Thanks to Lander’s detective work….I got a hold of the Global Insight housing study as well as the raw data! Based on the data, I project an additional 20% decline still to come in these two markets (all else being equal…which we know its not…but it at least gives us something to go by).
This figure was derived by taking Sacramento’s overall decline from peak (Q3 of 2005 to Q1 of 2007....a drop of 22%) so far, and comparing it to the decline so far forFolsom and El Dorado (around 15% right now). The study currently shows a 30% overvaluation for the Sacramento MSA. I then computed the current overvaluation for Folsom and EDH based on this ratio. The Sacramento MSA data came from the Global Insight study, and the Folsom & EDH decline was taken from my monthly historical charts of Dataquick/Sacbee data.
After looking at the time series of data available, I was very pleased since they showed 2002 to be the “just right valuation”.This is the same conclusion I had come to in my original data analysis (albeit using some similar data).
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6 comments:
I'd be very happy with 2002 pricing! Good work.
I might settle for 2003 prices.
BTW, I got curious about how I might measure "denial" levels among sellers: in my small local sample, sellers who had owned their houses less than 850 days had priced their properties at an average of 112% of the amount they had paid. So, they're still looking for a profit, despite having bought near the peak.
Of course, some of these increases will reflect improvements or sq. ft. additions since last sold. Also, most of these sellers are pricing in a 5-6% sales commission. Still, it seems clear that we are still on the early "denial" part of the curve, and can expect much bigger price drops as we proceed to "capitulation."
AB - even if I agreed with Global Insight's Boston based views, I wouldn't expect 2 of the nicer markets in the region to experiance "average" declines.... I expect the major hits to be in the areas with the most amount of inventory, foreclosures and dead sales volumes... Elk Grove, West Sac, Natomas...
But you can wish...
One thing about ED that is different than the other areas is some extreme increases in building and transportation fees... this means that in the future (maybe already), builders will not be able to undercut existing resale pricing, reducing supply at lower price ranges.
Sippn....I must not have been very clear in my description. I took a ratio of Sacramento to the Folsom EDH to account for the fact that they won't fall nearly as much. From the current numbers it only looks to be 2/3 the decline of the overall Sacramento Market.
LOL, I'm noticing that Sippn always challenges postings on the blogs-
"even if I agreed with Global Insight's Boston based views, I wouldn't expect 2 of the nicer markets in the region to experiance "average" declines"
and then NEVER responds to the response -
"I took a ratio of Sacramento to the Folsom EDH to account for the fact that they won't fall nearly as much. From the current numbers it only looks to be 2/3 the decline of the overall Sacramento Market"
BT - sorry, now saw your ratios - good show!
Anony - get a handle! you haven't been around long, apparently.
Most across the country, database type analysts, look at markets individually, without considering how they interrelate.
Sacto market is typically impacted by the high income and equity of bay area and so cal buyers who come here, especially EDH.
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