Recent Investor Sales

It has been heavily reported lately that investors are returning to the Sacramento marketplace. Unlike the specuvestors of the bubble years, these investors are banking on rental income, not appreciation, as their primary source of profit.

I used some fairly best-case assumptions for valuing these deals. This includes no financing costs (100% cash deal), 1% property tax, 6% property management fee (minor maintenance included), $100,000/year gross income for the investor, 100% occupancy, and they get their asking rent.

So how are these deals working out? Judge for yourself:

7442 St. Tropez Way: Asking rent: $1250. Price paid: $163,760 on February 2, 2009. Price to rent ratio: 130:1. After tax ROI for first year: 5.9%

8474 Sunblaze Way: Asking rent: $1450. Price paid: $430,000 on June 20, 2008. Price to rent ratio: 297:1. After tax ROI for first year: 2.8%

1416 Lockhart Way: Asking rent: $1650. Price paid: $292,000 on May 20, 2008. Price to rent ratio: 177:1. After tax ROI for first year: 4.5%

1849 Acari Ave: Asking rent: $1250. Price paid: $161,500 on November 7, 2008. Price to rent ratio: 129:1. After tax ROI for first year: 5.8%

9108 Jonell Ct: Asking rent: $995. Price paid: $216,000 on January 16, 2008. Price to rent ratio: 217:1. After tax ROI for first year: 3.8%

Are these returns any good? I guess it depends on how you like to spend your time. It's tough to get 6% from any passive investment these days; the 10-year T bill is yielding 2.7% right now. Personally, any active investment that yields less than 5% per year is just not worth it, so I wouldn't be a landlord at these returns.

Sacramento Regional Real Estate Trends for March 28, 2009

More rounding error changes in the indicators this week, though my anecdotal "waiting for Godot" source tells me banks will be dumping REO onto the market in the next month. I'm not holding my breath at this point.

Craigslist Trolling: Wing And A Prayer Edition

Store Closing: Stonelake Landing Shopping Center www.playntrade.com/elkgrove

Retail Fixtures Clothing Store Closing: We are closing our women's boutique in Davis, CA at the end of March and have all of our fixtures on sale.

Out of Business Sale: Computer stuff and office stuff 3235 Sunrise, Rancho Cordova Behind Costco and around rear of building

GOING OUT OF BUSINESS: We're quitting business and our warehouse is full of bargains for you! COME SEE, COME BUY ON SATURDAY, MARCH 28 - FROM 9AM-3PM

Auto Body Shop Equipment: OUT OF BUSINESS......ALL EQUIPMENT AND TOOLS MUST GO.

Restaurant Out of Business sale: Closing down business. Following items still remaining

Fountains priced to sell: Going out of business sale on fountains.

GOIN' OUT OF BUSINESS SALE! - $4888 (G&M AUTO SALE): **INVENTORY BLOWOUT!**

High Speed Copier - $99: Get er' done! Honestly, if we were not out of business I wouldn't dream of getting rid of this great machine.

HP Printers / Konica BusHub's: Going out of business sale. We are selling our printers, copiers and fax machines

SALON WENT OUT OF BUSINESS Selling Everything!: Full service salon has closed its doors. Everything from Hair stations, retail shelving unit, hydraulic stylist chairs, armoir, and product is on sale.

21 Rose Bushes - $15: We have 21 mature rose bushes for sale. Most are shades of red or dark pink, one is yellow, one or two are ivory with pink edges, but none are in bloom at the moment. Buyer will need to dig up whichever bush(es) they want and bring their own supplies (shovel, gloves, something to carry them in, etc.).

3BR/2BA WANTED - $1000: My credit is not so good but i do have a steady income and have not ever previosly been evicted from any resident please reply if you have a home that meet my intrests

asap: the reson i am posting this add is because i just found out i will be haveing to move by the end of the month due to an unknown forclosure. I am in need of a house ASAP!

*****wing and a prayer sale****: Why isn't my boat selling? Why no mails or calls? The main problem over the last 14 months here on Craigslist is non-effective pricing!... Example, a 7 year old wakeboard boat with all the bells and whistles and oh ya, speakers too! loaded that probably sold for 65+k new and may have only 100 hours on it, the seller wants an average of 38-45k w/ and NADA of $49k. That boat will sit there for 10 months and never sell!!!!! That boat should be listed at $29k and it would sell most likely and maybe even a couple thousand less? That’s the reality...

CalPERS Monthly Update

CalPERS total fund size dropped another $3 billion in March to $167 billion. Believe it or not, this 1.7% monthly drop is an improvement, since the fund hit a cycle low of $160 billion on March 11. Given these gyrations in fund size, it's clear CalPERS remains heavily weighted in stocks. The fact that pensions funds would have shown a better return over the last 10 years using a bond strategy has not been lost on some CalPERS peers. Maybe it's time to fire some of these "professional" fund managers, and take a more simple approach?

Sacramento Regional Real Estate Trends for March 21, 2009

We had a minor uptick in inventory this week, notable only because it was the first week over week increase since January. To bastardize a great writer, this may be how the Spring Bounce begins, not with a bang but a whimper. If there's any consolation for the buyers, asking prices remain on the downswing (save Yolo County). Indeed, median prices in Sacramento County have hit Y2K levels. Good hunting!

Sacramento Regional Real Estate Trends for March 14, 2009

No sign yet of a Spring inventory bounce this year; the only bounce we're seeing is an increase in aggregate asking prices as lower-priced inventory is leaving the market and higher-priced inventory is coming on.

I think it's late enough in the year to ask the question: Do you think there will be a Spring bounce in inventory this year? If anyone has a guess, please leave a comment!

Also, you all may have noticed a reduction in the amount of snark around here lately. Well, the gracious hosts of "After The Crash" were kind enough to let me use their blog as a platform for my less stats-related opinion posts. The blog is a co-op run by two of the Calculated Risk commentariat, nova and Hoopajoops, LTD, and features econo-disaster fan fiction, rants, raves, and occasional posts by me. Follow along, or join in if you feel like it.

California State Reveune Data: February 2009

The California state controller's office has released the February 2009 revenue statement (pdf), and it's ugly once again:

Year-to-date collections for the three major taxes were $6.2 billion below (-11.4%) last year at this time. Retail sales were down $1.74 billion (-9.8%), corporate taxes fell by $952.7 million (-18.6%), and income taxes were $3.5 billion lower (-11%) than
last year’s total at the end of February.

After February's $1.4 billion shortfall, the FY2009 budget is running $5.5 billion short of FY2008:


In another ominous sign, this drop is almost a billion dollars worse than the Governor's latest revised FY2009 projections, upon which the latest budget overhaul was based:

The State’s revenues continued to deteriorate in February. Total General Fund receipts were down $973 million from the latest estimates found in the Governor’s January Budget proposal.

The current rate of revenue decline makes the latest budget revision inoperable before it can be enacted. Unless the economy revives, or the federal government provides more stimulus, California is looking as severe government cutbacks in the near future.

Shadow Inventory Analysis For Zip Code 95628

Hopefully, this post can help address some of the questions raised in the comments yesterday and today about the REO "shadow inventory" question. I decided to focus on a zip code my wife and I are looking in, both for the sake of brevity, and self-interest.

95628 is a mid to upper scale suburb located in Sacramento County, and most dwellings are single family houses. According to the Sacramento Bee Home Sales Database, there were 1654 sales transactions in 95628 between January 2006 and January 2009. According to Foreclosure Radar, there were 365 foreclosures during that same time. (Note: The Sacramento Bee database includes some foreclosure sales, so the numbers aren't directly comparable.) Unsurprisingly most of the foreclosures took place in 2008 (206).

I ran a comparison of the 365 foreclosures against both the MLS and the county sales records:

Of the 365 foreclosures during that time, 260 were listed at least once after the auction date. Of those that were listed, 160 were sold. Of the 100 that were listed but haven't sold, 63 were listed at some point during 2009.  44 were sold without having been listed at all, and 46 were taken at auction but have never been sold or listed.  I defined "Shadow Inventory" as houses that haven't been listed after auction, or haven't been listed since 2008 and haven't sold. That leaves 83 foreclosures in 95628 that are off the MLS map, or over 27% of the MLS + Shadow total.

Clearly this is a market in flux, and there is a significant amount of bank-owned inventory in 95628. Ominously, Foreclosure Radar shows another 177 pre-foreclosures there right now, with 49 auctions scheduled. I don't expect the pressure from distressed sales to end any time soon.

Sacramento Regional Real Estate Trends for March 7, 2009

Another week without any remarkable trend changes. Inventory is trending slightly downward, and asking prices are showing a small increase. Sub $200K inventory is falling off in Sacramento and Yolo counties, which may explain the price action. My wife and I were on the housing prowl this weekend, and we visited several open houses and new developments. There was remarkably little traffic, which was due to the great weather (according to some agents we talked to. The weekend before the low traffic was due to the bad weather. :) At all the new developments we viewed, we were the only visitors. So far, according to my data and our on the ground experiences, the market looks absolutely dead.