• Is the supply continuing to grow?  Are more homes being foreclosed on?  Do we see any sign that this part of the equation is turning the corner?
• Granted that the demand for homes — especially foreclosed homes — has increased dramatically.  But has it increased enough to significantly outpace supply?  In other words, it’s no help to say 100 people bought foreclosures if at the same time 200 new foreclosures were listed. 

Because of the way the Metrolist database works, it’s easier to look at homes that have sold than it is to follow all the homes that have listed to see what became of them.  However, it’s possible to get a rough idea.

The table below shows in an approximate way the number of short sales and bank foreclosures that were listed since the beginning of 2007, for Sacramento County only.  I say “in an approximate way” because this data includes only those properties that sold or are still active — those that were withdrawn from the MLS or expired are not represented.

Since we’re in July, the numbers for July are projected.  As you can see, during May and June it looked like we’d turned the corner and had started to see a decline in foreclosures, but the number of foreclosures and short sales picked up again in July.  So the answer to our first question above is that it looks like supply is continuing to increase.  (Having said that, I’m encouraged somewhat by the dip in short sales in July compared to June — short sales are the “leading indicator” here, while foreclosures are the trailing indicator).
 

The answer to our second question appears to be that we’ve already reached a point where demand for foreclosures is outstripping supply.  Looking at a recent snapshot of the period July 9 - July 16th, for example, 314 foreclosures sold through the MLS while 288 more were listed. 

This optimistic figure breaks down somewhat if we include Short Sales, where 223 properties were listed to 33 sold.

Still, there are good reasons to focus on the absorption rate of foreclosures.  First, there are many difficulties with getting short sales approved.  Moreover, sometimes today’s short sale listings are actually tomorrow’s foreclosure listings, and at other times the seller goes on to cure the default, and we have no statistics about that. 

What we need above all for the market to turn around is to see demand for the end result of the process — the REO — to continue to stay strong, while we see the number for short sales go down.  I for one will be keeping my eye on that 716 short sales projected for July, to see what the actual number turns out to be and what it looks like for August and into the future. 

Therefore it’s not surprising that even though the paper difference in price drop is small, the unit volume boost in Natomas has been great even by Sacramento County standards.  Eighty-eight homes sold in Natomas in June of 2007, whereas 203 homes sold in June of 2008, an increase of 130.7%!

The average home sold in Natomas in June for $251,122, down 35.4% from last year’s average of $386,666.   With the bargains to be had, there is some degree of competition taking place.  Buyers paid an average of 99.26% of the list price for their Natomas home in June, and almost half the homes that sold (42.9%), sold for a selling price that was higher than the list price.

Some more statistics for Natomas are below.

Natomas Real Estate Unit Volume Data

Natomas Price Data

Residential Inventory (Based on 12 months of prior sales)

Residential Inventory (Based on 6 months of prior sales)

You’re welcome.

Such longevity is a partially a testament to my ability to endure my own tedium, since for much of that time — since about 2005 or so — a lot of what this blog has been about has been real estate market data.  I’ve posted some 287 market updates.  It’s my second most popular category next to “The Open Sac” (another word for miscellaneous — the default category).  In fact, I’m sure if I looked through the Open Sac I’d find several market update posts where I simply neglected to check the Market Updates box.

Oops.

Here are some of the things that have happened since I’ve been blogging:

• The Market Cycle
  Homes got more expensive, then quickly got a lot more expensive, then slowly got cheaper, then quickly got a lot cheaper.  We’re still in the getting cheaper phase.  We have gotten to the point where demand is rising because of it (in Sacramento County — we’re not there yet in Placer or El Dorado County).
• The Rise of the Bubble Blogs
  Once homes started getting less expensive, people started putting up blogs to make fun of those who were hurt by the downturn, bag on Realtors® and/or blame them for the market cycle, and otherwise encourage anonymous commenters to paint a coat of semi-gloss I-told-you-so (though as it happens, they didn’t) over the rotted structure of schadenfreude.
• Two Failures By Democrats
  OK, so George Bush stole the 2000 election, but how could you let him beat you again in 2004?  The American people, no doubt feeling the need to reward the underachievement of losing to an underachiever, elected a Democratic congress in 2006 to end the war in Iraq, which they didn’t do.  This fulfilled the 1974 prophecy of Stevie Wonder:  You Haven’t Done Nothin’.
• Irreplaceable
  Beyonce Knowles released this hit single on December 5, 2006.
• The Bigdealification of Real Estate Blogging
  Somewhere around time that Beyonce Knowles was releasing Irreplaceable, give or take a Thanksgiving turkey, an increasingly large group of real estate bloggers and their vendors started making a huge fuss about real estate blogging and how something called social networking was going to create — well, something — where people would all be doing — well, something. 

  Twitter evolved as the written equivalent of the Bush Presidency.

• I Become The Anti-Blogging Blogger
  In response to the hype, and no doubt because of thoughts like those in the last bullet point, no less a luminary than Mr. Bad MLS Photo of the Day himself once declared me the anti-blogging blogger.  Or words to that effect.  I think he nailed it.

  It’s only a web site.  It’s only a web site.  It’s only a web site.

• Getting a Contributor
  Purva Brown was nice enough to start pitching in, hooray!  Actually, really early on I had a contributor, too, since my wife, Kathy, used to help out quite a bit on the Sacramento Things To Do blog that launched at the same time as the real estate blog.  

  That other effort has since petered out, but this Sacramento Real Estate Blog lives on in the Sprit of Christmas and the Hearts of Children Everywhere!

Weichert’s article got a lot of airplay, including one astute reader who observed that his prediction of a market turnaround in 2008 was nothing less than boldly going where he’d already gone last year. 

I’m always a bit uncomfortable with market predictions, unlike my alter-ego, Johnstradamus, for whom predicting the exact hour of the market’s turnaround is child’s play.  There are several problems with such predictions.

• Nobody knows when “the market” is going to hit the bottom.
• There is no “the market”.  Weichert’s press release waffles on this somewhat.  “Weichert acknowledges that the recovery will happen at slightly different times and at different rates throughout the country because real estate remains a local business.”  If you’re going to make a substantive claim that the market’s on the rise, you should say which one is on the rise.  Empire Ranch?  Folsom?  Sacramento County?  Otherwise you’re just talking through your hat.  (Which is fine in one respect, I suppose, since it lets you talk through your hat again and again!).
• In Sacramento County at least, there are plenty of buyers out now, though we’re not at the bottom.  I’ve been writing about this for several months.  Sacramento County’s year on year demand has gone up for the past five months in a row.  With about 95% of last July’s volume already sold by now (July 21st), it’s a pretty safe bet that July will make six months in a row — though I think July’s unit volume will be down from June.  There’s already huge competition going on for foreclosures.  It certainly doesn’t strike me that I need to be boldly predicting the bottom to get buyers, since the buyers who are creating the bottom are already there to work with.
• Prices have not yet responded to increased buyer demand, and nobody but Johnstradamus knows just when they will, but I can almost guarantee it will be a surprise.  Currently 68.4% of the homes that have sold in July so far have been bank foreclosures.  69% of current inventory is either a short sale or foreclosure.  In order to continue to move their inventory quickly, I believe that banks will continue to cut their prices.  If the last year was any guide, they’ll be especially aggressive about this in the winter months.  However last year the demand was awful to begin with, so how much this year will be a repeat of last year’s cuts is anyone’s guess.
• Two $64,000 questions are as follows:

• How much will the money supply tighten?  So far this happened later and less than I expected.
• At what point will cash investors start to rush into the foreclosure market?  So far it seems to me that much of the early recovery has been fueled by people who will owner-occupy.

I believe you should no more try to time the bottom (though I’m sure a lot of people will) than you should have bought based on appreciation back in 2004 (though a lot of people did).  More important in either case is your own situation relative to what you’re buying, but then it boils down to sound individual decision-making, and what fun is talking about that?

Getting into the specifics, the average home sold in Arden / Arcade Creek for $287,475 in June, down 28.1% from last year’s average of $399,847.  On a sold price per square foot basis, prices fell less sharply (21.3%), and averaging $195.77 in June of 2008.  Bank foreclosures currently make up 22.8% of active inventory, but accounted for 48.6% of all sales in June.  Short sales, which make up 27.3% of inventory, accounted for only 3.8% of June sales.  Non-distressed sales made up 47.6% of sales in June, and comprise 49.9% of inventory.

The twelve month running average for sales in Arden / Arcade Creek is 64 homes per month.  June is usually a heavy sales month.  105 homes sold this month, up 16.7% from last June’s sales.  There are 6.8 months of inventory in Arden / Arcade Creek.

Unit Volume Data

Units Sold	June, 2007		June, 2008	Change
Foreclosures Sold	7		51	628.6%
(% of total units)	7.8%		48.6%
Short Sales Sold	1		4	300.0%
(% of total units)	1.1%		3.8%
Non-distressed Sold	82		50	-39.0%
(% of total units)	91.1%		47.6%
Total	90		105	16.7%

Price Data

Prices	June, 2007		June, 2008	Change
Sold Price / Square Foot	$248.71		$195.77	-21.3%
Average List Price	$413,125		$298,029	-27.9%
Average Sale Price	$399,847		$287,475	-28.1%

Inventory (Based on 12 months of prior sales)

Sale Type	Average Sales Per Month	Active	Months of Inventory
All Sales	64	465	7.3
Foreclosures	20	106	5.3
Short Sales	2	127	46.2
Nondistressed	39	232	5.9

Inventory (Based on 6 months of prior sales)

Sale Type	Average Sales Per Month	Active	Months of Inventory
All Sales	68	465	6.8
Foreclosures	30	106	3.5
Short Sales	3	127	36.3
Nondistressed	34	232	6.7

]]> http://www.sacramento-home.com/real-estate-events/2008/sacramento-arden-arcade-creek-real-estate-market_1205.html/feed http://www.sacramento-home.com/real-estate-events/2008/folsom-real-estate-market-update-4_1202.html http://www.sacramento-home.com/real-estate-events/2008/folsom-real-estate-market-update-4_1202.html#comments Sat, 19 Jul 2008 21:09:07 +0000 John Lockwood http://www.sacramento-home.com/real-estate-events/2008/folsom-real-estate-market-update-4_1202.html In May we were able to report — based on inventory at least — that Folsom had entered seller’s market territory, with inventory of only about four months of non-distressed sales, and 3.8 months overall.  This month’s inventory is up somewhat but still healthy, at 5.1 months for non-distressed sales and 4.9 months overall.  Eighty homes sold in Folsom in June, one unit more than during the same time last year.

This June, the average home sold in Folsom for $415,797, 19.6% less than last year’s average of $517,470.  Sold price per square foot fell 16.4% during this time, from $237.09 in June of 2007 to $198.30 in June of 2008. 

Non-distressed sales accounted for 58.8% of all sales in Folsom in June.  Bank owned properties accounted for 28.7% of sales, with short sales bringing up the rear at 12.5%.

Unit Volume Data

Units Sold	June, 2007		June, 2008	Change
Foreclosures Sold	5		23	360.0%
(% of total units)	6.3%		28.7%
Short Sales Sold	2		10	400.0%
(% of total units)	2.5%		12.5%
Non-distressed Sold	72		47	-34.7%
(% of total units)	91.1%		58.8%
Total	79		80	1.3%

Price Data

Prices	June, 2007		June, 2008	Change
Sold Price / Square Foot	$237.09		$198.30	-16.4%
Average List Price	$526,894		$427,683	-18.8%
Average Sale Price	$517,470		$415,797	-19.6%

Inventory (Based on 12 months of prior sales)

Sale Type	Average Sales Per Month	Active	Months of Inventory
All Sales	59	311	5.2
Foreclosures	11	20	1.8
Short Sales	4	85	20.0
Nondistressed	44	206	4.7

Inventory (Based on 6 months of prior sales)

Sale Type	Average Sales Per Month	Active	Months of Inventory
All Sales	63	311	4.9
Foreclosures	16	20	1.2
Short Sales	6	85	13.1
Nondistressed	40	206	5.1

]]> http://www.sacramento-home.com/real-estate-events/2008/folsom-real-estate-market-update-4_1202.html/feed http://www.sacramento-home.com/real-estate-events/2008/condos-first-to-fall-and-last-to-rise_1204.html http://www.sacramento-home.com/real-estate-events/2008/condos-first-to-fall-and-last-to-rise_1204.html#comments Fri, 18 Jul 2008 20:03:20 +0000 John Lockwood http://www.sacramento-home.com/real-estate-events/2008/condos-first-to-fall-and-last-to-rise_1204.html Traditional real estate wisdom (or possibly, “myth”)  has it that condos are the first properties to fall when the market turns down, and the last to rise when the market turns up.  I’m not sure about that, but I thought it would be interesting to take a brief look at how condos are doing compared to single family homes in the recent unit volume recovery we’ve been seeing. 

In case you came in late and haven’t had a chance to yell at me for saying this yet, for the last five months in a row, unit sales have been higher in Sacramento County than the month before and higher than the previous year.  In June, for example, 2022 homes sold county wide, up 86.2% from last year.

Of all the “property subtypes” (as they’re called), single family homes is the one that has experienced the most growth, with unit sales increasing 92.4% in that category from June to June.  By comparison, Year on Year increase for sales of condos has been sluggish, at only 28.91%.  This June 107 condos sold, versus 83 last June.

Another way to say this is that as prices fall, sales of all categories of homes have increased to some extent, except those categories that are so small that it’s impossible to get statistically significant results.  But the big winner in the unit sales recovery of 2007-2008 has been single family homes.

Sacramento County

Placer County

El Dorado County

Picture a 1960s folk singer without the pot and with a haircut, and you’ve nailed it.

Nevertheless, even if you’re more of a radical hippie freak than I am, you should be as conservative as heck when it comes time to buy a home!

For most of us who own homes, our mortgages are the biggest payment we make every month, so keeping one’s emotions in check and buying conservatively can make a huge difference in whether we’re overextended or not.

Selling Whale Harpoons to Eskimos

There’s a cliche in selling about the salesperson who’s so good that he can sell “ice cubes to Eskimos”.  Fortunately, those of us who sell homes don’t need to be anywhere near that accomplished.  People really want to own their own homes, so really our job is less about selling the idea of ownership than it is getting in front of someone who already wants a home and then providing them with access, expertise, and information to help them make an informed decision.

Indeed, as we’ve seen in recent years, the combination of the lure of home ownership with the high cost of area homes has created huge market swings from unsustainably high prices to rapid crashes in value.  So part of our job as ethical Realtors® is sometimes to talk our Eskimo clients out of the automated ruby-studded platinum whale harpoon they’re looking at and try to interest them in the solid oak whale harpoon that better fits their budget.

The recent housing crisis is an economic phenomenon of huge proportions, of course, but on the micro level what happened were that thousands of individual buyers overextended themselves.

Here then are some tips for buying more conservatively.

Six Tips for a More Conservative Purchase

1. How Long Do You Need to Be Here?
   Your first task is to consider how long you’ll be in the home.  Is your situation fairly stable and established?   Can you see yourself in the same job, with the same spouse, in the same area, for several years?   Home prices fluctuate according to a long market cycle, so for most of us, wanderlust is the enemy.  Of course, no one’s situation is ever guaranteed, but in general, if you know in advance that there’s a good chance that you’re moving next year, in general you should be renting.  Is this more true now that the market is going down?  No, it’s AS true.  It was true when the market was going up, too, but unfortunately many people lost sight of that truth when the market was going up.
2. Prequalify First, then Shop
   If you feel you’ll be in one place long enough to make buying worthwhile, an important next step is to get prequalified for a loan.  It’s hard to overstress how important it is to do this before you go shopping.   Working with the lender first lets you crunch the numbers first, independently of looking at homes you might want.  Can you get a conservative loan at a payment you can afford?  If so, what does the lender say you’re qualified for?  That’s a starting point (but it’s not the end of the story — see below).
3. Shop for a Conservative Loan Before you Conservatively Shop for a House
   Almost always — certainly always when Interest is still as low as it is now — you should insist on getting a fixed rate loan.  Can you get a lower initial rate if you don’t?  Of course you can.  But adjustable rates adjust, and remember our goal is to shop conservatively.  If you need the adjustable rate to get your $350,000 home, maybe you should be looking at $310,000 homes instead.  When you see “Adjustable Rate”, you should think “Increasable Rate”.
4. No, You CAN’T Always Refinance
   I sometimes think that if there was a single phrase that could be blamed for most of our current market troubles, it’s the phrase  “You can always refinance.”  Refinancing was not free in the best of times, and when prices are declining as they are now, it’s not always even possible.  Generally, if you need to refinance later to afford that home now, you can’t afford it now.  If a lender tells you “you can always refinance later”, you may want to emphasize that you’re trying to buy a home, not signing on to support your lender full time.  Be careful to use the appropriate level of force when you emphasize this.  The use of firearms or sharp-edged weapons, though providing temporary emotional satisfaction, may involve you in legal difficulties.
5. How Much Can You COMFORTABLY Afford?
   Once upon a time, buyers were advised that they could comfortably afford to spend 25% of their income on housing.  In California, especially, most folks wouldn’t qualify for a home at that number, so it got revised upward constantly.  Another way to look at this issue is to look at the total amount of money you have to service all your debts, including your car payments, student loans, credit card bills, and your mortgage.  Called your “back end ratio”, a conservative number is 36%, but in the market “heyday”, lenders were often using back end ratios of 50% or higher.Even more important than the ratios the lenders use, however, is your own common sense.  Does the number feel high to you?  If so, it is.  If the number the lender will lend people was the same in all cases as what people could comfortably afford, 75% of July’s sales in Sacramento wouldn’t have been short sales and foreclosures.
6. Shop Only For What You Can Comfortably Afford, If At All
   Once you’ve seriously dwelled on the questions in 1-5, NOW you’re ready to make a decision about whether you can and should go shopping for homes.  Now for the hardest step of all:  you should plan on shopping for homes that are actually in this price range.  Oh, but John, it’s a buyer’s market!  Surely I can get that $1.15 million dollar beauty for 75 cents and a pocket full of cheese, right?  Well, no.  In the first place, the difference between list price and selling price is not that great in real estate on average even in this market, and the better the home is already priced, the less difference there is.  Learn more.Even more importantly, however, the absolute cardinal rule of buying conservatively is to adjust your expectations to reality, not to adjust reality to your expectations.  Can you comfortably afford something up to $280,000?  If so, then you have no business looking at homes in the $400,000 price range.  The home that’s worth $400,000 but is listed for $280,000 is going to go for $320,000.   Besides, for $280,000, you might easily find the home that should be listed for $310,000 without much competition.  Moreover, as a conservative buyer, you know that if you’re comfortable up to $280,000 and look at homes up to that price, you may find something you like at $240,000.  Now you’re $40,000 more comfortable!

Common Sense + Up Front Number Crunching = Success!

With these six tips in mind, you should be well on your way either to making a purchase that won’t leave you overextended, or walking away before you even shop.  Learn all you can before you shop, keep your eyes open, and you’ll be fine!

“What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future,” said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. “We are in a crisis, and that crisis demands an unviable short-term solution.”

Read more.

My own favorites from the article are Carbides and Post-Modernism, but I wanted to plug my own pet project:  Bad News Futures.