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Home sales gravity: Higher-end prices in capital area can drop farther

Friday, October 23rd, 2009

After years of falling values and a massive sell-off of foreclosed homes in the Sacramento region, it’s easier now to believe real estate agents when they say the market has bottomed out.

But wait. That’s the lower end, houses priced at roughly $300,000 and under, the zone of repos and bidding wars between investors and first-time buyers.

The higher end of the Sacramento-area market – say anywhere from $500,000 to $1 million or more – still has ample room to fall unless this economy surprisingly rebounds. So owners are whacking harder now on initial asking prices.

You can see that in new statistics from home search firm Trulia.com. The company says homeowners with listings in El Dorado, Placer, Sacramento and Yolo County have collectively reduced asking prices by $156 million since putting out for-sale signs.

About 40 percent of that markdown is from homes priced at $1 million or more. On average, these richest owners have cut their prices by $271,000 in El Dorado County, and $334,000 in Placer County.

Up in the real estate heights, it remains more expensive for buyers to get financing. The move-up buyer pool is smaller than ever as thousands at the lower- and mid-market have seen their equity shredded.

Those who can buy at higher prices are savvy and watching for capitulation, meaning “price reductions and opportunity,” said Bob Bronswick, head of Coldwell Banker’s residential brokerage for the Sacramento and Lake Tahoe region. For owners, it’s all about what Bronswick and others in the trade call “getting a little more realistic.”

Bronswick said the higher end is a little stronger than a year ago. Yet numbers from the Sacramento Association of Realtors show just 2.9 percent of October’s buyers paid $500,000 or more in Sacramento County and West Sacramento. At today’s pace, it would take two years to sell the houses in SAR’s territory priced at $650,000 or more, said association President Charlene Singley. The market as a whole has a much smaller inventory of unsold homes – just 3.2 months worth.

This story is repeated all over California. There’s a market for it still,” Bronswick said of higher-end homes. “But it’s a little bit softer.” In a business where no one likes to be negative, and inside an economy that hasn’t got its act together yet, that’s probably putting it – well, softly.

 

Rents headed down again

 

While we’re speaking of deflationary real estate, area apartment rents have returned to late 2006 levels. That’s after a yearlong slide that continued in July, August and September, Novato-based industry tracker RealFacts reported this week.

No wonder capital apartment complexes are offering “two-bedroom blowouts” or a four-bedroom lease for the price of two bedrooms.

RealFacts pegged average third-quarter rent at $946 for 76,000 apartment units in El Dorado, Placer, Sacramento and Yolo counties. That’s down from $974 a year ago. The average two-bedroom, two-bath unit goes for $1,062, said the firm.

Rents at large apartment communities are falling in tandem with higher vacancies as more people who have lost their jobs double up, live at home or rent houses from people unable to sell them.

Average monthly apartment rents and occupancy rates in capital-area cities:

• Davis: $1,354; 96.4 percent.

• Elk Grove: $1,098; 88.9 percent.

• Folsom: $1,138; 90.4 percent.

• Rancho Cordova: $814; 93.5 percent.

• Rocklin: $1,047; 93 percent.

• Roseville: $1,066; 92.9 percent.

• Sacramento: $929; 92.4 percent.

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Sacramento’s July home sales mark a 2009 high

Monday, August 24th, 2009

Sacramento-area sales of new and existing homes reached a 2009 high in July as 3,815 buyers closed escrow, researcher MDA DataQuick reported this morning.

The sales tally included 3,495 existing homes and 320 new homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to the La Jolla-based researcher. Six of every 10 closed escrows were in Sacramento County, said DataQuick.

July sales beat June’s 3,758 total. But it was well below 4,126 closings in July 2008.

It’s the second straight month that sales have fallen below last year, when a massive supply of discounted bank repos fueled a sharp uptick in sales to first-time buyers and investors. The share of repo sales, which exceeded 70 percent early this year, fell below half in Sacramento County in July, according to the Sacramento Association of Realtors.

A dwindling share of repos drove up the county’s median price again in July to $180,000, DataQuick reported. That’s after two months holding steady at $175,000.

More significantly, the rate of year-over-year price declines greatly slowed again in July in Sacramento County, with prices 14.3 percent below the same time last year. For much of the past two years Sacramento County’s median prices – where half the homes sell for more and half for less – have slipped 30 percent or more from the same time a year earlier.

Regional highlights from DataQuick for new and existing homes combined:

• Sacramento County reported 2,318 sales, up from 2,284 in June. The $180,000 median price compared to $210,000 in June 2008.

• Placer County reported 617 sales, up from 598 in June. The county’s median sales price of $295,500 was down 14.3 percent from $345,000 last year.

•El Dorado County’s 237 sales were up from 218 in June. Its median price, $330,000 was down 15.4 percent from $390,000 in July 2008.

• Yolo County’s 240 sales were up from 225 in June. The county’s $281,500 median price was down 3.9 percent from $293,000 the same time last year.

• Sutter County reported 110 sales, down from 123 in June. The county’s $160,000 median price was down 21.2 percent from last year’s $203,000.

• Yuba County’s 113 sales were also down from 136 in June. The $155,000 median price was down 15.5 percent from $183,500 in July 2008.

• Nevada County reported 151 closed escrows, up from 143 in June. The county’s median sales price, $320,000, was down 14.1 percent from $372,500 the same time last year.

• Amador County’s 29 sales were down from 31 in June. Its $197,250 median price was down 32.6 percent from $292,750 in July 2008.

Regionally, the number of for-sale signs also fell for a 23rd straight month in El Dorado, Placer, Sacramento and Yolo counties after peaking at 16,262 in Aug. 2007. Sacramento-based researcher TrendGraphix reported 6,572 homes on the market in the four counties as July ended, the fewest in four years.

TrendGraphix said 14 percent of the for-sale signs were tied to bank repos and 27 percent to buyers seeking short sales, where banks accept less than owed to avoid the higher costs of foreclosing.

The real estate service Trulia also reported this week that 27 percent of Sacramento-area listings have cut prices, with the average drop being 11 percent.

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Suburban Sacramento land rush? Big homebuilders buy up ‘finished’ lots

Friday, August 14th, 2009

Sacramento’s new-home sales are still down and out, but some capital-area builders are betting money that the region’s suburbs will soon resume their growth boom.

They’ve begun snapping up ready-to-build home lots at prices ranging from $25,000 to $67,000, setting the stage for a new suburban land rush.

The phenomenon suggests that a real estate market in decline for four years may be resetting for a new business cycle, some say.

Builders looking for land are focusing on “finished” lots, which already have government approvals, streets and utilities.

“They just have to pour a slab and start building,” said Kathryn Boyce, Sacramento analyst for Costa Mesa consultant Hanley Wood Market Intelligence.

Capital-area builders say prices for finished lots have risen 20 percent since April as giant public builders muscle back into the region’s land game for the first time since 2005.

Boyce said the land rush is greatest in Placer County, followed by Folsom and Elk Grove.

Hanley Wood counts 17,251 finished lots in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. Many are owned by lenders that repossessed them. Others are owned by development firms that need to raise cash. Investors own still more.

The recent escalation in land prices has led some in the industry to question whether they can make money when so many homes are priced at $250,000 or less.

“Prices might be going up too fast,” said Tim Lewis, owner of Roseville-based Tim Lewis Communities.

Lewis recently bought lots at two projects in the capital region and one in Reno – his first in that city. “I’m cautiously looking at projects, but I’m certainly not on a buying frenzy like some of these publics (publicly traded builders) might be,” he said.

Even with the recent rise, land prices in the Sacramento region are nowhere near the dizzying levels of five years ago. At the height of the real estate boom in 2004, builders paid up to $150,000 for finished lots in Roseville, and up to $120,000 in Natomas and Elk Grove.

Still, the renewed scouting and buying by building giants has sent a buzz through an industry that has endured prolonged downsizing and financial trauma.

“There is a consensus out there that we are at the bottom or pretty darn close,” said James Radler, a Roseville-based land broker with Park Place Land Advisors of Irvine.

Radler and others say publicly traded home builders such as Los Angeles-based KB Home, Texas-based D.R. Horton, New Jersey’s K. Hovnanian Homes and Meritage Homes, headquartered in Arizona, are among those looking at lots and buying. Others in the game include private Arizona-based building giant Taylor Morrison. All are among the capital region’s top builders.

“These guys need lots,” Rad- ler said. “If they don’t do deals, they don’t build homes, and if they don’t build homes they aren’t in business.”

Most of the builders didn’t respond to Bee inquiries, which is not surprising, say those who watch the industry. Said Boyce, “They’re trying to position themselves without anybody knowing.”

“They all want to be under the radar as much as they can,” added Dean Wehrli, vice president and Sacramento analyst for Sullivan Group Real Estate Advisors of San Diego.

During the housing downturn that began after area home prices peaked four years ago this month, many large builders sold off home lots to maintain balance sheets. A few closed down divisions and left the area. Now, though capital-area home building remains sluggish – just 1,764 sales the first half of 2009 – firms are competing again for lots in a market they expect to begin rising as early as 2010.

Industry analysts say big Wall Street home builders, especially, need more lots to keep operations going while waiting for a new cycle.

“They essentially haven’t done any buying for four years,” said Radler.

The supply of lots is also constrained by the closing of Natomas to new building permits through 2011. That region, popular with buyers and builders for much of this decade, is under a building-permit moratorium until levee fixes bring 100-year flood protection.

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Home Front: Competition frustrates first-time buyers….

Wednesday, August 12th, 2009

Laurel Bane, 28, is a working professional with a down payment in hand. Hunting for her first home in Natomas, she’s made six offers since March. And she’s lost every house.

“It’s been a bidding-war hell,” Bane said. “I increased my offer by $12,000 on one, and I still lost out. I was $13,000 over asking price on another and still didn’t get it.”

Welcome to the punishment being inflicted this summer on first-time buyers. Considered saviors of the region’s real estate economy, thousands like Bane are trudging through minefields where their homebuying dreams are repeatedly blown up.

That’s because at the lower end of the price scale there are far more potential buyers than homes for sale.

Horror stories increasingly abound across a Sacramento housing market dominated by repos and short sales.

Home Front is hearing from buyers who expected it to be easy but are being outbid by investors. When they do offer more than investors, the bank often takes the lower bid because it’s cash.

Others say offers are made without getting any response.

The only way to compete is to bid well above the listing price. But when appraisals come in below the offer, the deal is killed.

The alternative is short sales, in which banks take less than owed to avoid the higher costs of foreclosures, but they can take months to complete.

Another snag: Home sales increasingly involve “flippers,” said Smith, referring to investors who buy properties that they try to quickly resell for a profit.

But if the so-called flipper hasn’t held the home for at least 90 days, the first-time buyer can’t get a Federal Housing Administration loan, which requires only 3.5 percent down.

“Minefield? That’s an understatement,” said Smith.

For Bane, who’s looking for a house below $200,000, it’s not been easy.

“I’m just looking for a small, manageable house for myself and one roommate. Yet everything I find is sold within the day,” said Bane, a facilities business coordinator at Rancho Cordova-based Vision Service Plan. “We’ll write an offer and submit it, and then find it was already sold.”

Bane had expected she’d be moved into her first home by now. With the federal Nov. 30 deadline for an $8,000 first-time buyer tax credit approaching, she’s fretting.

What’s roughing up buyers like Bane is a shortage of bank repos – and an unwillingness of most private homeowners to sell at today’s prices. For reasons that aren’t fully understood, banks have held thousands of repos off the market. The result is bidding wars, especially for homes listed below $200,000.

With defaults and foreclosures back on the rise regionally, I believes a “substantial” new supply of repos may hit the market next month.

“I am hoping that’s true because right now, I’m telling you, it’s tough on buyers.”

In Rocklin, would-be buyer Karin DeFoe said she’s just had her fourth offer fall apart. DeFoe, house hunting for her college-age son, said, “We haven’t had any luck.”

Last month, she told Home Front she’s lost offers on three houses to cash investors. All made lower bids than hers.

“All the repos are priced real low to start bidding wars,” she complained.

To Bane, it’s just plain frustrating.

“We’ll go into houses and people are there before us, and people are there after us,” she said. “Every house we look at has lines of buyers.”

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Get Ready! Free Fall In Home Prices Soon

Wednesday, May 27th, 2009

If you think home prices are low now, just wait because we have an encore.  Here’s why:

If we use California as an example, we know that the average price of a home was around $436k in 2006.  We also know at that same time that affordability was less than 13%, a historic low.  Take this combination and you have people getting into loans they couldn’t afford called sub-prime loans.

Most of these sub-prime loans have worked their way into the system but not through the system.  In fact, an enormous number of them (that means the majority) have been held back due to moratoriums.  The goal of the moratorium was to keep people in their homes but the programs didn’t work.  Over 60% of people re-defaulted on their loans after a modification, ergo the recent demise of the moratorium.

 

After the moratoriums expired it allowed banks to continue the foreclosure and eviction process, which typically takes 2-3 months at least.  The moratoriums ended in late March so what we have is a housing sale boom coming this Summer, keep your eyes open for June-August but…

There’s more!  Don’t think that after we get through this bulk of inventory that prices are going to rise again because they’re not and probably won’t in our lifetime (that’s inflation adjusted of course).

There’s more defaults to come in the form of alt-a and adjustable rate mortgages that are due to reset all the way through 2012.  With that in mind, there will be inventory for several more years.  Only after that inventory is worked through can prices begin to stabilize.

Back to California, we’ll have thousands of homes hitting the market in hard hit areas like Sacramento and Elk Grove, arguably the start of this crisis as determined by several national news agencies. So if you think there are lots of empty homes on your block now, wait until August because it will get worse.

If you’re in the market to buy a home, do it this year for the tax breaks.  There’s an $8000 federal tax credit and more available through your state.  In California you can get an additional $10,000 for buying a new home.

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