Buyer's Remorse Version 2008

From the Sacramento Bee:

Shania Jensen sat in the kitchen of her 2,700 square-foot home in Roseville's Crocker Ranch neighborhood and uttered three words that no homebuyer ever wants to say aloud. "I regret buying," Jensen said simply.

She and her husband, Steve Liggett, had been renting for two years, waiting for the right home. The wait ended in May 2008. "We thought we were getting a great deal on this," she said of the $419,000 purchase price. But today other new homes in the neighborhood are selling for under $400,000.
...
"With the taxes right now, if we end up deciding to leave, we'll leave California," Jensen said.

Bay Area SOS

From the Sacramento Bee:

The recession has finally caught up with Silicon Valley and much of the Bay Area...The economy here escaped the worst of the housing market crash – but not the more recent slump in consumer spending. That's hitting the tech sector hard.
...
Sacramento is hurting because it's being starved of the eastward migration – of people, jobs and wealth – that occurs when the Bay Area is healthy.
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State records show Intel Corp. laid off 200 workers at its 6,000-employee Folsom research park last year, and it continues to struggle...Hewlett-Packard Co...let 70 workers go at its Roseville campus last year, bringing employment to less than 3,500. As it integrates its acquisition of EDS Corp., it plans to lay off 24,600 workers worldwide over three years, which could affect Roseville and EDS operations in Sacramento, Rancho Cordova and Folsom.

From the Sacramento Business Journal:

Sacramento’s office market went backwards in 2008. The vacancy rate for Sacramento’s office buildings rose for the seventh straight quarter to end the year. And for the first time in two decades, tenants used less space at the end of the year than they occupied at the beginning, according to the region’s top brokerages.
...
Even traditionally stable areas have seen a drop-off. Nico Coulouras, vice president at Lowe Enterprises Real Estate Group, which controls about 700,000 square feet in the Highway 50 submarket, one of the best-performing areas in recent years, said leasing activity in that area was steady until November. “Then, it got quiet,” he said.

From the KCRA:

Home Depot Inc. said it is cutting 7,000 jobs and closing its smaller Expo chain, including a store in Roseville, as the recession continues to batter the nation's housing market.

From the Stockton Record:

...[San Joaquin] County's unemployment rate hit 13 percent in December, up 1.1 percent from November, according to data released Friday by California's Employment Development Department. It is the highest rate in the county in 12 years.
...
In recent months, [UOP economist Jeff] Michael had been saying that San Joaquin County employment numbers weren't as bleak as the national numbers and wondering whether that was a short-lived phenomenon. "Pretty clearly it was a blip," he said. "My reaction to (the new employment report) was, 'Wow!'"

From Business Week (hat tip RV6Flyer):

We asked AXIOMetrics, a Dallas-based apartment data company, to assemble a list of the 25 large metros where the rate of rent declines accelerated most in the fourth quarter.
...
Sacramento/Arden-Arcade/Roseville, Calif.
Rank: 24
Rent drop: -1.9%
Q4 2008 rent change: -3.9%
Q4 2007 rent change: -2.0%

From The Housing Bubble blog's Ben Jones:

We had...[a serious recession] in Texas when I was young. At first, lots of people hoped oil and real estate would bounce back and save our necks, but economics don’t work that way. We had a bubble and it didn’t come back.

What is frustrating to me is that the ongoing debate is headed by the fools that got us in this situation. Housing isn’t going to lead us anywhere. The fact is we’ve had the largest financial mania in history. It’s not going to return, and we better start working on how we will work and live in the future. Nobody can turn the clock back, and hoping that housing will lead a recovery is just as futile wishing oil would rebound in the 80’s.

"Approaching Bottom in Sacramento" or More "Wishful Thinking"?

From the Sacramento Bee:

[T]here's no doubt the steep drop in home values – median prices in Sacramento County are almost 28 percent below last year's figures – and relatively low interest rates have sparked interest. [DataQuick's Andrew] LePage said investor buys accounted for 18.6 percent of February closings in Sacramento County. That's up significantly from 12.7 percent in November and December. [The high for investor buys was May 2004 when they accounted for 25 percent of sales.]
...
Overall, sales remained weak, though real estate broker Tom Zipp of Citrus Heights said Thursday that rising investor activity "traditionally signals the bottom part of the market."

DQ stats by county (All Homes & Existing SFH/Condos/New Homes)
DQ stats by zip code

From the SacBee's Home Front blog:

I heard 17 months ago at a local builders conference that the eyes of the nation were on Sacramento and Washington D.C., seeking signs that the first markets into the tank would be the first to lead the way out. That turned out to be wishful thinking. Nine months ago again I heard Sacramento-area home builders say we were already scraping along the bottom. That, too, was a little premature. Now again there is a lot of buzz in the real estate industry that we're approaching bottom in Sacramento. Maybe we are.

From the Sacramento Bee:

If you see a stretch limousine cruising your Placer County neighborhood Saturday, it won't be for prom night. It will be one of the first limo foreclosure tours in the United States, prowling Rocklin, Roseville and Lincoln.

From the Sacramento Business Journal:

Two of Sacramento's top builders have unloaded 250 acres approved for new homes in Rancho Cordova for 16 cents on the dollar -- the first major land sell-off in the capital area since housing sales collapsed last year. The buyers are Ron Alvarado and Charles Somers, land developers themselves and partners in a large janitorial and building maintenance company. They bought the property last month from Pulte Homes and Centex Homes at a steeply discounted price of $8 million, according to multiple real estate sources who spoke about the deal on condition of anonymity.
...
At the height of the local housing boom, $8 million would have fetched less than 20 acres of land approved for new homes as prices had escalated to $600,000 an acre in some areas. Builders and developers are still waiting for a new benchmark on what land is worth in today's economy. The buyers in this deal, Alvarado and Somers, paid $32,000 an acre.

From the Sacramento Business Journal:

SAFE Credit Union has "assumed the worst" after enduring a horrible fourth quarter, moving a hefty $21 million to its reserves for loan losses this year with the dismal economy and the hard-hit housing market. The aggressive additions to reserves pushed the area's second-largest locally based credit union to a $5 million loss for 2007. And the credit union plans to add $1 million to its reserves every month of this year. The credit union experienced a rapid deterioration of consumer loans in the fourth quarter, said Henry Wirz, chief executive officer of SAFE. "It was a very sudden change."
...
What was surprising was how many of the borrowers had excellent credit when they applied for credit, he said. "They are prime borrowers, yet in our portfolio they are becoming a higher portion of delinquencies."

Placer Popluation Growth At Lowest Level Since 1971

From the Sacramento Bee:

A few years ago, Placer and El Dorado counties were red hot, flush with Bay Area transplants and drawing more residents each year at a tremendous rate. Now that trend is cooling. Both counties grew at a slower pace in the past fiscal year than during any of the previous 35 years, according to population estimates released Wednesday by the California Department of Finance... Placer County hasn't seen a lower rate of population growth since 1971, according to state figures. And El Dorado's hasn't been this low since 1968.
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The driver for the change appeared to be a statewide drop in domestic migration – movement from one part of the country to another. Instead, all of California's growth this year came from natural increase – more births than deaths – and immigration from other countries.
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Changes in the housing market help explain the domestic migration trend, several experts said. With housing prices down everywhere, Bay Area bargain hunters may not have the equity to move or may be able to afford something closer to home.
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Then there are the foreclosures. California residents who have lost their homes, [California's chief economist, Howard] Roth said, are opting to move out of state. In all, about 90,000 more people left California than came here from another state this year, and Roth said that trend may be cause for concern. When more residents leave than arrive, he said, it "often relates to what people think of California. Our economy is slowing down. We had a pretty big housing bubble that burst."

From the Sacramento Bee:

Rising construction costs and rapid growth have prompted Roseville elected officials to increase two developer fees and establish a new one, despite the sluggish housing market....City Manager W. Craig Robinson said cost pressures are affecting the city's ability to build promised facilities, many of which are needed to serve new development.
...
Building industry representatives, however, say the fee increases come at a bad time. "During this downturn, and probably for the foreseeable 18 months ahead of us, we think the market will continue to decline," said K. Hovnanian Homes' Frances Knight. "We suspect that the projections on building permits are going to be worse than estimated currently."
...
Wendy Gerig, Roseville Chamber of Commerce's chief executive officer, asked the council to delay the fee increases until the economy picks up. This year, a record number of businesses dropped their chamber membership because they folded or had financial constraints, Gerig told the council.

From the Sacramento Bee:

A recent Rancho Cordova forum, organized by Councilman Ken Cooley, drew about 80 people to City Hall to hear presentations by nonprofit organizations on options for those who miss mortgage payments and state and federal officials on what options they have to stave off foreclosure.
...
Past advice has gone out the window since the subprime collapse,...[Mike Himes, homeownership services director at NeighborWorks, a national nonprofit] said. Two years ago, the idea was to get into a house as fast as possible and eventually refinance the loan, he said. "Did anyone know two years ago there'd be a crash in the market?" Himes asked.

From the Stockton Record:

Stockton remained on top, with one foreclosure filing for every 99 households - more than six times the national average. Modesto had the No. 2 spot, with one foreclosure filing for every 104 households, and Merced took the No. 3 spot, with one foreclosure filing for every 106 households.
...
Steve Carrigan, Stockton's economic development director, said he doesn't see a downswing in foreclosures coming any time soon to the Stockton area. "It's bad, and it's going to get worse," he said. "We're going to have to weather this."

Weston Ranch Realty owner and broker Steve Clark said he hasn't seen any signs that the foreclosure scene is improving. A lot of people still come into his office hoping to list their houses in hopes of selling to avoid foreclosure, he said. Typically, though, they owe at least $100,000 more on the house than they could get for it, he said. "We can't list it," he said he tells them. "Nobody will buy your home and help you out of this mess."

There have been hardly any sales all this year, anyway, he said, adding that his office mainly handles property management for rental homes - an active scene. "I don't see a change any time soon," Clark said. "It's terrible, and I have a hard time seeing where the silver lining is."

'Kind of a Real Estate Bust'

From the Sacramento Business Journal:

San Diego-based sub-prime lender Accredited Home Lenders Holding Co. said Wednesday it is not taking any new loans and it is closing "substantially all" of its 60 lending offices and five support locations as of Sept. 5.

Accredited has retail branch offices in Sacramento, Folsom and Roseville, and it has a centralized retail office in Sacramento.

The moves are part of a restructuring in response to turmoil in the mortgage industry. Those moves will cost 480 people their jobs.

From the Inman Blog:

What a week. Since Friday, banks and mortgage lenders have announced more than 13,000 layoffs.

From the Associated Press (hat tip Sonoma Housing Bubble):

...[M]ore than 25,000 workers nationwide...have lost jobs in the financial services industry since the beginning of the month -- with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation's housing market.
...
Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year....

It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

From the Roseville Press Tribune (hat tip Jeff):

A downturn in property values is showing up on Placer County's assessment rolls, with a drop in assessed values taking a bite out of growth. Placer County Assessor Bruce Dear told the Board of Supervisors at a budget workshop Tuesday that the county's assessment roll increased from $52.3 billion last year to $56.8 billion - an 8.52 percent jump. But the $4.5 billion increase for the year would have been nearly $1 billion more if real estate values hadn't decline, forcing a downward adjustment on about 18,000 mostly residential properties.
...
"The market activity in the spring was kind of a real estate bust," he said. "It suggests the numbers will continue to decline significantly in this assessment roll." For a county that had experienced assessed value increases of never less that 12.76 percent a year since 2001, this year's 8.52 percent rise has already spurred county budget officials to warn that the slowdown in property tax revenue could escalate in the next two years.
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Sacramento County discontinued offering medical and dental subsidies retiring after May 31 because of a projected $33 million shortfall. El Dorado County is reducing its workforce by 26 positions through early retirements and layoffs, he [Placer county CEO Tom Miller] said.

Two Years of Change

From Rocklin and Roseville Today

Early on we had a number of people, who came to be known as “bubblers,” who
were using words like, “crash” and “doomsday.” Right now, I don’t recall anyone being very close to predicting where we are today. The local real estate market has not crashed, not all homeowners wish they were renters; some of us who are working in the industry still have jobs and are making a living doing something we enjoy. At the same time it is also clear that all the changes of the past two years have taken their toll on companies and individuals. Many jobs in the industry are gone, there are more homeowners facing foreclosure than we know about and some dreams based on growing equity have been shattered.

Waiting

From the Roseville Press-Tribune:

In a reflection of the continued sluggish housing market, the Roseville City School District's newest elementary school will probably have to sit empty for a year as officials wait for more students to arrive in the school's attendance area. That's the word from Superintendent Richard Pierucci, who updated trustees last week on the status of Junction Elementary School, located on Ellison Drive in the WestPark development.

Too few students are currently registered with the district in the developing area, making opening the school financially irresponsible, Pierucci said at the board's July 19 meeting. The developer-built, kindergarten- through fifth-grade school was completed in January 2007, but officials have been waiting for enough students to materialize before opening it...The lack of students is due to the area's sluggish housing market, Pierucci said.

From the Sacramento Bee:

Developer Sammy Cemo is a retail and commercial guy. Residential construction? "That's a little out of my realm," he says. But he's pursuing a residential development, nonetheless, in midtown Sacramento...The developer may not be a residential guy, but he knows this much: "Timing-wise," he says, "the market sucks." But he also knows markets turn. He'll start work on his apartment-condo-whatever at the first sign that things are improving.

Commercial Real Estate: The Other Shoe Drops?

From the Sacramento Bee:

In the up-and-down world of office leasing, Roseville and Rocklin for years have been the closest thing around to a sure bet. Until now.

Demand for new leases is down. Office vacancies are up. And a lot more space is under construction. "After many years, South Placer County is changing from a landlord's market to a tenant's market," said developer Abe Alizadeh...."Incentives (for tenants) will be going up. Lease rates will be coming down."
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"It's frightening," said Elaine Hartin, a broker with 17 years of experience in the Roseville office of Cornish & Carey Commercial.
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The area's declining housing market has stifled the residential finance, insurance and real estate businesses that for years gobbled up office space. A glut of existing office space is for rent. A record level of offices are under construction.
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What concerns Strain, Hartin and others examining South Placer County's office market is an obscure but important statistic that they watch, much as a cardiologist watches a heart patient's blood pressure. The statistic, called "net absorption," measures tenant demand for leasable space. It takes the office square footage newly leased in a given three-month period and subtracts from it any vacated office space during the same time.
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For 55 consecutive quarters, stretching back to 1994, the Roseville and Rocklin market has not recorded a single negative absorption period, according to statistics compiled by the Sacramento office of commercial brokerage CB Richard Ellis....Residential finance companies fueled the winning streak in recent years as they flocked to South Placer County's booming housing market and drove demand for office space.
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Two years ago, office net absorption in Roseville and Rocklin hit 471,398 square feet for the year, roughly equal to eight football fields of office space. It was the best year ever for the region's office leasing, statistics show.

But from that peak, net absorption plunged to a seven-year low of 294,000 square feet in 2006, as the housing boom ended and the companies that supported it downsized or, in some cases, went dark.

"They've almost all cut back. Some put their space on the market, subleased or closed," said Jon Walker, a senior vice president at Grubb & Ellis' Roseville office.

Office demand has plummeted further this year. Roseville and Rocklin's net absorption fell to a meager 16,500 square feet for the first quarter, down from 109,000 square feet for the same period in 2006. Second-quarter figures are due next month."Obviously, things have dropped off," Walker said. "The question is, how long will it last?"
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"Roseville and Rocklin could potentially see 40 percent vacancies," [Chris] Strain [executive director of brokerage Cushman & Wakefield's Sacramento office] said. "And things won't come back to a reasonable level -- I'm talking about 15 percent vacancy -- for three years. And that's if the economy doesn't go south on us."
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[W]ith 868,508 square feet of office space sitting empty -- and another 868,000 square feet under construction -- it's unlikely the market will turn around in the short term, said Grubb & Ellis' Walker. "I'm not preaching doom and gloom, but you've got to be realistic," he said. "We've got a lot of questions to answer."

Squatterville

Housing Bust Consequence #439: Suburban Squatting

From KCRA (video here):

Squatter Causes Anxiety For Neighbors

Residents of Voltaire Drive in west Roseville said a man is "squatting" in his former home that is now owned by the bank.
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Neighbors say the woman who did own it left suddenly. County records also show she filed for divorce and took her two children with her, aged 9 and 18 months. Neighbors said the woman's husband has been living in the home, even though it's in foreclosure.

The city of Roseville confirms the power to the house has been shut off. Neighbors worry the man could be cooking with propane, and could spark a fire or even an explosion.
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The city and the police department say the matter is out of their hands because Washington Mutual, which owns the home, has not evicted the resident.

Hat tip Max.

Sacramento Area Foreclosures At Record Highs, 922% Jump in Sacramento County

From the Sacramento Bee:

Foreclosures in full boom
In ominous sign of more to come, capital region default notices also hit record highs during first quarter of 2007.

There's a new kind of "For Sale" sign appearing in the region's neighborhoods -- offering property repossessed by the banks -- and there will be more, according to the newest round of statistics.

Both notices of default, the first sign that homeowners are having trouble making payments, and foreclosures reached historic highs across much of the Sacramento area during January, February and March, a property research firm reported Monday.
...
"You can't party that hard and not have a hangover. You just can't do it," said Keith McLane, who watches the market as principal of Carmichael-based West Coast Home Auctions, which offers sellers a quick sale for a lower price.

Notices of default -- issued after a homeowner misses at least two monthly mortgage payments -- reached their highest levels ever during this year's first quarter in Amador, El Dorado, Sacramento, Sutter, Yolo and Yuba counties, DataQuick reported.
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First-quarter foreclosure numbers also reached highs across much of the region -- in Sacramento, Placer, El Dorado, Yolo and Sutter counties -- according to DataQuick, which tracks county property records.

DataQuick said 1,505 homeowners in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties lost their houses to foreclosure during January, February and March. That's up from 865 the previous three months.
...
"A lot of these lenders are going to end up with an awful lot of properties," said Pam Canada, executive director of Sacramento-based NeighborWorks HomeOwnership Center, which counsels people with mortgage trouble. "It's been difficult these past weeks particularly. There's more of a tone of desperation from people we're finding now. They have very few alternatives."
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"It makes all the sense in the world," said Andrew LePage, DataQuick analyst. "This is probably the weakest (housing) market in the state, and showing some of the biggest year-over-year declines in home prices and some of the slowest sales."
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Nationally, Yuba County ranked ninth and Sacramento 16th among more than 1,000 counties for the percentage increase of defaults from the first quarter of 2006, according to ForeclosureS.com, a Fair Oaks-based Web site that tracks them for investors. Placer and El Dorado counties ranked 19th and 20th.

Q1 2007 foreclosures per SacBee chart:

• Sacramento County: 1,104, +922% YoY (previous high Q2 1997: 703)
• Placer County: 154, +927% YoY (previous high Q2 1996: 90)

From the Stockton Record:

Foreclosure activity continues to soar, with the number of default notices sent to homeowners in San Joaquin County last quarter hitting the highest level in the past 15 years.
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"We're seeing the tip of the foreclosures," said Jerry Abbott, president and co-owner of Coldwell Banker Grupe. It will take up to two years for foreclosure properties to work through the market, where at the current sales pace, it would take 11 months for all homes currently on the market to sell if no other properties went up for sale, he said.

That will further push down prices, which in San Joaquin County have sagged by more than 5 percent over 12 months, Abbott said. Expect that trend to continue into 2009, he said.

From CBS 13:

From Natomas, to Elk Grove, to Roseville, the signs are everywhere - for sale, bank owned, and foreclosure. Sacramento's chilly real estate market is creating problems in neighborhoods across Northern California.

Homes at Roseville's Morgan Creek Country Club often sell for more than a million dollars. When Matt and Elena Arney bought a new home here, they figured they were buying the luxury lifestyle the builder advertised. "We wanted a country club setting with other families. We have 2 young children," says Elena. The Arney’s were glad to see the community had what seemed to be a strong homeowners association to help protect their investment.
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The Arney’s and their neighbors say they've watched as their community's lawns have begun to turn brown, weeds have taken hold and uncared-for swimming pools have begun to slime over.

The Arney's say the house right next door shows clearly what's happening. "When we had 500 frogs in our backyard, we wanted to find out where they were coming from,” says Matt.

The $850,000 home went into foreclosure. The weeds began to grow, and water and electricity were cut off. Then the pool was drained, it has since refilled with rain water.

A block away, the dying lawn and spreading weeds mark another empty house. Directly down the hill from the Arney’s, is an enormous house neighbors say was stripped of fixtures and flooring by renters, before falling into foreclosure. The Arney’s and some of their neighbors say they understand what's happening. What they say they don't understand is why their homeowners association isn't doing more to clean up the blight.
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[H]omeowners fees usually go to maintain and improve common areas and facilities, not neglected private property.
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Matt says sometimes he breaks down and mows the lawn next door. Merit Company says there's really nobody to assess for maintenance after a foreclosure, banks have no budget for that and apparently no interest - and the home's original owner is no longer a member of the association.

That attorney for Merit Company says he's working on new ground rules for a number of homeowners associations now facing these problems.

Double Digit Soft Landing?

DataQuick's dqnews.com has posted their September numbers for California (archived here). From the Sacramento Business Journal:

All four counties reported lower median home prices, including a 16.5 percent decline in Placer and 15.6 percent in Yolo. Sacramento and El Dorado counties fared relatively better, with price drops of 6.1 percent and 1.8 percent, respectively...

Several area cities reported double-digit price decline, including a 27.1 percent tumble in West Sacramento to $350,000, according to the monthly report. Lincoln and Roseville prices plummeted 18.4 percent and 17.9 percent, respectively.

Only a handful of local cities reported slight increases in home prices, paced by 2 percent in Rancho Cordova and 1.7 percent in El Dorado Hills.

Price Reductions Graph

Zip Realty looks at the percentage of homes on the market where the asking price has been reduced. Coverage of Folsom, Citrus Heights, Roseville, and Natomas.

Local Price Reduced Figures

The Zip Realty Real Estate Market Conditions blog has some price reduced figures for some local markets:

• Folsom, CA: 37.8%

• Natomas, CA: 35.4%

• Roseville, CA: 35.0%

• Citrus Heights, CA: 31.5%

Elk Grove, Roseville Growth "Juggernaut" in Trouble

If market decline is a sickness, then strong population growth is the antidote, at least according to some real estate optimists. Here's the latest on how the housing "cure-all" is faring.

When the topic is the Sacramento region's growth, Elk Grove and Roseville inevitably come up. The area's two biggest suburbs have accounted for one-third of its population growth during the past five years.

But rising home prices and other factors have slowed the juggernaut. Roseville had its slowest rate of growth in 30 years during 2005, according to population estimates released Monday by the state Department of Finance...Roseville has seen its growth rate slip faster than just about any other city in the region. It grew by 1.4 percent in 2005, a rate of slow growth not seen in the city since the mid-1970s...Elk Grove grew 8 percent - substantial, but way below the almost 30 percent growth logged during 2003.

The two cities are the best local examples of a regional and statewide growth slowdown. Thirteen of the 18 cities in Sacramento, Yolo, Placer and El Dorado counties saw slower or no growth during 2005. While cautioning against confusing one year's worth of data with a trend, experts and city leaders blame high housing prices for much of the slowdown. They also talk about "build-out" - what happens when a city hits growth limits.

Overall, the four-county region grew 1.6 percent from Jan. 1, 2005, to Jan. 1, 2006, state figures show. It was the fourth consecutive year-to-year easing of the growth rate. The bottom line: People were coming here in droves when the area was seen as a bargain. Now that home prices have shot up dramatically, that influx of people has slowed, though not stopped.

Roseville residents are noticing the slowdown. Karen Olson and her family of four moved to Roseville from the Bay Area three years ago, when the city's growth was at its peak. "There was an incredible amount of growth," she said. "When we bought our house, we had to put in our bid and pray." Since then, however, she's seen that homes in her west Roseville neighborhood aren't selling as quickly. She blames the softening market on the rising cost of living and uncertain economic times...

As much as any place in the region, Elk Grove has been a victim of its success - high demand for homes in the area have pushed housing prices way up. More than a decade ago, some residents chose to live in Elk Grove in part because new homes tended to be less expensive than in Roseville or Folsom. But more recently, as home prices soared, it became difficult for first-time buyers to purchase any homes in the median price range - the point at which half the homes cost more and half cost less.

Builders Step on the Brakes, Permits Fall "Dramatically" in March

From the Sacramento Bee:

Permits to build more new homes in the Sacramento area fell dramatically in March from the same time a year ago, many of the region's fastest-growing cities reported Tuesday. The reports, which often are an indicator of builder confidence in the housing market, mirrored a similar slowdown across the West, the U.S. Department of Commerce said Tuesday...

Roseville officials attributed their dip to holding up permits while waiting for infrastructure improvements in the city's growth areas. Lincoln officials said their decline may reflect the winding down of Sun City Lincoln Hills. In Elk Grove, part of the decline comes from last month's lack of multifamily permits after the city issued permits for 192 apartments in March 2005.

Whatever the reasons, builders in El Dorado, Placer, Sacramento and Yolo counties clearly stepped on the brakes in a housing market that is down from its 2003 peak of nearly 23,000 permits and has slowed more since last summer. Along with wet March weather, builders are contending with 30-year mortgage rates that reached a near four-year high of 6.49 percent last week and a growing inventory of unsold existing homes...

Last year, builders in the four-county Sacramento region were issued permits for 15,630 homes and 2,863 apartments and condos.

Chart at the bottom:

Lincoln
3/2005: 186
3/2006: 105

Roseville
3/2005: 121
3/2006: 39

West Sacramento
3/2005: 124
3/2006: 21

Elk Grove
3/2005: 495
3/2006: 30

Rancho Cordova
3/2005: 50
3/2006: 14

Agent: "No Doubt Pricing Has Dropped," 5% to 10% in Some Areas

The largest development in Roseville history is set to hit the housing market this summer/fall, amid rising inventory. The Roseville Press-Tribune reports that in January, Placer County housing inventory shot up 272% compared with the previous year.

Just west of Sun City Roseville, the heavy currency of large-scale grading equipment precedes this summer's arrival of framing crews putting up model homes, followed by eventual houses and people. And with the West Roseville Specific Plan marching forward toward populating the area, city officials say development will bring nearly 21,000 people to Roseville over a 15-year build-out period, in four phases. The 3,162 acres of land will be built out by two companies - WestPark Associations and Signature Properties - and represent the biggest development in the history of the city...

But a real estate market with rising supply and buyers employing growing leverage could mean a changed sales climate.

The WestPark portion - the southern half of the project - will begin building units in July or August when model homes are completed. Expect to see residents begin moving into the first phase by fall, said Bennett. "What's interesting about new communities like this, I don't know of any builders that have set pricing. They don't until just before they open for sales," Bennett said. "That's part of the market, and the other part is the tweaking they continue to do to the home plans..."

Roseville Realtor Craig Seydel said that local builders seem "bullish" on new housing starts despite a local market where buyer power is making a decidedly notable comeback in recent months. According to statistics released by the Placer County Association of Realtors, housing inventory in January 2006 shot up to 562 listings compared 206 to a year before then. Despite a 272 percent increase in inventory, the median sale price had also increased to $432,500 from $406,000, or 6.5 percent. That's decidedly down from previous years.

"There's no doubt pricing has dropped. It's 5 percent in some areas, or even 10 percent," said Seydel of RE/Max Gold. "There's more room for negotiation to be done."

However, Seydel said he isn't too worried about an oversupply because large-scale developers can afford to work off smaller margins in selling new homes. "We've had so much residential growth and we're starting to see commercial growth," Seydel said. "Regardless of what the experts are talking about, we are in a soft landing."

Now is the Time to "Stop the Bleeding"

The latest from Andrew LePage of the Sacramento Bee.

A month ago Jerry Wright figured a simple newspaper ad was all it would take to sell a 1,400-square-foot rental home he owns in Roseville for $359,000. Not many homes sell for less there. But he found barely a trickle of demand. "It's been very quiet," Wright said. "I've been getting very few phone calls." Last week Wright, a real estate agent, decided it was time to "stop the bleeding." He put a renter back in the home to cover his mortgage. When the market picks up, he'll consider selling again. When will that be? That's what everyone is trying to figure out.

Wait-I thought smaller, less expensive homes were still selling like hotcakes.

Until recently, home sales were on a blistering pace. But for the first time in years, a rapidly slowing market has left would-be buyers and sellers facing conflicting signals about what to do next. Buy now - or hope for a drop in prices? Try to sell now - or hope that demand bounces back in the spring?

"What's the right answer?" asked Pam Petterle, Prudential California Realty's regional manager. "It's a crapshoot out there. Nobody knows for sure."

Among those struggling to get a read on the market is Michelle Winkel, out browsing open houses in her Land Park neighborhood Sunday. She and her partner are torn between investing in stocks or a rental home. "We don't want to buy something now that could be quite a bit cheaper in a year," Winkel said.

Few areas appear as murky as the Sacramento region. Over the past six months, the four-county region has experienced one of the most dramatic slowdowns among large U.S. housing markets.

Sales of new homes in Sacramento, Placer, El Dorado and Yolo counties plunged 57 percent in the last three months of 2005, compared with both the previous quarter and fourth-quarter 2004, according to the Gregory Group, a Folsom-based industry research firm. Sales of existing homes in December fell 30 percent from a year ago, according to DataQuick Information Systems.

TrendGraphix, a local data firm, found the average time to sell a home was 48 days - the highest in four years.

The slower market, which builders and brokers say perked up a bit last month, has left home values stagnant since summer. "I've seen no rise (in values) except in a few areas," says Nolan Lum, a veteran local appraiser. That leaves agents, mortgage brokers and others struggling to craft plans for the spring. Many agents are encouraging would-be sellers to put their homes up for sale soon, arguing they need to beat the anticipated crush of competition.

Erin and Ron Steward will do just that. They tried to sell their Foothill Farms house in the fall, then took it off the market. They plan to re-list it later this month for $449,000, $40,000 less than their initial price.

"I think a lot more houses are going to come on the market in March," Erin Steward said. Others are holding off. They want to see a rebound before they throw up a "For Sale" sign. Prudential's Petterle doesn't think that's wise. She says new listings in the spring will compete with homes that have been for sale for up to six months - ones whose prices have been reduced multiple times. "Sellers waiting for spring may have to start a lot lower (in price) than they thought they would have to," she said.

One way for buyers and sellers to get a better gauge of the market is to first hit some open houses. "If you see eight people one weekend (at an open house) and then 15 the next, it doesn't take a brain surgeon" to figure out the trend, said Michael Lyon, head of Lyon Real Estate in Sacramento. Lyon and others figure that interest should pick up after Sunday's Super Bowl - and then really take off in March and April.

Scott Syphax, head of Sacramento-based Nehemiah Corp. of America, pioneer of a popular down payment assistance program, said first-time buyers should hold off until the warmer weather, when a trend likely will emerge. "If the market does what it has traditionally done - pick up steam - in the spring, then if you're interested in a house get into the market," Syphax said. "If it appears to be slow, then probably waiting a few more months will work to your favor."

...or a few years?

Most housing analysts expect modest, if any, price appreciation this year. In the new home market, where prices soared in recent years, many builders have either cut prices or offered incentives worth thousands of dollars. Jay and Grace Calman, Vallejo residents who've been shopping in new subdivisions here for months, said they've seen builder incentives worth up to $70,000. The couple, who are buying a $527,000, 2,200-square-foot home under construction in Elk Grove, got a $15,000 incentive from their builder. Jay Calman's advice to buyers: "Be patient and be willing to wheel and deal with them."

You can find more incentives here.

Incentives also are catching on in the resale market. Regina Luster, a state worker, has been trying to sell her 2,100-square-foot rental home in the Pocket since October for $559,000. She recently tried to sweeten the deal by offering to cover closing costs and lend a buyer enough to cover a 10 percent down payment. "It's an effort to let buyers know you're flexible - that you're trying to work with them and not just trying to take advantage of a market that no longer exists," Luster said.

How about a price cut?

There are some signs the gloom of the last few months may lift, though perhaps not enough to entirely halt the incentives. The region is adding jobs at a respectable clip, which historically has meant housing demand won't plummet. Another ingredient: Rates for 30-year mortgages now average around 6.1 percent - low in a historical context.

But how many of those jobs are tied to the real estate industry [Sacramento Housing Bubble blog]?

"There will be a pickup in demand in spring, just like there always is," said economist G.U. Krueger, who follows housing trends here for Institutional Housing Partners, an Irvine-based investment adviser. "Will the pickup go back to where it was last year? I don't think so," he said. "Will it come back up from the dismal state we were in during the winter? Yes, it will be much better than that."

Mortgage Company Owner: "I couldn't afford to buy the house I live in today."

The Sacramento Bee recently quoted two mortgage company owners, who shared their views on the housing market.

First article:

...Nearby resident Scott Otsuka said he supports the Crocker Park project because he's a strong proponent of compact housing. "It's something we've really needed for a while," Otsuka said.

"Especially in Roseville, which has become the place where everybody wants to be, but nobody can afford to live." Ranging between 1,600 and 2,300 square feet in size, the "work force housing" is designed for young professionals and first-time buyers, although developers say it's too early to set prices.

"It bothers me that I've got employees who are making good incomes but can't afford to live in Roseville," said Otsuka, who owns a mortgage company. "Truthfully, I make a good income, but I couldn't afford to buy the house I live in today."...

Meanwhile, in a second article, another mortgage company owner has a different view on the housing boom:

...Bob Bader doesn't know [Alan] Greenspan, either. But the owner of Arden Mortgage in Sacramento calls him "a godsend" for keeping interest rates low and sparking an unprecedented housing boom. "He brought down the rates and got the real estate market going," Bader said...