Sacramento Real Estate Blog

I remember back when the market was still booming, in those innocently happy 2004 days when prices were going up and the country was still in love enough with Peter Print-money (aka George Bush) to elect him to a second term.  (Don’t blame me; I voted for Kerry).

Around that time, I remember one agent telling me that Natomas was a booming area where she saw a lot of opportunity.

Remember 2004?  CNN Money ran this article, with this little by-line, which is rather funny in retrospect:

“Don’t look now, but $2 a gallon gas is here.”

Yeah, don’t look now.

Anyway, Natomas Real Estate

Like many of the areas that were so hot in 2004 (Elk Grove comes to mind), a large number of foreclosures has turned 2008 into yet another buyer gold rush for Natomas.  Sales have more than doubled since 2007 in Natomas (which consists of the zip codes 95833,95834,95835,95836, and 95837).  78 units sold in August of 2007, versus 179 in August of 2008, a 129.5% increase. 

The average sale price in August was $252,522, down 30% from last August’s average of $360,698.  Sold price per square foot fell roughly the same amount (29.6%), averaging $133.57 per square foot in August in Natomas.

About a fifth of the homes that sold in Natomas in August were non-distressed sales.  Bank foreclosures accounted for 71.5% of all sales in August in Natomas.

Inventory in Natomas is falling. There are 5.8 months of inventory in Natomas, or 4.4 months if you use the absorption rate of the last six months.

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Placerville is one of the few incorporated communities in El Dorado County and the county seat, but when we talk about Placerville real estate, we often want to include areas that are outside the city limits as well.  Unit sales were the same as last year in Placerville, with 27 homes selling in August of each month.  However, the supply of homes in the Placerville area is far outstripping the demand, with the result that there are about thirteen to fifteen months of inventory in Placerville at present.

The average home sold in Placerville in August of 2008 for $190.36 per square foot, down 15.2% from last year’s average of $224.41.  The average selling price this year was $364,934, down 28.2% from last year’s average of $508,385.  At $315,000, August’s median selling price this year was down 26.7% from last August’s median of $430,000.

Of the more than three hundred homes in active inventory, only about 25% are short sales and foreclosures, though they made up about 41% of sales in August.

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North Sacramento and Del Paso Heights (95815,95838) is one of the areas that’s been hardest hit by foreclosures in Sacramento.  Because of the resulting huge price drops, many bargain hunters have been out out for the past several months, pushing the number of homes sold in August to new heights.  No matter what statistic you look at for this area, it’s extreme.

Take the fact that homes have lost almost half their value in a single year.  Last August, the average sold price per square foot was $172.19, and in August of 2008, that number had fallen to $90.80 per square foot, a 47.3% drop.  By coincidence, the average home size both years was the same, so the average selling price also fell 47.3%, from $214,633 in August of 2008 to $113,181 in August of 2008.  Alarmists take note:  the median price in this area fell 54.5% in one year, from $220,000 in August of 2007 to $100,200 in August of 2008.

Of course, such a huge drop is driven by distressed sales — lots of them.  Fully 93.1% of all sales in North Sac / Del Paso Heights in August were bank foreclosures, with another 4.9% being short sales.  If you add those two numbers up, you’ll see that only 2% of all sales that closed in this area were non-distressed sales (even though non-distressed sales account for 16% of all listings).

Although inventory has just recently dipped below the six month mark in North Sacramento / Del Paso Heights, I don’t expect this to remain true for long if banks keep discounting their offerings.  In August, sales volume had more than tripled from the year before, with 102 units selling in August of 2008 versus only 29 in August of 2007.

The average home sold in Orangevale in August for $296,325, down 20.9% from last year’s average price of $374,508.  Sold price per square foot was down 16.6%, from $214.62 in August of 2007 to $178.93 in August of 2008.  Meantime, the median price fell 25.4% during the same period, from $340,000 in August of 2007 to $235,500 in August of 2008. 

Foreclosures and short sales made up about one third of all sales in August of 2007 in Orangevale.  In 2008, that number had increase to about two thirds.  This August, demand for homes in Orangevale has been strong, with 87% more unit volume than at the same time last year.   Forty-three homes sold in Orangevale in August of 2008 versus twenty-three a year ago.

There are 6.2 months of inventory in Orangevale, about half of which are short sales and foreclosures collectively.

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Like most areas of El Dorado County, the market recently in Cameron Park is one in which there continues to be a moderate to high amount of inventory and sluggish sales compared to last year. 

Eighteen homes sold in Cameron Park in August, down 14.3% from last August’s figure of twenty-one sales.  Two thirds of these sales were non-distressed.  Sold price per square foot fell 17.1% over the year, form $222.39 in August of 2007 to $184.36 in August of 2008.  The average selling price in August was $358,500, down 16.6% from last year, while the median selling price was $368,000, down 8% from last year’s median of $400,000.

Inventory is fairly high at 8.1 months overall.  The number of non-distressed homes in active inventory (67.8%) aligns fairly well with the number of non-distressed homes that sold in August (66.7%).  22.6% of the active listings in Cameron Park are short sales, and about 9.5% of all sales are foreclosures.

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Unlike many areas of Sacramento County, El Dorado Hills and other areas in El Dorado County have not seen huge increases in volume in recent months.  With prices falling more slowly than in Sacramento County, El Dorado County has lower demand and more inventory.

With 47 homes selling in August of 2008, sales volume was down 9.6% from last year’s volume of 52 homes sold in August of 2007.  The average price per square foot fell 20.6% from August to August, from $235.59 in August of 2007 to $187.15 in August of 2008.  This year’s average El Dorado Hills home sold for $587,854, down 22.4% from last year’s average of $757,285.  The median price dropped 14%, from $610,500 in August of 2007 to $525,000 in August of 2008.

Non-distressed sales in El Dorado Hills make up a more significant proportion of sales than in other areas, making up 59.6% of all sales in August.  Bank foreclosures accounted for 34% of all sales, while short sales accounted for 6.4% of sales.

There are about 9.4 months of inventory in El Dorado Hills.

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The Churchill Downs area of Sacramento is the area in the zip code 95829.  Though no one calls it either of these names, you could think of it as East Florin Road, or South Rosemont.  Churchill Downs is an area where there are many homes built in the late 1980s and early 1990s.  (The average "year built" in our database is 1989).  Many of these homes show quite nicely, and the large number of foreclosures have brought a typically priced home in Churchill Downs down to the low to mid $200,000s.

The average home sold in Churchill Downs in August for $230,348, down 44.5% from last year’s average price of $230,348.  With this year’s crop being 13.7% smaller than last year’s, however, sold price per square foot fell somewhat less.  This year’s average was $135.31, down 32.4% from last year’s average sold price per square foot of $200.21.  The median sale price fell 34.5% from year to year, from $336,025 in August of 2007 to $220,000 in August of 2008.

With thirty-seven of forty-three sales being "bank repos", foreclosures made up 86% of all sales in August versus "only" 26.9% last August.  Short sales accounted for 4.7% of sales, while non-distressed sales made up 9.3% of sales.

Currently in inventory there are 184 homes in Churchill Downs — about five months of inventory based on the last six months of sales.

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How bad does the Treasury Secretary’s plan have to be before Congress approves it?

Well, don’t worry, Chris Dodd’s probably already written something close to what Congress will approve, but if you aren’t depressed enough yet, you may be happy to know that a real estate broker with no direct banking experience was able to come up with a better (albeit still hugely dumb) plan in a few days.

I believe you could put twenty smart guys in a room for a morning and come up with a better plan.  The problem with having Congress do it is that not that they’re not smart, but that they’re owned by the wrong people.

Meantime, here’s my dumb but not as dumb as Paulson’s plan. 

Spoiler alert:  I manage to pay back the American people in eight years while making 13 million low-risk home loans to the American people.

If you enjoy it, please don’t forget to hit the Digg button while you’re there.

A few months ago unit volume was peaking in Antelope, which made for a nice Antelope stampede pun, but this year we can see the curve rounding the top, at least temporarily.

63 homes sold in August, up 23.5% from the same time last year.  The average home selling price fell 32.1% over the year, from 312,766 in August of 2007 to $212,214 in August of 2008.  Since this year’s home was also slightly smaller in Antelope, the sold price per square foot fell less sharply, but still lost 26.9%.  Sold price per square foot in August of 2008 was $132.42.

Short sales closed relatively well in Antelope in August, accounting for 23.8% of all sales.  Foreclosures made up 61.9% of all sales, while non-distressed sales accounted for only 14.3% of the total.  Those who’ve been predicting for the last eighteen months that any minute now banks will suddenly smarten up and start approving short sales may want to look to August, 2008 in Antelope to see themselves vindicated.  (Just don’t look at other data points or you may be disappointed!)

Presently there are 4.9 months of inventory in Antelope.

I don’t know how much you’re following the news of the bailout of wall street banks who repackaged bad loans, but if you’re not, now is a great time to get involved and please, please call your elected representative and tell everyone you can about this incredible fiasco.

Hank Paulson, Secretary of the Treasury, and George Bush are asking Congress for the authority to spend up to $700 billion at a time (that’s a balance sheet maximum, not a maximum on the total the government can spend).  That’s more than the total cost of the War in Iraq so far.  The Treasury will spend it buying bad loans, and get no equity stake in the firms they’re buying them from — leading some to call it "cash for trash".

Section eight of the proposed legislation gives Paulson an oversight-free blank check as to how to spend that much of your money.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

You can read the full text here.

Although as you might expect, public opposition to the plan is strongest among Democrats, several prominent conservatives have also gone on record as being opposed to the plan.  This legislation is so bad that even CNN gets it.

Please look up and either write to or phone your Senator and House Representative right away.  You can learn more about the proposal by clicking through on the articles current on Digg for Business and Finance.

Congress is in a HUGE RUSH to get this done, so those of us who think it’s expensive, ill conceived and leaves us stuck holding the bill need to MOVE NOW to express our concerns to Congress.

UPDATE:

Here is the latest draft the bill, which I must admit I think is substantially better than Paulson’s original proposal.  I wouldn’t go so far as to say this makes me for the bill, but at least it’s moving in the right direction.

I’ve written for some time now that county-wide averages might not adequately or accurately represent real changes in home values.  For example, if counties with the largest drops in prices are also the ones selling the most homes (as I would expect given my role as a data nerd), then I would expect that the overall average county-wide difference in price (i.e., lump all the homes and divide) would be much higher than the averages difference in price for each area (lump homes by area, divide, then average that).

Well, if I haven’t put you to sleep already, you’ll be pleased (or horrified) to learn that the numbers don’t come out all that differently when you work the numbers different ways.  For example, in Sacramento County, our latest county-wide average price drop from August to August was 32.4%, while the area-wide average of the change column, below, works out to be 30.1%.  So yes, the fact that the cheapest homes are selling the most has skewed the numbers slightly — but only slightly. 

And of course, averaging by-area numbers entails a whole new set of problems — like how many areas do you have and how big are they?  For example, in Applegate, in Placer County, one home sold in August of 2007, and another in August of 2008.  If you live in Applegate and you don’t understand statistical significance, you may be very happy to find out that your area home values went up 63.2% in one year! 

Anyway, along the way we created a new query that goes area by area and checks out the price drops.  We’ll probably tweak this going forward to show unit volume, but here are some preliminary results for Sacramento County.

Sacramento County Real Estate Price Real Changes By Area

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Elk Grove’s sales continued strong in August, though like the rest of Sacramento County, unit volume was off slightly from the high we reached in July.  In August, 323 homes sold in Elk Grove, more than doubling last August’s total of 127 homes.

Prices in Elk Grove have fallen 30.3% from last year, with the average home selling in August, 2007 for $187.96 versus $130.97 in August of 2008.  Prices were up slightly in August from the previous month both in price per square foot and average selling price, but much of the gain seems to be a result of a possibly temporary upsurge in the number of non-distressed properties selling.

The average selling price in August was $281,994, down 26.7% from last year, while the median selling price of $265,000 was down 26.4% from last August’s median of $360,000.    

67.5% of homes sold in Elk Grove in August of 2008 were bank foreclosures, and 13% were short sales, leaving 19.5% in the non-distressed category.

Currently inventory in Elk Grove is low at 4.1 months (based on the six-month absorption rate of 277 homes sold per month), or 5.6 months if you use the twelve month average of 204 homes selling per month.

The raw data for Elk Grove is below.

Unit Volume Data

Price Data

Inventory (Based on 12 months of prior sales)

Inventory (Based on 6 months of prior sales)

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Hard on the heels of taking over Freddie Mac and Fannie Mae, and the bailouts of Bear Stearns and now AIG, this week the Federal Government announced that it would try to bail out the entire economy — adding some (big) number in the hundreds of billions of dollars to what’s probably a half trillion or so commitment already.  The total price total price tag a half billion to a trillion dollars (or more).

Basically the idea here is that the Federal Government is going to buy up a lot of "bad debt", i.e., things like worthless mortgage backed securities, but details of the plan are still sketchy, and I certainly don’t pretend to understand how it’s all likely to unfold, other than to say I know people will lie about it.  Take the United Press International, which included this ridiculous assessment:

Obviously, conservative Republicans do not like using this amount of public money to bail out private companies: They understandably ask why the U.S. taxpayer should pick up the tab for others’ bad choices.

No, obviously conservative Republicans like to say they don’t like to use public money to bail out private companies, but it was conservative Republicans along with the Democrats who rolled over ten years ago, repealing the New Deal legislation that has protected us from just such a fiasco since the Great Depression.

How will this affect the housing market?

As I mentioned, details of the plan are still sketchy, but to me, this is the least well understood aspect of the unfolding story.  Will the government get into directly writing down the principle for people in foreclosure?  Will they be auctioning off foreclosures directly?

I don’t even want to hazard a guess at this point, but I suspect the government’s actions will do more to simply keep more banks from folding in the short term and make Wall Street happy.  I’m less convinced that it will significantly shorten the time to home price recovery, but that won’t stop politicians from hinting that it will to deflect public outrage.

You would think I would write more about El Dorado County real estate than I do.  I live here, after all, and the homes here are (on average) more expensive than they are in Sacramento County — well, if you can sell them, they are, anyway. 

Right now in El Dorado County there are thirteen months of inventory that we have to get through, though the good news is that we’ve been selling more homes recently, so you can call it 11.4 months if you want the optimistic estimate.  That’s still a lot of inventory.  Six months of inventory is the traditional demarcation that distinguishes a buyer’s market from a seller’s market.  Six months is about what we’re seeing in East Sac and Fair Oaks.  Less expensive areas in Sac County are down around four to five months. 

152 homes sold in all of El Dorado County in August, down 9% from last year’s volume of 167 units.  Average sold price per square foot fell 18.6% from year to year, from $226.19 last August to $184.21 in August of 2008.  Together with a slight size drop from year to year, the average sale price fell 24.1% from year to year, from $524,693 in August of 2007 to $398,320 in August of 2008.  The median price county-wide fell from $430,000 to $354,950, a 17.5% drop.

One thing I’ve noticed about El Dorado County as we’ve gone along is that because El Dorado County started out more pricey to begin with, and because Sacramento County’s prices fell off more sharply, the difference in price between the two areas has intensified.  In 2007, the average difference in price per square foot was $18.53.  So far this year, that average difference has risen to $44.91.  Combine this with higher gas prices making commuting less affordable and the higher number of foreclosures that buyers have to choose from in Sacramento County and I think it becomes fairly easy to account for the sluggishness of sales here.  Add in unrealistic seller expectations and the idea that there’s always tomorrow for dreams to come true and you have a the makings of a perfect storm of market sluggishness in El Dorado County.

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Sacramento’s Arden / Arcade Creek Area continued to enjoy above average prices for Sacramento County in August, but area homes have lost value from last year as the number of foreclosures has risen.  With 102 homes selling in August, sales volume is up 54.5% over last August’s numbers.  Sales in August also bested the average over the last six months of 86 sales per month.

At 1387 square feet, this year’s average home was 12.7% smaller than last year’s average of 1589 square feet.  Coupled with a 17.0% decline in value in sold price per square foot (to $193.86 in August, 2008), the average sale price dropped 27.5% from August to August.  Last August, the average sale price was $370,984, while this August the average was $268,955.

Compared to other areas in Sacramento County, inventory in Arden / Arcade Creek is somewhat high — but in absolute terms it’s considered low at 5.4 months. 

Sacramento’s Arden / Arcade Creek Area is the area with the zip codes 95841, 95821, 95864, and 95825.

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Fair Oaks continued to enjoy strong demand in August, yet with homeowners losing less of the value of their homes than in other areas of Sacramento County.  Fifty-four homes sold in Fair Oaks in August, besting last August’s volume of forty-one units by 31.7%.  Bank foreclosures and short sales made up 59.3% of all sales in August, and comprise 41% of active inventory. 

The average home that sold in Fair Oaks in August was 1831 square feet in size, and sold for $333,816.  This sale price is down 12.2% from last year’s average of $380,000.  Sold price per square foot fell 16.5% from August to August, from $218.27 in August of 2007 to $182.30 in August of 2008.  The median selling price in Fair Oaks fell 12.6% from year to year, from $334,000 in August of 2007 to $292,000 in August of 2008.

Inventory in Fair Oaks is slightly higher than other areas of Sacramento at 6 months, but is much lower than last year.

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I recently predicted that some time soon the FED would disclaim that they were actually going to start buying bankrupt companies with their newfound policy of accepting equities as collateral, but I thought it would be weeks before we’d hear about the first one. 

No, it turns out it took them less than twenty-four hours to buy AIG.

So, what do you do if you’re 9.6 trillion dollars in debt?  Let’s start buying up companies that have failed, and stick the taxpayer with the bill.

Brilliant!

I wonder who the government will buy next.  Elite Properties is probably still too liquid.

Real Estate

I got into real estate at a time when the boom in real estate was well underway.  One of the things that surprised me at the time was how high prices were going.  I remember showing one not so great house in Cameron Park and thinking it was priced too high, then seeing the same house on the market the following year for $100,000 more and actually sell.

Because of this experience of being surprised by how high the market could go, I realized as the market decline accelerated that I should not be surprised if prices got really low — though naturally as a homeowner and as someone who’s income is tied to the real estate market, I hoped they wouldn’t.  So for the most part, the decline in prices has not surprised me too much.  It actually took place more slowly than my critics predicted (those who predicted I’d be out of business by 2006) — but to give my critics their due, the decline in value from 2006-2008 has justified much of their pessimism.

The Economy

If the decline in home values is not that surprising, what has surprised me has been the extent to which the rest of the economy is diving off the cliff with it.  Last week we learned of the federal takeover of Freddie Mac and Fannie Mae.  This week brought the sale of Merrill Lynch to Bank of America.  It also brought the failure of Lehman Brothers, which the Fed did not step in to prevent.

So the Fed’s gotten smart and is trying to minimize the risk to the taxpayers and the currency, right?

Wrong. 

I’m not an economist, so maybe the wrong things scare me, but to me one of the more frightening developments in recent weeks has been the Federal Reserve’s announcement that it will now accept "equities" (stocks) as collateral for loans. 

Here’s a prediction for you.  Remember a few weeks ago when we started to hear that the federal government might loan Fannie Mae and Freddie Mac some money, but would only do so as a last resort?  Within a few weeks we heard that the government had placed Fannie and Freddie in conservatorship. 

My prediction for the week ahead is that a spokesman for someone in the Federal Government (most likely someone at the Fed) will go on record that the change in the collateral allowed for Fed loans is only intended to give the Fed leeway in case it’s needed.  That said, the Fed will proceed to accept securities as collateral for several loans, and we’ll begin to hear about some of these companies falling within about six months.

Politics

It seems to me the only people who think the present economy is doing well are insane John McCain campaign advisors, who tell us we’re on the brink not of recession, but of accelerating prosperity.

You can’t make this stuff up.

I’m getting exposed to a lot of the economic news in the reading I’m doing for a new liberal politics blog I’ve been working on.

What It Means for You

In general, the failure of financial institutions all by itself shouldn’t put you off buying a home.  If your mortgage is current, you won’t be foreclosed on no matter who holds the note.  However, if your situation is such that your income is uncertain, then naturally you’ll want to think twice about home ownership (or any other major purchase).  In general, your personal "economy" and prospects are more important in this decision than the overall economy, unless you have to move soon.

Will home prices fall some more?  Yes, I believe they will.  How much?  I don’t know.  Will loans get harder to get?  Yes, to some extent that’s already happened, with 100% financing an absolute rarity already (though great FHA loans are still available at 3.5% down).

We’ve already seen a lot of increased demand based on the price decreases of 2006-2008.  The last week or two of inquiries has been pretty slow, however, so October may be an exception to the rule.

If you’re selling, what all this means is that you’ll have a longer wait than you thought if you’re not going to get realistic about your price and instead want to "wait to see what happens".  We may reach equilibrium in certain areas within the next year or two, but I don’t see recovery taking place that quickly.

August was another off month for East Sacramento, which the last few months had seemed immune to the price drops that were happening elsewhere in the area.  What’s happened more recently is that East Sac’s prices have started to drop slowly.  At the same time, while the rest of Sacramento County has had a huge upsurge in demand in response to the deep price cuts and large number of foreclosures, demand in East Sacramento has been flat.

In August, for example, 17 homes sold in East Sac, down 45.2% from last year’s unit volume of 31 homes.  The average price per square foot in East Sac in August was $308.20, down 9.5% from last year’s average of $340.54.  At the same time, at 1671 square feet, believe it or not, this year crop of homes was 27.6% bigger than last year.  As a result, the average sale price increased 15.5% from August to August, averaging $514,994 this year.  The median sale price increased 2.5% from last year’s $405,000, with this August’s median selling price in East Sac working out to $415,000.

Foreclosures accounted for 11.8% of all sales (two units) in August, with no short sales closing.  Foreclosures and short sales together make up 12.8% of active inventory.

With inventory in many areas of Sac County being about four-five months, East Sac’s inventory is comparatively high at present with about 6.3 months of inventory to get through.

Foreclosure sales continued to drive high buyer demand for homes in Citrus Heights in August.  102 units sold in August, somewhat more than the six month running average of 98 units per month, and 54.5% more than the 66 units that sold in August of 2007.

Sold price per square foot dropped 23.5% from August to August, with the average home fetching $190.91 per square foot in August of 2007 versus $146.05 in August of 2008.  At 1352 square feet, this year’s home was 7.6% smaller than last year’s home, so sale prices fell more sharply, 29.3%, from $279,468 in August of 2007 to $197,579 in August of 2008.

Demand for foreclosures was strong, with only 1.5 months of foreclosure inventory at present and bank foreclosures making up 72.5% of sales in August in Citrus Heights.  Buyers are routinely bidding over full price in order to be successful, with the result that the average sale price of $197,579 was 2.9% over full price, i.e., the average listing price of $192,058.

With 392 active listings, at present there are four months of inventory overall in Citrus Heights.

Below is the raw data for Citrus Heights for August, 2008.

Unit Volume Data

Price Data

Inventory (Based on 12 months of prior sales)

Inventory (Based on 6 months of prior sales)

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Everyone else is talking about this cosmetically advanced porcine this week, so I thought I’d work it in to the conversation somehow.

Welcome to my job.  I’m fortunate because — if you ignore my broker / management duties — I pretty much get to blog for a living.  Given the blog that’s turned out to be successful and the way I choose to feed it, this entails a lot of sifting through Sacramento market data.

Blogging.  About data.  I have achieved nerdvana. 

As many of you know, the usual schedule for talking about the market is one month behind.  So in October, I’ll write about September systematically and tell you want happened, zip code by relentless zip code. 

However, having achieved nerdvana, and therefore being overly excited about the data, of course I have to peek ahead sometimes.  Such was the case today when I peeked ahead to see how September is shaping up so far, even though we’re only a few days into it.

Wake Me Up When September Ends

Oh, all right, it’s not all that bad — but I do hate to see such a bigger-than-average price drop in a single month.  August’s average sold price per square foot was $140.87, and September’s average (so far) is $130.61. 

To be sure, some of this is simply that some of the foreclosures that didn’t sell in August finally closed in September, and August’s prices were higher than July’s, so you can look at this larger price drop as catching up on our bad news.

And to be sure, averaging the whole county is always a bit misleading, since part of the drop in prices when you do this is actually a shift in what areas are selling large volumes of home.  For many months now, overall the biggest gains have been in the most inexpensive areas.  (In fact, a good future article would be to look at total average price change county-wide versus an average of price changes by area).

Still, I hate ten-dollar-per-square foot price drops in one month.  I honestly do.  To be sure, we largely enjoy representing buyers, so the news is not necessarily bad from our clients’ point of view.  But still there’s a point at which my optimism for first time buyers runs smack into my sympathy for existing owners.

Like many other areas in Sacramento County, the last few months have seen a healthy inventory sell-off in Carmichael, with sales volume up considerably over last year.  For example, in August of 2008, 43 homes sold in Carmichael, up 59.3% from the 27 homes that sold in August of 2007.  Over the last six months, an average of 44 homes have sold every month, up from the running twelve month average of 36 homes per month.

Size Matters

This year’s average Carmichael buyer purchased a substantially larger home than last year, with the August crop measuring in at 1967 square feet, 27.4% larger than last August’s average of 1544 square feet.  During this time, sold price per square foot fell 26.8%, from $240.50 on average in August of 2007 to $176.05 in August of 2008, but because this year’s average home was so much larger, the average sale price fell only 6.7% during the year, from $371,385 in August of 2007 to $346,409 in August of 2008.  Meantime the Median price didn’t know what to do, and fell $17.2%, from $355,000 in 2007 to $294,000 in August of 2008.

Short sales and foreclosures make up about 35% of active inventory in Carmichael, versus 46.5% of the sales in August.

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This day brings up nothing but sadness, for those who lost their lives that day, and how we felt.

9/11/2001 is one of those days where everyone remembers where they were and what they were doing when they found out.  Like the day Kennedy was shot (so I’m told, though I’m too young to have a vivid memory of that day — being about four at the time).

This is also a day of sadness for me for the stupidness and abuse of power that came in its wake, when the American press assumed that government was a choice between freedom and safety, and our government decided that invading a country who had nothing to do with attacking us was low hanging fruit. 

If George Bush had been our President for Pearl Harbor, World War II would have been waged against Venezuela.

Being political doesn’t help relieve the sadness of this day, though.

Sometimes this day is so sad I don’t write anything.  This year I thought I would.

Tomorrow will be September 12th, and I’ll return to what some find to be the more chronically depressing subject of the erosion of our home values.  But look:  for the most part, people aren’t leaping out of skyscrapers over the real estate market.

Besides, if you want to be cheered up, what are you reading me for? 

Might I recommend a movie?

Prices changed very little over the year in Sacramento’s desirable Land Park area, with the sold price per square foot falling only one half of one per cent from August to August.  In August of 2007, twenty-four homes sold at an average of $312.15 per square foot, while this August, 19 homes sold, averaging $310.57 per square foot.  To be sure, this year the average home was  slightly smaller than last year, a fact which pushed the average sale price down 8.8% over the year, from $524,625 in August of 2007 to $478,689.  Similarly, the median sale price fell 10.4%, from $524,500 in August of 2007 to $470,000 in August of 2008.

Foreclosures and short sales make up about 19.7% of available homes at present in Land Park, a number that’s large by 2005 standards but far less than the average in Sacramento County.  In terms of August sales, they accounted for 26.3% of all sales.

One thing we’re seeing in Land Park that’s unusual for Sacramento County is that the average number of sales has actually gone down in recent months, rather than up.  Be that as it may, Land Park still enjoys fairly low inventory at 4.0 months.

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Sacramento’s Rosemont Area (95826 and 95827) continued to see improved unit volume compared to last year.  This year 64 homes sold in August in Rosemont compared to 40 homes in August of 2007, a 60% increase. 

Rosemont’s foreclosure numbers were higher than the Sacramento County average, with 73.4% of all sales being bank foreclosures, and another 10.9% being short sales, leaving the non-distressed sales at only 15.6% of the total in Rosemont.

As you might expect, with this many foreclosures, prices fell substantially from year to year.  Last year’s average home sold for $267,802 in Rosemont, while this year the average sale price was $181,313, a drop of 32.3%.  Since this year’s home was slightly smaller than last, however, the sold price per square foot fell sharply but a little less dramatically than the average sale price, falling 28.7% from $195.13 in August of 2007 to $139.15 in August of 2008.  The median selling price of a home in Rosemont was $264,000 in August of 2007 and fell 33.7% to $175,000 in August of 2008.

Low Foreclosure Inventory Leads to Over Full Price Offers

Inventory in Rosemont is very low at 3.5 months.  There are as many foreclosures in inventory (47) as there were sold foreclosures in August, and enough short sales for another two months of sales.

It’s not surprising, therefore, that homes are selling above list price.  The average sale price in Rosemont in August ($181,313) was 1.1% above the average list price of $179,295.

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The real estate market in August in Folsom was characterized by low inventory and a low number of foreclosures compared to other areas. 

Homes in Folsom retained more of their value than in other nearby areas.  The average home sold for 13% less on a sold price per square foot basis than last year, with this year’s average sold price per square foot being $197.65 versus $227.07 in August of 2007.   This year the average home buyers paid just about as much for their home, $481,075 on average as opposed to $492,654 on average in 2007, but their money bought a home that was 11.8% larger, on average, with this year’s average home footprint being 2,355 square feet.  The median price fell one tenth of one per cent from year to year, from $439,450 to $439,000.

With only 1.6 months of foreclosure inventory at present, the total number of non-distressed sales was comparatively high in August, at 73.8% of all sales.  Another 12.3% of sales were short sales, and 13.8% of sales were bank owned foreclosures.

Based on sales for the last twelve months (61 sales per month), inventory in Folsom overall is a low 4.6 months.  If you use the higher absorption rate of the last six months (74 sales per month), there are only 3.8 months of inventory in Folsom.  Sales in August split the difference at 65 sales, up 8.3% from last August.

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.

Demand for homes in Sacramento County has finally slowed somewhat for the first time in the last seven months, but even though fewer homes sold in August (1,929 units) than July (2,153 units), August’s sales volume figure in Sacramento County was still up a respectable 82.6% over last August’s sales volume of 1,056 units.

In contrast, the average county-wide price per square foot figure was down substantially (32.4%) from last year’s figure of $208.32, but at $140.84, it was up a few pennies from July’s number of $140.48.

Foreclosure Sales Slowed in August

The main thing accounting for both changes in August was primarily a slight slow-down in the number of foreclosure purchases.  Non-distressed sales were even at 478 units each month, while Short Sales were up only slightly, from 176 sales in July to 183 in August.  Foreclosure sales, in contrast, fell 15.5% from July to August, with 1499 foreclosures selling in July versus only 1267 in August.  Even so, the number of bank owned foreclosures that sold in August was still higher than the average of the last six months (1183 per month), and using 1183 as the absorption rate, there are only two months worth of foreclosures in inventory. 

Inventory Down From Last Year

If all the short sales went to foreclosure, current short sales would make up another 3.2 months of inventory.  Another way to say this is that we have about 5.2 months of “distressed sales” in inventory, which is just about how many non-distressed sales we have in inventory as well.  Although there’s a chance that this number will increase seasonally as we get into fall and Winter, it’s good to see it so low right now. Overall for all categories there are 4.8 months of inventory if you use the last six months absorption rate, otherwise 6.4 months.

We don’t have an exact one-year-ago-today figure, but to give you an idea what good news this is, by contrast, in our early August market update report in 2007, thirteen months ago, we reported that there were 10.7 months of inventory — so currently Sacramento County is looking at roughly half that number today.

Prices Down From Last Year — A Typical Payment on a Median Priced Home drops about $600

The average home that sold in Sacramento County this August fetched $235,367, down 33.1% from last year’s average price of $348,698.  The median sale price was down 33%, from $313,500 in August of 2007 to $210,000 in August of 2008. 

Assuming you got an FHA loan with 3.5% down, and a .5% monthly mortgage insurance premium at 6.45% (roughly the same both years depending on which week you look at), your estimated mortgage payment (PITI) for a median priced home if you bought last year would have been $1,953, while this year the payment on a median priced home would be approximately $1,318.50.  No wonder demand is up from last year!

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Freddie Mac’s latest Mortgage Market Survey reported that interest fell again last week.  After reaching a high of 6.63% (with the borrower paying .6 points) on July 24th, the national average for a 30 year fixed mortgage, for example, has fallen to last Thursday’s average number of 6.4% at .6 points.

Freddie Mac also reported some good overall news about that strangest of abstractions, the "national" housing market.

The housing front is providing some encouraging signs. The pace of home price declines slowed down for the fourth straight month in June and the number of metro areas exhibiting monthly gains rose from seven to nine, according to the S&P/Case-Shiller® 20-city composite index. There are also signs more buyers may be getting ready to return to the market. The Conference Board says the share of households planning to buy a home within six months is now at its highest level since March. At the same time, the supply for unsold new homes is down to 10.1 months, the lowest since February, as single-family existing homes (excluding condos and co-ops) start to sell more quickly. Although, when condos and co-ops are included, the resale inventory did edge up."

Here in Sacramento, the big news over the last several months has not been a slowing of price declines (although it looks like we’ll have a slight price increase from July-August), but a huge increase in buyer demand.  We’ve been writing about this for several months now, and in a few days we will publish our August report on Sacramento County’s real estate statistics.

Do you need a new web browser?  Probably most people are doing just fine with the one they have.  I happen to love Firefox 3.0, especially what they’ve done with the address bar and with being able to tag bookmarks, so I’m one of those people.  Others are using Internet Explorer version whatever-comes-with-the-computer and are none the sadder for it.

Then again, there are those of us who have to try every new thing that comes along, so with you in mind I’ll make an honorable mention of Google’s new Chrome Browser, that was just released today.  Although I don’t imagine I’ll switch from FireFox, Chrome has a few features worth noting. 

For one thing, the interface is very minimalist, giving you as much window space as possible for the site you’re viewing.  Like Firefox, the address bar integrates search so you can enter either a web address or a search phrase.  If you enter a search phrase you’ll go to your default Search engine — Google by default but it can be set to Yahoo or another engine.

One feature that’s gotten a lot of press and is somewhat interesting is the "Application Window" feature.  The idea is that — for web applications that you use all the time like gmail.com or other such sites — you can create an icon on the desktop that launches a super-minimalist window for that application.

For example, to create an icon to search Sacramento area real estate, first browse in Chrome to:

http://www.sacramento-home.com/Search.php

Then open up the page menu by clicking on the page icon in the upper right corner of Chrome:

Select "Create Application Shortcuts", then leave the default of "Desktop" selected:

When you click ok you’ll get neat icon on the desktop that brings you right to the search page every time!

Sweet, isn’t it?

Be the first one on your block!