Sacramento Real Estate Blog

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.

If you have identified a certain neighborhood as an area you are interested in, I would strongly recommend you do research into it before you make an offer on a house there or even go house shopping just yet, the reason being that once you find a house and fall in love with it, you will tend to look at the area with rose-tinted glasses. So, if you have identified a neighborhood, definitely look up its community profile in the local newspaper’s website, and on City Data.

Another thing you can do that is immensely helpful is to drive by the area many times, at different times of the day and get a feel for the place. Try first thing in the morning, sometime in the afternoon, later at night and definitely at least once on the weekends. Be critical. Roll down your windows. Can you tolerate loud music coming from some houses? What speed are cars driving? How do the lawns look? How do the houses look? Does it seem like the people that live there care about their properties? How many cars on the road? What kind? Are there junk cars in driveways? Oil stains on driveways?

The best thing of course is to knock on a few doors and talk to the people there. Ask them how long they’ve lived there and what they think. Tell them you’re considering buying in their neighborhood. Trust me, people love to talk about their homes and neighborhoods. And, if they don’t, take a cue.

A FSBO (pronounced fizz-boh) is a house that is on the market “For Sale by Owner.” This means that the owner has decided not to hire a Realtor to sell it for him - he intends handling the entire sale of the home by himself. Be forewarned - he also intends to do all the paperwork himself.

Sometimes, FSBOs happen to be retired Realtors wanting to save themselves the home selling fee - typically 6% divided amongst two Realtors - the buyer’s agent and the seller’s agent.

As a buyer going into a FSBO however you should remember that most FSBOs are overpriced. Because the seller has usually not spoken with a Realtor, he has not had the conversation of comps in the neighborhood and is probably asking more than the home is worth. Secondly, since he does not have an agent guiding him regarding the legality of certain structural issues, he might not be revealing things about the house he knows to be an issue. These might come back to bite you later.

Obviously, my recommendation is to stay away from FSBOs, but if you must buy one, get a good property inspector, an independent general contractor to examine the property (yes, both!) a pest inspection and hire your title company to make sure the paperwork is processed correctly. Take no chances and put in writing every assurance the seller gives you about the home.

credit: ishrona

Readers of this blog and Purva Brown’s Sacramento Real Estate Gal probably know that Purva is more of a real estate market optimist than I am. So she’s more likely to say something like this:

“Hey, you bubble blogger guys slept through the recovery!”

Sometimes I feel like such a coward, to tell you the truth, sending out a poor pregnant woman out to do the company’s rhetorical bear hunting.

On reflection, though,it’s probably not a bad thing to have a real estate company where the agents are optimists and the broker is a pessimist. While the agents are all out selling (a tough job where sometimes only optimism stands between you and despair), it’s the broker who’s supposed to be in the office fretting over getting sued.

We don’t say “pessimist” on the resume; we say “risk manager.”

What Do You Want To Prove?

Ouch, prices have come down 29.9% in Antelope, from the first quarter of 2007 to the first quarter of 2008 (sold price per square foot). The median sale price fell 26.2% during this period, from $325,000 in the first quarter of 2007 to $240,000 in the first quarter of 2008. The average home sold for $238,829 in first quarter of ‘08, down 28.1% from last year’s average selling price of $331,995.

If you’re Chicken Little, of course that proves that the sky is falling.

Meantime, a group of ungrateful home buyers in Antelope — heedless of the Naderesque altruism of these tireless geniuses who selflessly risk their anonymous reputations by toiling at their keyboards to warn buyers about the dangers of home ownership — these ungrateful buyers, I say, have refused to do the sensible thing and stay home and duck the falling pieces of Sacramento’s market.

In Antelope, in the first quarter of 2008, unit volume was up 44.5% from last year.

Damn it, ungwateful buyers. Wun away! Wun away!

Chicken Little was on such a winning streak last year in Antelope. Unit volume was down to 110 units for the first quarter of 2007. By August of last year, inventory in Antelope had topped twelve months.

Following the sell-off in the first quarter, we’re now looking at inventory numbers of 7.1 months.

Ingwates, that’s what you are.

Chicken Little FAQ

Q. How can you tell if Chicken Little is on your blog?
A. Your delete key finger is getting tired.

Q. What’s the difference between Ralph Nader and Chicken Little?
A. Ralph Nader has a job, and some people voted for him for President.

Q. Why does Chicken little tell you not to buy when prices are falling?
A. Because the bubble is bursting.

Q. Why does Chicken little tell you not to buy when prices are rising?
A. Because the bubble is going to burst.

Q. How do you make Chicken Little Soup?
A. Put Chicken Little in a pot. Boil vigorously. Then go out for Chinese.

Officially. I like that.

According to me, the official home search starts when you are pre-approved for a mortgage, have a number in mind and are actively searching for a home, that is, going out with some regularity with your Realtor to look at houses in a specific area you have selected as wanting to live in which has homes that fit your criteria.

This search should begin approximately two - four months before you want to love in to the house. Why so long? Escrow lasts about 30 - 45 days. And unless you are going to devote every waking minute to heading out looking at homes (most clients go out once a week) you will take on an average two to three times of going out before you make an offer. If that offer does not work out for some reason you will want to begin the search again.

Depending on how fast inventory is moving and what area you are looking in, it will take you about two months to find the right home and then another month to close on it. So plan accordingly. Traditionally, the summer months see the most activity because people like to move school children out to another school before the year begins again.

Just call the number to the upper right! No, just kidding.

This is a question I’ve been wanting to write about for a long time because it seems to me that clients end up frustrated when they don’t spend enough time looking for a Realtor, just a house. Here’s the scoop: all Realtors use the same tools, they all use the same MLS, follow the same rules and every Realtor knows how to do a basic search to find the home you are looking for. The difference lies in whether this Realtor’s style and way of doing business fits what you want.

So there, you are actually doing two searches at once - one for a Realtor and then for the house. And the second gets a lot easier if you do the first one right. Here’s what most people do: they see a house they like on the outside and call the number on the sign. That is the listing agent’s phone number. And chances are the listing agents (at least in today’s market) have no interest in driving buyers around and showing them homes. Buyers however call every number on every sign until someone answers and shows them a few homes.

While there’s nothing wrong with this approach, it wastes a lot of time. Instead, what I recommend buyers do is find a few Realtors they think they can work with and try calling them to talk with them. Better yet, search for them online. Many Realtors today have more than a website - they have a blog, where they publish information about topics that interest them and houses in general. Read their blogs, get a feel for whether you would get along with them and how competent they seem in their field.

Then call them, tell them what you’re looking for and go shopping!

Oh boy! Hold on to your hats. Buying a home is probably one of the most exciting and emotionally draining things you will ever do in your life. In my experience there are three types of home buyers:

1. The Fear Before the Process Starts Kind - This group of people feels an intense grip of fear/anxiety/dread when they first realize they are buying a house. They might walk around in a kind of stupor, bump into things and walls, and want to skip meals because their stomach is queasy. Then, they get over it and sail calmly through the home buying process. Their Realtors love them because they never show any worry or give them trouble calling incessantly. Their Realtors also wonder if they’re human, not having met them in the days these buyers refused to eat, got dark circles under their eyes and walked right out into traffic, scaring everyone around them.

2. The Anxious Home Buyer that Might not Make It - This is the worst group to belong to, so if you’re here, consider yourself warned: I will know you belong here. This is the home buyer who just cannot let go of her anxiety long enough to come into possession of a house. The home inspector almost gives up on her, the termite company swears they will never deal with her again and the Realtor is seeing red because this client has dragged her out of bed early on Sunday mornings and just when she is almost in escrow every calamity on earth has hit to help the cancelation of escrow. This home buyer might just not make it to the final signing and might not ever buy a home, so if you do see yourself here, ask yourself why you are buying a house or wanting to buy one. The answer might surprise you.

3. The Home Buyer’s Remorse Club - This is probably the largest community out there, so if you find yourself in the middle of an escrow wondering if you’re doing the right thing, or lying in your new bedroom of the house you just bought heart palpitating wildly, be reassured you’re in good company. Almost every home buyer claims to have some buyer’s remorse about spending too much, buying in the wrong neighborhood, and so on. Usually they get over it by the time of the housewarming and live happily ever after.

So which kind of home buyer are you? The group you fall into should give you a pretty good idea of how stressful this process will be for you!

As a first-time home buyer, you’re probably looking at this turmoil in the real estate market, the dropping values and think to yourself, “I could buy a home now.” You’re probably right. Here’s another reason why you should be considering this thought very seriously in this market - there is a lot of inventory to look at, interest rates are still near historic lows and, what’s more, there are some unbelievable deals in REOs out there.

But where should you start?

I recommend taking a good hard look at your finances and talking with a mortgage consultant to see how much you can afford to pay toward your mortgage every month. Make sure this amount includes taxes and insurance along with principal and interest on the home. The next step would be, working backwards from this number, to see how much of a home you can afford.

When you have that number in your head, see what’s available in an area you would like to buy in. Some people prefer to live where they have rented in the past but sometimes this is not always possible. Consider bedrooms, baths, and how close you are to work or if you would consider commuting.

Then, check how much you have in savings for a down payment. If you have about 10% down, in today’s market you should be fine. If you don’t, ask your mortgage broker what you need as a minimum down payment. Many programs today allow gifts from parents and other relatives for down payments as low as 6% so ask about those.

Then, get a Realtor. You can ask your mortgage consultant for a referral or just search online. Pick one you can trust.

Remember that first-time buyer homes are not always the dream homes people would like to own, but if you start somewhere near the bottom of the market (like today’s) you are likely to trade up in the not too far future to something that very nearly resembles your dream house!

Glad you asked. Usually, a good Realtor will find a way to ask you this question, but it’s a good idea if you have thought about it first by yourself. The first thing to consider is if you will be involving anyone in the financial aspect of buying this house. It amazes me when someone calls me to see a house and then tells me that their brother, or sister or uncle is paying for the home. When I tell them to contact the said relative, I never hear back from them. Bad communication!

So if someone is paying for the home, or putting a down payment on the home, realize they will probably want to be involved in the process, be it parents, or whoever. It is usually a good idea to find a time to go looking for a house with them. Also please understand that if they are going to buy the home for you, the lender will consider it an investment property, since they will not be living in it by themselves.

Even if no one else is contributing to the financial aspect of buying the house, if you need a second opinion, be sure to pick your “critic” wisely. Pick someone you know whose house you like and someone you see as having had some success in buying and maintaining a good property. Also be very clear on what you intend the do with the house (will it be a rental later?) and pick your critic accordingly.

One other person besides you (and your spouse) seems to be the consensus. Like with many other things, too many cooks spoil the escrow along with the broth.

In the big booming real estate market, banks were willing to loan to investors 100% of the purchase price of non-owner occupied residences for whatever reason. With a 680 FICO score, a buyer could come into possession of a house he could flip or rent out. These were called 80 - 20 loans, where the buyer would get a first mortgage for 80% of the purchase price and a second mortgage for the 20% rest of the purchase price. Since property values were headed up, most people thought they could refinance easily in the future against the increased value of the home into a fixed mortgage for 80% of the value.

Unfortunately, we now know that the dream of refinancing for a lot of people never quite worked out because property values began to fall. So today, if you’re looking for a zero down investor loan, you’re not going to find it.

Banks have stopped loaning 100% purchase price mortgages even to some owner-occupied borrowers. So buying a rental with the bank’s money alone is impossible. Your best bet is to come up with at least 15% down, although 20% to 25% is better because you can avoid private mortgage insurance and, possibly, get a better cash flow on your investment.

For those of you who aren’t familiar with it, Fair Oaks is a beautiful, established community in Sacramento County, east of the city of Sacramento. In the first quarter of 2008, the average home sold in Fair Oaks for $358,999, down 24.9% from the first quarter of 2007. A portion of this drop reflected a smaller crop of homes, with this year’s average footprint being 1930 square feet versus 2086 square feet last year. As a result, the sold price per square foot of a home in Fair Oaks dropped more moderately, 18.9%, from $229.25 on average in the first quarter of 2007 to $186.01 on average in the first quarter of 2008.

Unit volume has declined markedly in Fair Oaks, 38.1% over the year. Of the 60 units that sold in the first quarter, 30 were bank foreclosures but only two were short sales. Currently there are 6.8 months worth of unsold inventory, but at the rate foreclosures have sold over the last quarter, there are less than two months of foreclosure inventory.

When you start shopping for a home, especially when you are new to the area, it seems natural to ask your Realtor if it is an area that is “safe,” school information, information about the neighborhood and neighbors and so on. Many clients however do not realize that Realtors have to be very careful in handing out such information due to the Fair Housing Act to avoid allegations of steering. So while we might be able to give you school information, we cannot tell you the average size of families in the neighborhood. Information about crime seems to be another sensitive topic.

So where does a person go for such information? Here are a few resources. You can go to a title company and request neighborhood information. Chances are however they might be bound by similar rules. Online resources are best. If searching in the Sacramento area, go to Sacramento Bee’s community information page under “Homes.” For other areas, you can search their local newspapers or even go to City Data.

Personally, I find City Data quite fascinating, with their average temperatures and most common professions amongst residents. Especially when it comes to relocation, it helps to get a general idea of the place as well as the residents!

Though local residents no doubt break the area down a little differently, the Multiple Listing Service includes three zip codes in the area it considers “Land Park”.  These include 95818 (Land Park / Curtis Park), 95822 (Land Park and the Executive Airport area), and 95831 (the “Pocket Area”).  In this market update, we’ll compare the performance for homes in all three areas for the first quarter of 2007 against the first quarter of 2008.

In 2008, the average home sold in Land Park for $317,410, down 23% from last year’s average of $412,426.  Some of this price drop is an artifact of the fact that this year’s group of homes was smaller than last year.  Sold price per square foot dropped more moderately, 18.4%, from an average of about $256 per square foot last year to an average of $209 per square foot this year.  The median price fell more dramatically, reflecting both a real price drop and the focus on smaller homes.  In the first quarter of 2007 the median selling price was $377,500.  In the first quarter of 2008 it had fallen to $282,500, a 25.2% drop.

In current active inventory, about a quarter of the homes are short sales, and another quarter are foreclosures (more precisely, the numbers are 23.4% and 24.8%, respectively).  Reflecting the continued unpopularity and difficulty of short sales, however, only 3.9% of first quarter sales were short sales, while 35.6% of the sales were foreclosures.

Unit volume is up 4.1% this year for Land Park, with 205 residential units selling in the first quarter of 2008 compared to 197 units in the first quarter of 2007.

In inventory now, the average foreclosure lists for approximately $134 per square foot, versus $154 for short sales and $244 for non-distressed homes.  Homes in Land Park have been selling for approximately 94.9% of their listed price, on average.

Many first-time (and subsequent-time) homebuyers are faced with this question today: what’s the best home loan for them? Sure, they’ve heard about interest only loans and hybrid loans and a very popular refinance loan of 15 year fixed instead of the 30 year fixed because they get to pay lesser interest and pay off the mortgage sooner. But deciding the right one for their situation is tough.

For instance, consider the person who has been transferred and wants to live there for about 7 years. He knows for certain, he will not live in the place for more than ten years. Should he still get a thirty year fixed rate, just because these are uncertain times for rates? Or should he do something else?

I think a good mortgage broker should be able to sit down with you and work the numbers depending on your situation. Take a look at this post in the Mortgage Reports which talks about how only after half the loan is paid off does the 30 year fixed revert to making more payments on principal rather than interest. In this case, wouldn’t it make sense for the person who is buying a home to live in it for only 7 - 10 years get a hybrid loan, fixed for 10 years? Shouldn’t he at least consider it, instead of reverting to the knee-jerk 30 year fixed?

Here’s a Short Version of This Article

At least part of the dramatic drop in price that we reported for Sacramento County for first quarter of 2008 is a result of the fact that the cheaper homes are selling better, not the fact that individual homes have fallen as much as the overall average.

Here’s the Long Version

The nice thing about being an surly old bastard is that at some point you begin to care a lot less what people think of you, unless it’s someone with a gun pointed at you, or someone who might make you dinner. 

And so it is that I know that there’ll be those in the Chicken Little Subculture who’ll see this article as an attempt to minimize the bad news coming out of Sacramento County, and I am blissfully indifferent.

Let me be clear:  the real drops in value that we’ve seen in Sacramento County, Placer County, and El Dorado County have been fairly substantial.  Ask anyone who bought a home in 2005 and is selling one in 2008 — that’s not a great position to be in.  Of course, if you bought in 1996 and are selling in 2008, you’re probably kicking yourself for not moving in 2005, but other than that you’re sitting pretty.

So accuse me of minimizing the drops if you want, but I want to re-examine the numbers that came out in my last Sacramento County real estate market update in light of this other update that I did for Placer County.

The Problem With Averages

There’s always a problem when you aggregate data about a population.  On the one hand, you can’t analyze statistical data at all without more than one data point.  But the fact that the average man in America is 5′ 10″ tall (or whatever the average is this year) doesn’t mean that YOU are 5′10″ tall.  This much is obvious.

One of the interesting things I found out in looking at the Placer County numbers was that part of the reason for the roughly 30% price drop in the county was that the places where prices had fallen the most were selling more, so the higher priced homes were underrepresented.  In Lincoln, for example, home prices fell by 35%, and made up a bigger percentage of the total sales Placer County in 2008 than in 2007.  Meantime, Granite Bay, where prices fell only 9.2%, made up 8.8% of the total sales in Placer County in 2007 but only 4.1% of the total in 2008.

Looking at some of the areas we’ve considered in Sacramento County, the same sort of thing appears to be happening.  In Elk Grove, sold price per square foot fell 32.3% from year to year;  volume went up in Elk Grove by 19.8%.  In Folsom, in contrast, sold price per square foot fell more moderately (11.7%); unit volume went down in Folsom by 38.1%.

So what we’re seeing in Sacramento County is the same sort of thing I talked about in Placer County.  Prices have fallen dramatically, but only part of that drama comes from actual drops in the value of individual houses, and the rest is made up of the fact that the homes that have fallen more dramatically are selling better than those where the value has held on better.

Yes, I’ve been sick. No, I don’t hate the Sacramento real estate market.

While I was gone, I wrote an offer, got into escrow, celebrated, realized we weren’t in escrow when the listing agent called and said the asset manager had changed his mind about our offer, tracked down the deposit check, sent it back, felt very bad for my client, showed about ten homes to another client, wrote about five offers more, and worried about having infected my new client with the flu I had. (Although I really, truly was past it then.) Whew!

So what’s new here at Sacramento-Home? We are hearing from more investors and home buyers. Relocation buyers have been our specialty and we’re I think beginning to see them more and more now that it’s spring.

There are some incredible buys out there for people with 20% down. So let’s head out and shop! I have about 16 weeks left before the baby gets here. The countdown has begun!

In the first quarter of 2008, the average home in Carmichael, California sold for $341,551, down 13.9% from last year’s average selling price of $396,641.  At $281,500, the median sale price this year was down 20.7% from the median sale price in the first quarter of 2007, $355,000.  On a sold price per square foot basis, home prices dropped 17.6% over the period.  Last year the average home was 1690 square feet and sold for $234.70 per square foot.  This year the average home sold was 1767 square feet and sold for $193.29 per square foot.

As in most areas in Sacramento County, buyers were taking advantage of whatever bargain priced bank foreclosures were available.  In the first quarter of 2007, foreclosures accounted for only 6.6% of all sales in Carmichael.  This year that figure had risen to 39.1%.  At the same time, the overall volume of homes sold declined sharply (47.1%) from year to year.

In 2007, East Sacramento behaved like a beautiful seller’s market oasis in the desert of short sales, foreclosures, and falling prices.  So far this year, I’m sorry to say that this lovely oasis has turned out to be something of a mirage, as East Sac has begun to behave in many respects like the arid landscape surrounding it.

In the first quarter, the average home sold in East Sacramento for $447,050, down 11.9% from last year’s first quarter average of $507,391.  With this year’s home being slightly larger, sold price per square foot dropped 14.9% during this time.  The median sale price dropped 1.6% during this period, from $421,900 to $415,000. 

There are, however, two reasons to expect that East Sac may return to the verdant paradise we were reporting on last year.  The first is that homes are selling faster this year than last by about a third, with average days on market at 42 days this year as opposed to 63 days last year.  In addition, inventory remains low in East Sac at 3.8 months, but of course keeping it low means sales will need to pick up in April and May.

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.

Like most areas in Sacramento County, Rosemont experienced sharp declines in prices over the last year.  The median home price fell 29.8% from the first quarter of 2007 to the first quarter of 2008, from  $307,500 to $216,000.  The average home sold this year in Rosemont for $221,287, down 26.7% from last year’s average of $301,786.  Sold price per square foot fell 29%, from $219.80 in the first quarter of 2007 to $156.17 in the first quarter of 2008. 

Currently there are 9.7 months of homes in inventory in Rosemont, with some 33 homes selling every month and 323 homes available.  36.5% of the available homes in Rosemont are short sales, and 23.2% of sales are bank owned.  In contrast, last quarter’s sales were made up of 8.7% short sales, and 59.8% bank owned.

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

Aren’t you glad you’re not me? Now may be a good time to thank the deity of your choice that you’re not.  If you were me, then you’d be a veteran of over 200 real estate market updates.  That would be a lot of statistical ink if we were using ink, but as you know, I use electricity.  See?  Being me isn’t that bad!

After 200 market updates, you tend to get a pretty good feel for how the numbers are going to shape up month by month, quarter by quarter.  Yes, there are surprises as to where the trends are going on a six-month or one-year basis, and certain segments of the market behave differently than others, but usually February is not that much different from January. 

It sometimes gets routine enough to be boring, so getting my Elk Grove surprise was entertaining.  I was running the numbers for the first quarter of 2007 in Elk Grove versus the first quarter of 2008.  389 units sold overall in the first quarter of 2007.  I was running the numbers for how many bank foreclosures (REOs) have sold in 2008 and came up with 331.  No, that can’t be right — that has to be the total number.  Thinking I’d made a mistake, I tried it a couple of different times.  No, sure enough, 331 total foreclosure sales, almost as many as last year’s overall total.  Total unit volume this year was 466 units, 19.8% more than last year.  Foreclosures were 71% of the total.  Throw  in short sales, and distressed sales in Elk Grove accounted for 76.8% of all sales. 

Once You Get Past the Surprise, The Rest Is Obvious

Once you three quarters of the sales are either short sales or foreclosures, the declining values in Elk Grove follow as naturally as exhaust fumes follow a diesel engine.  Sold price per square foot fell 32.3% from 2007 to 2008.  The median sale price was $296,000 in Elk Grove in the first quarter, versus $393,000 in the first quarter of 2007, a 24.7% drop.  The average home sold for $313,136 in the first quarter, down 26.1% from 2007’s average of $423,622.

Next time we’ll look at how the Elk Grove active inventory breaks down, comparing the prices and inventory on non-distressed sales, short sales, and foreclosures.

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’m going to do a couple of things a little differently with our market updates this month.  In the first place, I’m starting out of order:  instead of looking at all of Sacramento County, I’m going to just focus on the cozy little El Dorado County town of Cameron Park (which happens to be where I live).  I’ll have a Sacramento County update in a day or two.  The reason for that is I want the countywide results to be more accurate, and brokers have three days to enter their sales, so I don’t want to do the Sacramento County results before the third or fourth of the month.

The second thing I’ll be doing this month is focusing primarily on quarterly data, since it’s the end of the first quarter.  So rather than comparing a month of real estate performance to the same time last month, for the most part I’ll be comparing first quarter 2008 with first quarter 2007.  Time permitting I may do a March-to-March analysis, but more likely I’ll just work on quarterly data all this month.

So what’s up in Cameron Park? 

Cameron Park homes lost about sixteen per cent of their value from first quarter of ‘07 to first quarter of ‘08.  In 2007, the average home sold for $468,387, while in 2008 the average was $377,198, a 19.5% drop.  Sold price per square foot dropped 16% during this time, and currently is at about $185 per square foot.  The median price fell 16.8%, from $425,000 to $353,500.

Based on the unit sales that have been reported so far, it looks as though Cameron Park had a pretty significant drop in unit volume from year to year as well, from 46 units to 31 units. 

Bank foreclosures and short sales together account for approximately 25% of available inventory in Cameron Park, and made up 42.8% of the sales in the first quarter.  To break that second number down further, 33.3% of the sales in the first quarter were bank foreclosures, while 9.5% were short sales.  Cameron Park is one of the only areas I’ve studied where the active Short Sales and the sold short sales are about even, at 11.9% and 9.5%, respectively.

If you’re interested in the history of development downtown in Sacramento, you may enjoy attending a presentation tonight (Wednesday, April 2nd) that’s being given as part of the Sacramento Preservation Commission Meeting.

William Burg, author of the Sacramento History Blog, will be giving the presentation at the Council Chambers, New City Hall, 915 I Street, First Floor. The agenda for the meeting is here.

I was just running the early numbers for March, and I’m happy to report that the Sacramento real estate market has fully recovered and has returned to the exuberance of 2004. The recovery started early in the month and was complete by March 17th.

Early in March, major lenders announced that they would once again be making many creative loan products available. John Stumpf, Wells Fargo chief executive, said his company intended to lead the market in this area by offering loans at up to 107% of the purchase price for qualified borrowers. When an aide brought the news to Countrywide CEO Angelo R. Mozilo, Mozilo quickly drafted a plan to provide loans at up to 109% of the purchase price for full doc loans, and 107% for stated income.

Countrywide is now offering two programs with these limits. The first is a traditional option-ARM, with one of the options being a negative amortization option. The second program is a new “negative amortization only” product, which is only available on the stated income loans.

With the new financing in place, buyers quickly realized the market had turned and shopped their way through the remaining inventory. After they bought the 3,411 available bank owned properties in El Dorado, Sacramento, and Placer County, they pre-ordered the next four months of bank owned inventory. A single investment group from Palo Alto accounted for over half these purchases.

With bank owned properties no longer available, buyers then quickly bid up the available traditional sales. Because of the rising prices and the availability of CountryWide’s innovative 120% HELOC, sellers offering short sales were able to refinance their homes and offer them on the market as usual.

With the short sales and foreclosures out of the way, prices quickly rose 23.9% on average, so prices in most areas are now at early 2007 levels. By July we expect to have prices above where they were in 2004.