Sunday, June 17, 2007

Sacramento Regional Real Estate Trends for June 16, 2007

Four county inventory moved sharply higher, increasing by 2.9% (483 listings) over last week:

In addition, asking price levels continue to fall. Average price per sqft has fallen 12% year-over-year in Sacramento County, from $259 to $228:

The reasons for this trend can be understood by looking at price level inventory:

In all the counties, the inventory growth rate for higher-priced houses is much lower than the growth rate on the low end. Simply put, this confirms what a lot of folks have been commenting on. The Sacramento housing market appears to be bifurcating into two markets, one for high-end houses in desirable areas, and another for low-end houses. We will need to look at sales to understand this fully. Stay tuned!

In flipper world, things are not looking up:

Watching the deterioration of the flipper position is amazing to watch. The only thing that seems to be holding is the 80:20 / 85:15 ratio of non-flips to flips. I expect these numbers to continue to grow as the REO departments of the various bag-holder banks come back to life.

Here are the weekly change graphs:

Does anybody find these useful? If nobody does, I will probably discontinue them on a weekly basis, and only post them when something changes. If anyone would like me to keep posting them weekly, leave a comment or send me an email.


Perfect Storm said...

I find the price per a sq foot and the flipper graphs very informative. I think in a couple of months both of these graphs are going to show some dramatic changes as the banks let loose the REO's

AgentBubble said...

Ditto that. All very useful and informative.

... said...


Totally humbled by your command of language. Let me try that in a sentence...

Entering the bar, I spied a blond and a redhead, my heart was bifurcating.

Does that help anyone?

Josh said...

Yeah, but try saying the word in a casual conversation at the bar. I bet both ladies' eyes glaze over.

That's why I stick with brunettes. :)

Anonymous said...

Great data, keep it comin'! Max, any plans to attend next weekend's heavily pulicized foreclosure auction? Figures from that would be pretty interesting.

Anonymous said...

I look for your statistical report every weekend! I am renting and I use it to watch the market in anticipation of buying. Please don't stop.

Anonymous said...

Max, I've been obsessed about the market for the last two years. I've been waiting for 6 years to buy my first home without endangering our finances. We refused to buy an overpriced house.

This weekend I purchased a house that fit our budget of 2.5X my income, with a 30yr fixed rate loan.

We found a brand new home in Lincoln Crossing which the original purchaser bailed on the home two weeks before completion. I walked away with 101K of incentives and upgrades from the builder from the current asking price of the model.

Its not perfect (new stucko homes are far from ideal dream homes) but for a first house, it will work.

I’m fully aware that the prices will continue to go down for sometime, but there is a point where you can find a home that fits the budget and you can be happy for several years.

Thank you for all the info for the last 4 months, and thank you all of you bloggers for getting me fully educated on the market!

patski said...

I haven't see much discussion on school systems.

In the Sac area I think it comes down to good school system or not, there's a huge disparity...

... said...

If you were able to overlay a map with school ratings (1-10) and median prices, you would see a correlation.

Def for Max: Correlation is like how the number of good looking women increases with the number of beers you've had...

Anonymous said...

The bifurcation trend has been alive and well for some time. That is the main reason why medians are such a poor measure of the health of a market, or even a gauge of what prices are doing. The very wealthy will always buy RE at the same pace and could care less about a housing bubble. In fact, they are downright bullish on RE:

Meanwhile, the lower end of the market has fallen off the cliff. I'm actually surprised that Sac medians are down at all with this light volume on the low end. This is just an indication of how bad the bloodbath will be in Sac when smoke finally clears. It some markets (like the BA for example) medians are still going up even though the market is just awful.

Anonymous said...

Thanks so much for the info. I am renting, and have been watching the market for 2+ years, and this is some of the best combined data I've seen.

Big Rig said...

How long can this bifurcation continue?

While Darth Toll's comment about there being a separate market for the wealthy may be true, I believe that there are a lot of homes priced in this "wealthy" market that are not "wealthy" quality homes.

And, I have a hard time believing that the "wealthy" market in the Sac area is as large as some sellers believe.

Does anyone have any thoughts on what happens next? Does the market continue it's bifurcation?

Josh said...

Correlation is like how the number of good looking women increases with the number of beers you've had...

It that correlation linear or exponential? Sippn, I think you're trying to get me in trouble at home. :)

Please don't stop.

Sorry, I didn't mean to imply I was stopping all the graphs, just the last two. (That's what happens when you blog before having the morning cup of coffee.) I'll just leave them in without comment.

We found a brand new home in Lincoln Crossing which the original purchaser bailed on the home two weeks before completion.

Good luck to you! I'm glad you found this blog useful.

I haven't see much discussion on school systems.

No doubt you're somewhat right, but schools can't be the only factor. The public schools in the Land Park area are less than desirable, yet the prices there stay high.

And, I have a hard time believing that the "wealthy" market in the Sac area is as large as some sellers believe.

Does anyone have any thoughts on what happens next? Does the market continue it's bifurcation?

I'm going on pure speculation here, but I would guess the higher end of the market would exhibit the price "stickiness" everyone talks about when they talk about the housing bust. The lower end would fall more rapidly as the actual neighborhoods deteriorate. But who knows for sure?

Anonymous said...

Continuing with the bifurcation discussion (and because I like writing that word again and again) here is the latest from View From Silicon Valley showing this effect in a dramatic manner. Sales volume is at a multi-year low and headed for all time lows, while the median price is at an all-time high and still headed higher:

A conundrum? Not really. There can be no doubt that the truly wealthy represent an ever-larger piece of an ever-smaller sales volume pie, thus skewing the median price higher and higher. Even though the market has essentially crashed, most people don't realize it unless they are trying to sell an overpriced sh!tbox. This is the effect I would have expected to see in Sac and we did for a while, but now we have falling medians in addition to bifurcation.

Counter-intuitively, you typically only see medians drop in a significant fashion towards the tail end of a bust when the volume of lower-priced stuff actual
picks up and drags the median down as a result. That's not happening in Sac. We have a lower median AND lower sales volume on the lower-end stuff. Fascinating, but not in a good way. My only explanation is that the market is so terrible in Sac, that everything is falling, even the high-end stuff that is still moving with some volume.

Steven, I couldn't agree with you more. There are many houses so over-priced that they are competing against literally a different class or category of house all together. I see this all the time. There are genuinely $1M houses - true mansions and not McMansions, and then there are houses priced at $1M that aren't worth $300K. The rich will make the right choice and buy the $1M house and the other house will just sit and sit until it is foreclosed on. The really good stuff will always be expensive and out of the reach of the average person, and that's how it should be. But we will also see regular houses return to a price where regular people can afford them. So, I guess I'm seeing continued decent volume in the ultra high-end, with prices falling across the board until the REO holders capitulate and then we will get a full bloodbath for anything other than a genuine mansion.

Anonymous said...

sorry, that was me above.

Anonymous said...

a great juxtaposition to see weekly is a combined inventory vs sales chart....that simulaneously answers the 2 questions one need ask when looking at the marktet

Big Rig said...

Darth & Max,

Thanks for the fascinating discussion about this bifurcation.

Has anyone since this type of behavior in the market before, in another place or time?

It seems like this would happen when the market heads downward because of the "stickiness" that Darth referenced.

Josh said...

Yay! I started a meme:


Keep it alive, Darth!

Anonymous said...

LOL! Cold Busted!

I must admit, Max, I have a problem. I'm addicted to this blog although I occasionally try to cross-pollinate the basic concepts to the big-boy macro blogs to see if something sticks.

Keep up the great work!

Anonymous said...

Every other day I came to check if you got any updates... Like it a lot!

Anonymous said...

I check all the time so please keep posting.

Anonymous said...

First "bifurcation" and now "meme". I had to go the dictionary. Sippn, I can save you the time!

meme (n.) A unit of cultural information, such as a cultural practice or idea, that is transmitted verbally or by repeated action from one mind to another.

It is nice to know Max is always setting the trends.

Anonymous said...

As an appraiser who has to argue with loan agents regarding a declining market, I find it very useful.