Sunday, December 24, 2006

Sacramento Regional Real Estate Trends 2006 Final

Inventory levels declined slightly to 12,900 listings after the big drop last week:


Many readers submitted comments questioning the validity of last week’s inventory plunge, so I tried to address them in this comment. If any readers have additional ideas, knowledge, or insight about the IDX/MLS relationship and their respective data management processes, I would love to hear from you.

Prices also stabilized somewhat over last week, with some divergence between median and average asking prices beginning to appear:


The overall year-end inventory decline is still occurring at most price levels:


and the remaining flippers continue their march into trouble:




To put the year into perspective, I would like to share some inventory data I've been collecting since June 2005. It is for Sacramento County only, but I think helps illustrate how exceptional 2006 was from an inventory point of view:


As you can see, the 2006 run-up completely dwarfed 2005 in both scale and breadth. Put another way, inventory levels in December 2006 are nearly the same as levels in August 2005.

For the true data junkies out there, here's the inventory change-per-day graph for 2006:



Both the weekly Saturday increases and monthly drop-off patterns are easy to pick out here.

From just these two graphs, it's easy to see why the latest drop in inventory is not a "hopeful sign" that buyers are returning, but just a seasonal pattern.

We broke 15-year-old inventory records, but prices remained high by any measure. We also saw flippers start to take their leave from the market, with those that remained getting further into trouble. Average and median asking prices began to drop as resellers and new house builders began to compete in earnest. I think it is safe to characterize the 2006 housing market as a market in transition, with many signs pointing to further price declines and more record inventory.

Predictions

I think the big 2007 housing story will be the rising foreclosures and bankruptcies due to ARM adjustments. I also think at least one, or possibly two major mortgage lenders will collapse due to forced buy-backs and increases in default. Ameriquest is my top choice, but Countrywide, Washington Mutual, and H&R Block (Option One) are top contenders.

Finally, I would like to thank everyone who made this site a success: Agent Bubble, JR, Lander, Patrick, Gwenster, and all the other bubble heads. If it weren't for your encouragement and feedback, I would have quit a long time ago.

Let's keep it rolling through 2007!

10 comments :

sippn said...

Ameriquest is a top producer of subprime - good prediction...I should call them for a loan!

Well, interesting info on inventory, but will MLS return your call or email, probably not. If your a member, trot on down there for an answer.

The 2005 v 2006 charts are telling, but do they include the past 2-3 weeks? would data converge?

Waiting for January.

darth toll said...

Merry Christmas Max and keep up the good work! Personally I vote for New Century Mortgage due to the high sub-prime mix.

Anonymous said...

Option One shut their doors earlier this month.

~Caddis

Max said...

Option One shut their doors earlier this month.

Not the last time I checked. H&R Block put them up for sale, but they're still out there making loans.

Here's a story from the Bee that illustrates Option One's troubles:

Placer Sierra to lose its No. 1 depositor

JR said...

Max,

Happy New Year. If your blog did not exist, I may have purchased that $840,000 home in Dec. 2005. How miserable would I be right now, stuck with $6,500/month payments on a depriciating property. By the way, that property is still for sale and they dropped the price 23%, before pulling it off the market a couple of months ago.

Your effort in getting the word out has been a tremendous service to those who chose to pay attention.

wannabuy said...

Well written. Thank you.

I truly believe that only open statistics will help end the coming bear market. Yes, end (as in its a good time to buy). Even knowing the facts, I will continue to shake my head at the magnitude of this bubble.

Sigh...

Happy new year everyone. While its obvious, whatever you do, don't buy in 2007.

Neil

patient renter said...

Didn't take very long for our predictions to start coming true... it's beginning already in 2007:

"Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80 percent of its 1,800 employees."

http://today.reuters.com/news/articlebusiness.aspx?type=bankingFinancial&storyID=nN02342721&from=business

http://calculatedrisk.blogspot.com/2007/01/mortgage-lenders-network-stops-loans.html

JR said...

Max, here is a perspective on the lower listing numbers at year end on MLS.

“Fuzzy Realtor Numbers In Phoenix, Tucson, and Vegas”, by Peter Coy, Hot Property blog, BusinessWeek, January 3, 2007.

http://tinyurl.com/y7jwvq

JR said...

Max, never mind. The previous link has erroneous data.


http://www.bloodhoundrealty.com/BloodhoundBlog/?p=853

tom stone said...

It will be more than one or two lenders going down this year,and even more in '08.one strong possibility is that money for home loans in californis will just dry up,we are almost all jumbo loans here,and that is speculative $,from the carry trade for the most part.once these fools notice the number of defaults,and the amount of fraud (hi casey,stock up on fruit flavored k-y)they may just put their money somewhere else,or demand a return commensurate to the risk.the money can disappear pdq,which would liven things up quite a bit.