Sacramento Real Estate Blog

This year I’m trick or treating as a housing market bubble.

Is it a scarey costume or a cute one?

I’ve been getting fairly busy lately, and some of my colleagues have been telling me that they, too, have had a lot going on in the past few weeks. I checked in on my friend Nan Raley at REMAX and her opinion was that prices had come down enough to knock many of the fence sitters off of the fence and get them moving. Certainly I don’t recall ever being this active this late in the year, but that could be partly from working a larger share of my own business and referring less of it out.

Meantime there are lots of predictions of further price reductions, througout 2007. I read at the California Association of Realtors® web site that CAR is predicting for the Central Valley a drop that will outstrip their statewide prediction of 2%.

I’ve been telling folks that I expect things to slow down fairly substantially between Thanksgiving and Christmas (because that’s what it always does), but I expect things to pick up again well after that time. However, I do agree with CAR that prices will continue to fall, albeit not at the pace they did this year. It’s possible, however, that this optimism is misplaced. I can say that when prices were rising they continually surprised me by how much and how fast.

I’ve been somewhat less surprised on the downtrend, simply because there’s such a well established cottage industry of pessimism, but perhaps I’ll have to revise that next year. Meantime I’m enjoying the fall rush!

As one might expect for an unusually prestigious (and hence expensive) area, Granite Bay’s numbers for September 2006 paint a picture that is in some respects atypical of the market as a whole.

The most interesting result is that over the course of the past year, the median sale price has jumped up a significant 25.3%. September of 2005’s median was $750,000 while September of 2006’s median was $940,000. At the same time, unit volume decreased 47.2%, from 36 units last September to 19 units this September.

At the same time, however, the average price increased far less (4.2%), and the average sold price per square foot went down (6.7%). Since this year’s homes were some 11.7% bigger than last year on average, the lower price per square foot is fairly unsurprising. This year’s crop of homes in Granite Bay averaged a substantial 3,540 square feet.

It would seem, then, that on the very high end, Granite Bay’s market is doing well, but the more “inexpensive” homes by Granite Bay standards are doing less well.

Overall in Granite Bay, inventory is quite high at 12.3 months, and in September expireds outnumbered solds 21 to 19, giving us an expired to sold ratio of 110.5%.

I thought I’d throw in a little counter-point to the barrage of news about how bad things are compared to their best years on record. Recently a web site visitor stopped by and let me know that this home on Verner Ave, currently listed at $299,000, was purchased when it was a new home by his parents in 1956 for $13,500.

It’s a commonplace of physics that Newtonian mechanics worked perfectly well at a macro resolution, but failed to account well for the behavior of particles when later applied to the micro level — hence quantum mechanics. (And it “failed” again at speeds approaching the speed of light, but that’s another issue).

Similarly, the Sacramento Bee’s three quarter inch headlines about the housing slump are perfectly valid and I agree with them 100%, on the Macro level. But even the Bee points out that this slump is compared to a “stunning housing boom that saw increases of 103 percent over a five year period.” (Sac Bee, October 18, 2006).

So, yes, indeed, prices are down about seven percent from last year in Sacramento County. or they’re up 2,214 percent from fifty years ago. Meantime gravitation is a phenomenal force responsible for pushing planets around, or a seriously weak little business compared to the forces at play in that glass of water you may have had recently. It’s all a matter of which resolution you’re talking about.

My colleague Vicki recently pointed out a Sacramento Bee article that shows the slowdown in new home sales from last year, including some pretty dramatic numbers for El Dorado Hills — the latter’s median price being down by 7.9%. In looking at the article myself, however, I have to admit that the Bee was a bit less “bearish” than expected, and even has the headline “Median Prices Drop a Bit”. For El Dorado County overall, the Bee reports a 2.3% drop in the median price for third quarter sales.

I just looked at the numbers for El Dorado County for September, and found a slightly larger drop for that month, at 3.9%. Last year’s median was $504,000, compared to this year’s median of $484,250. The average sold price per square foot dropped less, 2.4%, during this time, while the average sold price actually increased, from $544,110 last year to $555,259.

Meanwhile, if the averages and median paint a fairly rosey picture, the same cannot be said for inventory, now over a year’s worth (12.6 months), and the expired to sold ratio, now conveniently easy to calculate at 100%. 140 homes sold, 140 homes expired — if that doesn’t remind you of a coin toss, chances are you’re one of the 1,762 sellers who currently have a listing active in the MLS in El Dorado County.

Hey look, I have a Swicki now. (And see the home page, presently “above”)…

Until recently, I didn’t even know I lacked a Swicki, but no matter, I have one now. So now I’m more of a Web 2.0 guy than I was.

Last week I was only up to Web 1 lb 4 oz or so. I hadn’t even switched to the metric system.

Anyway, hopefully you find the search engine to be a somewhat useful addition to the blog. If so, please chime in and say so. For my part, being the proud owner of my own buzz cloud in and of itself doesn’t really move me to shed tears of joy, but if I’m being parochial and/or old school, let me know.

Well, OK, maybe the title is overstating things a bit, but the market outlook in Roseville was far from Rosey in September, with the median and average prices down 11.2% from a year ago. I’ve published more details on my Roseville site, in September 2006 Roseville Market Update.

I should look at Granite Bay as well. Recently I was surprised to see a listing in Ashley Woods in the high $500,000s. You couldn’t touch one there last year in the $600,000s, it seemed to me. We should have that report soon

I’ve updated the listings in the Sacramento Condo area of the site.

In addition, we have a new batch of new home listings for El Dorado County, Sacramento County, and Placer County.

Finally, I’ve updated the Sacramento County Duplex Listings.

As always, you can get the most up to date listings via the search pages, or by calling / contacting us to let us know your specific requirements. Enjoy!

My client, “J.W.”, in Sacramento, sent me this wonderful email yesterday and made my day, so I asked her for permission to reprint it here. I’ve edited some details in the middle that are unique to their particular situation, and therefore should be private.

John,
I just wanted to take this opportunity to thank you for how open and honest you are being with us. It is what we need and in knowing that the more we spend the more you potentially make it means alot to us that you are up front with us about these issues. It helps make us feel that you are looking out for our best interest. The only other major purchase we have ever made was for our truck, and it ws a really yucky experience, we saved and saved and saved and were able to buy it all up front, and it felt like the sales man was trying to push us really hard for things that we don’t need and that were beyond our means..(it felt like he was desperate for our money) it felt bad and we really didn’t enjoy it.. .luckily we love the truck and got what we wanted.

…

Anyway, all this boils down to that we are apreciative for your help and feel lucky to have found you since it was just kind of happenstance. John, have a great day, and we look forward to seeing you sunday.

I just got off the phone a little while ago with Jim Cronin, over at the Real Estate Tomato. Jim’s a real estate marketing consultant who’s doing a great business getting other Realtors® like me turned on to the benefits of blogging on their web sites.

We had a bit of a discussion as to the benefits of just having a real estate web site as opposed to a blog, and I brought up one of my earlier posts, You Ain’t Going Nowhere, in which I discuss how there are blog readers and web site readers, and it’s the former who read the blog and the latter who buy things.

Leave it to life to surprise you, because since then I’ve had a couple of serious inquiries from readers of the blog after I wrote that.

So, readers, do any of you read anyone’s blog as a vehicle for information before a purchase? Not just this one, but any blog anywhere? Inquiring minds want to know.

OK, multiple choice quiz. Sacramento County’s real estate market in September for September is:

1. Somewhat bleak
2. Very bleak
3. Not too bad
4. Hard to characterize due to bad data

Well, in some respects we have a better case for “Very Bleak” than we did in August. The year to year median sale price decreased 6.5% from September to September, from $374,900 last September to $350,500 this September. August’s year on year median sale price decrease, in contrast, was 4.6%. This doesn’t surprise me too much, in light of the fact that (I believe) the peak of the sales curve was last August, but prices really didn’t start falling in earnest until much later. I also do believe we’ll continue to see decreases, but it seems to me (from my own business at any rate) that we have gotten to the point where buyers are feeling like taking advantage of the prices.

On the other hand, the average sold price at first appeared to be up from last year, while the average square footage from last year looked pretty ridiculous. I had to throw out some bad data points, so I don’t have a lot of comfort, but it looks like the average sale price declined from $406,782 last September to $385,879 this September, a 5.1% decrease.

Meantime the expired to sold ratio rose from August to September of this year, from 96% to 110.4%. Overall, there were 1082 sold units in September and 1195 expireds. Unit volume was down 47.2% from last year’s number of 2048 sold units.

So the numbers are not all that great (for sellers at any rate), but there’s enough incorrect data in there to make me suspect the specific numbers somewhat.

What continues to amaze me however is how much competition I’m seeing on the “good” properties. On the last offer I wrote (this weekend) and one other this year, we were in a multiple offer situation. Again, I liken it to a fruit vendor with too much inventory of fruit, but a couple of very beautiful ripe samples in his cart that two buyers fight over. Or you can think of it like the line of suitors for the high school beauty queen / hearthrob versus the chances of the average Plane Jane / John.

Well, many thanks to Mehul at the Sacramento Bee for including me in his article about Business Blogging. My name’s actually John, not Jonathan, but inasmuch as it’s some free publicity, all is forgiven.

Three years ago, Jonathon Lockwood, a real estate agent in Cameron Park, decided there had to be a better way to drive potential clients to his Web site. Falling back on his past training as a software engineer, he launched his own blog.

It was 2003, and most folks hadn’t heard of a blog. But every day or so, he put up a new post, talking about the intricacies of real estate.

Before long, he had cornered the market on some pretty spectacular real estate — of the virtual kind. Now, when anyone Googles “Sacramento Real Estate” on the Web, it’s Lockwood’s Web site that typically pops up first.