Wednesday, January 31, 2007

West Coast Home Auctions Market Comparison

West Coast Home Auctions is holding a big auction sale this weekend in Elk Grove. In the spirit of the Priced To Sit series, I ran a brief comparison of the West Cost starting bid prices with the resale market. I also threw in pricing data from two nearby new house builders.

West Coast is auctioning off inventory that Standard Pacific Corp has been unable to sell:

"This is a fast, efficient way for us to close out and complete the project," said Jackie Shipley, the firm's vice president of sales and marketing. "We feel like we've had a lot of success in that community. ... It's important for us to do this and move on."

Shipley said auction advertising already has tripled the number of people coming to see the six houses, the last of a 172-home subdivision called Estancia at Belavida that Standard Pacific opened in late 2004.

Minimum bids will range from $430,000 to $530,000 for the four- and five-bedroom houses in a new neighborhood near Elk Grove's Franklin High School. That means bidders, expected to be a mix of would-be homeowners and investors, must meet at least the builder's minimum price to get the house.

There are currently 256 resale houses (including 74 flippers) on the market within the 6 square-mile area that includes the auction site. The area also continues to be built out, with several builders actively pursuing projects. Finally, a 7,000+ house community is currently being developed directly adjacent:

Like my previous analyses, I have plotted resale and flipper inventory on three graphs along with published builder pricing. For this particular analysis, I chose Dunmore Homes and JMC Homes for comparison purposes. (There was a lot to choose from.):

As you can see, Dunmore and West Coast have done their homework in terms of pricing. Both companies are clearly in front of whatever the resale market is doing. Whether their prices are competitive in an absolute sense, I guess we’ll find out this weekend.

BTW: If anybody is planning to attend this auction, please let me know. I want to do a followup piece in case the Bee chickens out.

Sunday, January 28, 2007

Sacramento Regional Real Estate Trends for January 27, 2007

The statistical story this week continues to be the degradation of the Sacramento County Flipper:

Caught between rapid house prices declines (new and resale) and lack of equity, flippers in Sacramento are caught in a classic squeeze play. Welcome to 2007, the year of the "Flipper Squeeze". In the spirit of the Squeeze, I would like to introduce a new set of graphs highlighting flipper inventory:

(Note: "Flippers" include "Flippers In Trouble", so the lower the difference between the two, the worse their market is performing.) Notice the steady rise in FIT inventory in contrast to fluctuations in the overall inventory levels. This will be an interesting trend to follow over the next few months.

As for asking price levels, nothing too dramatic to report:

It looks like each county is still finding itself after the end-of-the-year shakeout. It might take a few more weeks before any real trends being to appear. The same goes for price-level inventory and overall inventory:

Lastly, I plan on doing a couple of analyses this week, one on the Flipper Squeeze, and the other on the auctions planned for next weekend in Elk Grove. So stay tuned!

Sunday, January 21, 2007

Sacramento Regional Real Estate Trends for January 20, 2007

A watershed moment has been reached in Sacramento County. Half of all flippers are now taking a loss on their listings. That equates to nearly 10% of all listings! Yes folks, you heard it here first. Nearly one out of ten houses for sale in Sacramento County is a Flipper In Trouble:

Sacramento County’s lack of flipper performance is not mirrored in the surrounding counties:

Meanwhile, as we approach the end of January, inventory trends are beginning to rationalize. This week marked our third week-over-week increase for 2007, bringing four-county inventory up to 12,482:

There was an inventory increase in all the counties except El Dorado, which actually fell by 7 listings:

Asking price levels held steady, with the exception of Yolo's average, which continues to drop:

A final word: I still think the big story this year will be the credit crunch. In case you haven’t heard, there are a lot of rumblings going on in the subprime mortgage world. To follow this story, I highly suggest checking out these sources:

The Mortgage Lender Implode-O-Meter
- Aaron Krowne is keeping track of all the subprime lender failures. They’re failing at a rate of one per week.

Bakersfield Bubble – Crispy has been doing a great job of following these stories as well. Between him and Aaron Krowne, you’ll get the complete picture.

For some great analyis, read the comments by Tanta over on Calculated Risk. She’s got a great acerbic wit, so don’t argue with her if you have a thin skin (as Sippn recently discovered):

Information is Power, Which is Why You Don’t Get Any

Also, a guy named Paladin has a big story brewing. I'll be posting some links when his site is ready.

(*Update 2007-01-23: Link removed at Paladin's request.)

Tuesday, January 16, 2007

Sacramento Regional Real Estate Trends for January 13, 2007

Sorry, folks. Out of town family business called, so I'm way late with this weeks post. (That's the beauty of not working for a newspaper. You can set your own deadlines. :) Anyway, since ocrenter beat me to the punch, I'll keep it short and sweet.

Inventory is up:

Inventory increases are mostly happening at lower price levels:

Asking prices are steady or falling:

Flippers are still in trouble:

For the record, on January 13, I’m showing 12,304 houses for sale in the four-county area. Also, if you haven’t already, please check in on the "The Mortgage Lender Implode-O-Meter". He's doing a great job of chronicling the sub-prime collapse, which is sure to be the housing story for 2007.

Wednesday, January 10, 2007

Vacancy Rates Continue To Climb

In a previous post, I reviewed some stats for the number of vacant homes compared to total listings. Three months later, I figured I'd revisit this topic and see where the numbers were heading. With the exception of Galt, all areas had an increase, some considerably larger than others. Why do we care about vacant homes you ask? It's my opinion that vacant homes put pressure on the owner to either sell quicker or rent it out. Being forced to sell quickly in this market translates into pricing below your competition.

Monday, January 08, 2007

A Little Press

Flippers In Trouble got written up in the Sacramento Bee today:

If you doubt there's a frosty trend in the local real estate market, look no further than a five-month-old local Web site.

At Sacramento Area Flippers in Trouble (flippersintrouble., more than 470 Sacramento area homes are listed for sale at prices below -- sometimes way below -- what their owners originally paid. The site lists only residences purchased in the past two years and priced at a loss.



Sunday, January 07, 2007

Distressed Properties Update

This is my third installment on the situation for distressed properties in the four county area (Sacramento, Yolo, Placer, and El Dorado). I believe these properties are having a significant effect on the market and will continue to do so as their numbers increase. Here's a recap of the last two posts:

# of distressed properties - 1,016
# of MLS listings - 15,330
1 in every 15 homes is distressed

# of distressed properties - 1,196
# of MLS listings - 14,358
1 in every 12 homes is distressed

And here's the most current situation:

# of distressed properties - 1,413
# of MLS listings - 11,847
1 in every 8 homes is distressed

The trend is definitely developing. Even though inventory is dropping pretty steadily (over 20% from 12/1/06 to 1/7/07) we saw an 18% increase in distressed properties. How long can this go on? Anyone care to predict where the tipping point will be for the percentage of distressed properties compared to overall inventory? We're at about 12% now, so mark me down for an estimate of 17% at the highest point.

If anyone would like some numbers for a particular area or city, just let me know.

Saturday, January 06, 2007

Priced to Sit Part V: Lincoln Crossing Revisited

Now that the local media has discovered Lincoln Crossing, I thought a reanalysis was in order. Last time, we focused solely on JTS Communities, (see Massacre at Lincoln Crossing), and came to the conclusion that the lowering of prices by JTS was making the market very difficult for resellers, especially on Hillwood Loop.

Most readers are familiar with Lincoln Crossing, so I will only do a brief background. The subdivision is located south of the City of Lincoln, west of highway 65, or about 30 freeway miles northeast of Sacramento:

Lincoln Crossing has seen its share of resale inventory fluctuations over the past year. Resale inventory peaked there at the end of July at 164. Currently, there are 83 resale houses on the market, with 30 flippers:

These resellers have chosen to do battle with seven (yes seven!) builders that have backlogs of spec inventory they are desperate to unload. They include: JTS, Lennar, DR Horton, Pulte, Morrison, John Laing, and Centex.

Like my previous analyses, I have plotted resale and flipper inventory on three graphs along with published builder pricing. In the case of DR Horton, I have adjusted their asking prices by the level of discount they are offering elsewhere on their site (pdf):

Here is how everybody stacks up:

Surprising, at least to me, is how competitive the 83 resale houses appear to be when compared to the builders as a whole. That being said, there are still 33 resale houses priced higher than the highest priced new house in their respective size ranges. DR Horton and Pulte are the most competitive in the field, pricing at the bottom of both the builder and resale market. Lennar and Centex seem to be splitting the difference, and JTS is way overpriced. The smaller builders Morrison and Laing are priced competitively for their size ranges, but they will lose out to the broader market. (You can get a 1600 sqft place from DR for the same price as a 1300 sqft place from John Laing. This can be seen clearly on the $/sqft comparisons.)

Based on this data, it looks like there will be price drops from Lennar and Centex in the near future. As for JTS, they will have to come off another 20% just to compete. Since they have already dropped their prices by 35%, I don't think that's too likely.

You might get a better deal if you wait and buy the REO.

Sacramento Regional Real Estate Trends for January 6, 2007

Good day, and welcome to 2007! Market inventory has yet to recover from last month's steep fall-off:

Week-over-week inventory is still down since it includes the massive end of the year expiration drop, but I anticipate a big rebound next week. (The day-over-day increase of 61 listings for Sacramento County today was the largest since a 116 jump on August 12.)

Asking prices are already moving back to trend:

In fact, the $350K median asking price in Sacramento didn't even budge as inventory levels fell. Anybody care to bet on when we’ll see a $330K median?

The drop in overall market asking price is explained by looking at the inventory by price level:

As you can see, since April 9th, there's been a 33% increase in the number of houses selling for between $200K and $300K, while the price ranges above $300K have all seen inventory decreases. This is also reflected in the number of reduced listings.

Flippers continue to hold their heads above water, except in Sacramento County:

Placer and Sacramento flipper market trends will return next week, since I'm working on something you guys will find way more interesting…