Thursday, September 02, 2010

Sacramento Real Estate Market - September 2010 Water Cooler

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

50 comments:

No_Rush said...

Yet another frustrated buyer story here:

I offered to buy a short sale in EDH Promontory on July 30th after it fell out of escrow when the previous buyers got cold feet. We offered the same price we had been informed the servicer (BofA) and the investor had accepted previously. The house is a mess, carpet is ruined, appliances gone, junk is everywhere, and front landscaping dead. But BofA says appraisals more than 60 days old are stale and the one done for the previous buyer was definitely past 60 days so another one was ordered for our offer. The previous appraisal was at $570k. Low and behold the new appraisal came in at $620k and we got a counter form BofA at $620k on the Aug. 31st. A whole month went by to just get an unrealistic counteroffer.

Additionally, if you ever make an offer on a short sale, you'll find the bank refuses to pay many of the fees and penalties like HOA penalties, Mello Roos delinquencies and reduces commissions and limits escrow fees that they'll pay. On this deal they total up to roughly $16k. Another little tidbit is that the auction date is approaching on the 14th and we have until the 9th to counter their counter.

With all the waiting we did and unrealistic expectations from BofA, I plan on giving them a big FU and deducting the 16k from my original offer of $570k on the 9th. I'd rather let the bank and investor hurt some more and deal with the property as an REO with clean title. I'm not bitter....

husmanen said...

No_Rush. I hear you, the stories just keep getting better or should I say worse. You know if you now have mentally taken the hurdle past this property in its current situation you could make this an exploratory learning episode.

You could counter with the fees taken out and see what happens. It could take another 60 days and then you could request another appraisal.

SSs seem to be all or nothing, meaning they work it through and you get an REO deal beforehand or it becomes a gigantic negative feedback loop until it implodes.

One side note on my last SS offer, they tried shifting the Mello Roos and HOA delinquencies to my side of the cost column. That was also a NO NO and added to my reduction in counter bid and then bid retraction.

Also, just on the date you mentioned there are at least four (4) other homes in the Promontory that are slated for auction. It is starting to rain REOs in the upper end in EDH.

Roy said...

No_Rush, I assume you are looking to upgrade your house. Don't feel frustrated. I mentioned that house price in EDH is getting down, still. So be patient. I have waited for 2+ years and I decied to wait until early next year! There are plenty of shadow inventory to be released in the market, so don't worry. FYI, I gave an offer last summer for a 5000 house in Promontory area. When they finally approved it I decided to back off and gave them an lower off with the condition that I only pay up to 16k on taxes/HOA. They refused and the house is still empty in the hand of bank.

husmanen, could you tell us where to find auction information?

Thanks.

husmanen said...

Roy. Here you go...

http://www.fidelityasap.com

http://www.priorityposting.com

No_Rush said...

Husmanen - I think that's exactly what we're feeling and planning on doing. There are plenty of houses that fit our preferences coming up in the next few months. So we'll do our fishing expedition with this one and if it doesn't happen, then we'll look for some REOs.

And speaking of all the auctions coming up..there are roughly 3 a day on average for EDH for the next month.

Roy - My story goes back to 2004 when I sold my house in Folsom just "knowing" prices were nuts and started renting (we stayed in Folsom though). I remember being proud I sold for about 6 months and then as prices kept going up I started feeling like an idiot for uprooting the family and missing out on the "new reality". Of course since 2006 I've been vindicated, but after 6 years of renting and saving a bundle, my wife and I are ready to own again.

I think both of you are right, next spring and summer should be the perfect time to be a buyer.

husmanen said...

Anybody else notice that there are more articles and 'noise' on the internet and other media sources discussing stabilization of home prices at current levels is BAD for the economy?

Housing Woes Bring a New Cry: Let the Market Fall
http://www.nytimes.com/2010/09/06/business/economy/06housing.html?src=busln

THE ANSWER TO A HOUSING RECOVERY: LOWER PRICES
http://pragcap.com/the-answer-to-a-housing-recovery-lower-prices

5 reasons why falling home prices will be good for the economy...
http://www.doctorhousingbubble.com/5-reasons-falling-home-prices-good-for-economy-corporate-financial-profits-30-percent-of-economy-owners-equity-evaporated/

patient renter said...

I caught the NYT article. It's both good and wierd to hear more people advocating letting prices fall.

husmanen said...

Wonder where the Sacto area is when looking at the cycle of market emotions :

Euphoria*``(highest)``````^Euphoria
..Anxiety*```````````````^Thrill
.....Denial*````````````^Excitement
........Fear*```````````^Optimism
...Desperation*````````^Relief
...........Panic*``````^Hope
.....Capitulation *```^Depression
.........Despondency *
(lowest point)

Depending on the area, I might vote for Panic in EDH and Folsom and Capitulation in areas of Elk Grove and Roseville (closer to the bottom).

Any other comments?

Louie said...

What's so frustrating about this process of waiting for the rest of the country to catch up to the thinking that is evident on blogs like this. We're finally now seeing the mass media talking about the benefits of allowing the markets to find bottom without intervention. How many times does Joe the Plumber need to hear this message before it sinks in? I actually feel like being so informed can hurt me at times, because I end up getting scared out of investments that aren't going to tank for another year due to Joe's lag-time. OK, rant over.

Giacomo said...

We sold in spring of '06 and have been renting ever since. If my judgment is still good -- potential buyers can safely consider cooling their jets for TWO years. Just watch and wait.
I still fear that more bad times are coming, house prices will go much lower than most people expect, and we would be wise to just save, save, save.

demotutorial said...

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husmanen said...

Giacomo. You are probably right and it will take two years.

I should have another year at my rental due to the LL filing bankruptcy. Feels like a long time, but we have watched and waited a long time already – over 5 years. A couple years won’t kill us.

Then again, a great place at rental parity could suck us in. We have been close before…

patient renter said...

we have watched and waited a long time already

Ditto. What's funny is the longer we rented, the more reasons we found to just keep on renting. As it is we have very little interest or motivation to buy. Perhaps it's because we like our rental, but either way, renting is just fine with us.

husmanen said...

Louie. I agree with missing potential financial benefits, but ultimately it was me that did not short some of the companies I thought were going to be hit hard.

I can thank the great conversations on Piggington’s for exposing this area to me, now the conversations have almost disappeared. A few years ago it was like shooting fish in a barrel.

Being informed has hurt in other ways too. I remember being a parties a few years ago and mentioning some of my thoughts on housing and people would get really upset.

In 2005, one guy stated his house would never go under $500k. He then sold for $529 and bought a $759k house.

His original house is now on the market for $276k and his current house would probably sell for $470k.

Needless to say, we don’t talk housing anymore… no need.

husmanen said...

PR. While waiting we have saved too, our savings has increased about 80% since 2005.

When we buy I have a separate account for 'unknowns' which is approximately 5% of home value and another account to survive almost a year without additional income.

Just think, the bubble made me do it...

husmanen said...

You guys won't believe this one.

I just got confirmation that a house I watched go back to the bank and then sold at auction was sold to the DEFAULTER.

The house was bought in 2005 for about $767k, defaulted on in 2009, sold in 2010 to those living there for $440k. Open auction and the starting bid was $380k. Must of had some competition to get their house back.

Unbelievable. I have heard rumors of this happening, but I thought it was urban legend - couldn't actually happen.

WOW. A 43% reduction. I suspect their connections help them get the house back as the owners are in the real estate field.

AMAZING!

b1whois said...

so....
i finished my purchase of a income property last week in south natomas. it is a 3/2 1038 SF halfplex at 65K. looking to rent at 900/mo. it was a fast/cash purchase of REO from BofA. prop inspection revealed 2k of work to get ready to rent and another 2-3k of deferred maintenance. an all round excellent deal - last sold in late 04 for 240k. here is the link:
http://www.zillow.com/homedetails/3227-Iberian-Dr-Sacramento-CA-95833/26014109_zpid/

b1whois said...

and i an in contract for another place, a 3/2 1402 halfplex for 106 plus 10k of mold remediation. another cash offer, fast close REO with BofA.
think i am going to bail though, there is a rental restriction that i believe should result in a 15-20% discount relative to my little area. this discount would be in addition to a 10% discount for 1) streng home flat roof, 2) hostile HOA and 3) HOA dues of 70/month. so, eventhough it is very cheap, i dont feel it is cheap enough for my money.

b1whois said...
This comment has been removed by the author.
b1whois said...

ok. so it is the middle of the night and i have insomnia again. which is when i generate some of my best ideas, or seem i think at the time. so here is the idea, you be the judge:

from now on when i see a mold problem or a big gapping hole in the roof or boarded up windows on a house that is bank-owned or a short sale i am going to report it as a code violation to the city of sacramento.

the payoffs are:
1) harass the banks :0)
2) encourage banks to dump their properties sooner and/or for less money.
3) transfer wealth from the FIRE industry to the public coffers.
4) encourage improvements to substandard properties, then target buying to realize benefit of streets that are moving up instead of down.

mopar777 said...

335 Turnpike Drive in Folsom has chased the market down 50K or so in the past six months and now it's been delisted. Can anybody give me a hint as to their indebtedness and if they're getting ready to squat for awhile before the bank moves them out?

husmanen said...

mopar777. I couldn't find anything through my 'regular' channels and I would have to pull a favor to get some more info.

Maybe an agent lurking would be so kind to share as the information is readily available in their database.

Roy said...

6/2010 Listing removed * -- -- --
07/05/2010 Price change * $399,900 -
06/08/2010 Listed for sale * $419,000
02/14/2010 Price change * $450,000 -
01/09/2010 Listed for sale * $469,000

husmanen said...

mopar777. You were looking for the loan information right? That is what I am having trouble finding.

Louie said...

Did you all see in Friday's Bee that Wasserman is calling it quits on the housing column? I guess the housing crisis is over! :)

mopar777 said...

Thank you Roy! More neighbors who drank the Koolaid. Another source indicated indebtedness is probably around $460K. Another brown lawn and another renter. I told the wife we'll probably sell and get a one story about 2020 when we're in an up cycle again.

patient renter said...

What do you guys think of the TIME cover? The finance guys are obviously interpreting it as a contrary indicator, but I don't think things are quite that simple.

husmanen said...

PR. Which article? I must have missed it. The latest cover article I found was regarding schools. Here are some of their last housing related articles…

May 26. 2010.
Is the Housing Market on the Rebound?
http://www.time.com/time/business/article/0,8599,1991745,00.html

July 14, 2010
Housing Market Sees Widespread Price-Cutting
http://www.time.com/time/business/article/0,8599,2003578,00.html

Aug 10, 2010
How the Housing Market Is Fighting Its Way Back
http://www.time.com/time/magazine/article/0,9171,1913763,00.html

Sep 11, 2010
The Case Against Homeownership
http://www.time.com/time/business/article/0,8599,2013684,00.html

husmanen said...

Cash purchases as a percent of total sales are still going up in Sac County:

* Jun 21.3%
* Jul 25.6%
* Aug 28.6%

Does this mean flipping is still the thing to do?

Ref:
http://www.sacrealtor.org/documents/about/statistics/july2010.pdf

http://www.sacrealtor.org/documents/about/statistics/august2010.pdf

smf said...

Yes, flipping is alive and well.

When flipping returns back to normal levels, this whole bubble can finally be declared over.

patient renter said...

PR. Which article?

Sorry, "The Case Against Homeownership".

I am thinking that this must mark the beginning of the acceptance phase.

husmanen said...

PR. Could be, could be. Then the next step would probably be Despondency, we will see.

One interesting note from the article, ”They want to live in nice neighborhoods, and in the U.S., that often means you have to buy."

This is where they elude to rental = apartment. Not in our neck of the woods or in CA in general, excluding of course parts of the SF/Bay Area.

A relative of mine lives in beach community in SoCal for the last 50+ years. Even on their street there are a number of rentals.

As many that follow this blog and others there are plenty of "investors" providing single family rentals, just got to keep your eyes and ears open.

husmanen said...

The rumors of the banks changing their tactics regarding short sales and REOs continues.

Basically, no more extensions from Wells Fargo.

http://sdcia.websitetoolbox.com/post?id=4889182

Not sure why we would believe this one this time, but the email appears legit.

STOP ROSEVILLE CRIME said...

Things to keep in mind for the remainder of the year:

1. Interest rates will stay low
2. Home prices will continue to trend down
3. Be happy with what you have

husmanen said...

STOP ROSEVILLE CRIME. Your third point is so true. Keeping that in perspective is very important. A 'home' is what you make it... no matter where you are at.

husmanen said...

The DQ Housing Sales and Price data is out for August 2010

Both Folsom and EDH had YoY median price declines again, -2.94% and -2.92% respectively.

What is also interesting is that the MoM median house price data (July to Aug 2010) for Folsom decreased approximately 7.5% while EDH remained essentially flat (+0.4%).

………....Median 2010
…….... …Jul……Aug
Folsom: $333k...$360k
EDH:….. $430k…$432k

Folsom sold homes increased in August to 67 from 64 in July, while EDH decreased to 59 in August from 63 in July.

Where will the trend go next month…

Ref: http://dqnews.com/Charts/Monthly-Charts/CA-City-Charts/ZIPCAR.aspx

husmanen said...

Jim the Realtor in San Diego is a data based guy and has been calling/participating in the housing market bubble adjustment for some time. Jim provides a chart from Lender Processing Services that has some Sacto data identifying 90 Day Delinquencies and Defaults.

Sacto has 33.5 thousand homes that are 90+ days delinquent and 18.9 thousand that are in default for a total of 53.4 thousand homes in the pipeline.

Now, of course, all these home won’t come on the market and not all immediately, but that number is staggering compared to current inventory of 8.4 thousand (http://sacrealstats.blogspot.com/).

The title wave of foreclosures has not occurred as predicted due to unprecedented government intervention into the market.

How long do you think the pressure from the defaulters and those 90+ days late can hold?

Chart
http://www.bubbleinfo.com/wp-content/uploads/2010/09/default-chart.jpg

Article
http://www.bubbleinfo.com/2010/09/21/sd-foreclosures-next-12-months/

waiting_for_the_fall said...

To absorb that much inventory when it's finally relased, the government will come up with a new program for investors.
They will allow lower downpayments, instead of 20%, it will probably be 5% downpayment required. You will need good credit, and proof you can afford the payment, but that's it.
Right now, there's a limit of 4 homes per person, with primary being one of the homes. This limit will be removed.
There's no other way to absorb that much inventory without changing the rules.

No_Rush said...

Has anyone attended the bank auctions on the steps of the ED County courthouse steps? Better yet, anyone sign up as a registered bidder? I'd like to get a first hand account of the goings on. Thanks!

husmanen said...

Not me. There is a lot of risk involved and I have chosen to 'befriend' a person that has the understanding and the ability to see through the myriad of risks.

Risks include: Liens (e.g. taxes & HOAs), superior loans, thrashed house etc.

I did see the Sacto court house steps auctions when I was on Jury duty. It was low key, people with money multiple denominations of cashiers checks and seemed to know each other well.

Most houses were postponed or had such a high opening bid that no one bid, that took only seconds to complete. The ones that sold went fast too, everyone seemed to know their price and no budging.

Its about the return on investment money - no emotion, like it should be.

Anyone else have any observations?

patient renter said...

Hus - That delinquency data is amazing.

husmanen said...

From the Sac Real Estate Blog it now appears that the trend towards increased inventory continues.

This behavior is different from the last years as inventory was usually flat or trending down by the Fall.

Maybe the slow release of bank owned properties is coming to fruition.

http://sacrealstats.blogspot.com/

or

http://sacrealstats.blogspot.com/2010/09/sacramento-regional-real-estate-trends_27.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+SacramentoRealEstateStatistics+%28Sacramento+Real+Estate+Statistics%29

husmanen said...

Interesting, this would definitely impact the housing market in many ways.

Basically, you could default and then rent you house from the bank at market rents for 5 years:

HR 5028, the “Right to Rent Act of 2010”

http://www.cepr.net/documents/publications/right-to-rent-2010-9.pdf

Here are a few comments on the Irvine Renter blog:

http://www.irvinehousingblog.com/blog/comments/the-right-to-rent-would-flatten-the-california-housing-market/

patient renter said...

Yes, Dean Baker has been advocating Right to Rent for a while. My fundamental problem with it is that it forces property owners (the real owners, ie., landlords, banks, etc.) to subject their property to a "tenant" who has a "right to rent", whether they want to or not.

husmanen said...

PR. Your right and I think there are many flaws, but the comparison to rental parity pulls me in like a moth to flame.

Just identifying that owning at certain price levels from only a few years ago costs about $1000 more per month is amazing.

That is a lot of money that could be goosing the economy.

husmanen said...

Did anyone else notice the change in data results from www.metrolistmls.com?

They appear to be including 'Sold' homes for a given time period after the search date.

Nice improvement, might keep us on the sight a little longer instead of just using it as a base to then search for data on other sites.

husmanen said...

Metrolistmls.com almost got me.

The prices for the homes that appear to be sold are not the necessarily the sold prices.

They are the last asking price!! Example:

1907 Sheffield Dr, EDH, 95762
MLS Sold Price $425k
Actual Sold Price $400k

This is misleading and a disservice to those that use the service.

It appears we cannot trust metrolist with accurate information as having the asking price as sold price only helps to try to inflate prices.

When will they learn. It is about the fundamentals and all the smoke and mirrors will not work!!!

husmanen said...

Wait, the actual sold amounts are available but are not on the results page.

If you click on the individual property then you can see the list and sold prices above the picture in black text.

Better... but best would be to have them on the results page as it still appears like a sold price, not that it was just 'sold'.

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

http://www.boston.com/bigpicture/2010/09/human_landscapes_in_sw_florida.html