Sacramento Real Estate Blog

Elite Properties agents have been representing buyers on lots of foreclosure sales this year.  What’s more, we’re not alone — some 65% of the more than 12,000 homes that sold this year through the MLS were bank owned properties.  With a typical selling price of about 20% less than a comparable non-distressed home, it’s no wonder that most buyers opt for an bank foreclosure if they can find one that suits their needs.

Though we think the rewards of a foreclosure purchase generally far outweigh whatever minor difficulties we help our buyers overcome in the foreclosure buying process, there are nevertheless a few differences from a traditional sale that we think buyers should know about when they buy a foreclosure.  This is not to scare you away from foreclosures, which we think are great opportunities.  However, as always, the more you know up front, the more likely you are to have a transaction that runs smoothly and successfully.

How Foreclosure Transactions Differ From Non-Foreclosure Transactions

1. The sale will almost always be an "As Is" Sale
   Bank foreclosures are typically sold As Is, meaning the bank will not generally agree to make any repairs.  You still have an inspection period where you will have your inspectors examine the property and give you written reports on its condition, and you have the right to cancel the agreement if anything alarming shows up.  What you don’t generally have is any leverage to have the seller fix conditions for you. 

   Of course, every rule has an exception, and the exception in this case is that banks will sometimes agree to fix items required by an FHA lender, if you’re getting FHA financing.  We’ve negotiated this successfully many times.  To be sure, banks prefer conventional financing because conventional loans don’t generally have such prior-to-close conditions, but if you need FHA financing, it’s doable in many cases and we have a lot of experience with it.

2. The banks will counter our standard California Association of Realtors® (CAR) Offer With Their Own Addendum
   You should read over the addendum the bank sends back carefully, and go over any questions you may have with your Realtor®.  In almost all cases, the addendum will include:

1. A shortening of the escrow period.
   We often use 30 days as a "typical" escrow period when writing the offer.  Expect the bank to counter with a shorter period, often 21 days or thereabouts.
2. A shortening of your inspection period.
   The "default" inspection period in the CAR purchase agreement is 17 days.  The banks will often want to shorten this to something like 7-12 days.  Our main concern is that you have enough time to perform your inspections, so your agent’s job becomes getting all your appointments scheduled quickly and getting you the reports you need.  We have a lot of experience getting this done.
3. A per-diem penalty if the buyer fails to close on time (due to buyer’s default).
   The bank addendums typically include a clause where the buyer will pay a daily fee to the bank if they fail to close on time.  Often this daily fee runs somewhat higher than typical rents, with $100 to $150 per day being common. 

   Because the seller has both shortened your time to close and will charge you if you don’t get it done on time, it’s very important to get your financing in place if you’re buying a foreclosure before you write an offer.  At minimum, you should have a completed loan application with credit check submitted to your lender before you write a foreclosure offer.  This is not only important so you’re able to close on time and therefore avoid per diem charges, but many banks require direct lender approval for the offers they’ll consider.  This means approval from an underwriter working for the person with the money, not a mortgage broker loan pre-qualification letter.  Getting to this stage means getting with your lender before you shop, not while you’re in escrow!

In spite of the issues above, we believe the major discounts of bank owned properties represent a great opportunity for our buyers.  Our job is to inform you about the differences and minimize the negative impact of those issues that seem to be endemic to foreclosure transactions, so you get the benefit of the price without having to give up too much in the way of convenience.

The report below shows foreclosure sales for the past two months for the Greater Sacramento area, broken down by zip code.   To see how things are changing, compare to the June 16th Foreclosure Report.

Sacramento County

Placer County

El Dorado County

The chart below shows the total number of homes that sold in approximately the last sixty days.  (I say “approximately” because there’s usually some lag time between the sale and when the sale is entered in the database.) 

For each area, we then break the total number of units down to show the percentages of foreclosures that sold (these are bank foreclosures, or REOs).  Then we show the number of short sales that sold.   Finally, we show the number of non-distressed sales — where the seller was not in foreclosure and had enough money to pay off their loan.

At the risk of once again grinding our favorite ax, note that in almost every case, short sales are the smallest category.  Their failure to close in any significant numbers relative to the offers written on them is why we often refer to them as fake listings.  What’s especially telling is how they compare to the non-distressed category, which typically are priced much higher yet outsell the short sales by a wide margin.

Sacramento County

Placer County

El Dorado County

As prices in greater Sacramento (you know, the whole USA) continue to fall, naturally everyone wants to know where the bottom is.

I’ve been saying for some time now that we’ll reach the  bottom of the real estate market on May 20th, 2009 at 10:20 AM.  Actually, I’m not exactly sure.  It might be 10:15 if all goes well.

I am the eyes of Johnstradamus, and all your ways are known to me.

No, but seriously, we’re all curious.  Purva Brown posted a very interesting article to The Sacramento Real Estate Gal recently discussing Alan Greenspan’s recent prediction that the real estate market will begin to rebound in 2009.  (Hey look, Alan agrees with me!)  In discussing the article, Purva made the point that anecdotally we’re seeing some increases in demand.

I would go one step further to say that depending on the area, the pent up demand is not anecdotal at all, it’s quite real and measurable.  The unit volume numbers tell the story.  Elk Grove unit volume is up about 100% in April.  In East Florin, 95828 and 95829, unit volume is up 172% from last year.  Even in Roseville, where the price declines have been less precipitous, volume is up some 40% from April to April.

I believe we’ll continue to see increased demand as time goes on, as long as interest remains reasonably low.  In one respect this is a simple manifestation of the demand curve in action.  As price goes down, demand goes up.  Another way to look at the potential for real estate prices to reach equilibrium was one that Sean O’Toole recently reminded us of in his excellent post Death Spiral?  How to Find the Bottom in Your Market.  Sean’s point is one that I’ve believed for many months, that as more and more properties begin to offer positive cash flow, we’ll reach an equilibrium point.  This will be true even if Option ARMs continue to reset and cause additional foreclosures, and and there’s no shortage of articles on the bear side are predicting that they will.  See for example this article in Slate and this evaluation of the ARM Reset Problem.   Of course as Sean points out, you still have to predict what cap rate is reasonable for a given area to reach equilibrium.  With this in mind, those of you who may want to argue for a different recovery date than Johnstradamus predicts may easily be able to prove it using no more than a keyboard and a slide rule. 

Don’t get your fingers caught.

I admit I was pretty shaken when I first saw the ARM resets and Option ARM recasts lasting into 2011, but one thing that’s different about these resets will be that this “second wave” is not composed primarily of sub-prime borrowers, as I understand it.  So although it’s cause for concern, let’s remember that sub-prime borrowers by definition should have a higher default rate.  I wouldn’t be surprised to see more foreclosures in El Dorado and Placer County relative to Sacramento County as this unfolds, but that’s strictly a hunch.

What’s really encouraging to me is to see such an increase in demand in Sacramento County already, even though the numbers for rentals in areas like 95828 and 95829 still didn’t impress me as all that wonderful.  I suspect that most of these buyers are not investors, but first time buyers who are feeling like a home is now within their grasp.  Beyond that, however, I believe that if we ever get to the point where you can routinely get $200 per month on a single family with reasonable assumptions about expenses and vacancies, we’re going to get to a point where it won’t matter how many foreclosures get dumped on the market — enough investors will scoop them up that prices will reach an equilibrium.

It’s not (always) what you think.

I came across this beauty in the MLS that was sold last year in El Dorado Hills.

5364 square feet, 4 bedroom, 7 bath.

Selling price? $1.16 million. Including an 800 Square Foot Racquetball Court.

Nifty.

The transaction history is fascinating.

The owners purchased the home in 1998 for $550,000, and took out a $100,00 line of credit within a month of that. In 2001 they obtained another line of credit for $200,000, refinancing the whole shooting match in 2002 for a $750,000 first and another $150,000 line of credit. Three years later, in 2005, they took out an adjustable rate first at $1,267,500 getting another line of credit a couple of months later for $292,500.

El Dorado Hills — That’s Where I Want to Be!

I must admit, I tend to track the “trailing indicators” of the foreclosure process. A sold REO is nothing if not a property that has been well and truly through the whole nine yards of the process. If instead you look at short sales or track Notices of Default, you’re looking at the leading edge of foreclosures.

One encouraging bit of news I read about recently was the possibility that foreclosure numbers were down for April. Carol Lloyd suggested this in her article, Making Sense of Contradictory Foreclosure Numbers.

Of course, as you can guess from the title of that article, the jury’s still out on whether there really was a decline in foreclosure filings in April or whether we’re still well and truly on a path to inevitable destruction, combining the $4.00 home with the $250,000 gallon of gas.

Oh the humanity.

But meantime, check out this tidbit from Foreclosures.com, the rosier of the contradictory numbers:

“In most of our areas it’s getting better or staying the same and in some of our areas, there were huge drops in foreclosures ,” she told me. “In California, we went from 47,000 in March to 39,000 in April. That’s huge.”

I’ll take my good news where I can get it.

Now that we all know how much we hate short sales, I thought I would drop in my two cents with regards to what I’m hearing from other Realtors I talk to. (Yes, I do have a short sale listing. And yes, it’s getting a lot of attention from everyone but the bank.)

But from what other Realtors tell me, there are multiple offers on almost all well-priced bank owned homes. There are also multiple offers on short sales, especially if they are approved short sales.

What does this point to? I may venture a guess to say pent up buyer demand. I recently wrote an article on my other blog Sacramento Real Estate Gal about how the real investors are beginning to jump into the Sacramento real estate market. Historically, the investors jump first followed by the first-time homebuyers and then the rest.

So if you’re making an offer on an REO and your Realtor tells you there are multiple offers on the property already, don’t assume she’s lying just because you’re full of bad housing news. The good news is coming.

Related Links

Are Short Sales Fake Listings?  Part 1

Are Short Sales Fake Listings?  Part 2

Part 3 of our series “Are Short Sales Fake Listings” deals with the problems that buyers encounter because short sales are fake listings and the steps that buyers can take to find listings that are not short sales.

How This Works Out for Buyers

Buyers often feel like they should spend some time looking at Short Sales.  They’re often tempted by the low prices into ignoring the fact that these listings hardly ever close successfully.  Sometimes buyers hear about the long closing time (3 months and more to get the offer accepted in many cases, plus another month to close) and feel that they may not be in such a hurry so the long time frame may work.

What buyers often don’t realize, however, is that there’s a big difference between waiting three months for something good to happen that you know is coming, and waiting three months while having no earthly idea of what’s going on with your offer.

So what happens?

Rarely, the best case happens, and a buyer who was interested in a short sale gets their offer approved by the lender and is still interested in the property when it’s ready to close four months later.   Unfortunately this intermittent reinforcement leads more buyers and sellers to hope that maybe they’ll be the next American Idol winner.  (Intermittent reinforcement is also the principle behind the lottery and Russian roulette).

The most common case is one we see happen time and time and time again.  The buyers who were excited about their offer and thought that they’d be happy to wait end up frustrated as can be, while the unresponsive lender drags his feet for months and months.  Most people overestimate their own patience because they haven’t met loan workout managers, who are the undisputed masters at testing peoples’ patience.

In the worst case, as we point out above, the buyers wait patiently as detailed above.  Finally, their offer approved, they go through the inspection process and get their loan ready, but then the lender pulls the rug out at the last minute.  So these buyers - who’ve told their landlords they’re leaving — find their patience rewarded by being out of pocket by about $800 or $900 for inspections and appraisals.  All dressed up with no place to go.

How Can Buyers Get Listings That Don’t Have Short Sales?

Most real estate web sites are fed by the Multiple Listing Service, or MLS.  Unfortunately, web site providers don’t always give us the option of weeding out the short sales from the general listings.

Here, however, are three ways that you can filter out the short sales and only get the real listings, those that have a good chance of closing in the face of a reasonable offer.

1. Use our foreclosures only search page
   http://www.sacramento-home.com/foreclosures/
   The properties listed here include only bank owned foreclosures, and not short sales or non-distressed sales.  Bank owned foreclosures are enormously popular, because the low prices are just as real as they are on short sales, but bank foreclosures actually sell and close escrow!  (See the table on page
2. Checking if a listing is a short sale
   Our main search pages do not allow you to exclude Short Sales (unfortunately), but you can test to see if a given listing is a short sale by re-running your search and including only short sales.  The advanced options feature of the search page (see detail, below) allows you to do this.  To search only short sales, check the Short Sale box.  As you can see, you can also do a foreclosures only search here by checking the REO box only.
   
    
3. Ask your agent. 
   We’re always happy to do any custom search for you from the MLS, and we can set up you up for custom email updates excluding the short sales (and using almost any other search parameters you can think of).  Just give us a call at (877) 735-5657, and let your agent know that you want to get all the listings (for whatever area, size, etc. you’re interested in) except the short sales.

Related Links:

Are Short Sales Fake Listings?  Part 1

Why Short Sales Don’t Sell

Imagine a banker foreclosing on people.  Did you picture in your mind a damsel tied to railroad tracks and a guy in a black hat twirling his moustache? 

That’s just about right.

The Lender’s Stake in a Short Sale

Frank Llosa brilliantly documents two games that lenders will play when asked to accept a short sale.

Game #1 - Drag Your Feet and Continue Making Money
Tell the owner that you’ll accept their short sale, as long as they keep making payments.  This way you continue to get paid whatever the mortgage was or whatever you allow the buyer to negotiate.  The longer you drag your feet, the longer you get paid.

Game #2 - Drag Your Feet, Continue Making Money, and Foreclose Anyway
Another reason the lender may not want to accept a short sale is that if there is Private Mortgage Insurance on the loan, they’ll be able to get the loan paid off if they foreclose.  Expecting the bank to “cut its losses” only works if it’s not the case that they can have the loss covered in full if they foreclose and have to cover the loss themselves if they don’t.

While we’re on the subject of foreclosing anyway, don’t think the fact that you (as the buyer of the home) are in contract with the seller will deter the bank from foreclosing.  We even had one buyer who got to the end and had a loan ready to fund, (and yes, this buyer had paid for home inspections and an appraisal out of pocket) when at the last minute the bank decided they’d foreclose anyway.

Buying a Fake Listing?  Then You’ll Need A Fake Agreement.

Do you feel uncomfortable with short sales yet?  Take a look at the following language from the California Association of Realtors® Short Sale Addendum:

“Buyer, Seller, and Brokers do not have any control over whether Short-Sale Lenders will consent to a short sale, or any act, omission, or decision by any Short-Sale Lender in the short-sale process.”  In the next paragraph on buyer and seller costs, this addendum goes on:  “Such costs will be the sole responsibility of the party incurring them, if Short-Sale Lenders do not consent to the transaction or either party cancels pursuant to this agreement.”  [My emphasis both times].

Nice, huh?  You are on the hook for your costs if either party cancels “pursuant to this agreement”, but you just got done “agreeing” that nobody who has anything to do with the agreement can control what the bank’s going to do.

More About Lenders

Even if they don’t play the games we talked about above, think about the position the lender is in, and you’ll realize that lenders are not chomping at the bit to make your short sale work.

In the long run, the threat of foreclosure is the main stick that lenders wield.  It keeps everyone from doing a short sale when they get in trouble or just want to move and can’t afford it.  (It’s not called a MORT-gage for nothing).  Making the short sale process easy and convenient flies directly in the face of the lender’s overall financial interest.

In the short term, if they have short sales and foreclosures on the books, the bank is paying the taxes and other carrying costs on the foreclosures, while the seller is still paying those costs on short sales. To be sure, maybe in many cases the seller isn’t keeping up on these payments either - but at least in this case the costs are deferred to the future.  Foreclosures are bleeding bank funds now, so it stands to reason the bank will spend most if its resources on those.

Not only is a foreclosure a present liability and a short sale a future liability, but there’s still a chance that the lender won’t end up owning the home on a short sale.  The only reason a bank will accept a short sale is that the bank is convinced that the buyer will go through the whole foreclosure process if they don’t and the bank will lose.  Documenting this means spending further resources, but there’s a cheaper way to find out who’ll cure the default and who won’t.  Send everything to foreclosure and only take a bath on the sellers who don’t cure the default.   No wonder that we met with one major lender who told us that their policy was simply not to do short sales and go forward with the foreclosure process.

If Short Sales Are This Bad, Why Do Agents List Them?

There are several reasons that listing agents accept short sales, even though the success rate for such listings is dismal at best.

• Altruism
  Listing agents naturally want to help sellers if they can.  Even though the number of short sales that get approved and close escrow is dismally low, sellers who need to do a short sale may in some cases receive some benefit from the sale in the unlikely event that they’re successful.   It’s hard to say no when a seller is in trouble and asks you for help.
• Business Benefit to the Listing Agent
  Most agents meet buyers primarily through their own listings. (Elite Properties is a bit of an exception, since so many buyers find us through our web sites).  The traditional approach to a successful real estate career is to have well priced listings, because such listings attract buyers.  Having a sign in front of an attractively priced short sale will bring many calls, and there’s a benefit to meeting those buyers even if they end up buying another property from you down the street.  In other words, from a listing agent’s perspective, whether a given listing sells is less important than whether a given listing can generate other business.

To add insult to injury, listing agents know that other buyers and other agents are familiar with how bad short sales are.  So in order to tease buyers into viewing their listings, prices are often dropped below anything that’s at all reasonable for the area, to a point where there’s no chance at all the lender will accept the offer.  We know of one case where a Broker Price Opinion (essentially an appraisal on the basis of which the lender will accept or reject the short sale) was done and the home was worth $350,000.   Nevertheless, it was listed at $330,000, and the agent told us that it was listed that way because she wasn’t getting any showings at $350,000.

Welcome to the world of short sale logic!

_____________________________

(Please note that I hope this information is intended to be used before you’re in contract, and should not be taken as any sort of inducement to cancel an existing purchase agreement, listing agreement, or other contract you may have.)

It’s no secret that I hate short sales. As I wrote in Short Sales are Neither Short Nor Sales, I think they’re bad news from a buyer’s perspective. Furthermore, in Three Things Your Agent Should Tell You About a Short Sale, I shared my belief that they’re often oversold to sellers as false hope as a “way out” of foreclosure. Though there may be some advantages for the seller, in terms of credit damage most sources I’ve consulted with feel they’re just as bad a foreclosure.

To further point out some of the problems with short sales, I recently write a white paper that I’m making available as a PDF file, The Short Sale Fake Listing Fiasco (How to Avoid a Colossal Waste of Your Time and Money).

Since I think this is important information for buyers to have, I’m also republishing a version of this article beginning today as a blog series.

Buyer Beware — Not Everything That’s Listed Is Really For Sale

With the rising number of foreclosures in recent years, we’ve started to have a real problem with a type of listing that Virginia Real Estate Broker Frank Llosa calls a “Fake Listing” - the Short Sale. I agree with Frank that that’s just what they are.

Why do we say short sales are fake listings? Quite simply, a real listing is one where a qualified buyer can expect that if they made a full priced offer with no other buyers bidding, they would be able to close escrow and own the home.

Reasonable as it is, this expectation simply doesn’t hold water on a Short Sale. In Arlington, Virginia, for example, Frank Llosa documented that only 5% of short sale listings successfully sold. As we’ll see below for one local market, traditional sales outsell short sales by four to one even though they’re much, much more expensive. (But the good news is that bank foreclosures are listed cheaper than both and sell like crazy!)

If you can’t write a full priced offer on a listing and get your offer accepted with no competition, that’s a fake listing.

What Is A Short Sale?

A short sale is a listing where 1) the proceeds from the sale is less than the value of the loans on the property, and 2) the seller can’t bring in the difference to close, so they’re asking one or more lenders to approve the sale and accept a reduced payoff.

For example:

$350,000 Amount seller owes to lender(s)
$279,000 Proceeds from sale
________________________________

$71,000 Amount lender is asked to write off.

Why would the lender agree to such a write-off? Well, in principle the idea is that the lender will lose less by taking a reduced payoff now compared to how much it will cost them to foreclose on the property and sell it that way.

That Sounds Great - A Lot Of Them Should Sell, Right?

Wrong.

To give you an idea about how poorly short sales sell, let’s take one of our local areas that has a lot of listings, Elk Grove, and do a quick case study based on active homes available in early May of 2008 versus those that sold in April.

Active Listings as of May 7, 2008

As you can see, bank owned properties (also known as foreclosures, REOs, or “bank repos”) listed for slightly less than short sales, but both fell in the range of 62%-65% of the price that non-distressed homes were selling for. (By non-distressed, we mean a regular sale where the owner owns the home outright or owes little enough so they can pay off the loans).

Based on the numbers above, for example, a 2000 square foot home might list for $438,840 as a non-distressed sale, $276,180 as a bank owned property, or $284,740 as a short sale. Short sales are discounted almost as much as foreclosures, and there are almost twice as many short sales available as bank owned properties.

Based on price and availability, we would expect the number one seller the month before to have been either short sales or bank owned properties, and the number three seller to be non-distressed sales, right?

Let’s look at what we actually find for April.

Listings that Sold in April, 2008

In Part’s 2 and 3 of this series we’ll discuss why short sales don’t sell and what you can do as a buyer to find listings that aren’t short sales.

Related Links:

Are Short Sales Fake Listings Part 2

Are Short Sales Fake Listings Part 3

____________________

(Please note that I hope this information is intended to be used before you’re in contract, and should not be taken as any sort of inducement to cancel an existing purchase agreement.)

Unlike areas like Antelope and Elk Grove, the Rosemont area of Sacramento (95826 and 95827) is still in a buyer’s market, with fairly high inventory and declining unit volume.  The average home sold in Rosemont in April of 2008 for $216,135, down 27.1% from last April’s average of $296,360.  The median price fell 31.2% during the same period, from $305,000 to $209,900.  Average sold price per square foot is down 26.7%, from $202.57 last April to $148.44 this April.

As we mentioned earlier, Rosemont has yet to turn the corner into a recovery.  Unit volume is down 8.1% from last year, and the expired to sold ratio has risen from 54.1% in April of 2007 to 70.6% in April of 2008.  Average days on market are also up, from 48 last year to 56 this year.  There are 9.1 months of unsold inventory in Rosemont.

67.6% — approximately two thirds — of the homes that sold in April in Rosemont were bank foreclosures.  Of the thirty-four homes that sold, only one was a short sale (2.9%), in spite of the fact that 38.8% of the homes in active inventory are short sales.

Two areas in Sacramento County hold some special fascination for me — Elk Grove and Antelope.  In both areas, a large number of foreclosures have fueled steep drops in prices, and the fall in prices has created hot markets for bank foreclosures. 

Antelope is on the verge of transitioning from a buyer’s market into a seller’s market.  To be sure, the “sellers” are banks, and there are still a lot of foreclosures to get through.  Fully 84.1% of all homes in Antelope that are currently for sale in the MLS are either in foreclosure (22.1%) or being sold short (62%).

In spite of the number of foreclosures — which would lead one to suspect that further price cuts are in the cards — all indicators in Antelope are showing that the price decreases have already hit a sweet spot where demand is turning up sharply:

• At 72 units sold last month, unit volume is up 71.4% over last year (compared to 46% overall for Sacramento County).
• The expired to sold ratio has fallen to only 18.1% in April, compared to 73.8% last year.
• Days on market are down 25%, from an average of 60 in April of 2007 to an average of 45 in 2008.
• The ratio of the sold price to the list price has risen from 98.5% last year to 99.3% this year. 
• Current inventory is down to 6.79 months.  Anything under six months is traditionally considered a seller’s market.

No doubt many of the 199 short sales that are currently available will go to foreclosure soon, and as they do, they’ll be purchased by eager buyers.  In April, 9.7% of the homes that sold were short sales, even though they make up 62% of inventory.  In contrast, 76.4% of the homes that sold in Antelope were bank foreclosures, though only foreclosures make up only 22.1% of inventory.

In Part I of this article I talked about the sharp decline in average prices over the last year in Sacramento County, and how demand has risen dramatically in April in response.

In this article I want to revisit a theme that I first wrote about in March, that the different types of properties for sale effectively constitute Sacramento’s Two Real Estate Markets.

A Seller’s Market In Sacramento?

One of the Sacramento County real estate markets is the foreclosure market, and this market is behaving like a hot seller’s market.  Because the price of foreclosures is low compared to other homes, we very commonly see multiple offers, and offers over asking price.  The average discount for foreclosures is 2.3 % off of list price, while for non-foreclosures the average discount is 3.8% off of list price.  (Note that closing costs and other “non-price” concessions do not appear in these figures).

In April, 63.3% of all homes that sold were bank owned foreclosures.  Looking at the number of foreclosures now in inventory, there are only 2.7 months of inventory — which is extremely low.  By comparison, for homes that are not in foreclosure at all, there are eight months of inventory, and for Short Sales, (which I hate because they’re neither short nor sales), there are 38.8 months of inventory.

The Market Overall

I would characterize the real estate market in Sacramento as follows:

• Overall
  The overall market in Sacramento County is behaving like a buyer’s market.  Overall inventory is about 9.2 months.
• Non-Distressed Homes
  The market for homes that are neither being sold short nor being sold by banks (privately owned homes that aren’t in foreclosure) is a buyer’s market, with eight months of inventory.
• Short Sales
  The market for short sales is weak and tenuous at best.   There is an absurdly fat 38.8 months of inventory, meaning there’s a less than 5% chance that any given short sale will close in a given month.  Calling it a buyer’s market is charitable.  Since you don’t know if a given short sale will even get approved, it’s probably more appropriate to characterize the short sale market as a pseudo-market.
• Foreclosures
  The foreclosure market in Sacramento County is a hot seller’s market.  At 2.7 months of inventory, the inventory figures are comfortably below the 6-month demarcation line that traditionally separates a buyer’s market from a seller’s market.  Multiple offers are common, and the discounts from list price are typically quite low (because the discounts from the “average” (including non-REO) market value are already quite high).

Here is a table that shows the areas (zip codes) that have the most bank foreclosures (REOs) currently listed in the MLS.

For each area, it lists the number of REOs available, the number of all listings available, and the percentage of REOs. 

It’s sorted beginning with the areas that have the most foreclosures as a percentage of overall active homes available.

In the first quarter of 2008, the average home that sold through the MetroList MLS in Folsom sold for $419,955, down 16.9% from last year’s average of $505,263.  The size of this year’s average home was somewhat smaller than last year’s average, however, so sold price per square foot dropped much less dramatically, 11.7%, from $231.14 in the first quarter of 2007 to $204.16 in the first quarter of 2008.  The median sale price fell 10.9% from year to year, from $460,000 in Q1 2007 to $410,000 in Q1 of 2008.

The drop in value in Folsom was much less than it was for Sacramento County as a whole, which posted a loss in Average sold price per square foot of 29.1% versus Folsom’s 11.7%. 

If Sacramento’s numbers are turn out to be anything like those for Placer County, however, it may turn out that some of those “losses” are actually a result of lower priced areas being more heavily represented, with higher unit volume.  We’ll take a look at that possibility in a future article.

Meantime, back to Folsom.  In addition to having a relatively low drop in price, Folsom also enjoys a comparatively low inventory, at 5.53 months.  In active inventory, 9.7% of homes are bank foreclosures and 20.8% are short sales.  In contrast, among sold homes, short sales accounted for 9.5% of sales in the first quarter of 2008, and bank owned foreclosures made up 29.7% of sales.

If you’re interested in bank foreclosures in Folsom or elsewhere, you can search for them here.

As we saw last time we looked at Elk Grove, prices are down substantially (about 1/3) over where they were in the first quarter of 2007.  As a result, unit volume is up by about 20%, with foreclosures making up some 71% of what sold in the first quarter of this year.

So where are we now?  What are the prices on short sales and foreclosures in Elk Grove, and how do they compare to other types of sales?  If you’re in the market, what should you be looking at?  We can use Elk Grove numbers to learn a lot about what’s likely to sell and what isn’t.  Is it worth your time to be focusing on short sales, or should you ignore them in favor of foreclosures?

Let’s look at the numbers.  Currently there are 1221 units available in Elk Grove, and with an average of 135 units selling every month, that works out to be 9 months of unsold inventory. 

Now let’s look at how that inventory breaks down.  Good old, regular, non-distressed sales — where the seller has enough or more than enough equity to pay off their mortgage — make up 32% of the active inventory, or 391 units.  On balance these are the largest homes in Elk Grove, averaging 2,406 square feet.  They’re also the most expensive, even on a price per square foot basis, at an average list price of $212 per square foot.  Statistically, some thirty-one such homes should sell in April (extrapolating from the first quarter).  So the chance of one of these homes selling next month is 39 / 391, or about one in ten.

Next on the hit parade, at a list price of $147 per square foot, short sales are almost as cheap as bank foreclosures, so you might naively expect a lot of them to sell.  Yet short sales don’t sell.  Blame the listing agent who took the listing on a short sale that will never get approved anyway because the buyer has the money to pay off the debt and the bank knows it.  Blame beaurocratic bean counters at the bank.  Or blame “fickle” buyers, who change their minds after a “mere” four months of waiting.  Whoever you want to point the finger at, short sales don’t sell well, which is why I make no secret of the fact that I hate short sales.   532 short sales are currently active in Elk Grove, and, extrapolating from first quarter sales, some eight of these homes will sell in April.  So the odds on a short sale selling are 8/532, or about one chance in 67.

Bank foreclosures are cheaper than short sales at $143 per square foot, on average.  298 of the 1221 homes available in Elk Grove now are foreclosures — that’s 24.4%.  However, again extrapolating from last quarter sales, some ninety-six of these homes should sell in April.  So the odds of a bank foreclosure selling next month are about 96 / 298, or about one chance in three.

I Still Hate Short Sales, And You Should, Too

Based on the Elk Grove numbers, if you write up a short sale instead of writing up a bank foreclosure, this means:

• You’re going to pay, on average, approximately $8,500 more for the same house, assuming you get it.
• The “assuming you get it” part is really problematic here.  Even though short sales weigh in at $147 per square foot versus $212 per square foot for non-distressed sales, the fact that only 1 in 67 of them will close in a given month (versus 1 in 10 for non-distressed sales) should make you think twice about short sales.  I think they’re less of a plan than a pipe dream.

Related Articles:

Short Sales are Neither Short Nor Sales

Elk Grove Real Estate Market Update, 1st Quarter, 2008

It’s the fourth of the month, and that means that all good real estate brokers who don’t want to get fined $100 by the MLS have entered their sales data for the month of March into Metrolist.  This means we can start digging into the data for the first quarter in earnest now.

In the first quarter of 2008, 3,011 homes sold through the MLS in Sacramento County, a 4.6% increase in unit volume from the first quarter of 2007’s 2,879 units.  No doubt this reflects buyers taking advantage of the bargains that have happened as more and more foreclosed homes come on the market. 

Prices have fallen substantially over the last year.  Here’s a table that breaks the numbers down:

What’s Selling, And What’s Available

I’ll be publishing an article shortly where we analyze the data from one community, Elk Grove, in terms of how many non-distressed homes are selling versus short sales and foreclosures.  If you want to see that when it comes out, please subscribe now.

We’ll probably do a similar analysis for all of Sacramento County, but to whet your appetite and show the numbers a slightly different way, let’s show how many months of inventory there are for short sales, foreclosures, and non-distressed sales, based on the absorption rate for the last three months.

Sacramento County Real Estate Inventory By Type

Here’s a table that breaks it down, but you can read the text below to see how we got the numbers:

There are 9,661 homes in inventory (for sale) right now, and 1,004 homes sold per month for the last three months.  Overall, then, there are 9.6 months worth of inventory (i.e., 9,661 divided by 1,004).

Of course, how much inventory there is varies widely by type of sale.

3,494 non-distressed homes are currently available in Sacramento County.  (I use “non-distressed” to mean sales that are neither short sales nor bank owned foreclosures).  333 non-distressed homes per month sold in Sacramento County over the last three months.  Inventory for non-distressed sales, then, is 3,494 / 333, or 10.5 months. 

For foreclosures, which are selling like foreclosed hot cakes, the inventory numbers are much lower.  Some 605 foreclosures sold each month during the last quarter, so the 2,633 foreclosures currently available represents 4.4 months of inventory.

Short sales are just the opposite of foreclosures, because they sell like crusty old hot cakes that nobody wants to eat, because the bank may or may not approve your syrup.  Currently there are 3,535 short sales in inventory, and a whopping sixty-seven of such homes sell each month in Sacramento County.  Dividing again, we get 52.8 months of inventory.  Yes, short sale fans, that’s about 4.4 years.

I hate short sales.   I hate them as individuals, and I hate them as a group.  Were short sales a people, genocide would be a virtue.

Maybe this is the wrong opinion for a Realtor® to have under these market conditions.  Maybe some of the eighty-four subscribers to this blog are anxious short sale sellers on the verge of hiring Elite Properties, who will now think me a thoughtless slob.  Maybe my family will be out on the street because I’m such a poor businessman, saying what I think about short sales out loud on the Internets and all.

It’s not that I don’t care about all that bad stuff happening.  But I still hate short sales.

A Short Sale Tale

This is a true short sale story.

A buyer finds us through our web site, works with an agent of mine, and writes up an offer on a short sale home.  The seller accepts the offer, but we don’t have short sale approval from the bank yet.  This is back in November or so.  The house is a great buy compared to everything else on the market.

For the next several months, my agent plays a phone game with the listing agent, a game familiar to any agent who’s ever worked a short sale. 

Stripped of the pleasantries and extra details, the game goes like this:

Agent 1:  “Has the bank accepted our offer yet?”           Agent 2:  “No.”

Agent 1:  “Has the bank accepted our offer yet?”           Agent 2:  “No.”

Agent 1:  “Has the bank accepted our offer yet?”           Agent 2:  “No.”

Agent 1:  “Has the bank accepted our offer yet?”           Agent 2:  “No.”

This goes on for three or four months, until one day, miracle of miracles, Agent 2 says “Yes”, the bank has accepted our offer.  Only now, guess what?  The house isn’t a great buy any more because the bank waited so long.  Yesterday’s bargain is today’s overpriced turkey, so now the buyer wants to cancel the transaction and go look at other houses!  (Which the buyer is within her rights to do, by the way, since the bank has a “short sale contingency” period that expired months ago).

Circle The Winner, a Multiple Choice Question

The winner on the above scenario was:

A) The seller.

B) The seller’s real estate agent.

C) The buyer.

D) The buyer’s real estate agent.

E) The bank.

The Answer Revealed:

Did you guess “F) None of the above?”

Right you are!

This is a tale of two real estate markets. 

It was the best of times.  It was the worst of times.

In one of these markets, the average home sold for $374,928 in February.  In the other, the average home sold for 36.5% less, or $238,132, in February.  The sold price per square foot was 31.2% in the second market than the first).

The first “market” we’re talking about here is the Sacramento County real estate market — the one that consists of all the homes that sold that we’re not short sales or bank foreclosures.  I like to call this one the Sacramento non-distressed market. 

The second “market” is also the Sacramento County real estate market, but consists only of the foreclosures.  I call this one the Sacramento foreclosure market.

Obviously the non-distressed market is quite a bit more expensive than the foreclosure market.  Part of this is a real discounting over non-REO sales, and part of it is due to the fact that, as a general rule, the cheaper neighborhoods have more foreclosures.  (There are at least two or three chicken-egg problems inherent in that, which we won’t go into now).

Fun Facts About the Two Markets

Fun Fact #1:
Most buyers think that banks who have foreclosure are “more willing to negotiate” on price than non-distressed sellers.  In fact, just the opposite is true.  The average foreclosure sold in February at a 4.1% discount off of the list price, while the average non-distressed property sold for a 4.8% discount off of list.  (Those poor foreclosure buyers had to be consent with a measly 31.2% discount in sold price per square foot).

Fun Fact #2:
The difference in price between the two markets seems to be “growing”, if the current batch of active listings is any indication.  In February, the difference in sold price between the non-distressed homes and the foreclosures was 31.2%.  In active inventory, on the other hand, the difference in list price per square foot for the two markets is 38.1%.

Fun Fact #3
Foreclosures and non-distressed properties that sold spent about the same amount of time on the market — 65 days for foreclosures versus 69 days for non-distressed sales.  Average days on market for active listings show a bigger discrepancy, at 72 days on market for the foreclosures versus 96 for the non-foreclosures.  (This is related to fun fact #2 if you think about it — banks are more willing to cut list prices if the homes just sit there).

We’ve updated our listings database.  It was getting pretty long in the tooth there.

Most people who are users of our web site(s) probably don’t know it, but many of our web sites including this one, our Roseville real estate site and our Elite Properties company site actually rely on two different databases of listings.  When you use our search page, for example, you’re using a listings database that’s our IDX company gets from our Metrolist database.  These listings are updated daily, so when you do a search, you’re looking at listings that are within twenty-four hours of being as current as the ones that we as Realtors® can look at..

In addition to the search tools that our IDX company provides, however, we also wanted to allow you to browse for certain types of listings.  One thing our IDX system doesn’t do, for example, is show you short sales and foreclosures.  Because we don’t have direct access to the database our IDX company uses, we’ve created a second database that we can use in various ways.

For example, our foreclosure search page lets you search for foreclosures and short sales, or browse them by county.  Similarly our new homes section let’s you see homes that have just been built that are listed in the MLS, and our condo pages contain links to condos grouped by price and county.

As we mentioned above, we’ve also used this database on some of our other sites.  Many clients find us through our the maps of listings by zip code that we maintain on our company site.  These maps include zip codes in El Dorado County, Placer County, and Sacramento County.  Within each zip code you can find active listings and get recent market data.  We publish similar data for Placer County only on our Roseville site.

Unlike our IDX system, which is updated automatically on a daily basis, these other resources are updated manually as time permits.

We realize that from a software perspective, that’s not the brightest way to do it.  But if you’ve ever tried to get someone from Metrolist to call you back about a data feed, you probably have a good idea that it’s not half-dumb from an organizational perspective.

The good news is, it’s up to date now.  So as my wife is fond of saying, “Get your red hot houses here!”

Enjoy.

Related links:

I took a few minutes today to look at the discounts for short sales and foreclosures based simply on list prices.  In other words — how much are they discounted before you negotiate with the seller? 

Foreclosures may have a little more negotiating room between list price and sale price, but not as much as you may think.  The reason is that homes that are priced well to begin with tend to get more competition, so even in the case of bank owned foreclosures, buyers typically only negotiate something between 5-6% off the list price for foreclosures, as compared to about 4% for all sales.

The real bulk of the discounts for foreclosures and short sales already appears in the MLS.

So with that, let’s look at the results.  How much are foreclosures and short sales discounted in Sacramento County?

In active inventory, the list price for non-distressed sales are currently averaging $228.62 per square foot.  Short sales are discounted, on average, 27.8%, with the average list price for short sales being $165.00 per square foot.  Foreclosures are discounted even more — 36% compared to non-distressed sales — with the average REO in Sacramento County currently listed at $146.19 per square foot.

One caveat, however.  If you look at short sales and foreclosures on a neighborhood by neighborhood basis, you generally see foreclosures still having better discounts than short sales — but the overall magnitude of the discounts are somewhat less than they are when you look at the entire county.  This is because part of the 27.8% and 36% numbers reported above reflects the fact that in many cases more expensive areas also have fewer foreclosures. 

In Antelope, for example, Short Sales are currently listed at a discount of 26.3%, and foreclosures are currently discounted 30%, from their non-distressed counterparts.

“Only” 30% off?  That’s still not bad!

Related links:

I’ve been thinking about all the news about foreclosures.  I work here in the greater Sacramento area.  Though I live in El Dorado County, which (along with Placer County) has experienced relatively few foreclosures, Sacramento County currently has more than fifty per-cent short sales and foreclosures in inventory.  Now granted, that’s not necessarily a huge number compared to all the homes in the area, since obviously being in financial trouble triggers a sale — most folks who own homes aren’t in foreclosure, and aren’t selling at any given time.  Still, it’s enough to get my attention.

A caricature of Realtors® is that we’re always pushing home ownership on unsuspecting victims.  I think the general consensus lies somewhere between the idea that we have hypnotic powers of persuasion to lure our victims into contracts they don’t want (much like the famous Hypnotoad, shown at right) or — less charitably — that we hit people over the head with shovels to get them into our cars, then take it from there.

Those Educated Internet Buyers - What’s a Poor Hypnotoad to Do?

Unfortunately, your standard Jedi / Hypnotoad mind tricks only work on the weak minded.  Most people I meet here on the Internet have too many information resources at their disposal to be an easy mark for these unscrupulous amphibians.  That’s probably why none of my buyers has (to my knowledge) ended up in foreclosure yet. 

Still, there may be some of you out there who are just itching to do it, so for those of you with a real hankering to financially self destruct, here are . . .

Ten Easy Steps to Foreclosure

1. State your income. 
   You may have heard that stated income loans are for the self-employed.  Don’t you believe it!  Full doc loans are harder to do so your lender doesn’t like them, and I know you want things to go smoothly for your lender out of gratitude for the wonderful loan he’s getting you, right?  And you don’t mind paying the extra half point or so to go stated, do you?  While you’re at it, forget about the fact that overstating your income is loan fraud, a federal crime.  A smart buyer like you isn’t afraid of some wimps at the FBI, are you?  The more you say you make, the nicer house you can get.  That’s why they call them “liars’ loans”, after all.
2. Don’t Pay To Run Your Own Credit - Your Lender Will Do It FREE!
   Here’s the thing.  If you run your own credit, you might conceivably talk one or more loan officers into checking into different loan programs for you.  That’s not good.  This might educate you as a consumer, and you might find eventually bump into a lender who’ll explain things to you.  Learning is the first step on the road to making stupid loan payments on a conservative loan package.  How are you going to get foreclosed on if you make loan payments?  Huh?  Plus, running your own credit doesn’t count as an inquiry, and your loan officer is counting on you worrying about making multiple inquiries, so letting them do it free for you locks you in quite nicely, doesn’t it?  So stay away from sites like MyFico.com.  I’m not even going to link to them because you’ll only end up running your credit and getting confused.
3. If your lender tells you you can afford the house, you can afford the house.
   Although most knowledgeable foreclosure-philes generally frown on talking to more than one lender because one or more of them might turn out to be ethical, one thing you should do is get as many opinions as you can about how much house you can afford, and go with the highest amount.  You’ll get a much nicer house that way.  If someone in your family has a calculator or spreadsheet or other budgeting tool and suggests a lower amount, you should argue with her until you get the most house that that nice lender said you could.  In fact, you should probably be looking at homes that cost more than that, because you can always talk the seller down.   And maybe you’ll see something you like even better that way.
4. Always remember:  your lender can refinance you later.
   Remember, the market’s going up! Up!  Up!  Sure, it’s going down now, but it’s going up in a few minutes.  (I think I heard it’ll be fine by Wednesday.)  The reason you don’t need to figure out a conservative loan that you can live with is that the market’s going up, and if you refinance later you can buy more house now!  Wasn’t it nice of that nice lender to tell you that you could refinance later?  He must really be trying to help you by offering to do that extra loan for you.  That stupid lender who said you could afford less house was only going to do one loan, and didn’t even offer to refinance you later.  He must just be lazy.
5. Refinance early, refinance often.
   Now that you have a really killer house, do you really still want to be seen driving that old broken down car of yours?  You have this great big garage, and all you’ve got to show for it is a five year old import.  You have some equity now.  Don’t you deserve a Hummer?  Besides, your equity’s not doing you any good unless you put it to use.  You’ve already by now picked out a hard working lender who generously doesn’t mind refinancing you, so go for the gusto!  You only live once.
6. Remember, the market will go UP!
   And of course, it’ll go up just in time!  So you don’t need a conservative loan.  In fact, come to think of it, hopefully you bought when the market was going up.  You don’t want to buy when prices are low, because good heavens, they may get lower (and what would your friends say to that).  Plus, if the market’s going down, the best way to pay for your house is with some kind of boring loan, and you won’t be able to refinance or get yourself a Hummer.  If you learn how to get foreclosed on, you can buy high when homes are popular, and then you won’t have to sell low, because the nice people at the bank will sell it for you.
7. If you can afford the lowest payment, you can afford the house.
   One of the great financial instruments of the twentieth century was the Option Arm, or “Pick-a-Pay” loan.  You may have heard that they’re appropriate for the self employed too, or for people whose cash flow varies.  But you’re not going to believe that either, are you?  (See “State Your Income”).  With a pick-a-pay loan, you get to pay either a lot of money on the loan, or just a little bit of money on the loan.  You’re not going to be a chump and pick the fully amortized 15 or 30-year fixed payment, are you?  That payment will be huge!  You won’t be able to buy as much house that way!  You might have to settle for a lousy older home or condo or rent for a few more years while you save.  Through the miracle of Negative Amortization, you can own the big brand new mansion you really want now!
8. Never mind what negative amortization means.
   You don’t need to know what negative amortization means.  “Negative” and “mort” — anything that sounds THAT depressing isn’t something an upbeat mansion-owner like you should spend time on.  You shouldn’t worry about it anyway, because the amount of negative amortization on the loan is limited, and you’ll still have the loan when you hit the limit.  I want you all to stop worrying about negative amortization right now, and never, ever, ever, look it up.  Also while you’re not looking things up, don’t look up what happens when you hit the limit.
9. The best thing to do with a document you don’t understand is sign it.
   The quicker you sign, the quicker you’ll get the keys to your new house!  Do you want to move in and throw a party for your friends, or do you want to waste your life reading and asking philosophical questions?
10. While we’re on the subject of reading…
    There are books on Amazon.com and lots of great consumer web sites that talk about loan programs, managing money, etc., but hopefully by now you’ve learned enough about ruining your credit to avoid all that highbrow academic stuff and get down to the real fun of shopping for the absolute most house you can afford, with a big garage for your new SUV!  Besides, reading makes you sleepy.

(This shouldn’t be necessary, but here it is:  You should be afraid of the FBI, and loan fraud is a serious crime.  This article is meant to be humorous and tongue in cheek only, and instructive only in a reverse-psychology sort of way).

Our recent Sacramento Real Estate Year in Review article covered condos as well as other residential types like single family homes and halfplexes.  Today we turn to our attention to condos only, to see how they compare to the general category. 

When I looked at the numbers, the results were surprising given the traditional wisdom that condos are the first to fall in a down market and the last to rise in an up market.

Comparing 2006 to 2007 overall for all of Sacramento County, we find that the average condo sold in 2007 for $236,914, down 6.9% from 2006’s average of $254,370.  2007’s median price for a condo was $218,000, down 7.2% from last year’s median of $235,000.  On a sold price per square foot basis, the average condo’s value fell 10.8% during the same period, from $218.16 in 2006 to $194.51 in 2007.

As we saw for residential units overall, the numbers from December to December were more dramatic than the year to year numbers.  Sacramento County Condo values fell some 18.7% on a sold price per square foot basis from 2006 to 2007.  Though of course that’s a non-trivial drop, it’s somewhat smaller than the sold price per square foot drop of 21.8% from December to December for the residential category generally.

I suspect the traditional wisdom that condos are the big losers in a down market fails to take into effect the slight but real differences in the number of foreclosures on condos.  Among all residential categories, the number of bank owned foreclosures (REOs) sold in December was 47.2% of all sales — for condos that number was 28.1%.  Similarly in active inventory, short sales and REOs make up 55.7% of inventory for all residential units, but 46.4% for condos. 

There are two possible reasons for this.  The more obvious one is that condos are cheaper, so buyers were less overextended and therefore slightly less likely to default.  Another possibility — but I haven’t researched it so I only raise it as a conjecture — is that it’s possible more condos were owner occupied and fewer were purchased as investments. 

Whatever the reason, a slightly lower default rate has helped condos retain their value somewhat better than residential properties generally.

Depending on where you focus your attention, there’s news, there’s good news, and there’s bad news.

We began our look back on Sacramento County real estate in 2007 with a look at the overall “big picture” for the Sacramento County Real Estate Market for the entire year. Later last week, we reported on one area in the county market that’s consistently held it’s value better than others and enjoy’s low inventory and brisk sales, East Sacramento.

This week we turn our attention to an area that may well be the “worst case” in terms of rising inventory and price declines for Sacramento County, Sacramento’s Franklin / Freeport area (95823). I should probably point out before we begin that I have not sampled all the MLS areas, so my sense that Franklin / Freeport may be the worst case comes from the foreclosure numbers. There may be other areas that have fewer foreclosures but more inventory or lower prices, for example.

Franklin’s decline in 2007 has been rapid. Comparing full year numbers first, the average price lost 19.2% of its value from year to year, and dropped 21.1% in terms of sold price per square foot. The median sale price in 2006 was $314,850, in 2007 it fell 20.6% to $250,000. In 2006 one per cent of sales in Franklin were foreclosures. In 2007, that number was 41.6%.

Comparing December of 2007 to December of 2006, we find that by December, the trend of selling more and more foreclosures and deep price drops had continued apace. By the end of 2006 the average sale price was $282,327. A year later the average had fallen 34.9% to $183,914. Another way to say this is that the average home in Franklin lost slightly more than 1/3 of its value in a year. On a sold price per square foot basis, Franklin closed out 2006 at $200.21 per square foot, and had fallen to $126.61 a year later, a decline of 35.8%.

The percentages of short sales and foreclosures available in Franklin / Freeport are staggering. Almost three fourths (73.9%) of inventory in Franklin / Freeport is either a short sale (35.9%) or foreclosure (38.1%). At the same time, if you needed a case study of REOs outselling short sales, Franklin / Freeport is it. Last month no short sales closed, but twenty-five of the twenty-nine closed sales in the area were bank owned properties. That works out to 86.2%, or close to 7/8 of all sales.

The contrast between East Sacramento on the one hand and Franklin / Freeport on the other shows how local real estate markets are. East Sac enjoys less than three months of inventory and a brisk seller’s market where the prices have remained flat while nationwide prices are falling, while Franklin / Freeport currently has almost two years (23.6 months) of inventory, and homes there have lost two thirds of it’s value in a year.

If you’re a buyer or seller, the right question to ask is not “How’s the Market” overall, but “How’s the Market” for your particular area. Is there an area you’re interested in particularly? If so please contact us and we’d be happy to get you specific market data or comparable sales.

Related links:

One of the best things about selling real estate is that it’s constantly changing and it forces me to keep up with everything that is different about it.

So much so that I’m going to have to eat my words.

I’ve always maintained that bank-owned homes are the cheapest priced houses in any area. However, I was out in Antelope the other day and was surprised to see that the brokers listing short sales are catching the pricing bug.

Short sales in the Antelope area are now priced more competitively than bank-owned homes. Of course, as always happens with short sales (unless they are already approved by the bank, which is rare), they have to go through the process of getting approved by the seller’s lender, so the listing price is not by any means the selling price, which is more the case with REOs.

Also read Can You Actually Buy a Short Sale?

So much of the heat (and not light) that’s shed on real estate market writing contains the implicit assumption that falling prices are bad.

Are falling prices bad? Well, they are if you have no choice but to sell now, and you owe more than you own.

Falling prices are also bad if you’re buying and your position is such that you’ll have to sell while prices are still falling.

For everyone else, falling prices are much less of a catastrophe than melting ice caps, because we’re likely to see the situation turn around in a relatively short term.

Falling prices are actually good if you want an investment 1) that you can afford and 2) that provides positive cash flow.

For the longest time, I didn’t see too many properties that penciled out positive in Sacramento County. Today I stubbed my toe on a condo that seemed offhand to pencil out so well that I threw some conservative numbers such as a 25% vacancy rate at it, and I still ended up $5 per month in the black.

There’s probably an improvement of $100 per month that one could make in the vacancy ra