Sunday, June 04, 2006

Phase 5 of an Unraveling New Home Market

Ben Jones has a great discussion on his blog about what city or region is ground zero for the housing bubble. Sacramento has some worthy competition in the likes of Phoenix, Florida, and Las Vegas.

If there is one measurement in which Sacramento leads the country it is the rapidly declining new home market. Beazer called the Sacramento market the "toughest" housing market in the country. Sacramento leads the nation in cancellations. Apparently all the major homebuilders are walking away from land deals. Housing starts are down 55% and new home sales have plunged an astounding 59% from the prior year. Prices are flat or declining.

For bubble watchers in other markets, here's the progression to look for:

  1. Incentives (vacations to Las Vegas, plasma tvs, cars, swimming pools, etc.)
  2. Discounts ($150,000 off Centex 12-hour sale)
  3. Constant Discounts or "Extended Sales" ($150,000 off Centex 28-day sale)
  4. Stealth Price Reductions (Prices lowered but not trumpeted)
  5. Public Price Reductions (Prices lowered and trumpeted)
Tim Lewis lowers prices at Legacy
Tim Lewis Communities has new pricing at its Legacy community in south Sacramento. Home prices at Legacy start in the low $300,000s. Previous pricing was from the mid-$300,000s.


Anonymous said...

Just don't understand what's happening here! Elliot home rep in East Sac county says; "they're going to raise prices in August by $10 to $15k, and that they already had just finished raising prices at another site."
JMC homes is selling about 1 per month in the same region and haven't lowered their prices at all. In fact, one home had two offers on it...price $769.
With all the bad news and data, I still haven't seen it translating into lower prices.

Happy Renter said...

OCRENTER Is reporting an inventory of 15100 homes on the market.

Here is an interesting article from Forbes.
It's titled "Implosion" and Sacramento was mentioned. :)

Happy Renter said...

So, the market is tumbling on news of the Iranians holding back oil(higher gas prices), the fed declaring a continued fight on inflation(higher interest rates), and the homebuilders plummeting sales.

3 big hits for the Sacramento real estate market.