Thursday, October 30, 2008

Local Builders Behaving Badly?

From the Mountain Democrat:

"West County home-building company known for constructing multi-million dollar homes in Serrano has been accused by one of its clients of fraud and forgery.

Ultimate Development Inc., an El Dorado Hills-based company that reported $13.5 million in construction activity in 2007, is not only being sued by Serrano homeowners Robert Keszler and Jennifer Cutts Keszler, but is also being investigated by the State Contractors License Board.

The state licensing board is investigating what it calls a probable violation for a willful or fraudulent act that leads to substantial harm, theft and forgery. The investigation stemmed from a complaint being filed by an unknown party. "

Wednesday, October 29, 2008

Making a Move

Now that we are no longer actively looking to purchase a home, Mr. BT and I have been struggling with whether to find a less expensive rental that would suit our family better for the long haul. Our current rental is much larger than we need, and we hear the local elementary school is impacted which may force us to drive our daughter across town every day (all this for only three hours of kindergarten).

But moving involves a lot of trade offs in terms of time and $$. The premise is based on two questions that we continually struggle with. How much rent savings justifies the move, and how long do we need to be in the new rental to make the rent savings worth it. There is a lot of time and hassle involved in a move, and some expense (moving costs, utilities etc.).

Moving a family of four is not something I take lightly, even if it is a local move. My kids are too young to be of any help. In fact, they have a special knack for unpacking and destroying any semblance of order. Which will likely make moving more even more difficult.

Its not like our current economic climate will last forever....I am hoping we will know by spring how bad and how long of a recession we are in for (V, U, or L shaped recession). Perhaps by spring prices on the higher end (most of the homes in East Sac, Davis, Arden, CP, EDH, and Folsom) will finally be in line with the rest of the market (Pending Sales are way down according to my weekly screen scrape). According to Housing Tracker, the 75th percentile has started moving downward again, after a bounce earlier in the year.

We aren't too far from what I consider equilibrium (based on income and rent multipliers etc.). However an "L" shaped recession could easily push us past that point.

Wednesday, October 22, 2008

Weekly Screen Scrape - Another Milestone

Homes in my weekly screen scrape have broken through another barrier. There are now 2 homes that meet our criteria (in 95630 or 95762) listed below the 300k mark (and 41 homes between 300-400k).

This is encouraging news for us, as we would only consider homes we can afford on one salary at this point.

Since January of this year, price per square foot of homes in my screen scrape has fallen by 11%. However there is a great deal of disparity out there. Price per square foot ranges from $114, to $235. With EDH primarily on the lower end, and Folsom primarily on the higher end (if I had to guess this is due to home size and extra taxes/fees that EDH homes tend to have).

Sunday, October 19, 2008

Registration Deadline

Just a friendly reminder that the deadline for California voter registration is Monday. For more information see the Secretary of State website.

It may not always feel like it, but we live in a democracy. For our government to be effective, citizens need to be informed, participate and vote.

No complaining if you don't vote.

Thursday, October 16, 2008

The Day, the Music Died

I am now on the books for a 40 hour work week. This leaves me with less time to think about, and collect data on our local housing market. Separate, but certainly related, due to economic events way beyond our control, we have decided to put our home search on hold.

Thus I will be posting very infrequently from here on out (but hopefully once a week), until we decide to start up our search again. The timing seems apropos, seeing as how national economic events have completely overtaken our local housing market.

I don’t plan to continue tracking home inventory and the subsequent month’s inventory by zip code any more. Both metrics have become rather useless lately due to the influence of distressed inventory. The monthly screen scrape will continue, but I don’t plan on reporting results unless they are in some way significant.

To the tune of American Pie:
A long, long time ago...I can still remember how
That housing data used to make me smile.
And I knew if I had my chance,
That I could make those people dance,
And maybe they'd be happy for a while.

But October made me shiver,
With every blog post I'd deliver,
Bad news on the RSS feed...
I couldn't take one more deed.

I can't remember if I cried
When I read about our wild ride
But something touched me deep inside,
The day the music died.

Soo..Bye, bye miss Average Buyer
Drove my Chevy to the levee but the levee was no higher
And good ol' boys predicting it could get dire
Singing no time to wallow in the mire,
no more time to wallow in the mire.
Best to all, on surviving our wild ride.

Tuesday, October 14, 2008

Hitting our Home Away From Home

Our household received some very shocking news this morning. Our daycare was closing two of its classrooms, including the one our son is in. Apparently, California's tough economic times have now trickled down to the service sector. The daycare/preschool has seen their enrollment drop substantially with parents getting laid off, or looking for less expensive care etc.

We just found out today and have to find care by next week. I'm in serious shock.

One of biggest factors influencing our home search in foothill communities along the 50 corridor, is the fact that we really like our daycare/preschool situation.

Monday, October 13, 2008

Can you Bank on It?

Last month we pulled our down payment out of a savings account at national bank (where we had banked online for the last 8 or so years) and put it into a regional institution. Call me paranoid, but I like the idea of having a branch office in times of turmoil.

Wondering how others feel about this national vs. regional issue when it comes to banking. Do you have a local/regional bank or credit union to recommend? Or do you feel big national banks like BofA are the way to go, since they are likely "too big to fail"? Or do you chase the best returns, wherever they may be?

I've never been one to shop banks.....I tend to be a creature of habit and convenience.

I understand the FDICs need to keep people from pulling their money out of troubled institutions, however it would be nice, to have some understandable and objective ratings as to an institution's liabilities and exposure. I used Bankrate's safe and sound ratings to check but they seemed kinda generic.

In particular, with the local/regional institutions, I worry about their commercial real estate exposure. It can't be a pretty picture. All I see around EDH is empty commercial space, with even more being built!

Friday, October 10, 2008

Two Year Anniversary

This month will mark the beginning of our third year as renters in the Sacramento area. I still count my blessings that we didn't buy immediately after moving back to CA.

These are very somber times. According to yesterday's WSJ, California led the way into the recession. With all the job losses my friends and family have experienced, I am relieved to hear it's considered a recession around here, cause I would hate to think what things would look like if we hadn't hit recession territory yet.

Even though some bubble bloggers take joy in the aftermath, I am certainly not one of them. Although I must admit, its nice to know I didn't spend 60k on a top B-school education, only to find out everything I learned about fundamentals was rubbish.

But in every other sense, its absolutely no fun being right. I knew there was a housing bubble, and that stocks had gotten a bit out of control, not realizing the extent of the trouble we were in,. However I had no idea, when I wrote about it last October that we would be in such dire straits a year later.

Unfortunately, I am not seeing many factors kick in that will bring an end to the troubles we are experiencing. By my calculation, using today's Zillow data, our starter home in the D.C. area has at least another 10% to fall, in order to reach a somewhat reasonable level.

I guess the only bright spot right now is that oil and other commodities have retreated substantially. (I probably obsess over oil more than the next person, as my industry, aviation, lives and dies by the price of oil).

Rant on/
Of course this couldn't happen at a worse time. If other government agencies are like the one I work with, so much forward progress is on hold waiting for the next administration. With the exception of the Treasury Department, the rest of the federal government seems to be in a 9 month paralysis. No one wants to make a decision or take action. From my perspective, this is incredibly frustrating, as we are wasting precious time.
/Rant off

Wednesday, October 8, 2008

Market Stress Update Oct 2008

Some interesting developments over the last month. Folsom foreclosures shot through the roof, and NODs are down. If I had to guess this is a direct result of the legislation recently passed which requires lenders in CA to contact the borrower (or something like that). Mr. Mortgage has a write up if you want more details.....and his observations mirror what is happening here.

If this is the case, then starting real soon, we should see a surge in NOD activity.

I also started tracking market stress in Auburn last month, and should have some sales statistics to pair up with the market stress data for next month's update (courtesy of MCB44).

Tuesday, October 7, 2008

401-Keg Plan

A little mid-day humor. If your 401 looks like mine, you could probably use it.


If you had purchased $1000.00 of Fannie Mae one year ago, it would now be worth $31.00.
With Freddie Mac, you would have $37.25 left of the original $1000.
With Lehman Brothers, you would have less than $5.00 left.
If you had purchased $1000.00 of AIG stock you would have $44.00 left.
If you had purchased Bear Stearns, you would have nothing left

But, if you had purchased $1000.00 worth of beer one year ago, drank all the beer, then turned in the cans for the aluminum recycling refund you would have $214.00. Based on the above, the best current investment advice is to drink heavily and recycle.

This is called the 401-Keg Plan.

Historical Housing Data for Folsom & El Dorado Hills

For some reason the Sac Bee didn't post their Data Quick data by zip code, so all I have this month is Melissa Data. While Melissa Data is certainly better than nothing, it does tend to be erratic, as I believe it also captures new home sales.

I have heard those in the real estate profession claim that sale are up (implying that the market is on its way back), but as you can see from the charts below, they are nowhere near historical levels. Last year was a terrible year, so the fact that sales may be higher than last year is setting a really low bar. This is precisely why I like to get a broader historical perspective on the data.

Housing Tracker is showing a lot of stickiness at the 75% asking price range for the Sac Metro Area.

Sunday, October 5, 2008

Surprisingly Savvy

For the last year and a half we have attended open homes when we don't have something scheduled on a Sunday afternoon.

Up till recently, I haven't been all that impressed with the Realtors we have met (yes I know, usually the junior folks looking to bring in business). Normally we get the typical "it's a great time to buy" routine. Sadly I often feel I know more about the local market forces than some of these professionals.

However at two recently open homes, bank owned homes in Serrano, we met very savvy and knowledgeable Realtors. It was so very refreshing to hear their take on the market.

In the past, maybe I was just looking for Realtor's that validated my world view......but these two guys, seemed to know the details of the broader market, and had some facts and data to back up their opinions. I am happily swayed by opinions that are backed with sound theories and data. Up till now, many of the Realtors I met rarely had much to back up their claims.

Perhaps its a sign of the times, maybe all the soccer mom Realtors have left the market, leaving only the seasoned veterans and business savvy. In any case, I was really pleased to have a real and honest conversation (up till now I only smiled and nodded, not wanting to argue why now is not really a good time to buy, especially at the price they were asking ).

Thursday, October 2, 2008

Homeowner bailouts

I've switched sides. I am now in favor of bailouts for homeowners, flippers, speculators, investors ... everyone! So if loans need to be written down (including in bankruptcy court), or interest forgiven, or interest reduced, or principal reduced, I'm all for it.

In return, each person being bailed out will sign an agreement to pay from any future sales proceeds, 80% of the profits to the lender who took the initial financial hit on the bailout. If they aren't willing to share the profits, then no bailout.


P. S. Although this is my original idea, I seriously doubt I am the first to think of it!

Wednesday, October 1, 2008

Oh....Range on the Home

Many of the online tools I use, while very helpful, do not allow you to specify a range (except for price). In most zip codes this would not be a problem, but in the land of largess along the 50 corridor, it can be somewhat frustrating.

In particular, a home size range is needed to weed out the enormous homes (over 3000 sqft.). I guess all the search tools assume that bigger is better, so they only let you specify the bottom of a range.

Of course in some small way, its nice to actually have this problem. Two years ago, a 3000+ home would never have shown up in my criteria.