Sacramento Real Estate Blog

I’ve been writing a lot here about how demand for homes is up substantially from last year in Sacramento County, especially in the areas where there the large numbers of foreclosures have caused the biggest price declines.  Watching the demand start to pick up is fairly exciting, but as I’ve written, prices have not yet caught up.  Moreover, just looking at demand is not enough to understand where things are heading in the future.  To get a better understanding of when we might expect to see a recovery, we’d need to understand several other important factors:

• Is the supply continuing to grow?  Are more homes being foreclosed on?  Do we see any sign that this part of the equation is turning the corner?
• Granted that the demand for homes — especially foreclosed homes — has increased dramatically.  But has it increased enough to significantly outpace supply?  In other words, it’s no help to say 100 people bought foreclosures if at the same time 200 new foreclosures were listed. 

Because of the way the Metrolist database works, it’s easier to look at homes that have sold than it is to follow all the homes that have listed to see what became of them.  However, it’s possible to get a rough idea.

The table below shows in an approximate way the number of short sales and bank foreclosures that were listed since the beginning of 2007, for Sacramento County only.  I say “in an approximate way” because this data includes only those properties that sold or are still active — those that were withdrawn from the MLS or expired are not represented.

Since we’re in July, the numbers for July are projected.  As you can see, during May and June it looked like we’d turned the corner and had started to see a decline in foreclosures, but the number of foreclosures and short sales picked up again in July.  So the answer to our first question above is that it looks like supply is continuing to increase.  (Having said that, I’m encouraged somewhat by the dip in short sales in July compared to June — short sales are the “leading indicator” here, while foreclosures are the trailing indicator).
 

The answer to our second question appears to be that we’ve already reached a point where demand for foreclosures is outstripping supply.  Looking at a recent snapshot of the period July 9 - July 16th, for example, 314 foreclosures sold through the MLS while 288 more were listed. 

This optimistic figure breaks down somewhat if we include Short Sales, where 223 properties were listed to 33 sold.

Still, there are good reasons to focus on the absorption rate of foreclosures.  First, there are many difficulties with getting short sales approved.  Moreover, sometimes today’s short sale listings are actually tomorrow’s foreclosure listings, and at other times the seller goes on to cure the default, and we have no statistics about that. 

What we need above all for the market to turn around is to see demand for the end result of the process — the REO — to continue to stay strong, while we see the number for short sales go down.  I for one will be keeping my eye on that 716 short sales projected for July, to see what the actual number turns out to be and what it looks like for August and into the future.