Sunday, March 02, 2008

Sacramento Regional Real Estate Trends for March 1, 2008

(Ah, a timely post for once! :) The big developing story is the stabilization that appears to be taking place in the marketplace. After growing to 15,500, four-county inventory has dropped and held steady at just below 15K listings:

Also, although asking prices continue to fall, it looks to me like the curves have inverted in Sac County, and are already stabilizing in the other three counties:

Finally, market stress indicators have begun to stabilize for the first time in 18 months. SIT inventory seems to have found a bottom at 33% of total market (3,300 listings), while the average SIT days-since-last-sale continues to increase, indicating that the number of loss-takers willing to enter the market has stabilized:

These indicators, combined with anecdotes of buyers returning to the market, and we have the makings of a dead-cat-bounce this spring.

Lest you think I've turned into a housing bull, I still think the overall market drop has some distance to go yet. For one, the proxy REO indicator (flipper market share) hasn't budged, which means the banks aren't yet serious about disposing of their huge REO backlog. Also, the total SIT asking price loss keeps rising, which tells me that those who are desperate to sell still haven't lowered prices enough to attract buyers:

Finally, there are signs that the local economy is headed into a recession (increased unemployment, government layoffs, decreased demand for services) which will have a deleterious impact on the housing market. We may find ourselves in a self-reinforcing trend that could take several years to break.

However, while the trends are not improving outright, they are certainly getting worse at a much slower rate.


HousingRealist said...

I'd be curious to see what the
pre-forclosure to forclosure ratio
rate of change has been, as I suspect that ratio is escalating and will continue to do so, as more and more people see their value of their homes at less than their mortgage amounts. If I recall from the CSFB ARM reset schedule it appears March and Sep/Oct are big reset months.

Josh said...

If I recall from the CSFB ARM reset schedule it appears March and Sep/Oct are big reset months.

One thing to realize is those reset charts will change as the loans are modified. Also, it looks like a lot of ARM defaults are happening prior to reset, so that throws the timing off as well.

What I'm more interested in is the held REO/listed REO ratio...

patient renter said...

I wish everyone else were as astute as you to forsee the dead cat bounce that is to come.

Anonymous said...

Won't the ARM resets that are happening now actually lower rates for many people? My ARM rate is LIBOR +1%. With LIBOR under 3%, the ARM reset would actully be lower then the fixed rate during the initial loan period. This should result in less people in trouble due to the ARM resets.

patient renter said...

"Won't the ARM resets that are happening now actually lower rates for many people?"

Yea it would. Rates and resets are just one aspect of this whole thing though. For one thing, consider that some folks would very much like to get out from under their adjustable loans being that low rates won't stay low forever. A refi may not be possible though with values having dropped. Other aspects to consider are that low or negative equity may incentivize people to walk away and other economic strains that are beginning and will be ongoing will put further financial pressure on everyone, including homeowners.

... said...

Recession? Definately are here. Buffett said today we're in no growth if you measure per capita ( we've have GNP growth, but its pretty close to population growth, but it hasn't been measured like that)

Well, last time I looked, per capita meant "per wallet" and I'm with him.