Sunday, April 22, 2007

Sacramento Regional Real Estate Trends for April 22, 2007

Four-county inventory remained steady this week after last week's big jump:


Two reasons for the lack of increase were the 200+ drop in $200-$300K inventory in Sacramento, and the 100+ drop in $900K+ inventory in Placer:


At 15,066, four-county inventory is running 15.3% higher than last year at this time.

With the drop in higher-priced inventory, average market prices in Placer fell by 4.5% over last week, although the median held steady. Average prices in Yolo came down a bit as well, most likely due to the rapid increase in $300K-$400K inventory:


Some interesting data on the flipper front in Sacramento. It appears that flipper inventory is now growing more rapidly than overall inventory for the first time since last year:



Although overall flipper inventory is still lower than its peak values from summer 2006, it now stands at 21% of the market.

All four counties saw the number of listings with price drops increase w-o-w:



Nearly 10% of all listings in Sacramento County had a price reduction last week.

16 comments :

Gwynster said...

I was out in the field in Davis and Woodland yesterday. Lots of bank-owned and short sales either on the market or coming on the market in my price range.

My observation was that agents in Davis seem to be the most desparate and easily aggravated. The agents with distressed properties in Woodland were much easier to deal with.

That said, I'm considering an offer on a house at almost a 1/3 off listing price. I'm think it's too early to be out there still. I will most likely wait until next year unless someone takes on of my crazy offers.

Bubble Sitter said...

Max, so your saying 100+, $900,000 houses left the MLS roles in Placer county last week? Wow, did somebody go on a $90 million buying spree? Or perhaps 100 lenders sent out NOTs and the FB's capitulated and cancelled their agents' listings?

Probably a little of both, but I am guessing mostly the latter. Either way, there may be 100 new bag holders by the end of the month. Most of them just don't know it yet.

I saw GMAC mortgage listed an REO for $610,000 last week, with GMAC Realty (how did THEY get the listing?). GMAC lent $600,000 on the property a year ago, when the FB purchased it for $660,000 in April 2006. Guess what? The builder is selling the same model for about $490,000 right now. Why do you think the original FB walked from his $60,000 down payment? The lender is way out of touch. And there are about 18 more neighborhood foreclosures in process behind this one. If the lender doesn't wise up quickly, they will hold the house until Winter and have to dump it for $450,000. Maybe they need a new agent representing them!!

Amazing changes are occuring almost daily.

Max said...

Max, so your saying 100+, $900,000 houses left the MLS roles in Placer county last week?

Something weird is definitely going on with these high-priced listings. First El Dorado and Sac, now Placer. If I had to guess, I would say that these represent a small number of bag-holders (either builders, investors, or REOs) trying to do something with a block of houses.

Inventory has been less predictable this year compared to last; I think there are a lot of MLS games being played ATM. Won't matter much when the REOs really hit in a few weeks.

Patient Renter said...

Gwynster: Say your 1/3rd off offer was accepted... would you really go through with it? You know what it would mean, basically you set the new comp and it's possible that your 1/3rd be surpassed by even bigger reductions in the future. I like the idea of having fun with the realtors, but not sure beyond that.

Gwynster said...

If I had an offer accepted I'd go through with it - you bet. It would be 400 more a month including piti then my rent for a bigger place and the crappy little tax deduction.

The discussion went like this-
me: This home is nice. I’m looking for a 3/2/1 just like this. I could make an offer
agent: that’s wonderful!
me: ok we’ll start at the 1997 price for this house. 1230 sqft @ $80 per, adjusted for 2% appreciation. Add in inflation per core cpi annully…. I’ll offer 227K on this house.
agent: but the seller needs 330k to break even!
me: your client bough this house in 1998 for 124K. I think I’m being very fair.
agent: well my client ran into some trouble and had to refiance several times.
me: **puts the checkbook away**

Real said...

Given all the gloom and doom, I decided to do another check of the ole real estate stats for my neighboorhood just for shits and giggles. BTW, I live in Gold River (25 villages in 95670 zip code).

MLS* listed 46 properties for sale
with prices ranging from $365K to $879 - the low end included manor homes although I exlcuded condos.

Median Price = $500K
Median ft^2 = 2,118
Median price/ft^2 = $237

BTW, given the 2000 census, average income for GR HH = $90K. Given 7 years at 3% growth, I would say Median Home Price to Income = 4.5x.

I then looked at sales** for the preceding month for the same 25 villages of Gold River and I got 18 sales at right around the same stats as the listed inventory - given it is a sample size of only 18, differences are not statistically meaningful.

So, that equates to 1.4% of existing homes are currently for sale and months of inventory = 2.6 months.

So, it looks likes all the skyrocketing inventory numbers and crashing sales are occuring somewhere in Sac, but I am betting the quality established neighborhoods aren't seeing anything like this if you are looking at Land Park, McKinley Park, better areas of Davis, Folsom, and Fair Oaks. It is all about location and these areas have no new construction to compete with so pricing is strong and INCREASING. Now, if I lived in a neighboorhood built in the last 5 years with 20-30% of the area yet to be built, I would be worried but that simply is not too many people.

The renters will remain renters for years to come - honestly, did any of you renters believe prices would only be marginally off for the entire region 1.5 years after the 'peak'? How much do you think your projections will be off over the next 2-3 years as builders have scaled back and no longer control land options?

* inventory per the SacBee MLS link for houses in Gold River 25 villages prices between $100K - $1M. Sorting is needed to remove non-25 village inventory

** sales per the SacBee MLS link for Feb 20-Mar 20 (latest 1 month data available). Same sorting process applies.

Patient Renter said...

Real: Offering statements attempting to convince people around here without offering evidence (prices increasing in all those areas?) is like pissing in the wind. Maybe you fail to understand who your audience is. Perhaps you should start your own blog.

Real said...

Patient - I provided all of the statistics for my neighboorhood. I am not looking to buy in any neighborhood in Sacramento at the moment (may pick up a condo in DT San Diego) so I did not go through the bother of looking at them. I did post all the relevant facts about Gold River - do you doubt the info that I posted? The FACTS are that Gold River is holding up fine and inventory is at under 3 months. I don't know enough about the neighboorhoods within Davis, but I would bet you will see the same exact pattern there for desireable neighborhoods. You never answered my question on whether you thought the market would be down more than marginally 1.5 years from the 'peak'.

It is my opinion that the renters on this board do not represent most renters - you are all too cynical (because you were left out of the last run up and/or you think you are smarter than other people. I do not think any of you will ever buy.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

Your Gold River numbers are probably fine, but you made a claim that prices are rising in other areas without numbers. So how about some numbers for those other areas?

"You never answered my question on whether you thought the market would be down more than marginally 1.5 years from the 'peak'."

Yes, the market is down about exactly as much as I thought it would be. This bubble took 5 years to reach its peak so I'd expect it to take at least that long to bottom out. In that sense, we're perfectly on track for a reversion to the mean (housing only appreciates at the rate of inflation), a concept which you might want to become familiar with. If you don't agree with the idea, take it up with Robert Shiller.

Gwynster said...

"If you don't agree with the idea, take it up with Robert Shiller."

Ohhhh snap!

Real said...

In that sense, we're perfectly on track for a reversion to the mean (housing only appreciates at the rate of inflation), a concept which you might want to become familiar with.

This is notion is laughable. For one thing - what is inflation? The 'weak dollar' crew saying the economy is fake are saying inflation is 6% - is that what you are using in your calculations? Next, I guess you would argue that population growth has nothing to do with demand. I mean, more people fighting over a finite resource rarely causes a price increase right? If you honestly believe that the only factor that determines a house price is the rate of inflation, why do houses cost so much more out here than in Montana? I mean, do they have a different rate of inflation than California? If so, what rate are you using in your calculations, the Montana rate or the California rate?

You arguement is pretty weak and would be funny if you did not actually believe it. Because you actually believe what you say, it is more sad than funny. I have posted the numbers for Gold River, inventory at 2.5 months, sales in terms of price/ft^2 holding steady and now increasing - maybe Gold River is the only place in the state of California that these trends are occuring or maybe, just maybe, the basic assumptions behind your 'bubble deflating' logic are fundamentally flawed.

Just so we all stay on the up and up though - give me your prediction for median price decline over the next 12 months - you say that you were 'right' over the last 18 months but I find that hard to swallow so let's set the record straight and you give me a prediction for the decrease in median sales price over the next 12 months. I am sure Gwynster will give you a nice kiss on the lips if you are right...

Patient Renter said...

"If you honestly believe that the only factor that determines a house price is the rate of inflation, why do houses cost so much more out here than in Montana?"

I didn't say that, I said that inflation is what causes the *CHANGE* in home prices. The base starting price depends on many factors, one of them being "location", as you like to say.

"Just so we all stay on the up and up though - give me your prediction for median price decline over the next 12 months"

I don't know how fast this thing will play out over the next 12 months, but I can give you my overall prediction for this entire cycle which is in line with what I said above - values will revert to their historical mean. Whatever a home was worth before values started shooting up faster than inflation (1999/2000'ish), plus the added appreciation at the rate of inflation, will give you the final value of a home once prices bottom out. Of course it's possible that we could have an overcorrection given that this was the biggest housing bubble in recorded history, and other similarly excessive asset bubbles have historically resulted in painful overcorrections.

I know you're itchy on what's going on right now, but it's what happens over the entire cycle that matters, which means paying attention to factors that will effect the next several years.

Patient Renter said...

By the way, my understanding of what home prices will be once prices finally bottom out (housing only appreciates at the rate of inflation) is based on our nation's entire record of historical home price changes. The *ONLY* thing that will causes prices to increase long term (longterm meaning wait and see) faster than inflation are changes in supply or demand. Supply has kept up with demand perfectly well for decades, and as you know we have a record supply of vacant homes right now, so this is not an issue.

End result: housing will revert to the mean. Again, take it up with Shiller and his research if you disagree.

Real said...

PR - you have yet to address the question

"Whatever a home was worth before values started shooting up faster than inflation (1999/2000'ish), plus the added appreciation at the rate of inflation,"

What is the rate of inflation - is it national or local? The US gov says inflation is 3%, guys on some other forums say 14% - which is it in YOUR model? BTW, if I assume 14% over a 7 years period, I get a 2.5x run up vs. 1.18x at 2.5% so it is a huge factor. You discount population growth - why? Do you believe all areas in the US will have population growth at the same rate? You say supply has kept up with demand - do you think the fact that homebuilder have given up land options will affect this ratio? Please answer the question in terms of what % change you expect in the median home price for the Sacramento region - no more weasel comments, be a man and make a prediction.

Please take ownership of your opinions and do not pass them off to others - if you believe it - defend it. I realize opposing views may make you actually dig into your assumptions and realize that you are wrong - but wouldn't it be better to find that out sooner rather than later?

Patient Renter said...

"What is the rate of inflation - is it national or local?"

I'm concerned with national since my outlook is based on national historic value trends.

"The US gov says inflation is 3%, guys on some other forums say 14% - which is it in YOUR model?"

I'll let the future decide. Either way, it's still much less than the 50%+ annual rates of appreciation we saw for several years, which leaves plenty of room for a reversion to the mean - whatever the mean is.

"You discount population growth - why?"

There's a publication by Dean Baker from CEPR looking at government figured representing demand (population growth) that demonstrates that changes in demand have been much less than changes in supply. You can check out the paper, "The Menage of an Unchecked Housing Bubble". There's really no debate that supply/demand has not been a true factor regarding prices so I'm not going to waste time on this.

"Do you believe all areas in the US will have population growth at the same rate?"

No, but to the extent that there are no significant impediments to building supply, which is generally the case (and certainly the case around here) growth in population is a non-factor. See the Baker paper for more on this.

"say supply has kept up with demand - do you think the fact that homebuilder have given up land options will affect this ratio?"

No, because we have oversupply at the momemnt. If enough options were given up, it could affect things in the future, but that's not an issue for now.

"Please answer the question in terms of what % change you expect in the median home price for the Sacramento region - no more weasel comments, be a man and make a prediction."

Probably 50% total decline in 'real' terms. This could play out with prices eventually stagnating while inflation eats away at the difference, but I doubt it. I don't know about you, but homes in my area saw 200% increases in a few years. Considering no real changes in supply/demand that can account for this, the explanation is that of pure speculation and inflation (inflation defined as expansion of money/loose credit), nothing else. To the extent that hyperinflation may have been a cause, I expect that ultimately a period of deflation may be the result.