Monday, August 23, 2010

Losing the Bubble

In aviation, there is a great saying people use when they lose situational awareness, it's called "loosing the bubble." The origin (best I can tell) is related to a piece of equipment that uses a bubble to helps pilots orient themselves to the ground. So when someone "loses the bubble" they become disoriented and don't have a full grasp of what is going on around them.

So all this to say, I have lost the bubble on housing recently. Probably no surprise given that my posts have become very few and far between . So please keep that in mind as you read the following observations.

After a really great June, both sales and prices were up year over year in Folsom and EDH, July was less than stellar as many analysts had predicted (with the end of the government handout). For the most part, we are still off recent lows, but not by much.

What really has me worried as of late, is the build up in inventory. If this continues, we could go back to the era of double digit price declines. According to housing tracker, Sacramento inventory has been steadily climbing, and is now at levels we haven't seen since November 2008. Folsom and El Dorado Hills don't appear to be abnormally high, but we are moving into the time period where it gets harder to move a home.

There are a lot of analysts predicting a double dip in housing. I'm still thinking, for the Sac Metro area, flat year-over-year for several years (no appreciation, but not much depreciation either). Foreclosures and NODs appear to be cresting, but I continually hear stories of new ruthless defaults.

On a personal note, I don't imagine I will make much effort to get my bubble back. I thrive on new challenges (our garden is my new project), so posting activity will continue to be very sparse, and eventually go the way of Sac Landing and SacRealStats.