Sacramento County Real Estate - 2007 Year In Review
Well, those of you who are active fans of blogs of all kinds will no doubt find this 2007 Year in Review piece to be about a week late, since by now we’ve already had the “Gazillion Great Blogging Tips of 2007″, “101 Ways to Snip Your Schnauzer”, and gosh knows what other tremendous trips down memory lane.
As for me, I’ve been waiting for the December results to get posted to the MLS so I could have a good idea about what December looked like before beginning to take a look at the numbers.
In 2006, we began to see some price declines from the year before. Interestingly, because the rise in prices was so dramatic for the first half of 2005, and the drop in prices were fairly modest early on, by 2006 homes in Sacramento County had only lost 1% of their median value from 2005, and had actually gained 1.4% in average selling price. Though Land Park, East Sac, and Midtown are exceptions to the rule, the overall trend in Sacramento County in 2007 has been a year of steady decline in prices, and there was no offsetting increase in value in 2006.
In 2006, the average home in Sacramento County sold for $395,238, or $238.10 per square foot. In 2007, the average home sold for $357,851, or $211.12 per square foot. Thus the average price fell by 9.5%, and since this year’s crop was slightly larger on average, the average sold price per square foot drop came in for the whole year at 11.7%. The median price fell 9.3% from 2006 to 2007. In 2006, the median selling price of a home in Sacramento County was $395,238, and that number fell to $357,851 in 2007.
The Year of the Foreclosure
Toward the end of the year, as more and more homes went into foreclosure and there were fewer buyers taking advantage of falling prices, the pace of the decline accelerated as inventory rose. Currently, for example, there are approximately 10.41 months of inventory, whereas by year’s end in 2006 there were only 7.4 months.
Overall for 2006-2007, the number of sold foreclosures rose from less than 1% of all sales for all of 2006 to 20.9% of all sales for all of 2007. That number was significantly higher by the end of the year however, with 47.2% of all sales in December of 2007 versus 2.8% in December of 2008 being REO sales. Short sales continued to sell somewhat poorly, and even in December of 2007 only 4.6% of closed transactions were short sales. Nevertheless, the presence of these short sales in inventory should not be underestimated as a factor in bringing overall prices down. Currently some 55.7% of all active inventory is either a short sale (29.2%) or a bank owned property (26.5%).
As a result, price declines were more dramatic later in the year. For example, the overall year-wide sold price per square foot dropped 11.7%. But if we compare December to December we come up with a more grim 21.8% drop, from $223.84 in December of 2006 to $175.03 on average in December of 2007.
So Where Are We Now?
On the supply side of the equation, I believe we still have a way to go before we’re out of the woods. We have reached a point where short sales and foreclosures account for just over half of all active inventory in Sacramento County, as well as half of all sales.
On the demand side, it appears that for the short term at least we have turned a bit of a corner. I was pretty discouraged in September when we hit a low unit volume of only 709 units county-wide, but since then we’ve been slowly but steadily increasing month by month — which is especially encouraging given the fact that on a strictly seasonal basis, you’d expect December to be worse. 866 units sold in December. This is still not great by last year’s standards, but it suggests that some buyers are finally starting to take advantage of the low prices and still-high inventory.
If this upward trend in demand continues, we could hit equilibrium on prices sooner than expected.
As I mentioned recently, the biggest surprise of all is that interest rates have stayed as low as it has through all of this. Whether we continue to see that as gas prices rise and a new administration is elected in 2008 remains to be seen.
