The anecdotes keep piling up. Its seems many first time buyers are attempting to get back in the market now that homes are becoming reasonably affordable (under 300k). Unfortunately they are continually being beat out by investors.
It appears we have a game of musical chairs, investors buy foreclosed homes and rent them to folks who were foreclosed on. This is a closed loop, and does not set off the needed move up buyer chain reaction . I believe this is why homes over 500k are not selling very well.....there just aren't enough move up buyers out there!
As long as foreclosures dominate sales statistics, the chain will be broken. Homes have to be bought from real people, looking to move into another (larger) home for the chain to be repaired. One good to come of this: rent's don't go up, due to oversupply.
From what I understand, the government gives generous tax benefits to real estate investors, which makes rentals property an attractive investment even if rent doesn't cover all expenses.
Friday, April 25, 2008
Thursday, April 24, 2008
Cameron Park Trivia
I told BT I would do a post today, but I am not currently able to do my intended post due to "operator malfunction" on my part. So ...
The Commerce Dept. reported a few minutes ago that new home sales (contracts signed, not closed, and subject to reduction before closing due to cancellations that are not counted by the Commerce Dept.) dropped 8.5% to 1991 levels, with price declines of 13.3% year-over-year. I doubt that any of the regular readers would call this "news."
Cameron Park has no new home developments (that I am aware of), so the only measure is existing home sales. CP has long been known as the "poor man's El Dorado Hills," but it is nonetheless home to many. It is the only Zip Code that I watch with regularity. I know my stats don't compare on any level with those of BT and others, but here is what I observed this a.m.:
249 total listing (single family homes only, no condos)
29 listings +$1 million, with 3 pending
77 listings $500k-$1 million, with 4 pending
121 listings between $300k- $500k, with 24 pending
22 listings under $300k, with 7 pending
Observations: I have watched five specific homes in the $479k-$550k, go pending in the past, only to go back on the market. Of those five, two have gone pending one time and are back on the market, one has gone pending twice and is back on the market, another has gone pending three times and is pending again, and the last appears to have closed.
I have not seen any home +$1 million, go pending in the past 6 months and I'm frankly surprised to see it now. My guess is that this is a spring time phenomom.
The +$500k homes are simply languishing on the market with daily price decreases coming in my morning emails from the REO's and "near" REO's.
Paul
The Commerce Dept. reported a few minutes ago that new home sales (contracts signed, not closed, and subject to reduction before closing due to cancellations that are not counted by the Commerce Dept.) dropped 8.5% to 1991 levels, with price declines of 13.3% year-over-year. I doubt that any of the regular readers would call this "news."
Cameron Park has no new home developments (that I am aware of), so the only measure is existing home sales. CP has long been known as the "poor man's El Dorado Hills," but it is nonetheless home to many. It is the only Zip Code that I watch with regularity. I know my stats don't compare on any level with those of BT and others, but here is what I observed this a.m.:
249 total listing (single family homes only, no condos)
29 listings +$1 million, with 3 pending
77 listings $500k-$1 million, with 4 pending
121 listings between $300k- $500k, with 24 pending
22 listings under $300k, with 7 pending
Observations: I have watched five specific homes in the $479k-$550k, go pending in the past, only to go back on the market. Of those five, two have gone pending one time and are back on the market, one has gone pending twice and is back on the market, another has gone pending three times and is pending again, and the last appears to have closed.
I have not seen any home +$1 million, go pending in the past 6 months and I'm frankly surprised to see it now. My guess is that this is a spring time phenomom.
The +$500k homes are simply languishing on the market with daily price decreases coming in my morning emails from the REO's and "near" REO's.
Paul
Wednesday, April 23, 2008
Updated Historical Charts: Folsom & El Dorado Hills
Not much time for commentary today....but notice how sharply the sales dropped off in the MelissaData when compared to the DataQuick. I believe the driver is new homes, whose values also tend to be higher.
Tuesday, April 22, 2008
March/April 2008 Month's Inventory
Total month's inventory is now at a low since I have been collecting data. The data is ranked by most month's inventory to least. 6 month's inventory is considered a balanced market by most in the industry. Sales are from DataQuick (thanks for the link DJ) and inventory is gathered for Single Family Homes from ZipRealty.
No shortage of head scratching going on here. Several expensive zips, Granite Bay, El Dorado Hills, Davis, Loomis are way at the top, and others, are way at the bottom like Arden, Downtown and East Sac, Folsom and Roseville.
Lower inventory will likely stop some of the price free fall some parts of Sacramento have been experiencing lately, but I imagine banks will still be pricing their properties rather aggressively to make sure that if anything sells, it will be their property. Speaking of sales, there seem to be a lot of cheers that sales are up from those in the industry, but the folks over at BMIT put the trend in perspective for us.
No shortage of head scratching going on here. Several expensive zips, Granite Bay, El Dorado Hills, Davis, Loomis are way at the top, and others, are way at the bottom like Arden, Downtown and East Sac, Folsom and Roseville.
Lower inventory will likely stop some of the price free fall some parts of Sacramento have been experiencing lately, but I imagine banks will still be pricing their properties rather aggressively to make sure that if anything sells, it will be their property. Speaking of sales, there seem to be a lot of cheers that sales are up from those in the industry, but the folks over at BMIT put the trend in perspective for us.
Monday, April 21, 2008
If at first you don't succeed.....
......try, try again. Looks like we will be giving it another go. We found an REO this weekend that fits all our criteria, and is modestly priced. I jumped on the chance, when my husband expressed an interest in this home....which brings me to today's subject, finding a place we both want to call home.
Mr. BT and I, like many couples, value the various aspects of a home differently. I tend to want a smaller home on a medium lot.....whereas, Mr. BT tends to think bigger is better in every respect. Lucky for me, he doesn't like HOA and Mello Roos, so that keeps him out of the new developments with monster homes.
I have heard that remodeling a home is one of the biggest causes of marital discontent (typically finances tend to be number one).
Neither of us tends to be very hard over on any particular item so finding something we both like isn't that hard. But finding something we can both get excited about, and a price that is well within our budget is much more rare.
Many of us talk of finding our dream home.......but is your idea of a dream home the same as your partners?
Mr. BT and I, like many couples, value the various aspects of a home differently. I tend to want a smaller home on a medium lot.....whereas, Mr. BT tends to think bigger is better in every respect. Lucky for me, he doesn't like HOA and Mello Roos, so that keeps him out of the new developments with monster homes.
I have heard that remodeling a home is one of the biggest causes of marital discontent (typically finances tend to be number one).
Neither of us tends to be very hard over on any particular item so finding something we both like isn't that hard. But finding something we can both get excited about, and a price that is well within our budget is much more rare.
Many of us talk of finding our dream home.......but is your idea of a dream home the same as your partners?
Friday, April 18, 2008
Stressed Out
When we made our offer on a home last February, I was incredibly nervous about market conditions, so I started to track active NODs (preforclosures) and Foreclosures via http://www.forclosure.com/ to get a feel for how much downward pressure there would be on prices.
Looking at the market stress data below, I am rather grateful our deal didn't go through. In the seven weeks I have been tracking the data, foreclosures have almost doubled in these two zip codes.
Anyone who argues we have hit bottom around here, is severely delusional.
Thursday, April 17, 2008
Why do we Wait?
Why do we wait out the housing bubble? Why do some hate giving money to the government (taxes)? Why do others regularly fret over their investments? Why do we clip coupons and shop around for the best deal?
In the end, I guess it boils down to having more money to do with as we please. But what exactly does that get us?
Most Americans seem to view money as an end in itself, a symbol of status and power. So I was delighted to see a column in the WSJ that addressed this issue a little differently. What’s more, most of the benefits outlined in his column do not require vast sums of wealth. It’s all about lifestyle choices and pursuing what makes us happy. Of course, this avenue of thought caused me to reflect on my personal situation.
Since we moved back to California I have been the happiest I can remember (which to some degree, I define as the absence of stress in my life). In fact, I keep waiting for the other shoe to drop because my life’s experiences have taught me to expect tough times. We have paid off our enormous student loans (around 100k), so the only debt we have is a small car payment. Now that we are back in California, we are just a short drive away from family and friends, whom we see on a regular basis. We have also met some really nice families and made some friends (I have come to realize that the snobby attitude in EDH comes more from the people who work here, as opposed to the people who actually live here). And last, but certainly not least, I have a family and a job I love. None of these things are directly tied to our income level. In fact we took a sizable pay cut, in Mr. BT’s salary to come back to California.
All this to say, I don’t think money necessarily buy's happiness, but it does allow you spend more time on the things you enjoy (assuming you choose to do so). All the $$ we are saving by waiting out the bubble won't necessarily make us happier, but it will relieve financial stress and will likely go toward our childeren's college education.
In the end, I guess it boils down to having more money to do with as we please. But what exactly does that get us?
Most Americans seem to view money as an end in itself, a symbol of status and power. So I was delighted to see a column in the WSJ that addressed this issue a little differently. What’s more, most of the benefits outlined in his column do not require vast sums of wealth. It’s all about lifestyle choices and pursuing what makes us happy. Of course, this avenue of thought caused me to reflect on my personal situation.
Since we moved back to California I have been the happiest I can remember (which to some degree, I define as the absence of stress in my life). In fact, I keep waiting for the other shoe to drop because my life’s experiences have taught me to expect tough times. We have paid off our enormous student loans (around 100k), so the only debt we have is a small car payment. Now that we are back in California, we are just a short drive away from family and friends, whom we see on a regular basis. We have also met some really nice families and made some friends (I have come to realize that the snobby attitude in EDH comes more from the people who work here, as opposed to the people who actually live here). And last, but certainly not least, I have a family and a job I love. None of these things are directly tied to our income level. In fact we took a sizable pay cut, in Mr. BT’s salary to come back to California.
All this to say, I don’t think money necessarily buy's happiness, but it does allow you spend more time on the things you enjoy (assuming you choose to do so). All the $$ we are saving by waiting out the bubble won't necessarily make us happier, but it will relieve financial stress and will likely go toward our childeren's college education.
Wednesday, April 16, 2008
Collateral benefits of the housing downturn ...
This morning as I was driving down Hazel Avenue during commute traffic, I noticed the absence of contruction trucks which got me to thinking about the collateral benefits of the dramatic downturn in new construction.
First on my list was the dearth of gravel trucks and not having to deal with chipped and broken windshields from thrown rocks.
Then I got to thinking about how long it has been since I've heard a traffic report during the commute, reporting the daily "ladder in the rodeway."
Lastly, the total number of cars on the road appears to me (and others) to have declined. Presumably, this is at least partially due to the $4.00 gallon gasoline, but the missing contruction trucks is another factor.
What other "benefits" have you observed from the housing downturn?
Paul
First on my list was the dearth of gravel trucks and not having to deal with chipped and broken windshields from thrown rocks.
Then I got to thinking about how long it has been since I've heard a traffic report during the commute, reporting the daily "ladder in the rodeway."
Lastly, the total number of cars on the road appears to me (and others) to have declined. Presumably, this is at least partially due to the $4.00 gallon gasoline, but the missing contruction trucks is another factor.
What other "benefits" have you observed from the housing downturn?
Paul
Tuesday, April 15, 2008
Renters Bliss
While there are quite a few downsides to renting, I thought it would be nice to highlight some of the less obvious up sides (of course the obvious upside is that, at least in our area it is so much less expensive than buying).
--The thing that has been the best about renting, at least for us, is the ability to “test-drive” a neighborhood. If we were really ambitious we would move into the neighborhood I currently covet, to make sure it’s as great as I think it is.
--In times of economic turmoil, its beneficial to be relatively mobile. Not needing to sell your home in order to take a new job is a great benefit of renting in times of uncertainty and high unemployment.
--If personal circumstances change, you can easily downsize to a less expensive place.....if gas gets too expensive, you can move closer to work, and if you family size grows or shrinks you can easily "right size your home".
--Similar to item one above, if a neighborhood that you initially liked, with all its new homes etc. starts to crumble before your eyes, you can move with little to no cost (as opposed to those who bought and would have to sell for a loss in order to get out).
--While we treat our rental better than we would our own house, when our potty training kid accidentally pees on the stairs on the way up to the bathroom, I can take consolation in that at least its a rental!
In many respects, as some have pointed out in the past, Renting is very similar to an option on the housing market and you life circumstances.
--The thing that has been the best about renting, at least for us, is the ability to “test-drive” a neighborhood. If we were really ambitious we would move into the neighborhood I currently covet, to make sure it’s as great as I think it is.
--In times of economic turmoil, its beneficial to be relatively mobile. Not needing to sell your home in order to take a new job is a great benefit of renting in times of uncertainty and high unemployment.
--If personal circumstances change, you can easily downsize to a less expensive place.....if gas gets too expensive, you can move closer to work, and if you family size grows or shrinks you can easily "right size your home".
--Similar to item one above, if a neighborhood that you initially liked, with all its new homes etc. starts to crumble before your eyes, you can move with little to no cost (as opposed to those who bought and would have to sell for a loss in order to get out).
--While we treat our rental better than we would our own house, when our potty training kid accidentally pees on the stairs on the way up to the bathroom, I can take consolation in that at least its a rental!
In many respects, as some have pointed out in the past, Renting is very similar to an option on the housing market and you life circumstances.
Monday, April 14, 2008
Survey Request
This week marks the one year anniversary of the Average Buyer blog. Over the year traffic has grown quite a bit. According to Google, there are many daily visitors.
As a favor, I would appreciate it, if everyone would take a moment to fill out the survey I have posted on the sidebar. It doesn't require a sign on. Please mark all categories that apply (i.e. we are both Renting 1-2 years, and move-up buyers).
I would like to get a better idea of who reads the blog and why. It will help me know what type of content is most appropriate going forward. Thanks in advance.
As a favor, I would appreciate it, if everyone would take a moment to fill out the survey I have posted on the sidebar. It doesn't require a sign on. Please mark all categories that apply (i.e. we are both Renting 1-2 years, and move-up buyers).
I would like to get a better idea of who reads the blog and why. It will help me know what type of content is most appropriate going forward. Thanks in advance.
Tools of the Trade
One of the topics of discussion on Sunday was what tools we use to monitor our local market. I'm not talking statistics on overall market performance, but how to track local listings and sales, in order to identify specific properties and determine a reasonable offer price.
Below is a quick review of the the tools I know of and use. However additional input would really be appreciated. I will compile then post this on the sidebar for easy reference, like the glossary.
I don’t pay for any services, so all the sites are being reviewed in terms of their free content. If anyone pays for a service, please let us know what it is, and what value you think it provides (why its worth the $$).
Of course Lander, maintains links to many many good resources, so this is just a subset. They are grouped into categories.
Inventory Tracking
· http://www.metrolistmls.com/ Not as easy to navigate for just monitoring inventory, but gives the status of homes (like whether its pending or not) which I haven’t been able to find anywhere else.
· http://www.ziprealty.com/ My personal favorite. I love being able to save homes into a “favorites” section and get e-mail updates on them. I especially like the mapping feature. Its easy to use and presents great information for browsing quickly. It also hooks into Zillow and Cyberhomes to give you previous sales. Some have complained that their ZipAgent resets their criteria.
Foreclosure and Distressed Property Tracking
· Hotpads This is a new tool that has a really cool mapping feature for the foreclosure information. From the review I read, it gets foreclosure data from RealtyTrac. I haven’t tried the other features yet.
· http://www.foreclosure.com/ The free info is good for monitoring foreclosures and pre-foreclosures. As suggested earlier by someone on this the feature where for monitoring the name of the owner on the pre-foreclosure list is very helpful to see if your landlord is getting a NOD.
· RealtyTrac I haven’t used this site much, but it is often cited as a source of data, so I am assuming there are some redeeming qualities about it.
Individual Home Sale History:
· Sac Bee This is the only place I am able to find recent individual sales information in bulk, for free. Unfortunately, the information it doesn’t go back very far, and there tends to be a couple month lag in updating the data.
· Zillow This site is nice if you are looking at a specific home and want to see its sales history.
· Cyberhomes: Similar to Zillow. Others have said they think the values seem more accurate.
Below is a quick review of the the tools I know of and use. However additional input would really be appreciated. I will compile then post this on the sidebar for easy reference, like the glossary.
I don’t pay for any services, so all the sites are being reviewed in terms of their free content. If anyone pays for a service, please let us know what it is, and what value you think it provides (why its worth the $$).
Of course Lander, maintains links to many many good resources, so this is just a subset. They are grouped into categories.
Inventory Tracking
· http://www.metrolistmls.com/ Not as easy to navigate for just monitoring inventory, but gives the status of homes (like whether its pending or not) which I haven’t been able to find anywhere else.
· http://www.ziprealty.com/ My personal favorite. I love being able to save homes into a “favorites” section and get e-mail updates on them. I especially like the mapping feature. Its easy to use and presents great information for browsing quickly. It also hooks into Zillow and Cyberhomes to give you previous sales. Some have complained that their ZipAgent resets their criteria.
Foreclosure and Distressed Property Tracking
· Hotpads This is a new tool that has a really cool mapping feature for the foreclosure information. From the review I read, it gets foreclosure data from RealtyTrac. I haven’t tried the other features yet.
· http://www.foreclosure.com/ The free info is good for monitoring foreclosures and pre-foreclosures. As suggested earlier by someone on this the feature where for monitoring the name of the owner on the pre-foreclosure list is very helpful to see if your landlord is getting a NOD.
· RealtyTrac I haven’t used this site much, but it is often cited as a source of data, so I am assuming there are some redeeming qualities about it.
Individual Home Sale History:
· Sac Bee This is the only place I am able to find recent individual sales information in bulk, for free. Unfortunately, the information it doesn’t go back very far, and there tends to be a couple month lag in updating the data.
· Zillow This site is nice if you are looking at a specific home and want to see its sales history.
· Cyberhomes: Similar to Zillow. Others have said they think the values seem more accurate.
Friday, April 11, 2008
Too Good to Be True
I particularly like to browse listings on ZipRealty near downtown Folsom. I happened upon this one yesterday and immediately e-mailed my agent to get a little more info on it.
500 Sibley in Folsom, looks like a gem at first glance (older well cared for home near light rail and downtown Folsom). MLS 80023909. The lot size on the listing is really small, but the pictures show a large lot so I assumed it was a typographical error.
Well my agent called today give me the low down. Apparently they have split their lot into two parcels. And both must sell together. But it allowed the seller to drop their asking price on the home by 175k.
I guess desperate times call for desperate measures and dirty tricks. Sigh...and that home looked so lovely.
(From the mapping feature, it looks like the home is located next to a cemetery...too much bad juju in that case).
500 Sibley in Folsom, looks like a gem at first glance (older well cared for home near light rail and downtown Folsom). MLS 80023909. The lot size on the listing is really small, but the pictures show a large lot so I assumed it was a typographical error.
Well my agent called today give me the low down. Apparently they have split their lot into two parcels. And both must sell together. But it allowed the seller to drop their asking price on the home by 175k.
I guess desperate times call for desperate measures and dirty tricks. Sigh...and that home looked so lovely.
(From the mapping feature, it looks like the home is located next to a cemetery...too much bad juju in that case).
To Pool or Not to Pool
I grew up on the Central Coast of California, in a relatively small farming town. No one I know had a pool in their backyard. Back East, many middle class neighborhoods had a community pool. But here in Sacramento, seems private pools are very common in the suburbs. (or perhaps I’ve just developed a warped sense of perception from looking at houses in Folsom and El Dorado Hills).
Is it me, or does Sacramento actually have one of the nation’s highest number pools per capaita? I can’t tell if the recent proliferation of pools is a response to increasing wealth, germaphobia and anti-socialization or just a natural response to the hot summer days.
Around here, people seem to take their pools very seriously; there are waterfalls, slides, and even a pecking order. For instance, it seems above ground pools, get almost no respect. I have seen quite a few listings that feature the pool much more prominently than the house. (As if the house just happened to come with the pool you were purchasing.)
As for our preference, I have mixed emotions about the whole thing. Some pros and cons.
Pro: They provide endless hours of summer entertainment once kids are a bit older (and looking for something to do to while away the summer months).
Cons: First it seems like an awful lot of money to spend on something you don’t only use in the summer. Pools can be a serious liability (and with young kids, it will be a source of stress till they are old enough to swim well). They also require a lot of care and maintenance. The cost to heat the pool is rather prohibitive, which means you have to have some thick skin as well. Not to mention we also have a beautiful lake and river not too far away (and a nice looking aquatic center in Folsom…..having other kids to play always makes things much more fun).
Is it me, or does Sacramento actually have one of the nation’s highest number pools per capaita? I can’t tell if the recent proliferation of pools is a response to increasing wealth, germaphobia and anti-socialization or just a natural response to the hot summer days.
Around here, people seem to take their pools very seriously; there are waterfalls, slides, and even a pecking order. For instance, it seems above ground pools, get almost no respect. I have seen quite a few listings that feature the pool much more prominently than the house. (As if the house just happened to come with the pool you were purchasing.)
As for our preference, I have mixed emotions about the whole thing. Some pros and cons.
Pro: They provide endless hours of summer entertainment once kids are a bit older (and looking for something to do to while away the summer months).
Cons: First it seems like an awful lot of money to spend on something you don’t only use in the summer. Pools can be a serious liability (and with young kids, it will be a source of stress till they are old enough to swim well). They also require a lot of care and maintenance. The cost to heat the pool is rather prohibitive, which means you have to have some thick skin as well. Not to mention we also have a beautiful lake and river not too far away (and a nice looking aquatic center in Folsom…..having other kids to play always makes things much more fun).
Riddle Me This.....
How can sales be occurring at their normal seasonal levels, but pending (homes under contract) are way up?
My Theory:
Because escrow periods have gotten much longer (dealing with the bank, on both sides likely takes longer....buyers are finding it harder to get financing and the banks selling the homes take forever to make decisions).
My Theory:
Because escrow periods have gotten much longer (dealing with the bank, on both sides likely takes longer....buyers are finding it harder to get financing and the banks selling the homes take forever to make decisions).
Thursday, April 10, 2008
April 2008 Change in Inventory
To re-emphasize yesterday's statement about Sacramento metrics....."Lately when I look at the Sacramento housing market metrics, one word keeps coming to mind…..FUBAR. "
Below is the monthly inventory of SFH from ZipRealty for April and March. The "change in inventory" is from March to April. However, I also colored April if the inventory is less than it was in January. This is very odd behavior for a market that is normally highly seasonal. The list is sorted by Zip code this time.
Unfortunately, I am a bit short on time today, so not going to get into specifics or formulate hypotheses. So I will leave that to you all today.
P.S. Next month I will have a full year of data, so I can do year over year comparisons of inventory. Although at this rate, there may not be a need.
Below is the monthly inventory of SFH from ZipRealty for April and March. The "change in inventory" is from March to April. However, I also colored April if the inventory is less than it was in January. This is very odd behavior for a market that is normally highly seasonal. The list is sorted by Zip code this time.
Unfortunately, I am a bit short on time today, so not going to get into specifics or formulate hypotheses. So I will leave that to you all today.
P.S. Next month I will have a full year of data, so I can do year over year comparisons of inventory. Although at this rate, there may not be a need.
Wednesday, April 9, 2008
What Happened to the Spring Bounce?
The trees and flowers are blooming. However it appears that home inventory in Sacramento is immune to the trappings of spring this year.
I have come to believe that the industry has undergone such fundamental changes lately that the typical seasonal patterns are getting wiped out. First the evidence, and then a couple thoughts as to why.
According to housing tracker, we have been way above last year’s inventory level (by about 2000 listings) until this month. As seen from the monthly data, inventory appears to be flattening out and losing its “seasonality”. One look at the “inventory chart” and this trend becomes very obvious (the widening and flattening of inventory can also be seen in Max’s inventory charts over at Sac Real Stats).
Lately when I look at the Sacramento housing market metrics, one word keeps coming to mind…..FUBAR. We are in some serious uncharted territory. So all this talk about “inventory stabilizing”, and “bottom calling” on the local blogs is starting to make me chuckle. They always forget to mention that inventory has been way above normal levels for quite some time now. I find it especially amusing when commenter’s make broad predictions based on one or two data points. Personally I wouldn’t trust anyone who makes predictions which such self-assurance. We are all playing a guessing game at this point.
Yes, inventory may be stabilizing, but I believe it’s for a very different reason. It’s the loss of seasonality. Normally stabilization occurs because sales occur at an increased rate, thus keeping inventory down. (Although there is some evidence that increased sales are keeping inventory down at the lower price ranges).
The fundamental industry changes driving this trend have a lot to do with the overwhelming amount of distressed inventory, which, according to Agent Bubble’s latest data, now stands at 50% of the Sacramento market. A bank has nothing to gain by removing their listing from the MLS and waiting till spring (carrying costs make this a really stupid thing to do). I would imagine, distressed seller’s (short sales) feel the same way. I haven’t seen much to suggest that waiting till spring improves your chances of selling your home. If a home is priced right, it will sell, no matter what month it is.
Personally, I never understood the reason for the strong seasonal trend in residential real estate. Don’t people die and get divorced all year round? The only reason I can think of is related to the local school calendar. Some families want to sell their home in spring in order to be moved into a new home by the time school starts in fall. But that doesn’t really explain the increase in sales in spring (or why there is still a bump in spring inventory in counties with year-round school). Why is spring a better time to buy a house? Only reason I can think of (is self reinforcing) is that there is more inventory to choose from. In other states (think Midwest and East) the weather might come into play. But here in California, we have beautiful weather most of the year.
My industry (aviation) is rather seasonal, but there is a valid reason for that. Most families travel during school breaks (primarily the summer). There is also considerable travel to warm destinations in the winter (HI and FL come to mind). Business travel happens all year round, so it’s the additional the vacation travel that drives the seasonal demand.
I have come to believe that the industry has undergone such fundamental changes lately that the typical seasonal patterns are getting wiped out. First the evidence, and then a couple thoughts as to why.
According to housing tracker, we have been way above last year’s inventory level (by about 2000 listings) until this month. As seen from the monthly data, inventory appears to be flattening out and losing its “seasonality”. One look at the “inventory chart” and this trend becomes very obvious (the widening and flattening of inventory can also be seen in Max’s inventory charts over at Sac Real Stats).
Lately when I look at the Sacramento housing market metrics, one word keeps coming to mind…..FUBAR. We are in some serious uncharted territory. So all this talk about “inventory stabilizing”, and “bottom calling” on the local blogs is starting to make me chuckle. They always forget to mention that inventory has been way above normal levels for quite some time now. I find it especially amusing when commenter’s make broad predictions based on one or two data points. Personally I wouldn’t trust anyone who makes predictions which such self-assurance. We are all playing a guessing game at this point.
Yes, inventory may be stabilizing, but I believe it’s for a very different reason. It’s the loss of seasonality. Normally stabilization occurs because sales occur at an increased rate, thus keeping inventory down. (Although there is some evidence that increased sales are keeping inventory down at the lower price ranges).
The fundamental industry changes driving this trend have a lot to do with the overwhelming amount of distressed inventory, which, according to Agent Bubble’s latest data, now stands at 50% of the Sacramento market. A bank has nothing to gain by removing their listing from the MLS and waiting till spring (carrying costs make this a really stupid thing to do). I would imagine, distressed seller’s (short sales) feel the same way. I haven’t seen much to suggest that waiting till spring improves your chances of selling your home. If a home is priced right, it will sell, no matter what month it is.
Personally, I never understood the reason for the strong seasonal trend in residential real estate. Don’t people die and get divorced all year round? The only reason I can think of is related to the local school calendar. Some families want to sell their home in spring in order to be moved into a new home by the time school starts in fall. But that doesn’t really explain the increase in sales in spring (or why there is still a bump in spring inventory in counties with year-round school). Why is spring a better time to buy a house? Only reason I can think of (is self reinforcing) is that there is more inventory to choose from. In other states (think Midwest and East) the weather might come into play. But here in California, we have beautiful weather most of the year.
My industry (aviation) is rather seasonal, but there is a valid reason for that. Most families travel during school breaks (primarily the summer). There is also considerable travel to warm destinations in the winter (HI and FL come to mind). Business travel happens all year round, so it’s the additional the vacation travel that drives the seasonal demand.
Tuesday, April 8, 2008
Average Buyer Attempts
Now that prices have come down a bit, I'm not as embarrassed about submitting (what I consider) a reasonable offer. So I will create a new section to keep tabs on our attempts at purchasing a home., both offers and outings.
Offers so far in 2008:
1) January - We put in a verbal offer to a builder who built a custom spec home (the home sold for 16% below asking, but still 20% above our meager offer). For some reason, I'm not as embarrassed about submitting low offers to builders since they wouldn't take it as personally.
2) February - We submitted a written offer and negotiated with a seller on a short sale. Unfortunately, the bank would not approve the sale at our offer price (approximately 20% below asking). The seller did receive bank approval at 14% below their list price, and they immediately re listed the home (before we even responded that we wouldn't increase our offer price). We feel like we were played so that they could bring an offer to the bank and get a "bank approved" figure.
3) April - Written offer on an REO, approximately 15% below asking. After lengthy negations, and several unpleasant discoveries about the home and lender we bowed out at the last minute. Rather disgusted to learn that the home went for considerably less then what we had negotiated with the bank. How incredibly frustrating. They played uber-hardball with us, and we eventually walked....their loss.
4) June - Written offer on an REO. We saw this place at an open house, the same day as the offer #3 house. So far the bank is not budging on the price. They think its priced right now (apparently it took them 6 months and around 100k in price drops to get there). The home sold for 25K above our final offer.
5) August - We resubmit for the Short Sale that we tried for in February. In the hopes that the bank would be more willing to negotiate now that 6 months have passed. We even paid $300 for an appraisal. The bank would not negotiate. We believe the home is now going into foreclosure.
6) December - We made an offer to a builder at a development we have eyed for quite some time. We were surprised and delighted when they accepted. We closed on our home in Feb of 2009.
Browsing:
1) In mid February, saw 4 homes with our agent (one resulted in offer #2 above), and one additional home without our agent.
2) Mid April went to 5 open houses. Two were REOs. The other three were above our price range, but were not likely to sell at their current price, despite the agent's insistence. Wrote offer number 3 on one of the REOs.
3) Open house in June to re-examine the same REO we saw in April. The price has dropped substantially since then.
4) Early August - We saw 3 homes with our Realtor (one was having an open house). The one we liked the most is an REO (but we think it will get bid up way above our price range...and they are making you pre-qual through their people with lots of other paperwork...not sure if its worth the hassle to get outbid). Another was a short sale, but apparently about to go into contract. The third was an actual owner occupied sale, but the road noise was a pretty big turnoff.
5) Mid September - We attended 3 open houses. Really liked two of them. The third was beautiful, but not properly laid out for a family of 4. Was rather impressed at how much home we can get for our money these days. In both cases there was one other buyer there (so I wouldn't say tons of foot traffic, but better than nothing).
6) September - A bank owned home on a large parcel of land was up for auction. We visited on the "open house" day. Unfortunately, the very reasonable "reserve price" listed online was completely meaningless according to the Realtor, so we did not bother attend the auction, as the bank would not accept anything less than 3x the reserve. How annoying. Even more frustrated to learn that the home did not sell at auction, but then showed up on the MLS a couple weeks later as pending sale. It sold for less than we were willing to pay. Sounds like an inside job.
6) November - Went to some open houses one Sunday and saw a FSBO in one of our favorite neighborhoods (found it on Craigslist).
Offers so far in 2008:
1) January - We put in a verbal offer to a builder who built a custom spec home (the home sold for 16% below asking, but still 20% above our meager offer). For some reason, I'm not as embarrassed about submitting low offers to builders since they wouldn't take it as personally.
2) February - We submitted a written offer and negotiated with a seller on a short sale. Unfortunately, the bank would not approve the sale at our offer price (approximately 20% below asking). The seller did receive bank approval at 14% below their list price, and they immediately re listed the home (before we even responded that we wouldn't increase our offer price). We feel like we were played so that they could bring an offer to the bank and get a "bank approved" figure.
3) April - Written offer on an REO, approximately 15% below asking. After lengthy negations, and several unpleasant discoveries about the home and lender we bowed out at the last minute. Rather disgusted to learn that the home went for considerably less then what we had negotiated with the bank. How incredibly frustrating. They played uber-hardball with us, and we eventually walked....their loss.
4) June - Written offer on an REO. We saw this place at an open house, the same day as the offer #3 house. So far the bank is not budging on the price. They think its priced right now (apparently it took them 6 months and around 100k in price drops to get there). The home sold for 25K above our final offer.
5) August - We resubmit for the Short Sale that we tried for in February. In the hopes that the bank would be more willing to negotiate now that 6 months have passed. We even paid $300 for an appraisal. The bank would not negotiate. We believe the home is now going into foreclosure.
6) December - We made an offer to a builder at a development we have eyed for quite some time. We were surprised and delighted when they accepted. We closed on our home in Feb of 2009.
Browsing:
1) In mid February, saw 4 homes with our agent (one resulted in offer #2 above), and one additional home without our agent.
2) Mid April went to 5 open houses. Two were REOs. The other three were above our price range, but were not likely to sell at their current price, despite the agent's insistence. Wrote offer number 3 on one of the REOs.
3) Open house in June to re-examine the same REO we saw in April. The price has dropped substantially since then.
4) Early August - We saw 3 homes with our Realtor (one was having an open house). The one we liked the most is an REO (but we think it will get bid up way above our price range...and they are making you pre-qual through their people with lots of other paperwork...not sure if its worth the hassle to get outbid). Another was a short sale, but apparently about to go into contract. The third was an actual owner occupied sale, but the road noise was a pretty big turnoff.
5) Mid September - We attended 3 open houses. Really liked two of them. The third was beautiful, but not properly laid out for a family of 4. Was rather impressed at how much home we can get for our money these days. In both cases there was one other buyer there (so I wouldn't say tons of foot traffic, but better than nothing).
6) September - A bank owned home on a large parcel of land was up for auction. We visited on the "open house" day. Unfortunately, the very reasonable "reserve price" listed online was completely meaningless according to the Realtor, so we did not bother attend the auction, as the bank would not accept anything less than 3x the reserve. How annoying. Even more frustrated to learn that the home did not sell at auction, but then showed up on the MLS a couple weeks later as pending sale. It sold for less than we were willing to pay. Sounds like an inside job.
6) November - Went to some open houses one Sunday and saw a FSBO in one of our favorite neighborhoods (found it on Craigslist).
Meet-Up with Other Average Buyers this Sunday
Just a reminder, this Sunday is the Average Buyer meet-up on the patio at Dos Coyotes in Folsom. For more details see here. Based on comment responses and some additional e-mails it sounds like we should have a rather nice showing.
As for the results of the RSVP contest….it looks like I am buying a drink for Agent Bubble and Sacramentia for their price and inventory predictions. Who would have guessed that inventory would be lower in April compared to January (apparently Sactramentia!).
I am really looking forward to meeting all of you. I know I could certainly use use a pep talk, as we didn't pursue the short sale ….sigh.
P.S. I will be the lady wearing jeans with patches and will likely have a pile of old WSJs sitting nearby waiting to be read.
As for the results of the RSVP contest….it looks like I am buying a drink for Agent Bubble and Sacramentia for their price and inventory predictions. Who would have guessed that inventory would be lower in April compared to January (apparently Sactramentia!).
I am really looking forward to meeting all of you. I know I could certainly use use a pep talk, as we didn't pursue the short sale ….sigh.
P.S. I will be the lady wearing jeans with patches and will likely have a pile of old WSJs sitting nearby waiting to be read.
Monday, April 7, 2008
Trends in Auburn
MCB44 was kind enough to send an update on the Auburn area (which he tracks on a weekly basis). He put together a summary comparing sales in Q1 of 2007 to Q1 of 2008. The trend of more sales at lower price points is also similar to what we have been seeing in Folsom and El Dorado Hills.
Note that the high end of the graph is on the left, with the low end on the right.
Highlights: Median price decreased from 439,750 to 339,700. Sales volume decreased from 87 to 69.
I also totally agree with his conclusion regarding the data.....that we "will continue to see further downward pressure on prices and we will likely see more of the listings migrating down into the price bands where sales are occurring."
Note that the high end of the graph is on the left, with the low end on the right.
Highlights: Median price decreased from 439,750 to 339,700. Sales volume decreased from 87 to 69.
I also totally agree with his conclusion regarding the data.....that we "will continue to see further downward pressure on prices and we will likely see more of the listings migrating down into the price bands where sales are occurring."
Friday, April 4, 2008
Agonizing over a Short Sale
Well the bank came back with a price that is not too far from ours (25k more….but a drop of around 75k from asking). Its still a pretty reasonable price, but with all the maintenance needed on the home, it would end up being around 25% above our monthly rental expense.
With the banks approval their agent immediately dropped the price on the MLS (unfortunately we paved the way for him…sigh). So I suspect the home will now generate some more serious traffic. One thing in our favor, it’s a very odd house, so I don’t think we would be competing with investors on it.
So the question is, do we wait, in hopes that no offers come in and the bank changes their mind or forecloses? Or do we jump on it despite the higher price and the fact that the second lien holder has not agreed?
I keep going back and forth. In some ways I am okay if someone else grabs it, because it then sets a great comp for the area. Local market stress indicators keep me hopeful that we are in store for more price drops. On the other hand, homes don’t come up in this neighborhood as often.
Here are some additional pros and cons of our situation as I see it.
Pros:
- Location. Walking distance to the elementary school, and a small park
- Large enough lot to comfortably hold our old fishing boat and even older inoperable ‘68 Dodge Charger.
- Established neighborhood
- Nice looking swimming pool (but not sure how much we will use it)
- I’m really ready to settle down. Another couple that moved into the area a month before we did who rented up the street from us, just bought an REO. I am very jealous.
Cons:
- Road noise. Bordered on both sides by major EDH roads (perhaps more as DOT will be doing some major road work on either side of the house in the next 5 years….luckily the home is not located in an asbestos region)
- House layout (really odd, and with lots of oak cabinetry which I am not fond of). No room for my office if the kids refuse to continue sleeping in the same room. The layout will likely cause problems when it comes time to sell.
- Lot needs major landscaping, and has not been cared for.
- Swimming pool (needs looking after)
- Home needs major updating (at least 7 types of flooring on the bottom floor alone)
- With a recession in full bloom, I am anxious about purchasing a home near the top of our price range.
Thursday, April 3, 2008
Signs of the times ...
1. In the early 1990's as droves of folks moved out of CA, Uhaul charged a premium for one-way truck rentals to other states, to recoup the cost to Uhaul to try to get trucks back to CA for the next one-way move. Yesterday, I went to Uhaul's website and selected an arbitrary one-way truck rental from Sacramento to Charlotte, NC ($3,420) and compared it to a one-way rental from Charlotte to Sacramento. Same mileage, same truck, same number of days, but Charlotte to Sacramento was only $1,959, a premium of almost $1,500 to move out of California.
2. Four listings that I have been watching in the $500k range, recently went pending. In each instance, the "For Sale" sign vanished immediately with nothing in its place. In the past, agents would typically post "Sale Pending" or "Sold" signs on the posts and the signs/posts would not be removed until after escrow closed. Even though the MLS states the homes are "pending sale," there is no real estate sign on the property. The conspiracy theorists thinks the agents' strategy is to reduce the number of visible For Sale signs so that it appears to the casual observer, there are less-and-less homes for sale, thus falsely creating a sense of urgency among buyers. Someone else opined that it was more likely because the agents needed the signs somewhere else. What have you seen in this regard?
3. Lastly, of those same four listing, as of today, three are now back on the market with the "sales pending" lifted. I actually spoke to one of the homeowners last Saturday at her garage sale (while her home sale was still shown as pending), where she stated that she believed the escrow on her home was going to close this current week (presumably March 31 or April 1), however, my daily MLS email this morning has put her house back on the market for the third time. This suggests to me that her escrow cancelled literally at the eleventh hour and presumably not due to inspections, buyer qualifications, buyer downpayment, or the like.
Paul
2. Four listings that I have been watching in the $500k range, recently went pending. In each instance, the "For Sale" sign vanished immediately with nothing in its place. In the past, agents would typically post "Sale Pending" or "Sold" signs on the posts and the signs/posts would not be removed until after escrow closed. Even though the MLS states the homes are "pending sale," there is no real estate sign on the property. The conspiracy theorists thinks the agents' strategy is to reduce the number of visible For Sale signs so that it appears to the casual observer, there are less-and-less homes for sale, thus falsely creating a sense of urgency among buyers. Someone else opined that it was more likely because the agents needed the signs somewhere else. What have you seen in this regard?
3. Lastly, of those same four listing, as of today, three are now back on the market with the "sales pending" lifted. I actually spoke to one of the homeowners last Saturday at her garage sale (while her home sale was still shown as pending), where she stated that she believed the escrow on her home was going to close this current week (presumably March 31 or April 1), however, my daily MLS email this morning has put her house back on the market for the third time. This suggests to me that her escrow cancelled literally at the eleventh hour and presumably not due to inspections, buyer qualifications, buyer downpayment, or the like.
Paul
Wednesday, April 2, 2008
April 2008 Good Buys & Offers to Builders
There was only one post for March and I know there are quite a few "good buys" out there these days. So don't be shy this month. FWIW - The "good buys" section of this blog generates the most daily hits.
Please post homes you think are a good buy or any offers you know of that were accepted, especially to builders. It will help give others negotiating leverage when they are ready to buy. Even just letting people know what type of builder incentives they can expect would be helpful since its hard to tell if they give everyone the same incentives.
Pieces of data to include: Zip Code, MLS or Development Name, List Price, Incentives, Offer (if any), house details (sq ft, garage size, lots size etc).Feel free to post info for homes anywhere in the Sacramento Metro area.
Just cause I tend to confine my search to the Gold River, Folsom, El Dorado Hills, Cameron Park areas doesn't mean others have to.
Please post homes you think are a good buy or any offers you know of that were accepted, especially to builders. It will help give others negotiating leverage when they are ready to buy. Even just letting people know what type of builder incentives they can expect would be helpful since its hard to tell if they give everyone the same incentives.
Pieces of data to include: Zip Code, MLS or Development Name, List Price, Incentives, Offer (if any), house details (sq ft, garage size, lots size etc).Feel free to post info for homes anywhere in the Sacramento Metro area.
Just cause I tend to confine my search to the Gold River, Folsom, El Dorado Hills, Cameron Park areas doesn't mean others have to.
Tuesday, April 1, 2008
Update on Your Average Buyer
Things have been rather hectic for me lately. I have been playing single mom because Mr. BT has been traveling the great state of California with his new work assignment. As some of you may have noticed, Paul has stepped in to take up the slack.
As for the status of our short sale offer......it sounds like the 1st may be willing to at least consider it, they had an appraisal done recently. So its all about getting the second to sign on. Any suggestions are welcome.
I know many wouldn't consider putting in an offer on a short sale. However I don't really see it as that big of a hassle. Its not like we have to purchase a house in the next month, so waiting a little longer for an answer isn't really an issue for us. This home fits almost all of our criteria (except its a two story instead of a one story), otherwise we wouldn't be bothering to make an offer right now.
The "as is" sale would be the same if we bought from the bank, so that doesn't make a short sale any less desirable than an REO. We are rather handy so it doesn't intimidate us as much. (This home needs some serious TLC. )
The one true downside I have heard, is that sometimes banks cut the commission for the Realtors. So for some, it might be a challenge finding an agent willing to go the distance on a short sale.
If the short sale doesn't work out for us...I may start a scorecard to track all our failed offers and see at what price they finally sold.
As for the status of our short sale offer......it sounds like the 1st may be willing to at least consider it, they had an appraisal done recently. So its all about getting the second to sign on. Any suggestions are welcome.
I know many wouldn't consider putting in an offer on a short sale. However I don't really see it as that big of a hassle. Its not like we have to purchase a house in the next month, so waiting a little longer for an answer isn't really an issue for us. This home fits almost all of our criteria (except its a two story instead of a one story), otherwise we wouldn't be bothering to make an offer right now.
The "as is" sale would be the same if we bought from the bank, so that doesn't make a short sale any less desirable than an REO. We are rather handy so it doesn't intimidate us as much. (This home needs some serious TLC. )
The one true downside I have heard, is that sometimes banks cut the commission for the Realtors. So for some, it might be a challenge finding an agent willing to go the distance on a short sale.
If the short sale doesn't work out for us...I may start a scorecard to track all our failed offers and see at what price they finally sold.
Ten Reasons Why There Will be a Government Home Price Bailout
1. It is an election year. Conservative politicians must try to convince voters that they are not insensitive. Liberal politicians must try to convince voters that they are not insensitive.
2. Washington worries more about deflation than it worries about inflation. Deflation will erode overall tax income and politicians’ power, whereas inflation will increase overall tax income and politicians’ power.
3. As Boomers retire, social security is headed for a +$1 trillion deficit. Washington must continue to perpetuate the myth that American’s retirement assets are in their homes so that Washington can make social security a needs tested entitlement.
4. GDP is plummeting into a (likely) recession due to declining consumer spending. Only if Washington can fool the voters into thinking the voters have wealth by inflating real estate prices, can Washington successfully fool voters into returning to their buying and spending spree of the 2000-2006 time period.
5. The Federal Reserve has committed over 50% of its balance sheet to bailing out the financial markets in the past six months. It does not have enough left on its balance sheet to bailout the remaining (predicted) financial losses.
6. Voters are being hit in the wallet by rising gasoline prices. Gasoline prices are rising in substantial part, due to the plummeting dollar. The Federal Reserve cannot prop up the dollar by raising interest rates until the financial markets are stable. The financial markets will not be stable until home prices stop declining.
7. Local governments rely heavily on property tax revenue for funding. Declining real estate prices have and will continue to reduce funds available to local governments, thus reducing government employment and spending, prolonging and deepening the (likely) recession.
8. About 65% of America owns their own homes. Simply put, there are more voters who own homes and are watching the value of that asset decline, than there are voters who rent.
9. Wall Street financial institutions contribute far more to politicians than people who rent houses.
10. Only with inflation (including home prices), can Washington hope to minimize the appearance of the ballooning Federal debt burden as a percentage of GDP.
Paul
2. Washington worries more about deflation than it worries about inflation. Deflation will erode overall tax income and politicians’ power, whereas inflation will increase overall tax income and politicians’ power.
3. As Boomers retire, social security is headed for a +$1 trillion deficit. Washington must continue to perpetuate the myth that American’s retirement assets are in their homes so that Washington can make social security a needs tested entitlement.
4. GDP is plummeting into a (likely) recession due to declining consumer spending. Only if Washington can fool the voters into thinking the voters have wealth by inflating real estate prices, can Washington successfully fool voters into returning to their buying and spending spree of the 2000-2006 time period.
5. The Federal Reserve has committed over 50% of its balance sheet to bailing out the financial markets in the past six months. It does not have enough left on its balance sheet to bailout the remaining (predicted) financial losses.
6. Voters are being hit in the wallet by rising gasoline prices. Gasoline prices are rising in substantial part, due to the plummeting dollar. The Federal Reserve cannot prop up the dollar by raising interest rates until the financial markets are stable. The financial markets will not be stable until home prices stop declining.
7. Local governments rely heavily on property tax revenue for funding. Declining real estate prices have and will continue to reduce funds available to local governments, thus reducing government employment and spending, prolonging and deepening the (likely) recession.
8. About 65% of America owns their own homes. Simply put, there are more voters who own homes and are watching the value of that asset decline, than there are voters who rent.
9. Wall Street financial institutions contribute far more to politicians than people who rent houses.
10. Only with inflation (including home prices), can Washington hope to minimize the appearance of the ballooning Federal debt burden as a percentage of GDP.
Paul
Monday, March 31, 2008
It's Not Broke, Please Don't Fix It
For the last couple weeks the MSM has been noting that the major presidential candidates haven’t really put together a plan to address the housing crisis, which has now spread to a broader economic crisis. I’m not exactly sure why the MSM was clamoring for this, perhaps to give commentators something to gnaw on. Because anyone who is really paying attention to the housing bust knows that by the time the next president is sworn in much of the drama will have already played out.
Last week MSM got its wish, all three candidates discussed their economic platform. Unfortunately, wsing the housing market as an economic platform, while perhaps telling about their general approach to the economy, is not all that informative since the crisis will be in very different phase, needing very different solutions, by the time the next president takes office.
So that brings us to the Bush administration, whose approach I more or less agree with (yes you heard that right…I am agreeing with the Bush administration). Last Wednesday U.S. Treasury Secretary Henry Paulson said policy-makers should not interfere with an "inevitable" drop in housing prices but should work to minimize the impact on the economy.
According to last week’s NAR report (ironically caught off guard that sales were slightly up, but prices down) as well as local anecdotes (that there is considerable demand at the 200k level), the market appears to be in fine economic working order. The more prices drop, the more demand is stimulated. The market is not broke. Its working just as it should. The more affordable homes become, the more first time buyers will be able to enter the market, thus repairing the broken links of the housing food chain.
This is not to say that the government should do nothing. In fact there is a lot the government can do that doesn’t involve messing with the necessary market correction. The first and foremost is to modify/regulate the financial and RE industries to keep this from happening again. And it sounds like Paulson is leading the charge on this as well. (He is really starting to grow on me. Initially I was disgusted by his appointment, figuring he was there to do Wall Street’s bidding, but as this crisis has unfolded, it appears that he has the inside knowledge to know what type of regulation is likely to be the most effective, and is actually leading the charge.)
The second thing the government, particularly local governments, can do, is to provide assistance to those going through the foreclosure or short sale process so they don’t get taken advantage of. Local agencies can provide lists of suitable rentals homes or apartments, negotiate agreements with local landlords to take families whose credit may be damaged by a foreclosure etc.
In general I think this situation is very similar to open trade policy. The theory goes that open trade benefits the broader market by lowering prices. Government sets requirements to ensure safe products, and healthy working and environmental conditions. In exchange for lower priced goods coming from overseas, pockets of domestic workers are dislocated. Thus part of domestic trade policy is to address those dislocations and minimize their impact on the broader market.
Last week MSM got its wish, all three candidates discussed their economic platform. Unfortunately, wsing the housing market as an economic platform, while perhaps telling about their general approach to the economy, is not all that informative since the crisis will be in very different phase, needing very different solutions, by the time the next president takes office.
So that brings us to the Bush administration, whose approach I more or less agree with (yes you heard that right…I am agreeing with the Bush administration). Last Wednesday U.S. Treasury Secretary Henry Paulson said policy-makers should not interfere with an "inevitable" drop in housing prices but should work to minimize the impact on the economy.
According to last week’s NAR report (ironically caught off guard that sales were slightly up, but prices down) as well as local anecdotes (that there is considerable demand at the 200k level), the market appears to be in fine economic working order. The more prices drop, the more demand is stimulated. The market is not broke. Its working just as it should. The more affordable homes become, the more first time buyers will be able to enter the market, thus repairing the broken links of the housing food chain.
This is not to say that the government should do nothing. In fact there is a lot the government can do that doesn’t involve messing with the necessary market correction. The first and foremost is to modify/regulate the financial and RE industries to keep this from happening again. And it sounds like Paulson is leading the charge on this as well. (He is really starting to grow on me. Initially I was disgusted by his appointment, figuring he was there to do Wall Street’s bidding, but as this crisis has unfolded, it appears that he has the inside knowledge to know what type of regulation is likely to be the most effective, and is actually leading the charge.)
The second thing the government, particularly local governments, can do, is to provide assistance to those going through the foreclosure or short sale process so they don’t get taken advantage of. Local agencies can provide lists of suitable rentals homes or apartments, negotiate agreements with local landlords to take families whose credit may be damaged by a foreclosure etc.
In general I think this situation is very similar to open trade policy. The theory goes that open trade benefits the broader market by lowering prices. Government sets requirements to ensure safe products, and healthy working and environmental conditions. In exchange for lower priced goods coming from overseas, pockets of domestic workers are dislocated. Thus part of domestic trade policy is to address those dislocations and minimize their impact on the broader market.
Friday, March 28, 2008
This time, it really is different.
Each time I hear that statement about a financial market (including real estate), I cringe. As the real estate market went up, the pundits all had reasons why "this time it was different" and we were not in a real estate bubble. We heard it during the dot.com bubble. I am guessing folks heard it during the Dutch tulip mania, although I wasn't around then.
I monitor Radarlogic for Sacramento MSA average price per square foot, along with local sales statistics (actual non-seasonal adjusted closings as reported by MLS). Looking at Radarlogic and sales levels for the most recent years (2006 and2007), during the first 3-4 months of each year, there is a modest increase in average price/foot and a modest increase in sales, then the price/foot free fall resumes and the sales activity continues its downward spiral. This trend will not last forever. At some time, and I don't know when, we will start to return to historical pricing and sales patterns. Is this time really different? Is this the year? Has the price/foot free fall ended? Will we actually see an increase in sales (month over month) through the spring and summer selling season?
Paul
I monitor Radarlogic for Sacramento MSA average price per square foot, along with local sales statistics (actual non-seasonal adjusted closings as reported by MLS). Looking at Radarlogic and sales levels for the most recent years (2006 and2007), during the first 3-4 months of each year, there is a modest increase in average price/foot and a modest increase in sales, then the price/foot free fall resumes and the sales activity continues its downward spiral. This trend will not last forever. At some time, and I don't know when, we will start to return to historical pricing and sales patterns. Is this time really different? Is this the year? Has the price/foot free fall ended? Will we actually see an increase in sales (month over month) through the spring and summer selling season?
Paul
Thursday, March 27, 2008
Another Sign of the Times
Went to do my normal screen scrape today on the http://www.metrolistmls.com/ site, and found some very interesting changes. In the "status" column which used to just tell if it was pending, or if there was a release clause.......we now have an expanded list of terminology:
- AR indicating the property is Active w/Release Clause ,
- AS indicating the property is Active and a Short Sale,
- ASC indicating the property is Active and a Short Sale with a Contingency,
- AC indicating the property is Active with a Court Approval requirement and
- ACC indicating the property is Active with a Court Approval requirement with a Contingency.
- PSB indicating the property is Pending and accepting back-up offers.
One other positive development, they have stopped indicating that someone is using a discount agent. (Really, why should it matter to a prospective buyer what agent a seller is using. I think its was just the Realtors way of discriminating against those who threatened their lucrative business model).
Another note on the screen scrape.....I have stopped tracking all but the basic statistics these days. With over 150 listings, I don't have the time or desire to keept track of the details anymore.
Wednesday, March 26, 2008
A tragic 401k reminder from Bear Stearns ...
For years I have been listening to financial pundits on tv tell us not to invest our 401k's in the company that we work for. For all of their claimed financial savvy, apparently many Bear Stearns employees failed to heed this advice and are now likely to lose not only their jobs (it has been reported that J. P. Morgan will can 50% of the Bear Stearns employees), but have also lost virtually all, if not all, of their retirement, and for some, life savings.
I don't profess to be a financial person, but those that I listen to are adamant about diversifying retirement and savings. That means never invest in the company you work, so that if it fails, you only lose your job, not your job and life savings. It also means investing outside the sector that you work in ... After all, how good of a plan would it have been for a Bear Stearns employee to invest all of his/her 401k stock in Thornburg Mortgage (now trading at less than $2/share)? Many of the pundits recommend investing across a minimum of 5-7 other sectors.
Even knowing the advice of the pundits, I am regularly guilty of being too invested in cash equivalents (which historically pay too little), or too invested in one sector. I wish I had the self-discipline to follow the advice of the pundits!
Paul
I don't profess to be a financial person, but those that I listen to are adamant about diversifying retirement and savings. That means never invest in the company you work, so that if it fails, you only lose your job, not your job and life savings. It also means investing outside the sector that you work in ... After all, how good of a plan would it have been for a Bear Stearns employee to invest all of his/her 401k stock in Thornburg Mortgage (now trading at less than $2/share)? Many of the pundits recommend investing across a minimum of 5-7 other sectors.
Even knowing the advice of the pundits, I am regularly guilty of being too invested in cash equivalents (which historically pay too little), or too invested in one sector. I wish I had the self-discipline to follow the advice of the pundits!
Paul
Tuesday, March 25, 2008
Bottom's Up
There had been some speculation on the blogs and in the MSM that we may have hit a bottom for the lower end of the housing market. I thought I would do some homework to see if this trend applies to the two markets I track, Folsom (95630) and El Dorado Hills (95762), since my screen scrape (which is at the lower end) has been indicating a pick up in contract activity.
To some degree this theory is born out. The lower price brackets is where all the action is at in terms of pending sales (including release clause pendings). The data was gathered by quickly counting and bracketing info on Metrolistmls.com, so it is not that accurate (for example I think I had some overlap...600k homes will show up in both the 450-600k search and the 600k - 800k search using the Metrolistmls queries).
For a reference, a ratio of 16% is approximately 6 months inventory if all the pendings were to close in one month...which is highly unlikely...but still a good reference number to know.
To some degree this theory is born out. The lower price brackets is where all the action is at in terms of pending sales (including release clause pendings). The data was gathered by quickly counting and bracketing info on Metrolistmls.com, so it is not that accurate (for example I think I had some overlap...600k homes will show up in both the 450-600k search and the 600k - 800k search using the Metrolistmls queries).
For a reference, a ratio of 16% is approximately 6 months inventory if all the pendings were to close in one month...which is highly unlikely...but still a good reference number to know.
Monday, March 24, 2008
WWYD - What Would You Do?
Spent Easter in Santa Rosa with Mr. BTs family. When we arrived, we were heralded with the exciting story of how his brother had just put in an offer on a home (REO). They have been prequalified and have been at this for a couple weeks. The most recent offer, was on a bank REO for 299k.
He and his wife, and their 5yr old, aren't too hopeful because investors keep beating them out with all cash offers. Strangely enough, their reason for purchasing is because there aren't many rentals available (and their current rental has the sewage all backed up and the LL won't fix it).
Now I imagine Santa Rosa is more expensive than Sacramento. But I also know that as a county maintenance guy and an office worker, it will be rather tight making payments on a home for 299k.
Of course I think they should wait. But I held my tongue through all this, as the offer is already in........ so what is the point?
The part that confounded me was the fact that they speak of all these investors competing with them for the same homes. So how can there be no acceptably priced rentals? I suspect its a combination of their RE agent pumping them with slanted info, combined with their own interest in purchasing rather than continuing to rent (seeing what they want to see).
So what would you do? I'm certainly not implying I have all the answers. But neither of them have a college degree, and I am worried they could easily be taken advantage of. The overwhelming desire to "own" a home has gotten a lot of first-time-borrowers in over their heads. Most trust that their agents and lenders have their best interest at heart. Even Mr. BT and I learned the hard way, that this is rarely the case.
He and his wife, and their 5yr old, aren't too hopeful because investors keep beating them out with all cash offers. Strangely enough, their reason for purchasing is because there aren't many rentals available (and their current rental has the sewage all backed up and the LL won't fix it).
Now I imagine Santa Rosa is more expensive than Sacramento. But I also know that as a county maintenance guy and an office worker, it will be rather tight making payments on a home for 299k.
Of course I think they should wait. But I held my tongue through all this, as the offer is already in........ so what is the point?
The part that confounded me was the fact that they speak of all these investors competing with them for the same homes. So how can there be no acceptably priced rentals? I suspect its a combination of their RE agent pumping them with slanted info, combined with their own interest in purchasing rather than continuing to rent (seeing what they want to see).
So what would you do? I'm certainly not implying I have all the answers. But neither of them have a college degree, and I am worried they could easily be taken advantage of. The overwhelming desire to "own" a home has gotten a lot of first-time-borrowers in over their heads. Most trust that their agents and lenders have their best interest at heart. Even Mr. BT and I learned the hard way, that this is rarely the case.
Friday, March 21, 2008
The Weekly Screen Scrape - So Far
Since January 2008, the average price per square foot in my search criteria (in Folsom and El Dorado Hills) has dropped 5%. The number of homes avialable (not pending) that meet my criteria has risen by 16%.
The number of homes pending sale has increased significantly, but shows the exact same pattern as last March (which was the high for the year) and has not reached the same % high as it did last year. The ratio also went down by 3% compared to last week.
The number of homes pending sale has increased significantly, but shows the exact same pattern as last March (which was the high for the year) and has not reached the same % high as it did last year. The ratio also went down by 3% compared to last week.
Thursday, March 20, 2008
Increasingly Impatient
As some of you have aptly observed, I think my views on the housing market are overly optimistic. The correction cannot happen fast enough in my book. I am sooooo ready to settle down in a place I can call my own.
Have I mentioned lately how I resent waiting out this bubble? I have tried to contain the bitterness and complaints .....but for some reason I feel the need to lash out today.
Yes wishing it so, won't make it so.....and this makes me an increasingly bitter renter (financially content, but emotionally bitter).
At first the local Sacramento housing market was a kind of geeky curiosity.....wondering if and when the economic fundamentals would kick in. During that time we were fairly productive and checked out various local neighborhoods.
But now that I have been in this rental for well over a year, and have pinpointed where I want to live, the curiosity has lost all its charm...even to this uber geeky blogger.
Have I mentioned lately how I resent waiting out this bubble? I have tried to contain the bitterness and complaints .....but for some reason I feel the need to lash out today.
Yes wishing it so, won't make it so.....and this makes me an increasingly bitter renter (financially content, but emotionally bitter).
At first the local Sacramento housing market was a kind of geeky curiosity.....wondering if and when the economic fundamentals would kick in. During that time we were fairly productive and checked out various local neighborhoods.
But now that I have been in this rental for well over a year, and have pinpointed where I want to live, the curiosity has lost all its charm...even to this uber geeky blogger.
Humble Pie
So here I thought Mr. BT and I have done pretty for ourselves. We put ourselves through college (and I went on to get my MBA as well) and now both of us have white collar professional jobs.
Then I read this.............according to the Sac Bee story
"The highest-paid 10 percent of state workers earn a median annual salary of $107,580, up almost 25 percent from November 2003." The raises they have received seem way out of line with what we have received in the private sector.
This helps explain the demand for all these homes that seem ridiculously overpriced when compared to median salaries. Apparently salaries are much higher than I had realized. And yes I griped about this exact same thing last year as well, but it was related to federal pay.
Then I read this.............according to the Sac Bee story
"The highest-paid 10 percent of state workers earn a median annual salary of $107,580, up almost 25 percent from November 2003." The raises they have received seem way out of line with what we have received in the private sector.
This helps explain the demand for all these homes that seem ridiculously overpriced when compared to median salaries. Apparently salaries are much higher than I had realized. And yes I griped about this exact same thing last year as well, but it was related to federal pay.
Wednesday, March 19, 2008
Are we There Yet?
We have certainly come a long way. But how much farther do we have to go?
Last year, it was easy to be confident about the future direction of home prices. Rents were crazy cheep compared to purchasing the same home. As a result, home prices had to come down (rents weren't going up because frustrated sellers were flooding the market).
However we are now entering a rather grey area. Depending on your assumptions (and especially your location) things can go either way. For example, the home we are looking at comes out fairly even with our rent (with costs fully loaded into both sides) except for maintenance. This is a big exception, because the home is older, and in need of extensive maintenance.
From my limited calculations, in El Dorado Hills, we have another 10-15% to go. At that point, we will hit the rent adjusted value as well as the inflation adjusted value. Homes that are priced around 10-15% below comps in my price range are also flying off the market around here. So I feel fairly confident about this estimate.
Last year, it was easy to be confident about the future direction of home prices. Rents were crazy cheep compared to purchasing the same home. As a result, home prices had to come down (rents weren't going up because frustrated sellers were flooding the market).
However we are now entering a rather grey area. Depending on your assumptions (and especially your location) things can go either way. For example, the home we are looking at comes out fairly even with our rent (with costs fully loaded into both sides) except for maintenance. This is a big exception, because the home is older, and in need of extensive maintenance.
From my limited calculations, in El Dorado Hills, we have another 10-15% to go. At that point, we will hit the rent adjusted value as well as the inflation adjusted value. Homes that are priced around 10-15% below comps in my price range are also flying off the market around here. So I feel fairly confident about this estimate.
Tuesday, March 18, 2008
House of Cards
I know many felt it was just a matter of time before our consumer driven economy faltered. But lately it feels much more like a complete collapse than a falter.
Try as I might, I am having a hard time grasping what value these financial firms bring to our economy. I understand the concept of buying and selling stocks, since you are actually buying and selling ownership of something. I also understand margins, having money to back up your purchases. But the sophisticated financial “products” these firms sell, tend to be associated with a “position,” an “instrument”, or a “strategy.”
To be completely cynical about this....and I think the $2 share price of Bear Sterns might back me up, these companies don't produce anything of actual value. They seem to be middlemen that assist with transactions, or structure a deal, and take an enormous cut (hmmm...that sounds really familiar =) Even the WSJ theorized yesterday that the only real asset of BS may be the building that houses the employees.
Its not that I haven’t tried to understand, but the proliferation of these “products” have become mind numbing to your average suburban mom (hedge funds, EFTs, SIVs, CDOs, and the list goes on). According to my egocentric view of the world, if its so complicated that I can’t understand what purpose it serves, why should we use taxpayer money to bail them out?
All the headlines seem to emphasize the need for liquidity to conduct all these “transactions.” But these financial “innovations” and “transactions” all seem to be predicated on a house of cards. Once the rug is pulled out from under, the entire thing collapses.
What really gets me about this whole situation is the hypocrisy of it all. Many of these financial types are not in favor of safety nets for the American people, but yet they advocate them for their troubled financial firms and markets.
(And I am not so naïve to think all these products are completely without merit. In my industry, it was widely publicized how Southwest Airlines uses fuel hedges to stay ahead of its competition.)
Try as I might, I am having a hard time grasping what value these financial firms bring to our economy. I understand the concept of buying and selling stocks, since you are actually buying and selling ownership of something. I also understand margins, having money to back up your purchases. But the sophisticated financial “products” these firms sell, tend to be associated with a “position,” an “instrument”, or a “strategy.”
To be completely cynical about this....and I think the $2 share price of Bear Sterns might back me up, these companies don't produce anything of actual value. They seem to be middlemen that assist with transactions, or structure a deal, and take an enormous cut (hmmm...that sounds really familiar =) Even the WSJ theorized yesterday that the only real asset of BS may be the building that houses the employees.
Its not that I haven’t tried to understand, but the proliferation of these “products” have become mind numbing to your average suburban mom (hedge funds, EFTs, SIVs, CDOs, and the list goes on). According to my egocentric view of the world, if its so complicated that I can’t understand what purpose it serves, why should we use taxpayer money to bail them out?
All the headlines seem to emphasize the need for liquidity to conduct all these “transactions.” But these financial “innovations” and “transactions” all seem to be predicated on a house of cards. Once the rug is pulled out from under, the entire thing collapses.
What really gets me about this whole situation is the hypocrisy of it all. Many of these financial types are not in favor of safety nets for the American people, but yet they advocate them for their troubled financial firms and markets.
(And I am not so naïve to think all these products are completely without merit. In my industry, it was widely publicized how Southwest Airlines uses fuel hedges to stay ahead of its competition.)
Monday, March 17, 2008
Recourse of Course
In a fit of procrastination, I did a little research on the whole "recourse" issue. From what I had gathered, California is a non-recourse state. Meaning, the bank can't go after all your stuff, if your house doesn't fully satisfy the debt you owe the bank in a foreclosure.
However there appears to be an interesting twist to all this. According to the CA Franchise Tax Board, loans can become recourse if they are not made with purchase money. In other words, if you refinance your home, it is now considered to be recourse debt. The bank can get a deficiency judgement against you and go after all the goodies you bought while you weren't paying your mortgage.
So now I am wondering if all this seemingly charitable activity the banks have been reporting, "working out the terms of the loan with the borrower" is just a ruse to make the loan a recourse loan. You refinance to a lower rate, and can now "manage your payments" for a bit, and unbeknown to you, the bank now has recourse to seize the hummer you bought while being foreclosed on.
Please keep in mind this is all purely uneducated speculation on my part. But if I were a bank with a non-recourse purchase loan in California, I would do what I could to get my borrower to refinance and turn it into a recourse loan (and what do you want to make a bet, this recourse info is buried on the back of page 12 in fine print).
If I am reading all this correctly, I don't think I want to purchase with the idea of refinancing later when rates go down.
However there appears to be an interesting twist to all this. According to the CA Franchise Tax Board, loans can become recourse if they are not made with purchase money. In other words, if you refinance your home, it is now considered to be recourse debt. The bank can get a deficiency judgement against you and go after all the goodies you bought while you weren't paying your mortgage.
So now I am wondering if all this seemingly charitable activity the banks have been reporting, "working out the terms of the loan with the borrower" is just a ruse to make the loan a recourse loan. You refinance to a lower rate, and can now "manage your payments" for a bit, and unbeknown to you, the bank now has recourse to seize the hummer you bought while being foreclosed on.
Please keep in mind this is all purely uneducated speculation on my part. But if I were a bank with a non-recourse purchase loan in California, I would do what I could to get my borrower to refinance and turn it into a recourse loan (and what do you want to make a bet, this recourse info is buried on the back of page 12 in fine print).
If I am reading all this correctly, I don't think I want to purchase with the idea of refinancing later when rates go down.
Sunday, March 16, 2008
Febuary March 2008 Month's Inventory
I have had many family obligations lately, so not much time to obsess about the sales data that came out. While month's inventory is down from last month, perhaps due to the quickened pace of sales, it is still firmly in buyer's territory for most zip codes (6 month mark is often cited as a balanced market). SFH inventory is from Zip Realty, and sales are courtesy of the Sac Bee via Data Quick.
Friday, March 14, 2008
The Mighty Misleading Median
Initially, purchasing activity slowed, yet median prices kept rising. This enigma was oft attributed to the fact that only higher end homes were selling, raising the median. Now the roles are reversed and it appears that lower end homes are the primary drivers behind the sales numbers these days. With this reversal, the median home price has tumbled over the last year
This phenomenon makes home pricing look much more aggressive than it really has been because the distribution at the higher end has not changed much. The lower 50% of the market seems to be getting the hint, and that is where the sales have occurred (see stats provided by Agent Bubble below).
So while the median sales price has supposedly dropped 30% or so in Sacramento over the last year, I'm not sure its reflective of the entire market.
12/1/06 - 2/28/07
By Sales Price
0-100K - 21
100K-199K - 258
200K-299K - 856
300K-399K - 1417
400K-499K - 749
500K-599K - 376
600K-699K - 201
700K+ - 276
12/1/07 - 2/28/08
By Sales Price
0-100K - 106 (+405%)
100K-199K - 731 (+183%)
200K-299K - 1237 (+45%)
300K-399K - 958 (-32%)
400K-499K - 398 (-47%)
500K-599K - 187 (-50%)
600K-699K - 97 (-52%)
700K+ - 127 (-54%)
This trend was reinforced by my research yesterday. I checked out pendings in El Dorado Hills, since the bank is going to prepare comps for our short sale. The number of pending sales over 600k is anemic compared to the lower end.
This phenomenon makes home pricing look much more aggressive than it really has been because the distribution at the higher end has not changed much. The lower 50% of the market seems to be getting the hint, and that is where the sales have occurred (see stats provided by Agent Bubble below).
So while the median sales price has supposedly dropped 30% or so in Sacramento over the last year, I'm not sure its reflective of the entire market.
12/1/06 - 2/28/07
By Sales Price
0-100K - 21
100K-199K - 258
200K-299K - 856
300K-399K - 1417
400K-499K - 749
500K-599K - 376
600K-699K - 201
700K+ - 276
12/1/07 - 2/28/08
By Sales Price
0-100K - 106 (+405%)
100K-199K - 731 (+183%)
200K-299K - 1237 (+45%)
300K-399K - 958 (-32%)
400K-499K - 398 (-47%)
500K-599K - 187 (-50%)
600K-699K - 97 (-52%)
700K+ - 127 (-54%)
This trend was reinforced by my research yesterday. I checked out pendings in El Dorado Hills, since the bank is going to prepare comps for our short sale. The number of pending sales over 600k is anemic compared to the lower end.
Thursday, March 13, 2008
Stop the Presses - The Bee has a Blog
Lander always has the latest scoop. There is a new RE blog in town courtesy of the Sacramento Bee (by Jim Wasserman). Very exciting for me, cause it looks like he is posting advance info on the latest DQ data!
Personally, I have been rather pleased with Wasserman's RE coverage. He has discussed the price drops from the affordability angle more than once.
I just hope the comments on his blog are a little more civilized than the articles. The disrespect people display online never ceases to amaze me.
Personally, I have been rather pleased with Wasserman's RE coverage. He has discussed the price drops from the affordability angle more than once.
I just hope the comments on his blog are a little more civilized than the articles. The disrespect people display online never ceases to amaze me.
The Weekly Screen Scrape - Spring fling or flop?
In a mere 2 months, the average price per square foot has dropped 5% (for the homes I track that meet my criteria in Folsom and El Dorado Hills). There were some substantial price drops in the last two weeks, and I am now seeing several familiar listings coming back on the market after taking a winter break. Now that my sample size has grown significantly, I think these statistics can be interpreted as more indicative of the broader market (albeit the lower end).
On the flip side, there art a lot of homes in escrow right now. However to give a little context, last March was also the record for my pending to total ratio (34%, with 22 pending and 43 available). The main difference is that there are so many more homes that fit our criteria now. With 50 homes pending and 102 homes available, for a ratio of 33 pending%.
But here is the kicker....by early May 2007 that ratio had dropped down to 18%, one of the lowest points of the year.
Separately, our home search is on hold for a month while we wait to hear from the bank on the short sale we submitted. I'm not too hopeful, as the seller thinks the offer is low (of course its all semantics, since I think the offer is very reasonable). We actually lowered our original offer once we agreed it would be a short sale, to cover the "as-is" factor as well as the fact that short sales take several months to work out.
On the flip side, there art a lot of homes in escrow right now. However to give a little context, last March was also the record for my pending to total ratio (34%, with 22 pending and 43 available). The main difference is that there are so many more homes that fit our criteria now. With 50 homes pending and 102 homes available, for a ratio of 33 pending%.
But here is the kicker....by early May 2007 that ratio had dropped down to 18%, one of the lowest points of the year.
Separately, our home search is on hold for a month while we wait to hear from the bank on the short sale we submitted. I'm not too hopeful, as the seller thinks the offer is low (of course its all semantics, since I think the offer is very reasonable). We actually lowered our original offer once we agreed it would be a short sale, to cover the "as-is" factor as well as the fact that short sales take several months to work out.
Wednesday, March 12, 2008
March 2008 Asking Price Distribution
Below is the March 2008 update on Sacramento's progress toward affordable housing for your average family. We seem to be making some nice progress in the lower 50%. The upper 50% doesn't seem to be budging much, but I have a feeling their day will come. After all, a 10% decline on a $1,000,000 home is $100,000, compared to $20,000 on a $200,000 home. While the percent is the same, the actual $$ pain is more acute on the higher end.
Once again, this is a very unscientific data set, gathered from Zip Realty's website (the mapping function) for all home types (SFH, condo, multi family).
Once again, this is a very unscientific data set, gathered from Zip Realty's website (the mapping function) for all home types (SFH, condo, multi family).
Tuesday, March 11, 2008
A Taxing Debate
As an ENFP I tend to be very idealistic......so please forgive the rather naive discussion below. I must be missing some crucial piece of information because the "tax argument" for purchasing a home isn't very persuasive.
We just completed our taxes for this year. It was our first full year in California, and our first full year as married renters with two jobs (we had rented while married previously, but my husband was attending college full-time). We are now at a point where our income is such that we don't qualify for many deductions anymore (except for our two little munchkins of course). So needless to say our tax bill was larger than in past years (the state was what really got us).
Getting to the issue at hand......the "tax benefits" of owning a home are often cited as a reason to buy versus rent. But I have always felt this is a misconstrued argument. For one, you have to pay a lot more in taxes and mortgage interest than your actual deduction. So the "its tax deductible" argument only goes so far in my book.
In all honesty it seems like a big shell game to me. Instead of paying county property taxes, and lining shareholder pockets with the interest on your mortgage, you are paying higher federal and state taxes. I know some have a visceral reaction to paying anything that smacks of a tax, but is paying interest on your mortgage that much more appealing? At least with taxes, in theory the money is being put toward the common good.
Once home prices come down, we will find a middle ground between the two extremes. In theory we will pay less interest and property taxes (since our loan amount will be lower), but federal and state taxes will be higher since we will have less to deduct.
In any case, buying a home for the tax deductibility, seems to be a false argument because those tax benefits are offset with many other costs, such as homeowners insurance, property taxes and maintenance.
We just completed our taxes for this year. It was our first full year in California, and our first full year as married renters with two jobs (we had rented while married previously, but my husband was attending college full-time). We are now at a point where our income is such that we don't qualify for many deductions anymore (except for our two little munchkins of course). So needless to say our tax bill was larger than in past years (the state was what really got us).
Getting to the issue at hand......the "tax benefits" of owning a home are often cited as a reason to buy versus rent. But I have always felt this is a misconstrued argument. For one, you have to pay a lot more in taxes and mortgage interest than your actual deduction. So the "its tax deductible" argument only goes so far in my book.
In all honesty it seems like a big shell game to me. Instead of paying county property taxes, and lining shareholder pockets with the interest on your mortgage, you are paying higher federal and state taxes. I know some have a visceral reaction to paying anything that smacks of a tax, but is paying interest on your mortgage that much more appealing? At least with taxes, in theory the money is being put toward the common good.
Once home prices come down, we will find a middle ground between the two extremes. In theory we will pay less interest and property taxes (since our loan amount will be lower), but federal and state taxes will be higher since we will have less to deduct.
In any case, buying a home for the tax deductibility, seems to be a false argument because those tax benefits are offset with many other costs, such as homeowners insurance, property taxes and maintenance.
Monday, March 10, 2008
March 2008 Inventory - Inventory Takes an Unseasonal Dip
For some reason I have always hated the word "absorption." It conjures up images of paper towels and diapers. But based on anecdotal evidence, and my personal RE browsing obsession, I am assuming "absorption" now applies to the Sac RE market.
The unseasonal drop in inventory doesn't make sense, unless you attribute it to increased purchasing activity. In other words, inventory is being absorbed by buyers at a faster rate than new listings are coming on the market. If I were a strict doom an gloomer, I would attribute it to expired listings and frustrated sellers.
However I am sticking with the positive explanation because prices have a lot to do with sales activity, and there is sufficient evidence that prices are finally getting back to reasonable levels. Back in April of last year the median home price was $439,500. Fast forward one year, and that median has now dropped to $311,900 according to housing tracker. We have come a long way in a short while (almost a 30% drop).
Of course, this theory is largely driven by my gut. As an average move-up buyer, if I am seeing attractive properties in my price range, I assume others are as well. If we are antsy to become a homeowners once again, I assume others are as well (for instance, one of my favorite bloggers has recently taken the plunge).
The unseasonal drop in inventory doesn't make sense, unless you attribute it to increased purchasing activity. In other words, inventory is being absorbed by buyers at a faster rate than new listings are coming on the market. If I were a strict doom an gloomer, I would attribute it to expired listings and frustrated sellers.
However I am sticking with the positive explanation because prices have a lot to do with sales activity, and there is sufficient evidence that prices are finally getting back to reasonable levels. Back in April of last year the median home price was $439,500. Fast forward one year, and that median has now dropped to $311,900 according to housing tracker. We have come a long way in a short while (almost a 30% drop).
Of course, this theory is largely driven by my gut. As an average move-up buyer, if I am seeing attractive properties in my price range, I assume others are as well. If we are antsy to become a homeowners once again, I assume others are as well (for instance, one of my favorite bloggers has recently taken the plunge).
Friday, March 7, 2008
All's Fair?
Just noticed that the Q4 update to the National City / Global Insight Housing Valuation Report has been released. According to their study, Sacramento is now considered to be fairly valued! How bout that. We have come down from our peak of 53% overvalued to just 7%.
With the credit markets in such disarray, the economy teetering on the edge, and no end to the onslaught of foreclosures and NODS, Sacramento is likely to overshoot the mark.
With the credit markets in such disarray, the economy teetering on the edge, and no end to the onslaught of foreclosures and NODS, Sacramento is likely to overshoot the mark.
Thursday, March 6, 2008
The Weekly Screen Scrape - Mixed Signals
Well, its a very confusing time to be a buyer. Just finished the weekly screen scrape, and the pending sale ratio is at an all time high. Prices have dropped, and with interest rates lower, I think people are feeling more confident about the market.
On the other hand, NODs and foreclosures in El Dorado Hills and Folsom seem to be heating up as well, which would signal further price declines. According to foreclosure.com this week, Folsom has 110 active NODs and 39 active foreclosures with only 292 SFH listings right now. El Dorado Hills has active 150 NODs, 34 active foreclosures and 403 SFH listings last I checked.
Last year, around this time was also saw the peak in my pending sale to inventory ratio, so it could just be a seasonal trend.
Originally our plan was to use the pending sale ratio to figure out if the market was heating up, and jump in before it began to appreciate again. Many fellow bloggers have surmised that this is just a dead cat bounce, but I also know of some who have decided to take the plunge.
What's an average buyer to do?
On the other hand, NODs and foreclosures in El Dorado Hills and Folsom seem to be heating up as well, which would signal further price declines. According to foreclosure.com this week, Folsom has 110 active NODs and 39 active foreclosures with only 292 SFH listings right now. El Dorado Hills has active 150 NODs, 34 active foreclosures and 403 SFH listings last I checked.
Last year, around this time was also saw the peak in my pending sale to inventory ratio, so it could just be a seasonal trend.
Originally our plan was to use the pending sale ratio to figure out if the market was heating up, and jump in before it began to appreciate again. Many fellow bloggers have surmised that this is just a dead cat bounce, but I also know of some who have decided to take the plunge.
What's an average buyer to do?
March 2008 Good Buys & Offers to Builders
Please post homes you think are a good buy or any offers you know of that were accepted, especially to builders. It will help give others negotiating leverage when they are ready to buy. Even just letting people know what type of builder incentives they can expect would be helpful since its hard to tell if they give everyone the same incentives.
Currently there are over 20 homes in my screen scrape that are listed below 165$ sqft (of course, at least half of them are pending sale and many have mello roos and HOA). Still, not too shabby.
Pieces of data to include: Zip Code, MLS or Development Name, List Price, Incentives, Offer (if any), house details (sq ft, garage size, lots size etc).
Feel free to post info for homes anywhere in the Sacramento Metro area. Just cause I tend to confine my search to the Gold River, Folsom, El Dorado Hills, Cameron Park areas doesn't mean others have to.
Currently there are over 20 homes in my screen scrape that are listed below 165$ sqft (of course, at least half of them are pending sale and many have mello roos and HOA). Still, not too shabby.
Pieces of data to include: Zip Code, MLS or Development Name, List Price, Incentives, Offer (if any), house details (sq ft, garage size, lots size etc).
Feel free to post info for homes anywhere in the Sacramento Metro area. Just cause I tend to confine my search to the Gold River, Folsom, El Dorado Hills, Cameron Park areas doesn't mean others have to.
Wednesday, March 5, 2008
Bubble, Bubble, Toil and Trouble
While I am rather bearish on the economy right now, I feel the need to explore a couple issues that could affect how this whole economic meltdown plays out.
Bubble Bubble – With the advent of technology, transactions costs related to access and information have been substantially reduced in the last 2 decades. This has made it much easier for arm chair investors to jump onto every market bandwagon. One minute its tech stocks, the next its real estate, the next its gold, oil and commodities. Some of these markets can build and deflate quickly, and some will build and deflate slowly, depending on production lead times and the stickiness of the market. In any case, I think bubble psychology is here to stay. There is just too much money looking for a home (the next big thing). This would make a great PhD thesis: take a historical look at how long bubbles took to play out, compared to transparency (information) transaction costs, and asset production lead times.
Toil – Typically in recessions, unemployment rises. But lets not forget, just last month marks the first of the baby boomer retirements. This exodus from the workforce will mitigate some of the employment related issues we would otherwise see. Of course, if the stock and bond markets are performing poorly, this may delay the retirements.
Trouble? –How much trouble ahead is anyone’s guess. But if the markets can get a better handle on recognizing bubbles before they get too advanced, then it should bring some stability to investments. If investments are perceived as fairly stable, it will mean that the Boomers will feel relatively comfortable retiring. This in turn will keep unemployment at a more reasonable level than it would be otherwise in times of economic turmoil.
How do I see this playing out? Markets won't be able to get a handle on the bubble psychology. Just not enough contrarian investors out there. This will continue to create and destroy wealth at an increasingly rapid pace as well as prevent stabilization of the financial markets and banking system (hopefully some additional government regulation will either curb the risks, or require more disclosure, so that the financial system is not constantly teetering on the brink with every new asset bubble). I think Boomer retirements will be what eventually pulls us out of this mess since companies will be able to downsize in a less costly manner.
Of course there are a gazzillion other things in play (such as the dollar's loss of status, I am hoping our thirst for foreign goods subsides a bit which would spur domestic growth. This situation would be helped considerably if China would begin to devalue its currency.)....But I haven't seen much coverage by the MSM on these two issues which will play a big role in the aftermath of the housing bubble.
Bubble Bubble – With the advent of technology, transactions costs related to access and information have been substantially reduced in the last 2 decades. This has made it much easier for arm chair investors to jump onto every market bandwagon. One minute its tech stocks, the next its real estate, the next its gold, oil and commodities. Some of these markets can build and deflate quickly, and some will build and deflate slowly, depending on production lead times and the stickiness of the market. In any case, I think bubble psychology is here to stay. There is just too much money looking for a home (the next big thing). This would make a great PhD thesis: take a historical look at how long bubbles took to play out, compared to transparency (information) transaction costs, and asset production lead times.
Toil – Typically in recessions, unemployment rises. But lets not forget, just last month marks the first of the baby boomer retirements. This exodus from the workforce will mitigate some of the employment related issues we would otherwise see. Of course, if the stock and bond markets are performing poorly, this may delay the retirements.
Trouble? –How much trouble ahead is anyone’s guess. But if the markets can get a better handle on recognizing bubbles before they get too advanced, then it should bring some stability to investments. If investments are perceived as fairly stable, it will mean that the Boomers will feel relatively comfortable retiring. This in turn will keep unemployment at a more reasonable level than it would be otherwise in times of economic turmoil.
How do I see this playing out? Markets won't be able to get a handle on the bubble psychology. Just not enough contrarian investors out there. This will continue to create and destroy wealth at an increasingly rapid pace as well as prevent stabilization of the financial markets and banking system (hopefully some additional government regulation will either curb the risks, or require more disclosure, so that the financial system is not constantly teetering on the brink with every new asset bubble). I think Boomer retirements will be what eventually pulls us out of this mess since companies will be able to downsize in a less costly manner.
Of course there are a gazzillion other things in play (such as the dollar's loss of status, I am hoping our thirst for foreign goods subsides a bit which would spur domestic growth. This situation would be helped considerably if China would begin to devalue its currency.)....But I haven't seen much coverage by the MSM on these two issues which will play a big role in the aftermath of the housing bubble.
Tuesday, March 4, 2008
Due Diligence
I like to know what I am getting into before I make an offer on a home I am interested in. And lately there have been some temptations.
The following is a list of items I checked on with the offer we made a couple weeks ago. I am sure there are more, so feel free to chime in. I will add to it and post it on the sidebar with the other home buying resources.
The following is a list of items I checked on with the offer we made a couple weeks ago. I am sure there are more, so feel free to chime in. I will add to it and post it on the sidebar with the other home buying resources.
- Check to see where the home falls on the El Dorado County asbestos mapping.
- Look at the tax assessor’s website. Since I am new to the area, I also called to find out about the county tax rate (1.0364%), special impact assessments and the other district fees.
- Verify the school district. Redistricting has occurred several times and I wanted to see how likely would we be to get redistricted…as well as ask about how impacted are the schools.
- Get an estimate on water usage to see how it compares to what we pay now. El Dorado Irrigation District 530 642- 4000
- Get an estimate on electricity and gas usage to see how it compares to what we pay now: PG&E 800-743-5000
- Used the online form of my insurance company to get an estimate on Homeowners Insurance.
- C.L.U.E. Report for previous insurance claims on the home
- Googled the address to see what comes up.
Monday, March 3, 2008
A New Meaning to the Term Bedroom Community
Now I like to keep my posts clean, but this latest incident was just too amusing to not mention. So in true tabloid fashion I will report on a rather interesting development in the sleepy bedroom community of El Dorado Hills.
Apparently, Masque restaurant, and now the new Bistro 33 have attracted some promiscuous clientele lately. It a rather interesting mix ....and I won't go into all the gory details, but the clientele fall into two main categories (on Thursday nights in particular).
There are the hired hands (if you know what I mean) working the bar area patrons (I hear the manager is trying to crack down on the activity that is actually occurring at the restaurant). Some mom's from my group actually witnessed the deed one recent Thursday.
And then there are the swingers. It a very active group in the EDH area (they actually have a club?), and it is surprisingly pervasive (including several neighbors of another mom I know).
While at the park today I heard a hilarious story by one of my daughter's best friend's mom. She and her husband, who are both very attractive, were the target of affections at Masque recently. They had been drinking and it didn't really register until the advances became physically overt. Needless to say they won't be going back to Masque any time soon. Of course I couldn't stop laughing on hearing the story.....but more in a shock and awe kinda of way.
I find the whole situation very entertaining, EDH being such a bastion of conservative values and all.
Apparently, Masque restaurant, and now the new Bistro 33 have attracted some promiscuous clientele lately. It a rather interesting mix ....and I won't go into all the gory details, but the clientele fall into two main categories (on Thursday nights in particular).
There are the hired hands (if you know what I mean) working the bar area patrons (I hear the manager is trying to crack down on the activity that is actually occurring at the restaurant). Some mom's from my group actually witnessed the deed one recent Thursday.
And then there are the swingers. It a very active group in the EDH area (they actually have a club?), and it is surprisingly pervasive (including several neighbors of another mom I know).
While at the park today I heard a hilarious story by one of my daughter's best friend's mom. She and her husband, who are both very attractive, were the target of affections at Masque recently. They had been drinking and it didn't really register until the advances became physically overt. Needless to say they won't be going back to Masque any time soon. Of course I couldn't stop laughing on hearing the story.....but more in a shock and awe kinda of way.
I find the whole situation very entertaining, EDH being such a bastion of conservative values and all.
Agent Inquiries Only
Hard to believe it in this market, but us buyers still get treated shabbily when inquiring on a home. Below is my most recent run-in with an agent who obviously hasn't gotten the message that some RE buyers are sophisticated enough to make decisions for themselves.
There is home in my favorite neighborhood that is now listed for rent (the same neighborhood where we made an offer two weeks ago). I kinda recognized the place as having been sold in the last 4 years (my agent sent me all the recent sales so I could do my homework on this neighborhood).
Well I called the number to find out how much it would rent for. The guy was nice enough. But the rent was way out of line, even for EDH. So I ventured to ask, if they would be willing to sell. He thought they might be, but refused to discuss it with me any further, insisting my agent needed to call him. Apparently it makes us 'serious buyers' if our agent calls. Surprisingly, he even held his ground after I mentioned we recently put in an offer right around the corner.
Of course, I was a bit insulted. But once again, I won't let a snobby RE agent get in the way of my dream home. So after doing some more homework on the place, it looks like they are speculators with almost 100% LTV.
There is home in my favorite neighborhood that is now listed for rent (the same neighborhood where we made an offer two weeks ago). I kinda recognized the place as having been sold in the last 4 years (my agent sent me all the recent sales so I could do my homework on this neighborhood).
Well I called the number to find out how much it would rent for. The guy was nice enough. But the rent was way out of line, even for EDH. So I ventured to ask, if they would be willing to sell. He thought they might be, but refused to discuss it with me any further, insisting my agent needed to call him. Apparently it makes us 'serious buyers' if our agent calls. Surprisingly, he even held his ground after I mentioned we recently put in an offer right around the corner.
Of course, I was a bit insulted. But once again, I won't let a snobby RE agent get in the way of my dream home. So after doing some more homework on the place, it looks like they are speculators with almost 100% LTV.
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