Moody's Economy.com: Sacramento Real Estate Market to Bottom in Q4 2009

From Home Front:

How many times have we asked this question - where is bottom of this housing market - and seen it pushed farther into the future? One more time today, comes Moody's Economy.com, pushing it out until the fourth quarter of this year for El Dorado, Placer, Sacramento and Yolo counties.

From the Modesto Bee:

"To survive, you have to pare back your expenses, cut down advertising, let your employees go and ride it out," [Joseph] Anfuso [of Florsheim Homes] said. During the past two years, he's reduced his staff from 55 to 11...When housing was hot, Riverbank's Monschein Industries employed 406 people to craft cabinetry and countertops. Now only 72 remain.
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To stick it out, some builders have drastically slashed prices. When Taylor-Morrison's Carriage Lane project opened the summer of 2007, its 1,127-square-foot model had an advertised base price of $271,990. Now it's just $139,990. That's a nearly 49 percent reduction.
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[T]he housing slump won't end anytime soon, analysts warn. "The Central Valley is not immune to the slowing national economy and the region's housing market is feeling the effects," said Greg Gross, director of Metrostudy's Central Valley division.

From CBS 13:

Other job seekers expressed frustration at what they see as a growing divide between the instability of the private sector and relative safety of government employment. "The idea that state employees are somehow exempt from feeling the pain -- I find that somewhat ludicrous," said Pat Young of Corona del Mar, a former vice president of real estate developer Pacer Communities who lost his job in 2007. "They're upset because they're being docked two days a month. I think they look rather foolish against a backdrop of people who have lost their jobs entirely."

SacBee: The fastest shrinking job sectors in Sacramento

From News10:

Not bad for a day's work: In a down market, a Sacramento real estate broker made $275,000 buying a bank-owned home in West Sacramento and reselling it the same day. While other real estate professionals were struggling to stay afloat in the worst market in generations, the "flipper" was on a roll. Two months after buying the West Sacramento house, he picked up bank-owned homes in Sacramento and Rio Linda and flipped them both in a matter of weeks for a profit of $358,000.

The secret to his phenomenal success is simple: He's a crook.

Sacramento Price Slashing

From Business Week:

BusinessWeek.com, with the help of Mountain View (Calif.)-based Altos Research, a real-time housing research firm, ranked 14 of the country's largest cities based on how much sellers have slashed listing prices. At the top of the list is Sacramento, where the median asking price on Apr. 11 was $226,978—a 41% drop from a year earlier, according to Altos.

From News10:

Just a few years ago it seemed impossible: a home in Sacramento County for under $100,000. But a condominium developer is ready to sell some units at auction Sunday for as little as $85,000...One-bedroom condos were initially listed for $150,000 with three-bedroom units listed at $230,000.

From the Appeal-Democrat:

Median home sales prices in Yuba County dipped to $199,000 in March on nearly a third fewer home sales than a year ago, DataQuick Information Systems said....The sales price has declined $90,000, or 31 percent, from March 2007.

From the Sacramento Bee:

Layoffs are spreading to many segments of the area economy. Michael's Furniture, a Sacramento manufacturer owned by struggling retailer Restoration Hardware, eliminated 108 jobs in March, according to state records...National Distribution Centers, a West Sacramento warehouse, expects to lay off 175 workers at the end of April.

Cocktail Party Talk: How Many Bank-Owned Properties Are on Your Block?

From CNBC's Funny Business with Jane Weils:

[T]wo doors down [in West Sacramento] lives Karnial Saini, a realtor (the irony!) who says he put down 20 percent on his home when he bought it in '04, but got an adjustable rate mortgage he can no longer afford. "Yesterday I tried to refinance," he says, but his mortgage is for more than a half million dollars, "and the house appraises at $450,000." He says he is probably going to lose his home either through a short sale or by "just giving the bank the key."
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[W]hen I asked him if it's fair to bail him out, Saini admits not everyone deserves it. However, he didn't do a zero percent down loan, his home is just now less than his mortgage and he desperately needs a new mortgage. What he finds hard to understand is that the bank will agree to a short sale, but it refuses to lower the principal.

From the Tracy Press:

Chestene Dean, who moved from Minnesota to Tracy three years ago, called the state’s housing market a scam. She and her husband, Dennis, sold their stocks and borrowed from their retirement plan to buy a $600,000 home. Now they’re doing everything to keep the home, which now markets at about $390,000...The Deans wouldn’t say how many months they have been late on their mortgage payment, which is $4,700 a month. “There are other people hurting like us,” said Dennis Dean, glancing at the roomful of people. “Like them, we’re going to fight for our home.”

From Marketplace:

Seth and Joanna Goslin paid a final visit to their former home a few weeks ago...They haven't paid their mortgage since last summer. Now they're in bankruptcy and foreclosure proceedings...We sat on the living room floor of their 1,200 square foot condo in Elk Grove, California...Seth is 33 and worked for a mortgage broker until he was laid off early last year...
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The Goslins bought their home with what's known as a 2/28 ARM -- the interest rate is fixed for only the first two years, then adjusts up. They also did 100 percent financing -- no down payment -- but later, they refinanced into an even riskier mortgage called an option ARM. It allows borrowers to make payments that don't even cover the interest on the loan. That's how they ended up owing even more than their purchase price.
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Seth: I think because it's happening to so many, it doesn't really feel like a stigma. It sort of feels like... there seems to be a lot of sympathy.

Joanna: It seems like a couple of years ago, everybody at cocktail parties talked about how much their home value had increased and now it's, you know, how many bank-owned properties there are on their block.

From Marketplace:

[Realtor Alan] Waggoner and I do a little experiment. He checks the regular listings in Elk Grove. The average price is $447,000. Then he does the same search, but includes bank-owned homes and short sales -- those are the ones in pre-foreclosure. The total inventory more than doubles and it knocks the average price down to $370,000. The bank-owned homes have pushed the average price $80,000 lower.
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[Real restate agent Michael] Freeman: We have bank REO properties that are coming on... they're trashed and they are artificially driving the price down, because it's not really what the market would be bearing, but the buyer is going to take advantage of that.

From the Sacramento Bee:

Lenders took back the keys for 1,224 Elk Grove homes from October 2006, the earliest month for which figures are available, through the end of 2007, according to a Bee analysis of Federal Home Mortgage Disclosure Act data.

From the Sacramento Business Journal:

The Sacramento County Association of Realtors expected thinner ranks this year with the housing downturn, and the prediction has held true...The association listed 5,577 Realtors as members this year, compared with 6,337 last year...The Placer County Association of Realtors also reported a 12 percent decline from last year, with about 2,300 active members this year, 320 fewer than in 2007.

From Investment News:

Speculation is growing among analysts and home-building executives that the battered housing industry finally may be approaching a bottom, at least in terms of inventory of both new and existing homes. It could be the first sign that the hemorrhaging in the housing sector could be approaching an end. But if history is any indication, home prices may not start to bounce back for at least two years, and at least one analyst thinks it could take as long as four years.

In the past, new-home sales typically started increasing about a year after supply and demand fundamentals stabilized, while home prices took at least two years to tick up, according to James F. Wilson, director of research and senior analyst with JMP Securities LLC of San Francisco...Mr. Wilson said that he has seen early signs of inventory stabilizing in certain markets such as Sacramento, Calif., and San Diego.

From the Sacramento Bee:

A fancy new campus rising in East Natomas has become the latest flash point in the toxic relationship between the Grant Joint Union High School District and the new school system that soon will absorb Grant. The new district, Twin Rivers Unified, will take over Grant and three other elementary districts on July 1 in a merger.
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Twin Rivers officials...are deeply worried about the current housing downturn, as well as a building moratorium in the Natomas basin while levees are improved. "Two and a half years ago, when they planned this and there was a housing boom, it made sense. Today it doesn't," said Rob Ball, Twin Rivers' associate superintendent. "We're going to have a brand new building and no students to put in it."

From the Sacramento Bee:

The economic downturn hasn't bypassed Loomis, population 6,529. The sales tax portion of its $3.5 million budget is down about 20 percent, largely from the struggles of construction- related businesses. But since Loomis' city government relies lightly on development fees, the town avoided the worst effects of the downturn.

From the Sacramento Bee:

Sacramento, where unemployment has risen to 6.2 percent, is particularly vulnerable as the economy softens. Foreclosures have run into the thousands, and housing prices have fallen more than 25 percent in two years, making it among the hardest-hit markets in the country.
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[J]ob losses are spreading beyond the housing sector...The past few months in the Sacramento area have seen layoffs at employers as diverse as Intel Corp. in Folsom (112 jobs) and Sutter Medical Center's two main hospitals (54 jobs), although Sutter said all but 20 employees found jobs elsewhere in the organization. The general downturn loops back to housing: Consumers who have lost equity are less wealthy and less likely to spend.

From the Stockton Record:

You own a winery worth about $850,000, you've built up $1 million in real estate equity between the winery building and a couple of homes and, as a married couple, have a combined income well into six figures. So what have you got to worry about?

With the housing market collapse, a big new mortgage, uncertainty on Wall Street, a wife who is retiring this year partly for health reasons, looking to his own retirement in three years and a recent, sudden slump in wine sales, there was plenty to concern Rod Ruthel. "It was too many things happening at once. I was a little freaked out about it," said the owner of French Hill Winery in Mokelumne Hill.

He was particularly concerned when sales at the winery, normally a recession-proof business, had suddenly fallen by nearly half. Also worrying was a switch from credit card charges, usually nearly 100 percent of the trade, to one-third in cash - a sign customers were watching their spending more closely.

Curbside Home Auctions

"Artificially Cold" Real Estate Market

From the Sacramento Business Journal:

The area's first developer-driven auction of new homes attracted a lot of attention and bids -- but none high enough to close a deal. Twenty bidders left the auction late last month thinking they'd landed a steep discount from the asking price for a piece of an award-winning housing development near the river in West Sacramento.

But the deals never closed escrow. Two weeks after the auction, the bank that holds title to the homes canceled the sales, citing auction rules that the bids didn't meet minimum prices. Other than sore feelings from some of the bidders, it's as if the auction never happened.
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Even though the auction saw some lively bidding, the homes failed to get anywhere near the reserve prices, let alone the list prices. For River's Side, the final bids were an average of $88,000 less than the reserve prices, [John] Leonard said...Leonard said a confidentiality agreement with the lender prevents him from discussing details, but that the bank didn't think the auction environment correctly tested the value of the homes.

From the Redding Record Searchlight:

Here's another sign of a stagnant real estate market: Some developers in town are taking their homes off the market and turning them into rentals. Two weeks ago, East Oak Estates in south Redding announced this would be the last weekend some of its homes would be for sale. They were going to start leasing them out.

But East Oak developer Karen Margrave said buyers waiting for some colossal closeout sale will be sorely disappointed. She has no plans to sell her homes at below what she paid -- nor she says will other builders. So they're getting into the rental business while waiting it out..."We know prices are going to go back up, and we believe they will start rising again next spring," Margrave said in an e-mail.
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Brad Garbutt, who's been selling real estate in Shasta County for years, said it's unusual for developers to rent back their homes. "I don't recall any developer on a large scale doing something like that," Garbutt of Real Estate Professionals GMAC said. "Developers usually can't do that. They can't stop everything because the bills keep coming." Glen Jones of Greater Shasta Homeplaces in Redding agreed that it's strange to see a builder get into the rental business. "I have never seen it before, but we have never had this situation," Jones said.

From the Tri-Valley Herald:

In light of the lethargic housing market, local home builders are asking city leaders to alter the structure of existing development agreements to give developers more time to build. During Mondays Manteca City Council meeting, developers of some of the newer subdivisions plan to ask for an across-the-board extension in the amount of time they have to build homes once theyve obtained building permits. If approved the deadline would be extended from three to five years. The builders believe that an extension would offset some of the problems caused by an overabundance of houses and a downturn in the housing market
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The proposed increase was spread out over the period of time real estate experts predict the market will reach bottom and turn around. The market was artificially hot a couple years ago and is artificially cold now. People are worried, but the market is resilient, [George] Gibson [of Stockton-based FCB Homes] said.

From the Modesto Bee:

[Sarah] Huff and her husband, John, say their contractor, Viking Pools Mid-Valley Inc., has closed its doors without finishing their pool, and she doubts she'll ever get her money back or a finished pool out of the defunct business.
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[Viking western regional sales manager Aaron] Stahl and other pool industry officials said the housing market bust has hurt many pool contractors, which prospered when it was easier to buy a home or refinance a home loan. As a result, some business owners may be more likely to cut corners to stay afloat, industry officials and consumer experts said.

That may have been the case with Mid-Valley. [Tina] Hill, who worked there for 2 years, said orders slowed dramatically over the past year, mirroring the free fall in home prices and sales. "I'm sure it's a direct result of that," she said. "There were a lot of problems, off and on, and the last three months there were just more of them." Don Burns, president and chief executive officer of the California Spa and Pool Industry Education Council, said many pool contractors are struggling because of the housing slump.

From the Stockton Record:

Countrywide Financial Corp., sharply paring its work force nationally in the midst of an on-going housing slump, has closed its Stockton loan-processing center. A company phone message and a notice posted on the front office door said the March Lane center has closed and has been consolidated with a Countrywide center in Elk Grove.
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One Stockton resident, Susan Feighery, has been trying to get a Countrywide mortgage loan for a condo purchase, but she said she is frustrated because her loan application has been delayed as it has seemingly bounced from one person to another as staffing dwindled...[S]he was told several times that her loan application was being passed to someone else and that the previous handler no longer worked for Countrywide.

From the Sacramento Bee:

Speaking of office vacancies, the Sacramento region is holding its own for now. But look out for next quarter. "There are not enough tenants to go around," says [local Cornish & Carey exec John] Frisch, who reports that the region's vacancy rate is 15.22 percent, up a hair from the previous quarter.

The cause for concern: Nearly 3 million square feet of new office space is under construction in the multicounty region. But there's not nearly enough business growth to absorb it. "I expected a lot more red ink at the bottom of the (space absorption) tables," Frisch says of his company's third-quarter vacancy report. "I think there will be next quarter."

Peer Pressure Not to Buy?

From the Sacramento Business Journal:

Rather than drop prices to entice buyers in less time, John Leonard slashed prices on 22 new homes he built in West Sacramento to sell them in a day -- he hopes in less than an hour. Leonard is owner of Leonard Development Co. Inc. of Sacramento, and he's hired a public auction company to sell homes in his River's Side at Washington Square project quickly.

He's not being forced to sell. The project is still current with its loans. But people simply are not buying them. "There isn't permission for people to buy a house. People's peers, parents and family won't let them feel good about buying. Everyone says, 'Wait a little longer and the prices will come down,' " Leonard said. "The carry cost on the project is not insignificant. We decided on the auction to expedite the sales."
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Hundreds of people have toured the homes, but no one is willing to pull the trigger and buy one. Leonard chose to go the auction route to force the issue. "I wanted to take an aggressive approach to make people come out of the woodwork," he said.

From the Modesto Bee:

Sellers are eager to make deals, and buyers are in control, but there's nary a real estate sign in sight.

Welcome to the new and used vehicle market, where many Northern San Joaquin Valley dealers are experiencing the same slowdown seen in housing. What happens in auto sales often follows housing markets, dealers said. And that's especially true now, they said, because fewer people can refinance their home loans and use the money to buy a car or truck. "That was driving the market," said David Hillier, who owns Hillier Ford in Escalon.
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When housing prices were soaring, many homeowners took equity out of their homes, by refinancing or getting a second mortgage. They often would use the money, which is tax deductible, for vehicles and other big-ticket items.
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Edmunds.com spokesman Chintan Talati said consumers are taking a break on buying vehicles, just as they're stepping back on buying houses. "Housing is such a large part of everything," said Talati, adding that vehicle sales have slumped the most in places where housing has slumped the most -- such as California.
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[Jorge] Elizalde [owner of El Tio Auto Sales] said he's also noticed that -- perhaps because so many housing loans have failed -- banks are hesitant to give car loans. So he's financing more loans himself.

Also from the Modesto Bee:

Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated. Realtors and other experts in the Northern San Joaquin Valley said they're seeing more offers these days that come in well below the asking price. Sometimes, sellers are accepting them.
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There's a real risk the offer will insult the seller to the point that they'll refuse to counter, Realtors say, and the seller easily could make the assumption that the buyer isn't committed to making a deal..."When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or (the buyer) not as serious," he [Jon Boyd, president of the National Association of Exclusive Buyer Agents] added.
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Buyers even may write a letter to the sellers to make their point, as they did when the market was hot and they aimed to stand out from the crowd, [Dick] Gaylord [president-elect of the National Association of Realtors] said. That way, they can detail what they like about the house but express their fear of future dropping values.
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But sellers shouldn't take a low bid as the equivalent of a slap in the face, said Chad Costa, a Modesto Realtor. "The first reaction is to say, 'how insulting,' and I say that it's just how the market is right now," said Costa, with Re-Max Executive.
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Stan Lynam, who recently retired as a Realtor after 22 years, including 10 in Modesto, said sellers who receive several low bids may opt to pull their house off the market. He said a client recently reduced the asking price by as much as 15 percent, and still got few nibbles. So the client decided to wait it out.
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Valley realty experts...acknowledged that what's a low offer now could be right in line six months from now if prices keep falling.

From the Sacramento Bee:

Never mind that many people will be on a final summer road trip or making eggs and bacon at mountain campgrounds this weekend. Real estate agents will be holding open houses over Labor Day weekend, even if foot traffic is less than a regular weekend. Over the three-day Memorial Day weekend in May, agents hoped high gas prices might keep people closer to home and cruising open houses. With gas prices lower now, agents like Mona Gergen, a specialist in Sacramento's Pocket neighborhoods, just hope it's not awfully hot Sunday for traditional 2-4 p.m. showings.
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What's definitely not hot this summer is home prices here (especially if you're selling a house). The nation's gold standard for measuring rising and falling prices lists five Central Valley metro areas and Reno among 10 regions with the most depreciation. The report for April, May and June was released Thursday by the Office of Federal Housing Enterprise Oversight. It measures sales prices of the same houses over time. Once-booming El Dorado, Placer, Sacramento and Yolo counties ranked ninth nationally with a 6 percent decline in home prices from the same time in 2006. Bigger decreases were seen in Yuba and Sutter counties, Modesto, Stockton and Merced, which led the country with an 8.65 percent decline.

"Less than Fully Prepared for the Foreclosure Surge"

From the Davis Enterprise:

[B]etween January and April, a notice of default - the first step in the foreclosure process - was issued for 69 West Sacramento homes...Another 33 West Sacramento homes got auction notices, meaning the lender was prepared to take back the home and sell it at auction. And 28 West Sacramento homes were repossessed by the lender.

Those numbers are still rising, week by week, as cooling home prices, rising mortgage interest rates and competition from home builders take their toll. In other words, there are a lot of stressed-out sellers. “Right now, we have 273 houses for sale in West Sacramento,” said Lean Hertel, a Realtor and field trainer with Lyon Real Estate's office in West Sacramento. “Of those 273 homes, 102 are being advertised as ‘short sales.' And 34 are already owned by the bank.”
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Woodland has seen a rise in foreclosures as well. During the first four months of 2007, a notice of default was issued for 38 Woodland homes. Auction notices were issued for another 19 homes and 25 homes were repossessed.

Some areas in Sacramento have been hit much harder. In the 95823 ZIP code in south Sacramento, there were 213 homes that got a notice of default, 98 that got an auction notice and 107 that were repossessed during the first four months of 2007.

Observers see the same trend up and down the state - but it's more pronounced in the Sacramento area, where communities like West Sacramento, Elk Grove and Natomas added thousands of new homes over the past five years, and lenders were making all kinds of new-fangled loans to get buyers into those houses.
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“It's hard on the clients, and it's hard on Realtors, too,” Hertel said. “We didn't get into real estate to sell homes for people who don't want to sell their homes.

“The developers are hurting, too,” Hertel said, and some builders are offering $100,000 in upgrades at no charge, if you use their financing. But that can make things even tougher for the individual homeowner trying to move on. “You're competing with the developer” for the buyer's attention, Hertel said. “And the developer has 15 homes to sell, while you've got one.”
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Hertel added that there are relatively few Realtors working in West Sacramento who weathered the previous market downturn, back in the early 1990s. And many banks are less than fully prepared for the foreclosure surge as well, Hertel said. “The banks have so many of these short-sale contracts to negotiate and process, we're struggling to get them through,” Hertel said.
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“Two years ago, I was telling buyers, ‘Here are three houses, pick one, and we'll do the best that we can do for you.' Now, it's ‘Which one of these 20 homes do you like, and what would you like to pay for it?' ” Hertel said.

From the Sacramento Bee:

The dust is just settling from that huge home foreclosure auction last Saturday at Cal Expo, and here comes a bigger one. Dallas auction giant Hudson & Marshall will sell 175 bank-repossessed houses at 1 p.m. July 22 at Sacramento's Radisson Hotel. Many are owned by Seattle-based lender Washington Mutual Inc., according to home descriptions on the auctioneer's Web site. Only six days ago Real Estate Disposition Corp. of Irvine auctioned 107 houses from eight area counties.

Hudson & Marshall's event testifies to the dramatic rise in repossessions in California, especially in Sacramento and the Central Valley...It's easy to see what's spurring these auctions. Lenders took back 969 houses in May in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to Fair Oaks-based Foreclosures.com. About two-thirds -- 651 houses -- were in Sacramento County. Many belonged to owners who bought at the height of the housing boom with little money down and fell behind on payments as housing values fell.

From the Contra Costa Times:

As subprime loans have been resetting, the number of borrowers falling behind in their payments has risen and foreclosures are up...Realtor [Mark] Ross sees the effect of this in his business. You can't find a locksmith to lock out a non-paying renter: they're doing nothing but foreclosure lockouts.

Subprime borrowers are suffering a fate similar to stock market investors in the late 1920s. Then investors bought overpriced stocks on credit. When stock prices dropped, many people had to sell when their brokers demanded more collateral for their loans (margin calls). This caused the 1929 stock market crash, which ushered in the Great Depression.

Now, it is not likely that the subprime meltdown will cause another depression. But it is rippling though the financial markets already and will cause a lot more people financial pain before it's over.

Stung by the Sacramento Real Estate Market

From the Santa Cruz Sentinel:

When Howard Little got a call last year about refinancing, he decided the time was right to pull money out of his home in Boulder Creek to invest in real estate. He bought a house in Sacramento and figured he'd have steady rental payments to supplement his disability income.

Instead, he lost the property in Sacramento to foreclosure, and fell behind on payments for his own home. His credit rating dropped and he couldn't refinance. To avert the lender from foreclosing on his home in Boulder Creek, he put his five-bedroom, two-bath Boulder Creek home on the market, but with listings at all-time highs he hasn't found a buyer. He's dropped the price from $680,000 to $650,000 and now $630,000.

At 58, he doesn't want to give up the place his parents owned, the place where he and his wife raised their two children. He wishes he could go up to Sacramento to track down what went wrong there. He doesn't drive because of epileptic seizures, so he's been trying to get information via phone without much success.

"Where I'm going from here I don't know," he said.

From News10 (also video):

The numbers are startling.

Nearly 20 percent of Sacramento homes are worth less than the value of their mortgage. Some 3,400 Sacramento County property owners faced foreclosure in the first quarter of 2007, up nearly 200 percent from 2006. Sacramento County ranks in the top ten nationally in the number of foreclosures.
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Real estate investor Tony Sedillo said while he can make money if the foreclosure trend continues, watching families leave their homes under the financial strain is excruciating to see.

"This one woman was paying $2,000 a month and is now paying $5,000 a month after a year," Sedillo said. "Who wants to profit when a little girl is looking out the window and the parents are packing up?"

From the Sacramento Business Journal:

While residential towers have seemingly stalled in downtown Sacramento, a San Diego developer with pension fund backing is seeking approval for a 24-story condominium tower on the West Sacramento riverfront.

Fairfield Residential LLC is looking to build a 150-unit development on about 1 acre between the pyramid-shaped Ziggurat building and the California State Teachers' Retirement System's new headquarters under construction.
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Fairfield bought the property last year, but the developer said it's likely to wait until conditions are more favorable before building. "We're not going to rush into a bad market," said Dan Milich, development manager with Fairfield. "We're in a position to wait it out. If you're wondering about a groundbreaking, it's too early for that."

Fairfield would need to seek a construction loan to build the project, Milich said. Financing of pricey residential projects is scarce these days, judging from the delays and problems with Sacramento's other condo towers. A resurgent housing market, however, might lead to looser lending.
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Large condo projects have not fared well in the past year. In Sacramento, there has been no word yet from the partners in The Towers on Capitol Mall project -- John Saca and the California Public Employees' Retirement System -- on what will happen with their plans to build twin 53-story condo towers. Saca has failed to come up with enough financing to satisfy the agreement with CalPERS, essentially putting the project on hold.

Craig Nassi, the developer of Aura, another high-rise condo tower in downtown Sacramento, has struggled to secure financing for the project since last fall.

West Sacramento Prices "Tumbled" 26% in a Year

The Sacramento Business Journal reports on November's CAR & DataQuick stats:

Report: West Sac home prices fall 26 percent in a year

Sacramento-area's median home price plummeted and sales tumbled in November from a year earlier, the latest evidence of a struggling real estate market. Home prices in the four-county region declined 3.9 percent to $365,000 in November compared to a year ago, according to a California Association of Realtors (CAR) report released Thursday. But several markets -- including Elk Grove and West Sacramento -- reported much larger price drops [Keep in mind the city data is from DataQuick and measures combined (all) sales of existing and new homes.]

Existing-home sales fell 24.5 percent last month in the Sacramento area compared to November 2005, according to the closely watched monthly report. The region's sales drop was one of the largest in the state.
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West Sacramento's median-home price -- meaning half the homes sold for more, half for less -- tumbled 26.2 percent last month to $363,500, easily the largest decline in the region.

Elk Grove, Lincoln and Placerville also endured double-digit percentage declines in median price from a year ago. Placerville fell 14.6 percent to $365,000; Lincoln dropped 13.8 percent to $420,909; and Elk Grove declined 12.9 percent to $428.000. The Realtor group cautioned that communities with small numbers of transactions may see unusually large fluctuations in median prices.

And all four counties reported lower home prices, led by a 16 percent decline in Yolo County. El Dorado County had the smallest drop, down 4.3 percent. Placer and Sacramento counties' median home prices fell 12.6 percent and 8.8 percent, respectively.

CAR report here.
DQNews/DataQuick report here (and archived here).

'At the Moment, Nothing Will Pencil' "Despite a Mountain of Recent Hype"

From the Sacramento Bee:

...Sacramento's central city housing effort -- despite a mountain of recent hype -- took so long to germinate that downtown largely sat out one of the hottest housing markets in memory. With the real estate industry in a slump, it's unclear whether some of the ambitious projects conceived at the tail end of the housing boom will materialize. "In Sacramento, we didn't capitalize on a great market cycle," said Sotiris Kolokotronis....

The local urban market was just starting to take off when the nationwide housing downturn began. Now, developers say, sales prices have stagnated while the cost of steel, concrete and other materials continues to rise -- making it more difficult to finance already tight deals.

"Market conditions have deteriorated rapidly," said developer Mark Friedman, whose Loftworks group developed successful loft housing, office and retail projects at 16th and J streets. But the firm recently walked away from a 16th Street project it was working on with the Capitol Area Development Authority. "At the moment, nothing will pencil."
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Friedman said he also has put on hold his plan to build about 2,000 housing units just across the river from downtown on the West Sacramento waterfront.
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Unlike Saca and Nassi, some other developers who started planning downtown projects while the market was hot have backed out or said they're waiting to see where prices go before breaking ground.

Citing the nationwide market downturn, D.R. Horton, one of the nation's largest home builders, recently pulled out of two high-rise condo projects planned for downtown Sacramento....

Meanwhile, the Sacramento suburbs still offer so much more square footage for the money that people who might otherwise choose to live downtown don't. "We've basically got unlimited land for suburban development, which detracts from the downtown," said John Frisch, local head of real estate brokerage Cornish & Carey Commercial.

"Nobody is Predicting the Projects Will Dry Up"

From the Sacramento Business Journal:

The Southport area in West Sacramento is poised for a big growth spurt. Within the next few months, developers will seek approval for more than 8,200 homes at three sites.
...
If the projects are approved, the slumping housing market could determine how quickly homes are built. Nobody is predicting the projects will dry up, [Steve] Patek [West Sacramento's director of public works and community development] said. "I think everybody expects that we're coming through the first year of a two-year downturn and that it will pick up again," he said.

It's unclear whether the housing downturn affected two Southport projects that were recently withdrawn.

One proposal by KB Home was for 1,700 homes on 400 acres along the river. The national homebuilder is no longer pursuing that project, but still has an interest in the Southport area, KB Home spokesman Craig LeMessurier said. Other developers are looking at the property but the city hasn't received a formal proposal. Blackridge Southport LLC proposed rezoning areas in the Southport Business Park to allow for new-home construction. That application was withdrawn in September.

West Sacramento Flop

From Flip This:

Well, it looks like the McMansions in Woodhaven saga has come to an end after a year. This story was based on a Sac Bee story that ran in December 2005 (see below) just as the market was starting to cool. The story dealt with a flipper couple who had purchased a newly built 3,100 sq foot McMansion for $809K and had hoped to flip it for $885K.
...
Anyway, it looks like the saga has come to an end. The house sold (according Domania) for $681,036. The burn rate in the story for this empty house was $6000/month (or $72K for the year held) so I get an overall loss for this dog of: $681K (sale price) - $34K (commission) - 72K (holding cost for year) - $809K (original cost) = $234K.

From the original Sacramento Bee story:

On a Saturday in July 2004, the line formed at The Rivers, outside a sales trailer operated by Sacramento homebuilder JTS Communities Inc. Perched next to an old golf course just minutes from downtown Sacramento, the subdivision is one of several projects bringing high-end housing to West Sacramento. On this day, 70 lots were being released. As the line of buyers lengthened, sales people passed out water bottles to the parched masses.

John McConnell, an Elk Grove building contractor, waited in line with his real estate agent and future wife, Lynette Wall. Hours later they got inside the trailer and he reserved a two-story, 3,100-square-foot home on Woodhaven Place. The price: $809,000, including an unexpected $85,000 "lot premium" for sites next to the golf course. But he wasn't complaining.

"At the time we all thought it was a fairly good deal," McConnell said. An agent who works for Wall snapped up a property on Woodhaven, too. When the trailer closed, at 10 p.m., the lots were gone.

McConnell said he and Wall originally planned to live on Woodhaven. By the time construction was completed two months ago, they'd changed their minds. The purchase was now an investment - and a somewhat risky one at that.

They listed the property in early October for $885,000. Soon they dropped it to $880,000. They need $860,000 to break even, Wall said, given the closing costs they paid, the $6,000 monthly mortgage payments and a 3 percent commission to the buyer's agent.

Complicating things: competition. Four other homebuyers on the two-block street are trying to sell, including Wall's agent. And the builder is offering discounts on four other Woodhaven homes it hasn't yet sold. All told, one-fourth of the street is for sale.

Wall has faith, but acknowledged she's getting uneasy. "I knew it was going to have to slow down (but) I didn't think we would have so much inventory," Wall said. "I'm hoping somebody will offer me a fair deal that'll make me a little bit of money."

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.

Lincoln BackLogs

A reader sent in an article from the Sacramento Business Journal:

The small city of Lincoln has become the stage for a battle between homebuilders for the dwindling number of homebuyers in the Sacramento region. Five years ago, few builders would look at the city. Today, it has an oversupply of subdivisions -- more than any other city in the six counties...

Today in Lincoln, 16 homebuilders hold 36 subdivisions with more than 2,000 lots -- more new-home communities than any other submarket in the region, said Greg Paquin, owner of The Gregory Group, a Folsom firm that studies the market...

Now Lincoln's builders are pulling out the stops. Their incentives for homebuyers average $24,016 -- more than any submarket but West Sacramento, which averages $31,000 for its 21 projects, Paquin said. Elk Grove's average incentive is $12,851. Besides gifts, builders also have lowered prices, sometimes dramatically. JTS Communities has this year offered homes for $500,000 that had been priced at $650,000 to more than $700,000, said Ian Craig, general counsel for JTS.

From the Tri-Valley Herald:

With older homes in established neighborhoods sitting on the market for upwards of a year, new home builders don't see the lines of buyers waiting for a lottery to purchase homes. So they're getting creative.

Pulte Homes, with subdivisions in Brentwood, Oakley, Mountain House and Tracy, is offering $99,000 in incentives -- from a free pool to no payments for six months to free upgrades -- to entice buyers. They're even offering each home buyer a vacation for two with a destination of choice for closing before Christmas this year...

Ryland Homes is offering 40 percent off mortgage payments for the first year (to commemorate it's 40th anniversary), while another developer had been offering a free Mercedes-Benz with the purchase of a home.

From the Wall Street Journal:

Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one. Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper... For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.

Hat tip - Northern New Jersey Real Estate Bubble blog

American Dream Turned Nightmare

From KCRA: "At the Sacramento County Courthouse, it used to be that foreclosure auctions happened once a week. Now, several times a day homeowners are seeing their American dream turn into a nightmare. In Sacramento County during the second quarter of this year, the number of homes going into foreclosure stood at 1,866. That compares to 857 forclosures for the same time last year -- an increase of 118 percent. Elsewhere, foreclosures are up 74 percent in Stanislaus County, 87 percent in San Joaquin County and 116 percent in Placer County."

"Alexis McGee of the investor services agency Foreclosures.com said many homeowners who find themselves falling behind on their mortgage payments should not try to refinance, but rather simply try to sell..."

"So, does this mean the housing bubble has burst? McGee still describes it as a leaking bubble but said her description will change if a year from now foreclosure rates have doubled again."

From the Sacramento Business Journal: "Sacramento-area home prices dipped lower last month, and sales tumbled by almost 45 percent from a year ago, according to a report released Thursday. The region's median home price -- meaning half the homes sold for more, the other half for less -- dropped 2.4 percent to $378,590 in July, compared to the same month a year ago, according to the California Association of Realtors. Home prices also inched 1.5 percent lower from June."

"West Sacramento had the area's largest one-year drop at 16.5 percent, while home prices in Lincoln and Rocklin -- one of the fastest-growing cities in the region -- fell 13.8 percent and 12.5, respectively...Sacramento County's median home price fell 3.4 percent to $367,000 from a year ago, with Orangevale and Fair Oaks posting 5 percent-plus price drops, the largest in the county."

"Placer County's median-home price decreased to $460,000, 7.1 percent lower than a year ago. In addition to Lincoln and Roseville's double-digit price drop, Granite Bay home prices were off 7.4 percent to $735,000, still by far the priciest community in the county. Auburn's median-home price improved 11 percent to $479,000, the only price increase in the county."

May Day, May Day!

The real estate industry speaks.

An agent gives some May results at Realty Times:

The Median Price is the Same as April of this year and May of Last year...The number of Re-sales during the May was dramatically lower (40%) in comparison with the May of 2005 and 2004....

Another agent at Realty Times had this to say about the Sacramento housing market:

The market is down because there are so many houses for sale.. and there are a lot of investors who bought houses to remodel and now need to get them out of inventory. The market was HOT for the last 5 or so years with the price of homes going up 112% for an average of aproximately 23% a year. When the interest rates started going up in July 2005 and the newspapers started talking about a price bubble, a lot of people put their house on the market to take advantage of the high prices before the bubble burst. This created a glut of homes for sale at a time when the number of buyers was going down because of the higher interest rates. As a result, to sell their homes, sellers are being forced to be more competative. Thus, lower prices and a buyers market.

Riva in West Sacramento says it's a great time to buy during the 'price and incentive war:'

"There's no better time to buy a new home than when there's a price and incentive war going on," said Scott Bolli, director of sales for development company Pacific West Cos. "While most people buy when everyone else is lined up to buy, the best deals can be found in a buyer's market. The people that buy at Riva today will stand a much better chance at a bigger return on investment, especially with our prices being so low and huge credits for closing."

An agent in Modesto sees 'panic pricing' and tells sellers to calm down:

In addition to price reductions, today's buyers are also seeing a lot of new inventory, according to Larry McDonald, a Realtor with Keller Williams Realty in Modesto. "After the massive rainy season, a lot of houses are just coming on the market," he says. "There are all of these homes that have flooded the market."

McDonald won't speculate on whether the market has turned. But he has seen some "panic pricing," sellers getting nervous and pricing their homes too low. To calm his clients' fears, McDonald reminds them that current mortgage rates are still quite attractive by historical standards and won't keep buyers away. "I can remember when rates were at 13 to 18 percent," he says. "We have been blessed with a good market."

A Redding agent thought a $70,000 discount was a mistake:

Has the north state real estate market tipped in the buyers' favor? Two new homes in the Land Park subdivision in northwest Redding were discounted $70,000 this week, slashing the list price to $409,900. The reduction so surprised real estate agent Brad Garbutt that he initially thought it was a mistake.

"They have scaled back prices to what they could have gotten nine months ago," said Garbutt, a member of the Shasta Association Realtors board. "There are probably going to be some starving real estate agents around."

Finally, this agent in Visalia was 'shocked' when he looked at the numbers:

Two reports detailing the health of the local real estate market are painting a picture of a rising inventory of both new and existing homes in Visalia and in the Tulare/Visalia MLS. The Tulare County Association of Realtors reports as of June 1 the inventory of existing homes for sale reached 1690, up from 1541 in early May of 2006. These numbers compare to just under 400 homes for sale this time last year.

A second more detailed report done by Icenhower Real Estate of Visalia focuses on both new home builders in the Visalia area as well as the market conditions for existing homes. "We needed to get a handle on what was going on," says Brian Icenhower who worked on the report along with Cyril Thompson and others in the firm. "We found there is an excess of 70 subdivisions being marketed in the Visalia area alone," says Icenhower and the competition in new homes and volume of product "has driven down prices for both new houses and existing homes."

The pace of building has not let up in Visalia, the city reports, with an expected 1400 to 1550 new homes likely to built this year. The Icenhower report details that of the 845 existing homes for sale in Visalia, 283 or one third of them are vacant. Icenhower says that's due largely to the fact so many homes in recent years were purchased by investors...

A key measure of how sales of existing homes are doing is the average number of days on the market. In May of 2005 the average market time was 31 days for homes to sell, a trend that continued until about February of this year when the MLS reports the market time jumped to 58 days. MLS figures for June show pending sales are about 50% of what they were last June signaling slower sales even as the home selection grows for both new and existing homes. Last year the supply of existing homes on the market amounted to enough for just one month. As of June 2006 we have a six month supply, says the report.

The report shows new home subdivisions by price around Visalia with the busiest part of town in the city being the rapidly growing northeast where there are over 20 active subdivisions. Icenhower says the "the numbers kind of shocked me" especially when you add in the amount of residential land and lots already available in the city detailed in a new city report.

Shhh...Stealth Price Cuts?

Are area builders going into stealth mode? When I last looked at Riva in West Sacramento, the condo complex had just added up to $50,000 discounts. Recently, they announced the end of that discount:

Incentives of as much as $50,000 will be discontinued before month's end at the attached-home communities of Riva in West Sacramento and Jasmine in Elk Grove. So now is a good time to buy, said Scott Bolli, director of sales for the developer, Pacific West Cos. "We plan to scale back our incentive program after May 21," Bolli said. "If you haven't visited Riva yet or if you've been waiting for just the right time, this is a great opportunity."

So waiting would be a bad idea if you wanted to buy one of these condos, right? Well maybe not. I looked a little closer at the starting prices and noticed a trend:

February 4, 2006: "Pricing starts in the mid-to upper-$200,000s"
April 22, 2006: "Riva pricing starts in the mid-to high $200,000s"
April 29, 2006: "Pricing starts in the mid-$200,000s"
May 6, 2006: "Riva pricing starts in the mid-$200,000s"
May 20, 2006: "Riva pricing starts in the low $200,000s"
May 27, 2006: "Riva pricing starts in the low $200,000s"

And at Jasmine:
May 13, 2006: "Prices start in the high $200,000s"
May 20, 2006: "Home prices start in the mid-$200,000s"
May 27, 2006: "Prices start in the mid-$200,000s"

Do you see what I see? Is the Sacramento housing market entering a new phase where builders move beyond incentives & discounts and actually lower prices?

Lowball Centex?

Meanwhile, an ad appeared in my inbox which I thought was interesting. It appears Centex has shifted tactics and is offering a "private" sale:

As a SacBee.com subscriber, you're invited to a special Private Sale that will take place for one week only from May 27th through June 4th, 2006. You'll be privileged to the best quality homes along with special Private Sale discounts you have to see to believe!! This is the ideal opportunity to get the very best quality home at the very best price. No reasonable offer will be refused!

Learn more about this sale here. Any ideas about what a "reasonable offer" would be?

The Waiting Game

The Sacramento new homes incentive parade continues. At last glance, this West Sacramento condo complex was offering free appliances and window coverings.

"The response to the free appliances and window coverings has been great," said Scott Bolli, director of sales for Pacific West Cos., an award-winning residential development company. "Riva already has so much to offer, and now you can get even more. But we're not sure how long this offer will last."

Apparently, the response was so great that Riva is now offering up to $50,000 discounts (and free two-tone paint!)

Riva, a community of attached homes in the Southport district of West Sacramento, will hold its second-phase grand opening today and Sunday with as much as $50,000 off some homes, special financing and other incentives."I don't think there's a better offer anywhere in or near Southport," said Scott Bolli, director of sales for Pacific West Cos. "I know some people have been waiting for the right time. Well, this is the right time. We've never offered so much for so little."

And this condo complex in Elk Grove wants to reward reluctant buyers "big time."

Jasmine, a community of attached homes in Elk Grove, will hold a special spring celebration with as much as $50,000 off some homes, as well as special financing and other incentives. "When we say this is a special celebration, we really mean it," said Scott Bolli, director of sales for Pacific West Cos., a residential development company. "We've never offered so much. If you've been waiting, it's paid off, big time."

Wow! I wonder what the payoff will be if one waits even longer!

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

"Buyers will have to be enticed" by pools, outdoor kitchens, and $150,000 discounts

Celebrate! The now famous Centex 12-hour sale is hitting the Sacramento area. Mark your calendars for February 11th! Save up to $150,000 on new homes in Elk Grove, El Dorado Hills, Rocklin, and Lincoln! So turn off the TV! Drop that rake! Don't delay! Deals like this won't last! Take advantage of the "lull" in the market before prices skyrocket again in the spring!

"On Saturday the 11th, we are giving our homebuyers a special one-time opportunity to save up to $150,000," said Patrick D'Arcangelo, Centex vice president of sales and marketing. "With 13 brand-new neighborhoods from Lincoln to Elk Grove, homebuyers are sure to find the home and neighborhood they want most at unheard-of savings." [link]

Stop reading this insanely boring blog and click on this link for more details! (And don't click here to learn about all those cancellations.)

If cash doesn't interest you, how about pools, outdoor kitchens, custom cement floors, washer-dryers, flat screen T.V.s, stainless steel appliances, or granite counter tops? CBS13 reports on the ever-expanding world of "free" incentives and upgrades.

If you're in the market to buy a house you're in luck! After years of waiting in line to buy now you have leverage.

Don't you feel lucky already?

There are a lot of homes on the market, interest rates are on the rise so to get a prospective buyer interested, builders are getting creative. A flat screen T.V., stainless steel appliances, granite counter tops--are they now standard with the price of a home?

Rindy Merrifield knows in this market, even gorgeous houses don't sell themselves. But adding incentives do. "It can be incentives for upgrades. It can be $10,000-$20,000 in some cases," said Rindy. Outdoor kitchens. Custom cement floors. Washer-dryers...what used to be upgrades are now on the table. "You can always ask the builder for anything and a lot of people do," said Rindy.

A few years ago, all of this would have seemed impossible. But according to a D.C. based market research company, the value of incentives by homebuilders now averages $8,965--double from last quarter. "20,000 new homes are scheduled to go up in this roseville development. And with this many homes and the housing marketing softening buyers will have to be enticed," said Rindy. As new neighborhoods crop up in Roseville builders are throwing in preferred lender incentives and sometimes lowering fees.

"They've offered new pools. New house. New pool. Turnkey ready to go," said Steve Youngblood, Lyon manager. If you like a house and want the furniture in it--ask for it. You never know what you might be able to negotiate.

Want more? How about a chance for a day-spa gift certificate at today's "Luxury Bowl" event? Or generous preferred-lender incentives up to $65,000? Maybe you would prefer a new General Electric Co. washer, dryer and refrigerator - as well as new window coverings? ("But we're not sure how long this offer will last" in West Sacramento.) Find more great incentives here.

(Thanks to commenter HighSierraGuy for the Centex info & link.)