Thursday, December 02, 2010

Sacramento Real Estate Market - December 2010

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

28 comments:

Wadin' In said...

Rental Inventory continues to get tighter and tighter. If you are looking for a 4 bedroom house in South Placer County, the Rocklin Craigslist only has 6 available. Lincoln has 2 for rent.

People are still moving into South Placer County. The school districts reported a surprise increase in the number of students this year.
Housing affordability is bringing the families back to the area.
Housing pergatory for all the bank owned properties is leading to a shortage of rental availability.

Curious and interesting trends.

husmanen said...

Wadin' In. Glad you brought this up, it forced me to do a little updating of my rental data for my focused areas for parity purposes.

I see the number of rentals come and go depending on the time of the month. I got a few new ones for Folsom/EDH that I hadn't seen before. Weren't on CR, those go really fast if they are not overpriced.

This time of the month we should be seeing more rentals coming on line since notices may have been given on the 1st. Then again there could also be a seasonality to rentals, more rentals in spring/summer than winter due to school schedule, weather etc.

husmanen said...

Anybody else notice that the aerial pictures in Google Maps are now restricted to one point of view (Westward)? The one point of view can be used by clicking on 45 degree angle under the Satellite pulldown.

The Google Earth option does not have very good pictures of the properties, especially compared to the four corners aerial views.

Bing's maps are good but they are not as close up as Google's were and are usually older.

That was a nice resource, maybe it will come back again someday.

Mary said...

How do you access these posts?

husmanen said...

Interest rates seem to be going up. Although not high (yet) they have inched up quite a lot in the last few weeks.

Today it stands at 4.74%, just a few weeks ago it was 4.25%. That is over a 10% increase in a few weeks, not something to disregard.

Could we have just seen the lowest interest rates for a long time? Are we now entering an inflationary period?

Interesting times...

husmanen said...

Something is changing. Todays bankrate.com 30yr fixed rate mortgages are at 4.91%.

vin said...

The state water resources control board just voted to impose a 300%+ fee increase on every home in sacramento county and jack connection fees to unbelievable levels. Your Bill will go from $20 to $60 immediatly!! All of these is due to an unproven downstream wastewater quality problem which really can never solved given a growing population.

These contrived water quality schemes really only have two outcomes. Growing Cost to you and bigger enviromental problems. If this stands, there will be:

Large overblown contracts awarded to Board cronies,

Govenment employee payraises and promotions, and worse,

More massive developement accompanied by population explosion when the economy inmproves. The latter is based on diverting money for "cleaner water" into increased capacity at treament plants.

This has been all been done before. The "Clean water" grant program was directly responsible for the development of most of the remaining rural areas of so. cal. Just check out LA massive Hyperion Treatment plant. Its Still dumping largely untreated waste directly into the ocean with much as 750 MGD on rainy days.

As a byproduct the water consumption to support these massive population increase has diminished groundwater resourcesand resulted in large scale salt water intrusion.

Developers tend to love these measure sas they can easily incorporate them as "mitigation measures" to help adopt EIRs and Negative declarations ensuring the success of their pet projects. Government loves these as well as its money in the bank and job security.

A proposition to overturn the Boards unilateral decision seems the only way but it must have the teeth to make it stand.

Such teeth should consider: Defunding state agencies. Dissolution of all the regional boards. Repealing porter cologne act

husmanen said...

Chp 7, SS or combo?

Anybody here have knowledge of the advantages/disadvantages of filing Chp 7 with or without a SS?

I have some friends that are contemplating this very decision any actual experiences would be appreciated. An NOD has been filed on the house, but no auction date.

Some things they are thinking about:

* Impacts of Chp 7 on potential loan mod
* Timing of filing if they can get a mod
* Timing of filing if they CANNOT get a mod

They are underwater by about 40%.

husmanen said...

Vin looks like this is a good case for the Coase Theorem incorporating externalities.

Anyway, here are the Rate and Fee estimates:

http://www.sacdeltasolutions.com/pdf/rate-fee-estimate.pdf

Local paper reference:

http://www.sacbee.com/2010/12/09/3247806/sewage-plant-upgrade-ordered.html

husmanen said...

Property tax time again!!

I just checked my rental and someone is paying the taxes on the property, probably the bank with our tax money.

Now the 'owner' hasn't paid the bank in probably over two years, definitely more than one year.

And the beat goes on...

husmanen said...

Does anyone personally know of someone fighting bank taking the house AFTER it has gone through the process and sold?

I heard a rumor of this but it is just that. I have a hard time with the logic that would be used in the case, ie I didn't pay for years, bank forecloses but didn't do it correctly so I get the house free and clear.

The rumor was from an agent I know.

Something seems to be missing here.

husmanen said...

Wow, rates for 30yr mortgages are still holding up and are now at 4.97% today.

This may push some fence sitters off and we may get a small bump in the number of sales.

We'll see.

husmanen said...

Over 7% of housing units in the Sacto Area are vacant according to the U.S. Census Bureau’s American Community Survey released Dec 14, 2010.

I am not sure if this number is historically high or low.

Reference:
http://www.bizjournals.com/buffalo/datacenter/housing-statistics-for-9975-us-cities.html?appSession=31988938038200&RecordID=38&PageID=3&PrevPageID=2&cpipage=1&CPIsortType=&CPIorderBy=

husmanen said...

In the last few days in Folsom I see many of new rentals on Craigslist, either with 3bd, 4bd or 5bd. Some with above market prices others not. Must be the time of the month.

Also, interest rates for 30yr fixed are now at the magical 5.00% according to bankrate.com.

Wadin' In said...

Husmanen, the rental market is back to normal levels on Craigslist. I see the same thing in South Placer county. The listings have gone from an average of 5 to an average of 15 per community (4-5 bdrm in samples). The rates are averaging 5% above last year (was $.68/sf then, now $.72/sf, but still reasonable). You were correct in thinking the lull was seasonal.

In the sales department, 2011 will be the year to determine if we are thru the bottom of the bubble. Look for activity after Super Bowl weekend Feb. 6, 2011.

My prediction is that the worst is over, sales will increase slightly, inventory will stay the same and prices will be firmer, ticking up 2-3%. And yes, interest rates will not be returning to 4.25% in your lifetime. They will stabilize in 2011 at about 5.5% to 6.0% (still the best in decades).

I think most of the ARM loans scheduled for 2011 resets have already defaulted and people are walking early, since they can rent a house for $2500/mon, instead of paying $3500/mon on an underwater loan ($4500/mon after reset!)

That being said, the appreciation of homes is history for this decade. The only way to build equity in the next 10 years is the old fashion way: pay the loan down with amortization!

husmanen said...

Wadin. I like your step into market predictions for 2011. What do you think about putting a couple subjects out there next month (January) and let's see what happens.

Subjects could include:

* House prices - Sacto
* Economic Recovery - CA/USA
* Jobs
* Rental prices
* Interest Rate Tax Deduction
* Inflation
* Gold
* Oil
* Strength of US Dollar
* Stock Market

We have some time to think about it, about two weeks, and this could be fun :-)

Last year I would have definitely got hammered on interest rates (much higher) as that did not come to pass, at least not until recently.

30yr fixed 5.19% (bankrate.com)

husmanen said...

Data Quick numbers are out for November 2010.
http://dqnews.com/Charts/Monthly-Charts/Sac-Bee-Charts/ZIPSACB.aspx

Looks like the median price in EDH has risen slightly, but the $/sqft went down with higher sales than previous month. Folsom’s median price dipped a bit and had an ever so slight uptick in MoM data for in prices. Both EDH and Folsom the sales are up over 10% MoM. Folsom’s median price change YoY for Nov is -13.2% and EDH is 0.8%. Data below:

……………Median Price ($/000s) 2010
Area..…Jul|Aug|Sep|Oct|Nov
EDH:…430|445|446|405|415
Folsom:333|340|330 |333|328

……………………Median Sales 2010
Area….Jul..Aug..Sep..Oct…Nov
EDH:..…64…67…52…58…65
Folsom…63…59…48…52…63

$154sq/ft in Nov 2010 for EDH (down $5)
$167sq/ft in Nov 2010 for Folsom (same as previous month)

We may see a surge in December, but most probably January, as some people move off the fence since interest rates have been rising rapidly lately. Then probably a dip as those buyers are gone, but then the Spring selling season starts.

David said...

Is there a correlation between mortgage rate increases and price drops? An analysis appeared today in the WSJ: http://www.smartmoney.com/personal-finance/real-estate/mortgage-rates-jump-will-house-prices-fall-1292541771553/

husmanen said...

David. One would naturally think that as interest rates rise that prices would drop to accommodate the same monthly costs, all things being equal (in a vacuum).

Historically this correlation has NOT occurred as rising interest rates were often in unison with wage/goods inflation and economic recovery. History can be cruel though as I remember many claiming ‘housing prices have never dropped nationally’, even housing risk software did not include this as an alternative.

Rising interest rates will remove buyers (demand) from the market, but the response from the sellers (supply) is not immediate like interest rates and there will be a lag. If buyers want to sell in the near future they will have to decrease price or hope wage inflation (inc Demand) , strong economic recovery (inc Demand) or general inflation (dec Value) really kicks in quickly.

Also, when one thinks of declining interest rates one would assume it would translate into higher prices and we know we have not seen that in the last four (4) years – interest rates down and prices down.

During the bubble higher prices were supported by very loose money, strong economy and low interest rates, now we have much tighter money, weaker economy and raising interest rates. All things are not equal.

husmanen said...

Trulia's December 2010 Price Reduction Report for
America’s Largest 50 Cities by Population

Sacto comes in at #34 with 29% of the listings with price reductions. Only Long Beach and San Diego have more with 36% and 30% respectively. SF was one below us with 29% also.

Josh said...

I really have to shake my head at the folks who are paying $300/ft in East Sacramento, Land Park, & Curtis Park. Further, who are they? Where do they get their income (or capital), which they obviously value so little? It's astonishing to me. Have they somehow failed to notice that the bubble popped four years ago?

Wadin' In said...

Husmanen said: "Last year I would have definitely got hammered on interest rates (much higher) as that did not come to pass, at least not until recently."

Not to worry, H, as the lower interest rate phenomenon was artificially caused by the Fed with QE 1 & 2.

David asked: "Is there a correlation between mortgage rate increases and price drops?"

Your question is very appropriate. Many people believe there is a direct and absolute correlation, just like bond pricing (when rates go up, existing bond values go down). But as Husmanen pointed out, there are many, many other factors. In the coming market, rising interest rates will be a sign of a recovering economy. This is a much more important factor to the home buyers, since they know their jobs are secure and their future is brighter.

Way too many people think rising rates will lead to lower prices. I seriously doubt it. Husmanen pointed out we have seen a dramatic lowering of rates and continued dropping of housing prices. Other factors contribute substantially to housing values (supply/demand, lost jobs, weak economy, etc.)

There is getting to be pent up demand for buying homes and I think you will see rising rates will not cause home prices to drop. They may not go up much, but after this year, the bottom in prices will be achieved.

waiting_for_the_fall said...

What about the 6+ million foreclosed homes that haven't been released to the market yet. Do you think all those homes won't affect the price of existing homes, even if interest rates remain the same?

It's sad, if not laughable, how people think we will get through the most massive credit bubble in history in under 5 years. Ha! :(

husmanen said...

If nothing changes dramatically in our economy except for a rise in interest rates I don't see anywhere prices can go but down.

Everything being equal, including comparable rents, people buy off the monthly cost. If the cost goes up there are less demand and prices will have to fall.

Historically this has not happened as the economy and housing market looked very different than today. Economy was inflating and houses were being washed through the market, not held back.

The Sacto market has homes being sold that are below rental parity and other areas that are still way above (without the added value of quality or uniqueness that may add to the price), i.e. track homes in Serrano and Folsom to name a few.

When January rolls around lets share our predictions for the coming year. It will be fun to see what happens.

husmanen said...

Remember the SS that got auctioned off last month by the bank for $440k and it was sold to a 3rd party for $312k ?

871 Mount Ranier Way, EDH

It was back on the market for a few days by the bank, I suspect, for $449k, but now it is off-market again. Weird...

smf said...

The census reports that for the first time ever, California does not get an additional congressional seat.

How will the excess housing be absorbed when the population is no longer here?

husmanen said...

Ron Trujillo reporting for the Sacramento Business Journal:

"The four-county region’s per-capita income dropped last year to $40,236, from $41,119 in 2008. Last year’s per-capita income is the lowest since $38,996 in 2006, the final full year before the grip of the Great Recession started in December 2007."

A painful record: Per-capita income drops in Sacramento region

http://www.bizjournals.com/sacramento/blog/numbers/2010/12/painful-record-per-capita-income.html

husmanen said...

HAPPY NEW YEAR everyone!!

Here is my shot at predictions for 2011 (no science involved ;- ):

House prices – Sacto : Bifurcated market. Lower end stabilizes/remains stable and the mid/upper end takes a minimum of 20% dip in median price as upper end (>$400k) shadow inventory begins to come to market.

Economic Recovery - CA/USA: CA slowly moving sideways, areas such as San Diego and the Bay Area recover faster than the rest. USA recovery is slow but continues no sharp increases, the months of losing >500k jobs per month, as in 2008, don’t return.

Jobs: Sacto jobs remain slow to increase but unemployment slightly reduces to 10.4% from 12.5% by end of year.

Rental prices. Remain flat as incomes do not rise appreciatively and there are a plethora of homes to rent.

Interest Rates: Interest rates slowly creep up to nearly 6% by end of year.

Interest Rate Tax Deduction. Lots of political discussion but nothing changes.

Inflation. Starts to take off in summer and goes over 4% by end of year.

Gold. Bubble bursts, hits $600 per oz by Dec 2011.

Oil. Prices go down in spring and up in summer, down fall, up winter. Lather rinse repeat. Also, there will be some type of spike in summer based on market speculation and financial bets make by large traders.

Strength of US Dollar. Dollar strengthens against the Euro but not by more than 20%. Weakens against the Yuan by >20%.

Stock Market. Up/Down not sure, I guess by December 2011 there is an increase of only 5% - total WAG.

Personal House Purchase I will buy in 2011.