Sunday, March 25, 2007

Sacramento Regional Real Estate Trends for March 24, 2007

Inventory levels surged dramatically this week, increasing by 425 listings, or 3.1%:


Looks like the spring selling season has officially begun, and it's off to a fast start. Late March 2007 inventory is higher than mid-May 2006 levels. Both Agent Bubble and I predict inventory could top 20,000 listings this summer. (At this rate of increase, we will hit that number by late June or early July. One week doesn’t make a trend, however.)

If you didn't see it on Thursday, I am introducing a new metric to track week-over-week changes in inventory. I will probably tweak the graphs in the future in order to add some information (e.g. what are the price metrics of the new inventory; was the "new" inventory really new, or relisted after a period of time; etc.) Anyway, I plotted the data set both in absolute and percent of market terms:



Some interesting things to note from these graphs:

- Roughly 10% of all listings have been reduced since last week.
- New and decreased listings track remarkably well.
- Hardly any listings are showing week-over-week increases

As for price level inventory, take a look at the Sacramento $200K-$300K trend:


That price range makes up over 25% all Sacramento County inventory. So, where is it all located? Google Earth knows the answer:


Not a lot of surprises here. North Highlands, Oak Park, South Sacramento, and Del Paso Heights are heavily represented.

On the asking price scene, only El Dorado County seems to be holding on:


Sacramento asking prices have officially returned to the steep downward trend that began last summer, dropping 8.9% since then.

The flipper situation remains dismal:



Agent Bubble should also have some new distressed property numbers posted here soon. Suffice to say, the data aren't giving us a lot of good things to say about the selling environment in Sacramento. Inventory is shooting for record highs, flippers are going broke, and asking prices are dropping rapidly. And the selling season has only just begun.

6 comments :

Bubble Sitter said...

Max,

You and your readers have tracked the the sagas of the JTS subdivisions and how they have probably created more FB's than any other builder in Sacramento.

Well, this week the very first foreclosure hit the streets at The Estates at Lincoln Crossing. Wells Fargo now owns a house on Hillwood Loop which sold for $707,500 on April 17th, 2006. The buyer put 20% down ($141,000) and could not flip it. Wells lent $566,000 and this was probably a first payment default, as the flipper must have decided his "first loss is the best loss."

The new listing price is $559,000. The house is 3500 SF ($159/sf). The bank will take a loss, and the financing was not even a sub prime loan.

There are over 50 more investors with 100% sub prime loans in that subdivision. There are 7 more houses currently in foreclosure and at least 60 more which have been sold and sitting vacant for nearly a year, while the flippers are in a "catatonic" state. There are probably 15-20 homes ready to go N.O.D. and many homes no longer have their utilities connected.

The interesting thing is the builder appears to still has 15-20 houses available in inventory. Now the builder will be competing with the lenders for sales. This will be the very same lenders he has been relying upon to provide the sub prime financing which allowed the builder to make FB's out of nearly a hundred investors.

This is going to get very interesting this summer.

Oh and the traffic at the foreclosed house was minimal at best. It is still overpriced. The rents in Lincoln have dropped 15% in the last few months as many new houses have been added to the rental market out there. The subject property might rent for $.50/SF or $1950 today. After bonds ($400), HOA ($105), taxes ($450), insurance ($60), management ($100) and maintenance ($50), you will net just $785/mon or $9420/year. If you want a 6% return on your investment, the property is worth about $157,000 to an astutue investor. Clearly, that is an absurd value, but the point is still out there.

This could get very ugly, very very soon. No one is going to accept any negative cash flow today, since there is no future appreciation in the foreseeable future.

ratlab said...

Since the said property has 20% down, it was most likely financed through the in-house lender JTS Financial for the buyer to obtain the maximum incentives. JTS Financial is... drumroll... Wells Fargo.

So essentially the lender (WF) is competing against their business partner (JTS) for this house.

Perfect Storm said...

Not a lot of surprises here. North Highlands, Oak Park, South Sacramento, and Del Paso Heights are heavily represented.

This is the beginning for a downward spiral in these areas. It looks like a bunch of homeowners and flippers are trying to escape, but it is too late.

Anonymous said...

Wow, great work Max, thanks for all the good info. WIth a bag of popcorn, the housing market will be good entertainment this year (if you're not one of those unfortunate people that got caught in the riptide).

Perfect Storm said...

Both Agent Bubble and I predict inventory could top 20,000 listings this summer. (At this rate of increase, we will hit that number by late June or early July. One week doesn’t make a trend, however.)

23,000 plus is in the bag. If anybody needs to sell better price right.

anon1137 said...

Just to reiterate a point that Sippn made a few weeks ago, many of the "flippers" ID'd by Max's analysis are actually banks (bank-owned properties), not investors taking it in the shorts or sad buyers trying to escape a bad decision.

On the inventory price changes graphs, I don't get the "increased" listings. So, the seller put the box on the market, got too many offers, so they increased the asking price?

The Google Earth maps are great. Why doesn't some real estate organization (CAR, SAR?) put all of the MLS on a Google Earth map?