Monday, December 31, 2007

Predictions for 2008

Before I make any bold guesses about 2008, here's what I said one year ago:

"I think the big 2007 housing story will be the rising foreclosures and bankruptcies due to ARM adjustments. I also think at least one, or possibly two major mortgage lenders will collapse due to forced buy-backs and increases in default. Ameriquest is my top choice, but Countrywide, Washington Mutual, and H&R Block (Option One) are top contenders."
As you can see, I was completely right about the big story of 2007. As for my other prediction, I was way off the mark. Sure, Ameriquest and Option One are out of the underwriting business, but so are over 200 other companies. Not exactly "one" or "two". :) My record, therefore, stands at 50%.

With that in mind, here are some guesses predictions for 2008, in no particular order of importance:
  • At least three publicly traded house builders will go bankrupt.
  • Countrywide Financial will be out of the origination and underwriting business.
  • There will be a run on Washington Mutual. No prediction on whether it fails or not.
  • Fiscal crisis at the state and local level as tax revenue declines and bond funds dry up.
  • Unemployment in California will reach 6.5%, and 6.1% in Sacramento.
  • SIT losses in the four-county area will reach $1 billion at some point during the year.
  • The FIT will return as banks begin to liquidate in order to raise cash.
And my boldest prediction:
  • There will be a dead-cat bounce in Sacramento real estate this spring, resulting in one or two months of appreciation. This will quickly reverse itself by July, and by September record price drops will resume.

Happy New Year, everyone, and thanks for continuing to support this and the other fine blogs in the Bubblesphere. See you in 2008!

Sunday, December 30, 2007

Sacramento Regional Real Estate Trends for December 29, 2007

End of the year time here at Sacrealstats, and what a year it's been. Record high inventory for most of the year, record low sales, record price drops, and huge increases in market stress indicators were some of the themes. Here's a look back:

Record inventory for most of the year (including now)

Inventory began increasing in the four-county Sacramento area at a rate to amounts unseen in recent memory, and is currently at record levels for end-of-year:

We began 2007 with over 12,000 inventory listings, and we end the year roughly 25% higher at over 15,000.

Rise of the SIT, demise of the FIT (for now)

Market stress indicators rose (and are still rising) at a rapid pace. Asking price dollar losses (difference between previous selling price and current asking price) for sellers taking a loss rose 900% from $28 million to over $250 million in 2007. While Flippers In Trouble inventory has declined since September (believed to be due to increased foreclosure activity), Sellers In Trouble inventory has continued to grow. SITs now make up 30% of all listed housing inventory in Sacramento County, and average percent loss per SIT listing is well over 20% of previous purchase price. In a sign that things will continue to deteriorate, average days since last sale for SIT listings continues to rise.

Record asking price drops as sellers begin to capitulate

Sellers finally began to get the message in 2007, with record asking price decline occurring in all four counties. Median asking prices in Sacramento County fell 20% by the end of 2007, while average $/sqft values fell 17%:

Not surprisingly, there was a concurrent rise in lower-priced inventory, and a drop in higher-priced inventory throughout the year. Price drops also occurred in roughly 10% of all listings each week:

Well, so much for the year in review. Coming up next: Predictions!

Saturday, December 22, 2007

Notable Listings

Very few things surprise me anymore in real estate. However, when this listing popped up in MLS this morning, it caught my eye.

Some background:

9341 Starting Gate Ct
MLS #70128412

Purchased new from JTS on 1/30/06 for $1,344,500.
Loan amount was $1,175,000

Took out $237,000 more on 2/16/07 for a total loan balance of approximately $1,412,300.

Bank of New York purchased home for $926,345 on 10/1/07.

Just listed for $711,900.

Feel free to draw your own conclusions on this one.

Thursday, December 20, 2007

Downtown Sacramento Commercial Real Estate Photolog

Mish and others requested more CRE photos, so who am I to deny them? The following is a random sampling of the glut in commercial real estate in downtown Sacramento. It is by no means comprehensive, but I think it does represent the glut fairly well.

For those of you not familiar with Sacramento, it is the seat of the California State government and home to dozens of state agencies and thousands of state employees. Unfortunately, most of these agencies have become concentrated in a few, newly-built, large high-rise buildings. This, together with the mismanagement of parking policy by the city, and an inept redevelopment committee, has left downtown with a glut of mid-sized office and retail space.

Despite all of these problems, developers continue to build into the glut.

Note: Zoom in and click on the icons to be taken directly to the photo.

View Larger Map

800 J St Lofts

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Luxury Lofts 900 K Street

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801 K Street

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Vacant Lot on K Street

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Vacant Storefronts on K Street

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980 9th St

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9th and J

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21st and P

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2020 L St

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920 20th St

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1815 I St

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1801 I St

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17th and I

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1600 H St

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1330 H St

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14th and H

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1314 H St

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13th and H

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1234 H St

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1231 I St

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11th and H

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11th and J NW

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11th and J NE

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J between 11th and 12th

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K between 11th and 12th

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