigslist. This seems like a really small number for 3 cities with a combined population of over 150,000people.

How many houses would be in this area? Using 3/people for every house, that is 50,000 houses in the market. The implied vacancy less than 2/10ths of 1%.

If you take out all the Craigslist duplications and out of area listings, it is probably down to 50 houses.

husmanen said...

Wadin'in. That does sound tight.

Have you seen it change a lot recently?

Do you think it is the same for the 3 bedrooms?

I remember one of my good friends in East Sac at the peak wanted to sell and rent a four bedroom. He could never find a good four bedroom to rent so he stayed in his house.

Some areas are tight for rentals, but with the number of newer homes in the areas you mention this does surprise me.

Wadin' In said...

Hussman, 18 months ago, it seemed like there were a lot of rental houses and prices were heading lower. One reason for the lower prices was that many "landlords" were offering their properties for 75% of the typical rent. Why? Because they were going to walk away from their homes anyway, which were upside down! They just wanted as much rent as possible and did not worry about making the mortgage payment. Today, renters are much smarter and don't rent homes going into foreclosure.

So in the last 18 months the market has changed. Supply is down, demand is up and rentals are very tight, at least in South Placer County. I have seen rents go up 5% or more over the last 12 months.

The supply of 3 bedroom homes is greater than 4 bedroom homes, but the same fundamentals apply.

patient renter said...

If deflation takes hold, it could happen

Yep, but if deflation takes hold other concerns will outweigh the attractive borrowing rates.

husmanen said...

Here is a tidbit from an auction lately.

3004 Aberdeen in EDH
Loan:$1.12Million
Opening Bid:$398k
Sold to 3rd party:$536k

Pool, view, grassy area and tennis court.

WOW!

husmanen said...

Interesting article in the WSJ about "How to Beat Deflation", if it comes what to do.

One particular interesting section is related to Hard Assets like commercial properties and rental homes.

“In a deflationary period, investors should be especially wary of commercial and residential real estate and the real estate investment trusts that invest in such properties, analysts say. Much of the value of real estate is predicated on an ability to raise rents, says Morningstar's Mr. Peters. A lack of inflation, little rent-raising power and low occupancy rates, he says, "could come back to hammer this group a second time."

http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748704657504575411483630498058.html

Interesting times...

Lucky said...

Husmanen,

Where did you find that info on the EDH house that sold at the auction? Was that recently?

How can I view info like this casually? Pretty interesting stuff.

Thanks

smf said...

I have already seen EDH homes suffer like this.

When our in-laws bought a house there in 2006, the house next door was on sale for $1.1 million. The realtor told us that the owner had rejected an offer for $1 million because it was 'too low'.

It sold for $875K...to someone who intended to live on the house for two years and then flip it.

He recently lost the house, and took several things with him.

Sold recently for $537K.

husmanen said...

Lucky. I would say that was recent...last week.

The sites you will need are fidelityasap.com or priorityposting.com

They cover about 80% of the foreclosure filings. You can search anywhere in CA, and most of the country I believe.

Of course, a subscription to Realtytrac will do all the work for you, but that will cost you.

BTW, anyone will experience from signing up for Realtytrac that would like to chime in on their service?

husmanen said...

Wadin'in. I have been thinking about your rental information.

Do you think the rental costs would cover PITI on the homes you see on the market?

I randomly choose a rental in Rocklin (Misty Hollow Dr.) from Craigslist

(http://sacramento.craigslist.org/apa/1886298295.html). The asking rent is $1990 per month.

The recent sales of nearby homes range from $235k to $318k, let’s just pick a number in the middle for the rental’s value: $276k.

A PITI for a $276k home with 20% down, 30yr loan at 4.5% would put you at about $1500/month.

If that rental can get nearly $2k per month in rent than those houses are under rental parity. $500/month cash flow is pretty good.

husmanen said...

Then of course there are those that have no idea what the local rental market can bear:

Asking $2500/month
Local rents range from $1800 to $2100.

But then again, maybe someone thinks this is a good deal. Someone that just 'walked away', has bad credit but a ton of cash and the monthly cost is much less than their former bubble priced home. Possible.

http://sacramento.craigslist.org/apa/1883092694.html

STOP ROSEVILLE CRIME said...

I've got three large homes in my Roseville neighborhood all ready to be rented.

Lots of friends deciding to walk away from their homes this year. Just wanting to be kicked out while they save their former mortgage payments each month. It's gonna be an interesting 2011.

Wadin' In said...

Husmanen,

Yes the numbers work very well these days. However, for a rental property, you need 25% down and the rate is going to be 5% instead of 4.5% for a non-owner occupied unit. Your example still works well and the owner also gets $200/mon ($2,400/year) of principal reduction in the loan as part of his overall return.

The returns are better than in the depths of the mid 1990 downturn, but mostly because interest rates were 7% then. They are 5% now.

husmanen said...

Wadin. Those numbers may work in your area but they seldom work in EDH or Folsom, but we are getting there - slowly but surely.

After the Fed's latest stimulus expired the market has changed (softened).

Every week there are more and more price reductions for the same model of home in EDH & Folsom. However, still OVER rental parity for most but the trend is clear.

The greater Sacto area has washed through the bubble at different speeds - I believe Elk Grove and the South area were ahead of the curve.

EDH & Folsom are behind.

Placer may be ahead of as I have seen a few examples of great homes at great prices (with some land around them too).

husmanen said...

Got this from Piggington's, a clip from Date Night the movie.

Made me laugh a little.

http://www.flickr.com/photos/50026136@N04/4880918849/

From $1.8 million to $320k...

They say something like "I think we will hold off as it may go down a little"...then Tina Fey, the agent, says that's a good move...

b1whois said...

wadin' in: where are you finding nonowner occupied financing?

RV6Flyer said...

Investor financing is available all over the place, you just have to show you can cash flow it or have stabilized rents.
The real question is, why would you ever want to own a residential rental?

canadian_gyrl said...

hi all, i have a question. i have a friend who is interested in investing in sac town real estate to rent and flip when the price goes up. i am against this kind of investing because imo its people like this that price the average joe out of real estate in the first place. since neither of us are american, nor do we really know anything about sac town re, could you provide me with any fire power to help change her mind.

thank you
concerned canadian.

Lucky said...

Why Sacramento? It is easier if you are buying a property with some background knowledge from a friend/relative, but you definitely require local market specific information.

I wouldn't want to invest in a market that I didn't know anything about or without local help. If your friend knows about Sacramento real estate or has trusted sources who will provide credible and unbiased opinions, it should be fine.

I know of a few "investors" that have been a couple of years in to their investment and wish they didn't. They haven't lost money, per se, but they haven't really made money. Most of it has been paper money, which they know can disappear. If the market heats up quickly, which I don't see happen, they will cash out, otherwise they are in it for the longhaul (which they didn't expect).


How long does the friend plan on investing the money? What type of return are you looking for? What type of property are you looking at buying? Will you contract out the property management/landlord duties? What about taxes bringing the money back to Canada? What part of Sacramento are you thinking of?

How much capital will be invested will obviously change the opinion ($100,000 may not be worth the hassle, but $2,000,000 invested in to a larger portfolio would have more potential IMO).

husmanen said...

canadian_gyrl. I support what Lucky has said above, but your inquiry makes my Spidey Senses tingle a little.

Something seems a little amiss - identification of foreign investor, potential political reference to manipulated markets and what is right/wrong, ... hmmmm...

Maybe if you gave us a few on the blog a few examples of homes you have been interested in but did NOT buy and most of what Lucky referred to above my Spidey Senses would stop tingling.

Roy said...

Guys, just FYI. I put on offer for short sale last summer and decided to back off after bank approved but seller filed bankrupcy. Now after one year, my agent told me that the house is still on hold by bank. Bank will release them eventually. So if you are looking for bottom price, it is not time yet. The house is in EDH.

sacramentia said...

Canadian_gyrl, you answered your own question. Neither one of you know the markets in Sacramento. You will get your ass handed to you by some Realtor(r) willing to "teach" you.

patient renter said...

the house is still on hold by bank

Which is why my cash is still on hold by me :)

husmanen said...

Thought you guys might enjoy this.

I just got info. on a house that I have been monitoring for a few years now. It went back to the bank a while ago but never came out on the market and still looks nice and cared for.

Obviously, I thought it could be a renter situation. It is, but only one room. The previous owner has rented out one room to postpone the move.

The bank and the renter are in agreement for cash of keys, BUT the renter does not have full possession of the house. So no cash for keys.

An offer of cash for keys was made to the previous owner (still living there), they said NO WAY too low. AND if the bank didn't increase the offer substantially they will destroy the house.

Then the previous owners said that they were thinking of getting another long term roommate.

And the merry-go-round goes on and on.

cutcotim said...

A little off the topic here.... But can anyone advise on Land Park? We've been renting here a few years now and want to stay in the neighborhood. I'm starting to see some houses get close to affordable (payment would be close to our rent).

Good time to look/buy in the area? Still gonna come down? What kind of $ per sq ft should I look for for a house that needs a little cosmetic tlc?

Thanks for your opinion!

Louie said...

I had an interesting conversation with a homeowner today. (Which resulted from the fact that in doing drive-by's in my search for a house, I got the address wrong and knocked on the front door of a house that wasn't for sale).

Anyway, the house was extremely well manicured, remodeled, very nice landscaping, and large lot. It is located behind Del Paso Country club in a solid neighborhood. He told me that he tried to refinance recently, but that the house appraised at $200k. He bought it in 2002 for $275K. The appraiser said that because it was relatively small (1,560 sq ft) and the fact it only has one (maybe 1.5) bathrooms, that killed the value. The guy was stunned though, and obviously disheartened by his lack of equity.

From my limited understanding, it seems like banks are hedging on the conservative side, and they really don't take into account a property's condition and upgrades. Its about square footage and meeting certain conditions (# of bathrooms, etc). So it may be prudent to buy a short sale in which the owner has put a lot of care and expense into the home, because that will be discounted. Of course, there are the negative aspects of dealing with a short sale.

Has anyone else noticed this phenomenon?

husmanen said...

Louie. I haven't noticed that phenomenon, but then again I haven't been paying that much attention. I will now.

But I am more impressed that you went up and knocked on the door of a potential house for sale. That takes some gumph (sp?).

My friends and family joke that when I do my drive-bys it is like the grim reaper paying a courtesy call before it all goes down. Funny.

Corey said...

We bid on a shortsale in August of last year and closed in March of this year. We love our new home and are so happy after so many years closed out of the market by the housing market shenanigins.

We have made improvements since we moved in and will make more. It was a rental property before we purchased it and upkeep was minimal at best.

The house sold for $340,000 in 2005 but we purchased for something we could afford $145,000. The breakdown is $93 sqft at 1552 sqft. Zillow history reveals the house sold for $165,000 in April of 2002 and earlier in January for$145,000.

Wow, the great correction continues.

Corey said...

We bid on a short sale in August of last year and closed in March of this year. We love our new home and are so happy after so many years closed out of the market by the housing market shenanigins.

We have made improvements since we moved in and will make more. It was a rental property before we purchased it and upkeep was minimal at best.

The house sold for $340,000 in 2005but we purchased for something we could afford $145,000. The breakdown is $93 sqft at 1552 sqft. Zillow history reveals the house sold for $165,000 in April of 2002 and earlier in January for$145,000.

Wow, the great correction continues.

husmanen said...

Corey. Thanks for the info. My agent says 'SS are the new REOs'. I have stayed away from these but may be changing my mind as more stories come out about successful ventures.

If you will, I have a few questions:

* Was your bid one of many provided to the bank or the only one?

* Did others fall out and you made it to the first in the line?

* Did the bank return with any counter offers?

* Just speculating, if you had not purchased the house as SS would it have gone REO?

* Can you purchase a similar home in the area for about what you bought yours for (REO, SS or organic seller)?

Thanks beforehand.

Louie said...

Hus,

Yeah I can be aggressive (rude?) when it comes to investigating a house :) But I figure that if its a short sale, the owner benefits from people being interested, so he/she is usually friendly. I haven't done it a lot, but I've gotten a few tours through homes without my agent around. And ultimately its saving him time, because most drive-by's and knocks on doors result in the house being crossed off the list.

Corey said...

Hi husmanen-In answer to yuor questions:

* There were several bidders.

* I was told a few fell through. I and my husband are long time employed which may have made a difference.

* No counter offer was made by the banks involved.

* I am unsure of the specifics but assume it was on its way to an REO.

* A smaller house with 1274 sqft across the street sold for $149,000 a few weeks ago. Our home is in line with comps for the area when the sale was made.

It is not the best neighborhood but Its our kind of hoood. My husband commute is down to 5 minutes and mine is also shorter. My husband put down $45,000 down payment so our mortgage payments are very reasonable.

husmanen said...

Corey. Thanks for sharing what happened in your situation. We don't get too many first hand accounts here anymore.

Now just sit back and enjoy your house!!

husmanen said...

Not unexpected...

Sacramento-area home sales drop in July

http://www.sacbee.com/2010/08/19/2970007/home-sales-drop-in-july.html

husmanen said...

Ohhh!! My Sunday morning ritual of reading the recent home sales in the SacBee Business section was ruined - the entire data on El Dorado County is missing.

Ohhh, the tragedy...

Louie said...

hus, I saw your post today regarding the lack of Bee data for ED County, and it got me thinking: How does the Bee list its "Recent Sales." So I looked online for the addresses of the sold homes listed in Sunday's Bee for the 95821 zip (where I'd like to buy, or in 95608).

First, Trulia did not have a record of those sales. So I tried Redfin, and they did. And they let you download an Excel file of all those sales.

Here's what I think is happening with the Bee: they listed home sales for the three day period of 8-4 to 8-6, because all three they listed (Arbor Way, Carson Way, and Rosemary Circle) were sold on those dates. Curiously, they left out 2612 Ethan Way, which sold on the 4th. Maybe at 92,000 it was below some kind of price threshold. Maybe it's a condo and they only list single-family homes.

So there you go. Look up which homes were sold on those dates in El Dorado County, get a cup of coffee, and you can have your sunday ritual back :)

husmanen said...

Louie. Thanks!!

After your comments I poked around on Redfin and found the data!!!

Awesome. Now I can check whenever I want and sit back and enjoy.

Thanks again!!

Louie said...

No problem Hus. I'm obsessed with this market and this search just helped feed the addiction :)

Does anyone have any experience with the negotiation process of a short sale? I guess it depends on how the appraisals come in. I just wonder if the banks budge pretty easily on the price if the appraisal comes in below the offer price, or if they demand more if the appraisal comes in higher. Any seasoned vets out there?

husmanen said...

Louie, I have not gone too far down the SS road, but my agent has and her response of late is that “SS are the new REOs”. Meaning that a lot more are getting through the gauntlet. Then there is another but… but it really depends on the selling agent and if they are knowledgeable and persistent - correct paperwork, contact person etc.

Piggington’s website has many a dynamic conversation, even in today’s market, and has been one of my main sites I visit to keep abreast of what is going on. Although, SD is different in many ways a number of the subject matters provide great insight. Here are a few on Short Sales:

http://piggington.com/question_about_submitting_short_sale_offers_to_the_bank

http://piggington.com/short_sale_approvedwaiting_for_reapproval

http://piggington.com/short_sale_2nd_lenderextortionist

http://piggington.com/advise_on_making_offer_on_short_sale

husmanen said...

Louie. Here is a nice article on Short Sales by Irvine Renter with a cool diagram of the Non-Judicial Foreclosure Process.

http://www.irvinehousingblog.com/blog/comments/shadow-inventory-builds-as-lenders-shift-to-short-sales/

husmanen said...

I had to share this link about a toxic asset that Planet Money on NPR bought for $1000 in Jan 2010.

Tracking Our Toxic Asset
http://www.npr.org/templates/story/story.php?storyId=124578382

If you put your cursor over the time line you can watch the values change. The speed and intensity of the decrease in value increases dramatically after May 2008.

husmanen said...

Put in an offer on an 'approved ' SS, about 8% under asking today. With all costs and PITI it as still a tad over rental parity.

They counter with full price. I suspect they have no other offers or the other offers are lower.

I told my agent to counter with a 3% reduction in the offer. Or we could just bow out gracefully.

I like the counter offer. Could do this all day. Every communication will be a reduction.

Like the house but the REOs in the area are piling up. When they do come on the market they are close to my bid calc. Time marches on.

husmanen said...

Fastest turnaround of a bank I have ever seen.

3200 Stanford in EDH.

Friday auction at 2.30pm, no one buys it goes back to the bank, for $306k.

Saturday on the market for $449k.

It is a good $150k-$200k OVER the current market.

Without knowing the liens or any background there is probably a good reason it went back to the bank in today's flipper market.

Come on bank lets get with the program here.

patient renter said...

hus - I love your bidding strategy. I'd like to take a similar approach, but I don't think my wife would have the patience for it.

husmanen said...

PR. My agent translated my words into something more acceptable.

We didn't hear any more until today, where the seller basically said 'hey were is your formal counter-counter offer'. Oh and btw, we have lots of offers and we will take the best one.

My response is that they should know what the best offer is already and should quit messing around. My offer has been retracted.

If they call next week the offer will be lower again. Otherwise I have learned a lot and will take it with me to the next round.

Emboldened, maybe but I am just reacting to the market as my email fills up with price decreases, while more homes come on the market, macro variables are not improving etc etc.

Roy said...

Economic is slowing down, I believe the house price would drop again, 3 years in a row. My prediction is we will be at bottom 2011-2013.

2 weeks ago there was an open house for a 4000 sqft house (US homes), SS price is 579k, there were 2 bigs over 600k. I think that's crazy.

ReDev said...

Very interesting information and good comments. The commercial properties need to flush out before the market will be able to stabilize. The lenders have been sitting on huge negatives, they will be releaseing some soon. You think the prices have dropped for residential, you haven't seen anything yet!