Sunday, September 30, 2007

Sacramento Regional Real Estate Trends for September 29, 2007

A couple of items worthy of mention. Firstly, inventory actually increased this week, going over 18,000 for the first time since mid-August:

I expect inventory to drop by next Saturday due to the end-of-the-month expiration effect, but it could stay well above 17,000 through the end of October. That would be an unprecedented event.

Secondly, the seller-in-trouble (SIT) situation continues to rapidly deteriorate. In terms of total dollar losses, percent of original sales price, total inventory, and percent of total inventory, there is no bottom in sight. The graphs speak for themselves:

Shocking (at least to me) is how close the average percent SIT loss is to the 20% level. That puts a large fraction of the first lien holders in the Sacramento RE market into a loss position.

The overall market indicators are feeling the SIT effect as well, with asking prices falling at an increasing rate:

Median asking prices in Sacramento County have fallen by $20,000 (6%) in the two months since the beginning of August. There was a 4% drop in the price-per-square-foot during that same period.

Stress continues to build, and every week a greater percentage of the market is selling at a loss. Clearly, the Sacramento market is in transition, and all indicators point to further price reductions. There is no bottom in sight. Usually I don't give advice on this blog, since any decision to buy or sell a house is highly individualized. However, if you can wait, I think you should.


Gwynster said...

Couple of updates:
The Woodland house from July auction is now a flip for 424K (purchased in Aug for 262k with commission)

The golfcourse condos are all reducing prices, not enough but it's a start.

Open houses are turing into OPEN HOUSES! as they holding on week nights praying for traffic. I'll call them OH! from now on.

New builds just introduced to the market are rapidly reducing prices.

Davis is now having REOs listed as REOs in the MLS - finally. I had a feeling that once jumbo loans froze up, this town was going crater and it's on it's way.

Mike said...

Well, although price will go down lower throughout next year, I found a house that was selling for much below market price at around $140/sq ft.

Since it was on the market for a long time, I made an low offer at around $120/sq ft. Will see if they accept.

Rob Dawg said...

Inventory holding through September? That's huge. It means that the wanna sellers are pretty flushed out and all that's left are the hafta sellers.

The Oracle od all things Real Estate in Sacramento John Lockwood blogged a few days ago the Davis was a btright spot and holding up well. Go to heard his record remains untainted by the truth. When are you all up there gonna get on his case?

Disclosure; my eldest is considering Davis for college so by Sept '09 I'd like to pick up a nice 3br SFR for her to live in and rent out so I'm secretly cheering for a substantial decline.

smf said...

Funny story about inventory:

I was checking the MLS with ranges, since we have a limit of 200 per search.

I had noticed several ZIP codes had LOWER inventory as time went on...

Finally it hit me.

It was due to lower prices than were no longer applicable to the price range I was searching.

Gwynster said...

Rob, have you seen what a 3/2 goes for here even in the really bad areas? There is a reason I'm renting, and renting, and renting...

Rob Dawg said...

My sympathies. Yes, I see the rent numbers and the sales prices. Can I be honest here? Whointhehell would choose to live in Davis for coastal California prices? Okay, I understand researchers and faculty of UCD and all the rest but I mean... a distant suburb of Sacramento? Oh, and another thing. It isn't Just John Lockwood lying through his one moving part. Half the low priced properties I click on in my tracking of SFRs are in fact 1/2 a duplex or attached or zero lot line or PUd or some other not SFR despite always limiting my search to SFRs. Where is the discipline of the profession?

... said...

SMF - some truth to that but not 100%. One higher end city I watch, Folsom, has fewer homes above $900K vs last year because the building of new higher end homes has virtually stopped.

Building department has been like the Maytag repair shop since early 2006.

MAX - could you remind me or refer me to the SIT definition - watching the FIT improve is actually just a function of FITs being over 2 years old now.


Anonymous said...


SITs are FITs with no 2 year limit. Flippers = sell in 2 years. Sellers In Trouble are not "flippers" since they are not (read "can't") sell in the 2 year window that defines Flippers. Max developed SITs because FITs were declining due to the window, which was a false indicator of an improving market.

Gwynster said...

Rob, I used to say that if it weren't for our jobs which we worked hard to get, we'd be longggg gone from Ca, not just Davis. Davis is supposed to be super liberal, low crime, and kid friendly. What a bunch of butt nuggets. Live here for 2 yrs and you'll see it's anything but all that. Jim Wasserman did a piece on Davis conversatism and I saved it on my blog. Davisites are still smarting from that smackdown.

I think the coming recession is going to nastier then most realize so I want to stay employed someplace where we have significant seniority. If UC starts layoff folks, they'll need to be at skeleton-level staffing before we get pink slips, especially me.

And yes, all those halfplexes listed as SFRs make me freaking nuts too! I even had an agent try to get me to look at the Bidwell condos by tell me they were really halfplexes. I blogged about that run in because it showed just how far people here will stoop for a sale, any sale. I saw an agent completely beaten down while at an open house on Miller. Lockwood is blowing happy, disney-quality toy bubbles out of his a$$. I worked for the mouse - I know tinsel covered poo when I see it.

I know of quite a few people who bought those halfplexes for 300k+ in 03 and 04 and there is no way they can get out of them without selling at a loss, they've tried. They are all rentals now and pray every month that the current tenants don't vacate in favor of a huge place in Woodland or West Sac with a few roommates. One of these people is a dear friend who took a position in SF so I hear about it often.

I will say there are a lot, and I mean predictably steady growth of 3 and 4 BR houses on the rental market. All these people who can't sell or won't because they don't want to give the house away. We're getting flooded with them.

'09 may be early but not a bad target. If you plan, you might be able to get a in-law unit in the downtown core for the daughter right off campus. If I weren't married, younger, and was looking to rent it's what I would do.

LOL ok /rant off >; )

... said...

Thanks for the reminder. I would state that the FIT stat is no longer important - being a flipper within a year window meant paying the full income tax burden on the gain, after 2 years it was possibly sheltered - doesn't matter in a loss anyway, unless its a business, but hard to prove when your loan docs say otherwise! duh.

Josh said...

I would state that the FIT stat is no longer important -

I agree, for now. In the future, the FIT will serve as a proxy for REOs hitting the market. I'm still calculating and reporting it as a way to show the lack of REO listings...

Any sudden spike in flipper/FIT listings will indicate an influx of REO listings...

Josh said...

Max developed SITs because FITs were declining due to the window, which was a false indicator of an improving market.

I would like to correct one slight misconception here. As noted in my August 26 post the FIT definition was refined to include "somebody who listed a house for less than what they paid within the last two years, even if the listing continues after the two-year cutoff."

This change means that the decrease in FIT listings is not due to a conversion into SITs, but the removal of the FIT listings from the MLS (or an increase in their listing price putting them out of FIT range). They're either selling (not likely), increasing in price (even less likely), expiring and not re-listing (possible), or going back to the bank as REO (likely).

I expect a resurgence in FIT listings as the banks dump REO in order to raise cash.

Mike said...


It looks like my low ball offer of $118/sq ft has been rejected. I guess we are not at 2001 pricing yet.

No problem, I can wait. I am sure they will accept $120/sq ft range next year.

Gwynster said...

in my 'hood, we've gone from 275+ sqft to 180. Can't wait to see what next year brings.

One thing I have noticed is that a lot of what is coming off the MLS even at low prices isn't selling. I have a list of MLS# going back to Fall 05 and very little inventory changed hands. So never assume that just because it dissappeared off the list that a knifecatcher saved someone's day. Often it magically appeared as a REO in 7 mos time.

smf said...

I have started to see houses in nicer areas going to about 2004 prices or less.

Saw a house in GR that is listed below its 2005 price. We could get it for $55K below its 2005 purchase price, and the house did have some renovations.

There is another house in EDH that is stuck a little bit higher than its 2003 purchase price.

Anonymous said...
This comment has been removed by a blog administrator.
W.C. Varones said...

San Francisco Countrywide employees get a memo from Mozilo.

Anonymous said...

Mike, you're better off getting rejected - no sense catching a falling knife. We'll be lucky if the RE market bottoms at 1998 prices. Those that think that fundamental values are roughly equal to 2001 values are 100% right, but they are also forgetting about the collateral damage inflicted by the bursting of the great credit bubble. Thanks to HeliBen and the rest of the pigmen, GD2/WW3 is now a virtual certainty and likely we won't be thinking about RE in a couple of years.

Too bad to, because I really wanted to come in with a strong vulture-cash position in a few years but now it really doesn't matter.

Great blog Max and AB, btw.

Mike said...


I know I am catching a falling knife buying at this point. However, if I can pick up a house at 2001 price, it still would make sense for me since I cashed out my home at 2005 prices (Sold my home at $260 /sq ft) and therefore if I buy at $120 /sq ft it still is a pretty good deal even if prices continue to fall. If I purchase a home now at $120/sq ft, I still will have good amount of cash left over from the profit I made on my house sale and interests earned (and profit from home builder stocks I shorted) for three years. So it makes sense for me to buy now if a good deal pop up, especially since I have two young kids and I am getting tired of renting. It depends on individual situation I think.

Now,if you believe prices could fall back to 1998 levels (I purchased a home in 1999 at $90 /sq ft) then I'll have a chance to purchase a second house with money left over and become a rental home landlord. That is with a positive cash flow, right off the bat!!! Not a bad deal I think.