Sacramento Regional Real Estate Trends for April 26, 2008

More of the same. Asking prices continue to edge down slightly, and cumulative losses continue to edge up slightly, but inventory is remarkably stable. 50% of the Sacramento County market listings are still Sellers In Trouble, and that number is showing no signs of improvement. Cumulative losses in Sacramento County are almost $0.5 Billion.

On the sales side, CAR is reporting a 29% y-o-y price drop for the state, and a 25% drop in sales volume. They're blaming the price drop on the increase in interest rates on non-conforming (aka "jumbo") loans, but the reality is the GSEs are simply requiring downpayments of 10% or more.

On a personal note, things are going to be pretty sparse around here for me starting around the end of this week. Let's just say there will soon be a "Mrs. Max" that will be commanding my full attention for a while. :) The stats will be taking a couple of weeks off, but I should be back blogging in full-effect after that.

Jumped the Shark

OK, this is the last food post. I swear.

This thing has totally jumped the shark. From a column in the Wall Street Journal:

Load Up the Pantry
April 21, 2008 6:47 p.m.

I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food.

No, this is not a drill.

You've seen the TV footage of food riots in parts of the developing world. Yes, they're a long way away from the U.S. But most foodstuffs operate in a global market. When the cost of wheat soars in Asia, it will do the same here.

Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster.

"Load up the pantry," says Manu Daftary, one of Wall Street's top investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it isn't going to happen here. But I don't know how the food companies can absorb higher costs."

Some points, tongue firmly in cheek:

• Food is very cheap! Seriously, if your food budget is rising, maybe you should stop eating out all the time! (I'm looking at you, Elk Grove.)
• Do you really "feel better" eating all that overpriced organic food? Honestly?!
• Variety is the spice of life. If rice prices climb, try beans or bread.
• Food is perishable. How much can you really "stock up" on before it starts to go bad?
• America is fat. I bet if we doubled the price of food, we would save twice that amount in health care costs alone. Quit eating so much!

Here's some perspective, courtesy of the Daily Show:

Please Don't Panic

I can personally confirm that Costco is limiting rice purchases in Sacramento:



However, that does not excuse the Washington Times for this panicky headline and article (posted on Drudge, no less):

Americans hoard food as industry seeks regs

The article mentions no specific examples of "food hoarding," only the following generalized statement, which is inexplicably linked to Canadian Filipinos buying rice to ship back to the Philippines:

Costco and other grocery stores in California reported a run on rice, which has forced them to set limits on how many sacks of rice each customer can buy. Filipinos in Canada are scooping up all the rice they can find and shipping it to relatives in the Philippines, which is suffering a severe shortage that is leaving many people hungry.

I think this whole thing is a media-driven story that has the potential to create a real crisis. You already have crap like this happening:

Super Lucky Elephant White Rice - 50 lb. bag - $35 (sacramento)

I don't think it's time to panic. Yet. :)

Picture of the Day

Getting There

38 condos in the Laguna Oaks complex in Elk Grove were auctioned off this weekend. It looks like the auction was successful, with all the units selling. According to News 10, buyers paid more than the minimum asking price but less than the suggested asking price:

"While several condos were expected to sell under $100,000 during pre-auction speculation, Winchell said it appeared just one sold under that mark at $95,000. Even the most expensive three-bedroom unit sold at a healthy discount of $170,000."

The HOA dues (.pdf) for an 1168 sqft three-bedroom/two-bath unit at Laguna Oaks are $181 per month, and property tax is $177 per month (1.25%). Figuring a realistic 7% 30-year fixed loan, PIT for this property would be $1489 per month, or ~$18,000 per year.

Not too shabby. The area is decent, the units look OK, and the average family of four can definitely afford these. I do think $145/sqft is still a bit high, but the overall price seems to work. I wonder how the people who bought two years ago feel about these "healthy discounts?"

Sacramento Regional Real Estate Trends for April 19, 2008

The word this week month is stabilization. Most of the key market metrics have leveled off, including the stress indicators. In fact, I think what's happening with inventory is unprecedented in recent history.

Other data sources suggest (and the week-over-week graphs seem to confirm) that market activity has increased since March. At this point, it looks like demand is just about soaking up all the new supply coming on. Also, Agent Bubble's data tells us that two-thirds of all sales in March were distressed. I think a case can be made that the market is completely bifurcated, with banks controlling the margin. "Real" sellers are staying out, hoping that once the banks finish disposing of their inventory, prices will rise again. Those "real" sellers that do venture in are having no success, so the listings sit.

This bifurcation can be a useful psychological indicator. Bottom callers might want to pay attention here. Usually, a cyclical bottom doesn't occur until the downturn is recognized by all market participants. Since there won't be a reduction of REO inventory for quite some time, it is likely that prices will continue to decline, and "real" sellers will become more stressed as carrying costs mount.

I expect that market indicators will remain stable, or even improve somewhat, in the near future as bank REO managers test the margin and their pricing power. They will walk the market down in baby steps, hoping to reclaim as much of their failed investments as possible, until losses due to carrying costs outweigh any gains to be had by delay. In the meantime, "real" sellers will continue to stay on the sidelines, only venturing into the game when external necessity forces their hand.

Metrolist Lowers Default Pricing... Again

Metrolist lowered the default price on their search page today. The last time this happened was December 15, 2007.

Before:

After:

The Biggest Losers

Call it a morbid sense of curiosity, but I always like to take a peek at tax records for any house I look at in MLS. While it helps when negotiating for a buyer, it also helps me gain insight into just how messed up things were for the past few years. Last night, I was looking at some homes at the Ranch in Wilton, and found two short sales that blew me away. Max has shows some huge losses over at the Flipper in Trouble site, but these two listings seem to have set a new record.

Take a look:

Listing #80031129
6 bedrooms, 5 baths
5,450 sf
2.46 acres

Sold by JTS on 11/9/05 for $1,322,500
Two loans taken out - $198,350 & $991,600 ($1,189,950)
Currently listed for $600,000 (21 days on market)

Listing #80031360
5-10 bedrooms, 4 baths (it really does say up to 10 bedrooms)
4,850 sf
2.8 acres

Sold by JTS on 6/30/05 for $1,240,000
Sold by 1st owners on 3/31/06 for $1,397,000
Two loans taken out - $975,000 & $365,900 ($1,340,900)
Currently listed for $600,000 (21 days on market)

So, on the first one, we have a minimum loss of $722,500 + fees.

On the second one, a minimum loss of $797,000 + fees. And that's in just 2 years.

More Dead Retail

Stopped by the West Sacramento Wal-Mart and Home Depot over by the Ikea on Reed Ave. yesterday afternoon. Dead as a doornail. If it weren't for the music playing loudly over the PA system, you could hear a pin drop:



I would say the staff outnumbered the customers 2:1 easy. I made passing comments to the checkout clerks at both stores; they both said it was typical for the middle of the month. Neither one seemed particularly concerned...

Fun With Google Trends

Some people in the comments over at Calculated Risk were posting some interesting Google Trend graphs:


Notice the difference between the Google search terms and the frequency of occurrence of those terms in news stories. Looks like "subprime" wasn't in the borrowers lexicon until well after the collapse was underway. "Foreclosure" is definitely on the rise:


If you can find some interesting trends, post a link in the comments. :)

Note on "Shadow Foreclosures"

**Update: mp3 of the conference call, along with Volker's now-famous speech to the Economic Club of New York on April 8, is available at http://drop.io/sacrealstats001

Interesting note from the Wachovia conference call today:

Q: Jonathan Adams, Oppenheimer Capital - Analyst: If I look on page 19 of your presentation, it strikes me that there's nothing in the 90 day past due trends that would justify the kind of change that you have made in your outlook. You can pick a different -- a number of different metrics, whether it's the dividend in suggesting that over a broad range of scenarios it wouldn't need to be cut and then five or six weeks later coming to a different conclusion, or it's some other metrics as well. But it just strikes me as difficult to understand how management's view of the environment has changed so dramatically.

Don Truslow, Wachovia Corporation - SEVP, Chief Risk Officer: Well, I guess -- this is Don. One thing that doesn't show on the chart is the level of cures between 90 days and further severities and defaults have been dropping. The severities in the market place when we take a house back, it takes a lower price to get homes sold and our outlook is -- and as I think everybody has been reading, there is an expectation that there's a broad accumulation of foreclosed properties that haven't hit the market yet and perhaps even some shadow foreclosures that haven't emerged as yet. So our concern, looking forward is that -- and again, what we're beginning to see more evidence of and sense more of in the first quarter is that conditions are going to continue to get tougher and there's an overhang of inventory out there that is going to be costly for the industry to work through.

So on the default rates at 90 days, not a dramatic change in pace but it's more the role rates, the propensity to go all the way to foreclosure, the higher severities taken on disposing of properties and then the, just further understanding and recognition that there is an inventory of foreclosed properties building out there that are eventually going to have to get dealt with.

Read the whole thing at Calculated Risk.

Sacramento Regional Real Estate Trends for April 12, 2008

Steady as she goes. Looks like 15,000 listings is the magic number. Also, it looks like asking prices are slowing their decent, which seems to conform to an emerging seasonal pattern.

Weekend Humor

I find your lack of faith confusing!

UPDATED: Sac County Sold and Listed Stats

UPDATE: I've also added pending sales to the mix. Enjoy!

There's been some discussion on stats that show the number of distressed properties that are being listed and sold compared to regular listings, so I figured I'd start compiling the data and see what trends we can find. The chart below is for Sacramento County only, as it's just too time consuming to include the other nearby counties. Let me know if you think this data will be helpful and I'll continue to post updates each month.

Distressed Properties Update

A disclaimer about the distressed properies update for this month: Our MLS recently underwent some major changes affecting how short sales and REOs are entered and tracked. The previous method relied on status modifiers and existing financing to track these types of listings. The new method is more abbreviated and simply has a field called REO for tracking REOs. Short sales are now listed as either "Active Short Sale" or "Active Short Sale Contingent." When an agent enters an REO, it's as simple as checking the REO box. However, short sales are a little more complicated. First, the listing must be entered as an "Active" listing and then submitted to MLS. After submission, the agent must then revise the listing and change the status from "Active" to "Active Short Sale" or "Active Short Sale Contingent." While this may not seem complicated, remember who we are dealing with.

At any rate, I've already seen several listings that are marked short sale in the comments, but not in the status, so I know we're going to have some issues.

Enough rambling, here are the stats!

Sacramento Regional Real Estate Trends for April 5, 2008

What the selling season giveth, the end of month/end of quarter taketh away. Inventory fell this week by nearly the same amount it rose last week. In fact, almost all of the indicators took a breather, so I'm going to execute my Bloggers Prerogative and let the graphs speak for themselves.