Sacramento Real Estate Blog

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.

February was a fairly strong month for duplex sales in Sacramento County, with twenty-five units selling, as opposed to eighteen units last February and an average of 19 units selling each month over the previous years.  As will residential properties, duplex prices have fallen sharply over the past year.  The average sale price of a duplex in Sacramento County fell 27.3% from February to February:  from $348,420 last February to $231,000 this February.  During the same period, the median sale price fell by 33.7%, from $348,420 last February to $231,000 this February.

It’s a tough time to be a duplex seller, with the duplex inventory still high at 14.6 months.  Though the median sale price of a sold duplex in February was $231,000, the median list price of the 279 duplexes in inventory is $329,000.

What’s encouraging is that we’re seeing more and more properties that pencil out fairly well.  One duplex that’s listed now, for example, yields a positive cash flow of $48.00 per month assuming a 20% down, a 10% vacancy factor and a property manager — if you managed it yourself that number would be more like $198.00 per month.  Three years ago I’d be hard pressed to find a duplex in Sacramento County that provided any kind of cash flow.  Today I found this one after about five minutes of looking — and I’m sure there are others out there.

Admittedly, the cash flow numbers for the “middle of the market” may not be too impressive.  Nevertheless, there are bargains to be had, and I believe that as prices on some duplexes and other multi-unit properties continue to fall, sales in this category will pick up throughout 2008 and beyond.

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I usually like to check in with my favorite seller’s market, East Sacramento, whenever I need cheering up. Lucky for me I wasn’t starting from a really depressive base line this time, because the usual jolt of happiness I get from East Sacramento is mostly missing from this month’s numbers.

For most of the past several months, our reports about East Sacramento have shown prices holding very steady. This month turned out to be the exception that “proved” (i.e., in the original sense, “tested”) the rule, because February’s numbers saw a dramatic un-East-Sacramento-like dip.

This year the average home sold in East Sacramento for $459,127, down 22.3% from last year’s average of $591,145. The median price fell a less dramatic 5.8%, from $433,450 last February to $408,200. Meantime sold price per square foot dropped 16.8% from February to February, from $388.15 on average last year to $322.87 on average this year.

Unit volume was also down this February, from twenty units last year to thirteen this year. This number of thirteen was also well below the average monthly sales volume for the past year, which was twenty units per month.

Even though February was not a good month for the thesis of an East Sacramento seller’s market, there were a couple of areas where East Sacramento’s numbers still showed strong. First, compared to almost anywhere else in the region, inventory is still extremely low in East Sac at only 2.94 months. Secondly, the average days on market decreased from year to year, from 35 last year to 25 this year.

As we saw last time, overall East Sac put in a performance of about $350.00 per square foot for the last two years. So what we’re seeing in these numbers are unusually high numbers for last February, and unusually low numbers for this February. Of course with small sample sizes like East Sac such fluctuations are commonplace. What remains to be seen is the extent to which East Sac can recover from this month of poor comps.

Greetings, market statistics fans!  Straighten up those pocket protectors and hang on to your slide rules, because it’s time once again for us to catch up on our REM sleep with yet another thrilling installment of our never-ending saga:  Sacramento (County) Real Estate Market Updates!

And the crowds went wild.

The good news:  905 units sold in February, up some ten per cent from January.  Unit volume was even up marginally from last February — and, yes, this still holds true when you adjust for the leap year.  February’s unit volume was the highest since last July, when 977 units sold.

The average home sold for $273,603 in February, up slightly over January’s average of $269,301, but down 29.9% from last February’s average sale price of $390,043.  The median sale price of $249,000 was down 29.2% from last February’s median of $353,000.  Sold price per square foot is down 28.8% from February to February, at $162.76 this year versus $228.63 last year.

The 905 units that sold in February is not bad for a late winter month where the average over the preceding twelve months was 968 units per month.  Currently there are 9,866 homes on the market, which works out to be 10.2 months of inventory.  33.9% of the homes in active inventory are short sales, but as we’ve reported earlier and a variety of our colleagues in other markets have reported since, the closing rate for short sales is much lower, at 6.6% in February.  Bank foreclosures (REOs), in contrast, make up 28% of the current active inventory (2,763 of the 9,866 available units), but in February they accounted for 59.2% of the homes that sold in Sacramento County (542 out of 905 total sales).

Related links:

In our Sacramento Real Estate Market Update for January, Part I, I began rounding up the usual statistical suspects, but I decided to leave some of them to a future post, since I wanted to spend some time in part one having a discussion about the recent upsurge in demand.

Left out of part one was a discussion of where we are with respect to foreclosures and short sales. In January of 2007, foreclosures and short sales collectively made up only 7.3% of all sales. Foreclosures accounted for 4.6% of all sales, while short sales accounted for 2.7% of all sales. That’s about one home in every thirteen.

In January of 2008, in contrast, foreclosures and short sales accounted for 67%, or just over two out of every three sold homes. Of these, the vast majority are foreclosures, which accounted for 60.5% of the total sales in January, even though they only make up 27.5% of the current active inventory. Short sales make up even more of the active inventory at 32.1%, but in January only 6.5% of closed transactions were short sales.

Related links:

January’s real estate numbers for Sacramento County are in, and so on the one hand we’re ready for usual: a nerd-friendly, statistics-heavy look backward on the previous month.

Yes, I want to spit out all the boring numbers, but at the same time there’s something very exciting going on that’s a bit harder to measure, but it’s nonetheless quite real: we have gotten incredibly busy in January, with buyers who’ve decided that now’s the time to be shopping and writing offers. Not only that, but our buyers are starting to face quite a bit of competition on the best priced homes.

We’ve been answering about six new buyer inquiries per day for the last two weeks or so. and although we’ve averaged about 1,650 daily unique web site visitors for most of 2007, in January that number shot up rather dramatically to 2,207, the highest number ever.

Buyers Who Didn’t Get The Memo

A lot of people are focusing on the supply side of the market, and pointing out — correctly I think — that we still have a lot of Option ARM resets to work our way through. I call that the supply side because more foreclosures of course means more supply of homes. Based on such a the supply-focused analysis of option ARM resets, the market will continue to be bad well into 2009 or possibly later.

However, what I believe is happening in January is what the real estate bears haven’t spent much time on. Yet in retrospect it looks like it is precisely what one should expect to happen when prices fall like a rock: demand increases.

Thus, for example, this January the median price was $250,000 for Sacramento County, down a dizzying 27.5% from last year’s median price of $345,000. The last few months have seen some of the biggest drops in prices since the Sacramento County real estate market started its decline in September of 2005. The average sale price is down 28.4% (from $376,112 last January to $269,301 this January), and the sold price per square foot has fallen 27% to rest this January at $161.65.

Meantime, however, unit volume appears to have reached a bottoming out point. In September of 2007, the worst month for unit volume in recent memory, unit volume was down 41.3% from the same month a year earlier. This January, however, our unit volume is down only 1% from last January, and if the current surge in buyer interest continues, I would not be surprised to see year on year unit volume increases for many months in 2008 over 2007.

Related links:

2007 was a year of decreasing real estate prices throughout the greater Sacramento area, with homes in Folsom retaining their value better than the rest of the county, especially later in the year.  For 2007 overall, the median sale price in Folsom was $450,000, down 7.2% from 2006’s median of $485,000.  811 units sold in Folsom in 2007 through the MLS, at an average sale price of $490,588, down 5.3% from 2006’s average of $485,000.  In both years, homes sold for more than 97% of list price.  In Folsom, sold price per square foot fell 8.4% from year to year, and only 8.9% from December to December.  In contrast, Sacramento County’s sold price per square foot fell 11.7% for the whole year 2006-2007, and a much more substantial 21.8% from December to December.

In other words, Folsom’s prices have not dropped as rapidly as in Sacramento County as a whole, and the trend does not seem to be accelerating as it is in other areas.  The number of short sales and foreclosures taken together are also much lower in Folsom than county-wide averages.  Short sales account for 17.1% of active inventory, and REOs only make up 5.8%, for an overall figure of 22.9% — compared to 55.7% for Sacramento County overall.

The other good news in Folsom is continuing low inventory, 5.1 months as of this writing.  In Sacramento County overall, the inventory numbers are more than twice as high at 10.4 months.  Six months is traditionally the cutoff beyond which we’re said to be in a “buyers’ market”, so one can consider Folsom to be in a bit more of a seller’s market than Sacramento County generally.

Related links:

Yesterday I had the pleasure of meeting Marc Brinitzer, author of the Sacramento mortgage blog, LendingClarity.com. Marc is a Mortgage Consultant and the leader of Big Valley Mortgage’s Team One.

Real estate blogs have been around for some time. Mine was one of the first in this area, but recently a handful of competitors have started blogging about the Sacramento area, and there has been an explosion of new blogs being launched by other Realtors® in other areas. Mortgage blogs are fewer in number. Google returns 12 million results for “Real Estate Blog”, but just under 2 million for “Mortgage Blog”. So you might say with some justice that Realtors are six times more verbose.

I came across Marc’s blog lately and thought it had some really good work — so we’re fortunate that the first mortgage blog I stumbled on for our area is a real keeper. For example, his most recent discussion of Risk Based Pricing talks about how as lenders tighten their underwriting guidelines more and more, it’s more important than ever to keep your payments timely and your credit pristine, since even in A paper world will start to stratify. To paraphrase Orwell, all A paper borrowers will still get the best rates, but some A paper borrowers are more A paper than others.

Marc also drew my attention over coffee to a great article he wrote about these Countrywide Shenanigans (and I’ll let you follow his links from there to learn how to avoid selling your soul to the Devil).

Marc and I may be doing an article swap or two in the near future. I may be doing some more Mortgage reporting of my own going forward, since I am taking a very serious look into creating an in-house lending solution for those buyers who would feel they’d benefit from it. Be that as it may I do think that Marc’s blog has a lot to offer and you should check it out.

The Sacramento MLS, Metrolist, lists the name of the 95831 zip code as “Sacramento South Land Park Greenhaven”, but one look at the map, and Sacramento area residents will immediately recognize that bulge of land around that they call “the Pocket Area”.

The numbers for November show a neighborhood that’s doing relatively well for Sacramento County, with homes retaining more of their value than other areas, and much better figures for inventory and unit volume as well.

Sold price per square foot declined only 6.1% from November to November.  Last November the average Pocket Area home sold for $398,204, while this year the average home sold for $390,719, a 1.9%.  The median selling price in Sacramento’s Pocket Area in November was $365,090, down 6.9% from last year’s median price of $392,000.

The foreclosure rate in the Pocket is 13% of active inventory, while short sales account for 8.7% of active inventory — a combined rate of 21.7% is much lower than Sacramento’s overall average, which recently topped 50%.

Other numbers also show the Pocket Area’s relative strength compared to other Sacramento neighborhoods.  Inventory is only at 5.67 months, putting the Pocket Area (technically at any rate) in the “sellers’ market” category.  Unit volume dropped only 4.2% from November to November, so the Pocket was relatively immune from the November slowdown that plagued the rest of the area.  Days on market and the expired to sold ratio are both down slightly from last year — lower numbers are “better” for sellers in each case.

Related links:

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

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

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

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

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

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

There’s probably an improvement of $100 per month that one could make in the vacancy rate, and you can take out the $85 per month in management fees if you want to rent it out yourself. The other thing that’s conservative about this analysis is that this is based on the list price of the home. On the flip side one should inquire about utilities and factor in an estimate for maintenance.

Granted, five bucks is not a lot of money. But lots of folks who bought when it was “a good time” because prices were going up were happy enough to be upside down by hundreds of dollars. (Like the seller of this condo — which is now bank owned? Could be!)

After writing yesterday’s article about East Sacramento’s real estate market, I started to wonder if maybe part of the reason was that all along it had not seen the wild over-valuation that some other areas had experienced during the boom years of 2003-2005.  With this in mind, I decided to take a look at the Land Park area (i.e., the area known in MLS as “Land Park / Curtis Park”, zip code 95818).

The reason is that I remembered thinking in 2004 or so that prices were way out of line in Land Park.  One home in particular stands out in my mind from that time as a real piece of junk, yet it listed for something well over a half million dollars.

Well, in looking at Land Park’s numbers, it quickly became clear that Land Park was behaving a lot like East Sacramento.  The answer to East Sac’s success, therefore, was probably not so much that it was never over-valued as that it simply retained its peak value better, like Land Park.

Like East Sac, this November’s crop of Land Park homes was significantly (12.5%) smaller than last year.  Thus, though the average sale price dropped, sold price per square foot rose from year to year.  This November, the average home sold for $495,795, down 8.4% from last year’s average of $541,321.  Reflecting the average size of this year’s home, the median fell even further, 18.8%, from $520,000 last November to $422,000 this November, an 18.8% drop.  Yet over this time, sold price per square foot rose 4.7%, from $318.61 to $333.64.

Like East Sacramento, this year the expired to sold ratio is down from last year’s numbers.  Last year the ratio was 54.2%, while this year the number is only 22.7%.  Another sign of the sellers market in Land Park is the inventory, which is only 3.88 months.

So, if you’re looking for a Sacramento home that’s close to downtown and increases in value when the market appreciates, and holds its value when the market is down, it’s hard to beat 95818 and 95819.

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Hello, my name is Inigo Montoya.  You killed my father.  Prepare to die.

This is a tale about blaming the real estate market for whatever else is wrong.

This is also a tale about a bit of ugly sheudenfreude on my part.  The other day I was reading Sacramento News and Review, and there was an article in there about the Sacramento Bee’s stock prices.  While the average Sacramento County home owner’s investment lost 20-30% of its value over the last two years (1st chart, below), the average investor in McClatchy Stock (Sac Bee’s parent company), saw the value of their investment fall 75% (second chart, below).

Normally I’d feel bad for the folks over at the Bee — or at least, I might feel neutral.  But I have to admit, coming on the heels of these folks babbling every other day about the “housing crisis” and “mortgage meltdown” for the last two years, I didn’t feel a heck of a lot of sympathy.   If a guy who invests a dollar ends up with 75 cents, and that is a “meltdown”, what word might be appropriate for a guy who invests a dollar and ends up with a quarter?  Catastrophe?  Unmitigated disaster?  How about THE END OF LIFE AS WE KNOW IT!

But wait — The Sacramento Bee has identified the culprit here.  You see, the mortgage meltdown and the END OF LIFE AS WE KNOW IT at McClatchy aren’t unrelated — it’s the housing market’s fault that the Sacramento Bee’s stock is in the toilet!

Explaining the downturn in July, the Sacramento Bee’s Dale Kasler wrote:

“The downturn mainly reflected a significant drop in ad sales, especially at McClatchy’s California and Florida papers. Nearly three-quarters of the drop in ad revenue came from those two states, which are suffering from real estate woes. Real estate advertising was down 32 percent in California and Florida, causing a spillover effect that depressed other ad categories.”

Wow, really?  That’s quite a meltdown indeed, if now we’re causing a “spillover effect” that’s depressing other ad categories.  How does that work, exactly?  I suppose the sales manager at Folsom Lake Ford said to himself, “Well, hmm, the houses aren’t selling that well any more — no point in advertising the new Explorers this week.  Let’s pull the ad.”

Spillover effect.  OK I’ll bite, let’s discuss spillover, shall we?  With houses harder to sell, not easier, you might expect that instead of spending less on real estate advertising, we might end up spending more.  Then again, maybe your former advertisers didn’t like the fact that your constant use of terms like “Meltdown” and “Crisis” is scaring the buyers off day in and day out, while prices are better than they’ve been from a buyer’s point of view in two years and interest is still quite low.

“My name is Inigo Montoya, Sacramento Bee Staff Writer.  My yellow journalism killed my stock prices.  Prepare to watch me blame the housing market — again!”

By the way, if there are any Sac Bee readers out there who are still wondering, JFK was not killed by Adjustable Rate Mortgages resetting.

The numbers are in for November.  As we get into what’s usually a slow time of year, unit volume is continuing to rise slowly from September and October, with 809 units selling as against October’s 803 and September’s rather bleak 709 units.  Buyers are beginning to take advantage of the bargains offered by short sales and REOs (bank foreclosures) in inventory, which collectively account for just over 50% of active listings (REOs make up 24%, while short sales comprise 26.5% of inventory).

The average home sold for $323,772 in November, down 15.2% from last November’s average of $381,666.  Average sold price per square foot is off 16.6% from a year ago, at 188.35% versus last year’s $225.97.  The median sale price in November was $293,000, down 15.1% from last November’s median of $345,000.  Unit volume is off 25.7% compared to last year, but as we mentioned earlier, is strong compared to recent months.

There are 11.21 months of unsold inventory at present in Sacramento County, down from last month’s figure of 11.61 months.

Related links:

The one and only Sacramento Real Estate Gal, Purva Brown, recently called my attention to some really important information for buyers about short sales — their abysmal closing rate.

Many readers of the blog will no doubt already know that a short sale is a sale where the seller has insufficient funds to pay off the loan(s) on the property, and has asked the lender to allow the sale to continue but approve a reduced pay-off instead of going through foreclosure.  Like homes that are already owned by the bank (REOs), short sales are often discounted compared to other homes.

Unlike REO’s — however — there’s a problem.  It’s harder to tell exactly where the problem is than it is to tell you the numbers.  In Sacramento County, for example, as of late November, 2007 short sales accounted for 2,890 of the 11,053 active listings — 26.1%.  At the same time, 16.8% of all listings marked pending sale (in escrow but not yet closed) were short sales.  The pending sales data, moreover, may tend to underreport short sales, since many listing agents will continue to list the home as active until the lender has approved the sale — or even beyond this point.  (Indeed, this practice is common enough that it’s become the subject of an MLS rule prohibiting the practice).

OK, so how many of these short sale transactions are closing?  In October, the number was only 3.8% of sales — so far in November, that number has only risen to only 5.3%.

5.3% of sales, versus 16.8% of pending sales.  In other words, two out of every three short sales transactions (or more) fail to close escrow.

Why the low numbers?

• First of all, understand that the lender doesn’t have to approve the transaction.  They can always foreclose.
• Sometimes buyers find out in the process that short sales are not for them.  When it takes a month or two or longer to get a short sale buyer, many’s the buyer (we’ve worked with some) who’ve simply lost patience or couldn’t wait because of their situation.
• I’ve seen cases where short sales were listed where the buyer was not even behind in their payments.  As a buyer, have your agent ask about the status of the seller.  If they’re not behind in payments, and if there’s not an adequate hardship, the chances of the lender approving the transaction trail off to something pretty close to zero.  Chances are that a large percentage of short sales shouldn’t even be listed.

Can you avoid the short sales and still get a bargain property?  Absolutely!  If you focus on the REOs — bank owned foreclosures — you’ll find homes that are typically priced below the short sales and are much easier to own.  When you look at REOs, the number of homes that close compared to the number that are for sale is actually higher, not lower.  For example, it’s not uncommon to see 12% REOs in inventory, but 25% in the sold statistics (about twice as many).

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Gold River, California is an upscale neighborhood / subdivision in Rancho Cordova (95670).  Wikipedia says it’s often “mistakenly” considered part of Rancho Cordova, but given that the County of Sacramento doesn’t list it as a separate community, I think I’ll have to defer to the county on this one.  (Someone let Andrew Keen know that Wikipedia was wrong again.)

Gold River real estate provides another excellent example and case study of the fact that real estate is a highly local phenomenon, since many of its numbers are atypical for Sacramento County.

For example, recently I reported that overall in Sacramento County in October, just over one third of the homes that sold were bank owned.  In Gold River, in contrast, none of the homes sold in October were bank owned.  In fact, no foreclosures have sold all year in Gold River, or last year either.  However there are two foreclosures currently in inventory — this is 5% of the inventory, compared to approximately 20% of the active inventory county-wide.

No doubt in part because sellers don’t have to compete with banks, Gold River has kept its value fairly well during 2007.  In the first ten months of 2007, seventy-one units sold in Gold River, down only 6.6% from the first ten months of 2006.  Gold River homes lost only 6.6% of their value (sold price per square foot).   The median sale price in Gold River dropped from $537,500 in Jan-Oct 2006, to $499,000 during the same period in 2007, a decrease of 7.2%.  The average selling price fell 4.4%, from $545,041 in 2006 to $521,156.  Unlike the rest of the county, where the average discount from the list price is approximately 4%, the average discount from list price in Gold River was only 2.4%.

Compared to the rest of Sacramento county, Gold River is getting through the downturn in the market rather well.

Here are currently available Gold River homes.  If you have any questions about these listings, let us know!

Related links:

A colleague of mine recently published an article critical of foreclosure auctions, saying that the tendency of buyers is to overpay at them, and banks know this.  I don’t have any data on that to report one way or another, but whether you love them or hate them, Hudson and Marshall are holding another Sacramento Foreclosure Auction on Sunday, November 18th at 1:00 PM at the Radisson Hotel at 500 Leisure Lane in Sacramento.

You can also bid on properties online before the auction.  (Legal disclaimer:  I’m not advising you to do that or saying you’re going to get a “good deal” or anything of the kind  — right now I’m wearing my blogger hat, and I’m not your agent.)

On the other hand, if you’d like to secure an agent to help you identify which of these properties are good ones, preview them, and assist you with the bidding process so 1) you don’t overpay and 2) you have your own agent rather than the bank’s agent to help you with the inspections and paperwork, give me a call at (530) 672-9160 and I’d be happy to help you with it as a buyer’s agent.

Even if you don’t hire us to work on it, I’m thinking I might go to the auction and report back.  Maybe I can get Purva to go as well, but she may have family coming to town.

Foreclosure auction party?

Some people will take any excuse to throw  a party.

Let’s hope there will be dip.  I like dip.

Trick or treat.

As I prepare my report on Sacramento County’s real estate market for October, 2007, I recall  my happy youth watching The Flintstones.  You remember Fred and the gang.  From the town of bedrock, he’s a page right out of history.

One great cartoon gag from the the Flintstones — though surely it has roots all the way back to the Manichean cartoons of the third century — were the Fred Flintstone as devil / Fred Flintstone as angel that would sometimes perch on Fred’s shoulders, whispering instructions.

Sometimes Gazoo would whisper the instructions.

Bloggers, Find Your Voice (From Among Those You Hear in Your Head)

In my case it’s the eternal angelic optimist, Purva Brown, on one shoulder versus the pitchfork-armed bubblers on the other.

Bubbler pokes me with pitchfork:  In terms of unit volume, October was the second worst month in recorded MLS memory.   803 units sold in Sacramento County in October.

Purva flaps angel wings:   C’mon, John, that MLS data only goes back to October, 2004, so all you have to compare it to are good times.  Plus, October’s volume was an increase of  11.7% over September!  Look on the bright side, will you.

OK, you two.  Behave.  Fight it out between yourselves.  Let my shoulders be your last battleground.

The Rest of the Numbers

The median price of a home in Sacramento has fallen to $300,000 in October, down 14.3% from last October’s median of $349,900, and 24.9% from their peak of $399,499 of November, 2005.  Average sold price per square foot was approximately $189.32 in October, down 18.2% from last October’s $231.23, and down 25.5% from the peak of $254.10 (September, 2005).  (Purva:  That’s not fair, John — you keep making the houses lose 1/4 of the value by picking high peak values from different months.  What are you, some kind of bubble blogger now? ).  The average home sold for $327,719 in Sacramento County in October, down 14.9% from last year’s average of $385,233.

Recently we reported that about a quarter of the homes selling in Sacramento County were foreclosures (REOs).  The numbers have now risen to slightly more than one third.  More precisely, of the 803 units that sold in October, 285 (35.5%) were REOs.  Now you bubblers might think you could get an even 50% if you throw in the short sales, but you can’t, because only 31 short sales sold during this period, so the overall total ends up being about 39.4%.

Inventory is 11.61 months for Sacramento County overall.

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For some time now, we’ve had a Sacramento Foreclosures section where you could browse for Bank Owned Properties or Short Sales by county in El Dorado, Placer, and Sacramento County.

We’ve now added a Foreclosure Search Form to make it a little easier to:

• Select only in the areas you’re interested in, across all three counties.
• Narrow your selections by price range.

We’ve kept it really simple, but hopefully this basic functionality makes things a bit easier.  Please give it a try and let me know if you run into any problems!

Related links:

I’ve updated our site home lists, including the sections for:

• Condos
• New Homes
• Foreclosures

Most of these sections are pretty much “browse only” as of now, but I plan to have a search tool in place for the foreclosures soon — probably some time this week.

A client once told me that it’d be nice to have such a thing for the new homes section as well, so I may tackle that this week as well.

Enjoy.

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They say only two things in life are certain, death and taxes.  I’m happy to report that as Realtors®, we don’t get asked about death a lot, but people do often have questions about property taxes.  We often hear questions like:  “Aren’t California property taxes expensive?” and even more often, “What is the tax rate in [Name Your Favorite] County”.

Folks within the state are trained to ask, “Does this property have Mello Roos?”, whereas folks from out of state think a Mello Roos is a laid-back male chicken — a myth I will dispel conclusively as we go along.

Yes, I know, that was pretty bad.  I’d better get right to the article, at the risk of further taxing your patience.

1) I Live Out Of State and Have Heard that California Property Taxes Are High.  Is That True?

Actually, yes and no.  It’s more correct to say that California property values are high.  Many property taxes are taxes that are levied “according to value”, but we often say ad valorem because saying things in Latin is so much more fun.  Because of this, according to the Tax Foundation, California ranks #10 from the top in the median property taxes paid on homes among the fifty states, but ranks 46th (i.e., 4th from the bottom) in terms of the property tax rate. 

Statewide, our ad valorem property taxes were limited (by proposition 13) to 1% of the market value, and there rate of increase was limited to a maximum of 2% per year for inflation.  (In other words, in the first year they’d be 1%, the second year 1.02%, etc.)  Later, Proposition 8 required assessors also have to take possible devaluation into account, hence Purva Brown’s recent post about Sacramento County taxpayers getting a lower bill.

2) What’s the Tax Rate in Sacramento County and Surrounding Areas?

Though our statewide rates are limited to 1.0%, voter approved bonds and fees can and do increase that figure.  Both Sacramento and El Dorado County claim average tax rates of 1.1%.  When I first got into the real estate business, I was taught to use a more conservative figure of 1.25% to give to my clients as a ballpark number, and most lenders I know use that estimate when calculating the Tax component of PITI (Principle, Interest, Tax, and Insurance).  In all these cases, we’re talking about an initial rate based on the market value at the time your home was sold.

3) What’s A Mello-Roos, and Do I Want One?

Proposition 13 was originally passed in 1978 because older Californians were being priced out of their homes by the ever-growing tax burden, given the wonderful appreciation we enjoy in California.  (Ahem:  well, most years we enjoy it, anyway).  Of course, once you limit the amount of taxes counties can collect, now you’ve got a new problem, especially as new communities develop — how do you pay for things you might want, like streets, water, drainage, sewage facilities, policemen, parks and recreation.  Along came state Senator Henry Mello and Assemblyman Mike Roos, who co-sponsored 1982’s Community Facilities District Act, which allowed communities to pay for these services through bonds when 2/3 of the voters in the district approve them.  Bonds issued under that legislation still (accusingly?) bear the names of the authors of the bill.

Of course, being bonds, the good news is that unlike taxes, they’re eventually paid off.  The bad news (can you say “proposition 13 loophole”) is that now your effective tax rate could be 2.5% or more depending on how much the Mello-Roos bonds bring to the table.

4) Are there Any Mello-Roos Bonds On [Name Your Property Address]?

Well, you’d think we could just go ahead and give you a straight answer to that one by looking in the MLS or calling up the county assessor’s office, wouldn’t you?

Well, yes and no.

The good news is, that in most cases we can get you more information from the county, or in certain cases you can even go online yourself and check.  (We’ll do a tutorial on this soon).  The reason we have to say that “in most cases” is that Community Facilities Districts who issue Mello-Roos bonds may ask the County Tax Collector to include this lien as part of your biennial tax bill.  They may, and in most cases they do, but here’s the problem:  they don’t have to.  For example, the El Dorado County Tax Collector shared with me that the city of Placerville has several properties with 1911 bonds (another form of special assessment) that aren’t on the tax role.  So folks in those areas of Placerville get a separate bill.  Although most Mello-Roos bonds and other special assessments are levied through the county tax collector, if you call any assessor or tax collector in any county, you’ll no doubt come up with several similar exceptions to that rule.  The bottom line is can get you an answer that has maybe a 95% chance of being right within a business day of hearing from you.

5) How Can I Find Out More about Mello-Roos and Other Special Assessments for the Home I’m Buying?

Fortunately, the State legislature has your back on this one, and enacted legislation in 1992 requiring the seller and the listing agent to disclose whether there are Mello-Roos bonds on the property.  In 1992, legislators noticed that some builders were cleverly using other forms of special assessments to avoid having to disclose that they had Mello-Roos bonds.  (”Hey we don’t have any Mello-Roos” [wink, wink]).   Senate Bill 1122 therefore extended this disclosure requirement to other forms of special assessments.

Now if there’s one thing broker’s don’t like (other than water chestnuts — I hate water chestnuts), it’s having liability to disclose something that the seller may not even know, especially where the information is not obvious and our usual way of finding out the answer is right only 95% of the time.  So naturally, companies have sprung up to do the disclosing for us.  One such company that we particularly like is Property ID.  Property ID provides natural hazard disclosures, but as part of their report they also include a special assessment disclosure that is ensured up to $20 million.  We always write Property ID into our agreements asking the seller to provide this when writing up a purchase agreement.

Most agents don’t order Property ID or another disclosure report up front, but if it’s available, we’re happy to provide it to you prior to opening escrow.  Usually you get the report while you’re in escrow and under your inspection period.  If you really want to try to nail it down with more certainty, you might try ordering a report from Mello-Roos.com, but most of our buyers have found that checking with the assessor up front and then getting Property ID (or a report from another reputable disclosure provider) in escrow is a cost-effective alternative.

Related Stories

Sacramento Property Taxes Fall

I’m Moving to the Sacramento Area, and am Over 55. Can I Keep My Tax Base?

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It Pays to Subscribe

We’ve started to write about the valuable discounts we provide on our real estate services that are available only by subscription to our blog / newsletter.  In the future we may also be offering additional discounts and prizes that other merchants may provide, and other incentives to subscribe.

The point here is to develop a stronger readership of local people who may be interested in real estate, not to trick you into giving up your email address.  I don’t sell email addresses, and no one so far has found themselves stuck in a home because I spent my days emailing “buy a house, buy a house, buy a house” to my unsuspecting victim.  These discounts and other incentives will also be available to those who subscribe to the feed in an RSS reader.  (What the heck is that?  We’ll have a tutorial coming soon).

Today we’re taking our first step toward implementing this by installing the software that will show you these discounts if you are subscribed.  At the moment we’re still in a testing mode to see if the plugin is on and putting together our first discount offer(s), but if all goes as expected (he said, crossing his fingers) we should be able to announce that our subscribers-only discounts are live within a post or two.  Meantime if you subscribe now you’ll get these discounts when they’re ready. 

No, that’s not shamelessness.  It’s “transparency”.

Related Articles

New Subscribe By Email Feature

Over the weeks we’ve highlighted some of our online listing services under the heading of “Elite’s Ultimate Online Listing”. In this seven-minute screencast, we show you how much exposure you get from a typical listing agreement with an agent, and how our listing marketing compares to this.

Topics we cover include:

• The multiple listing service — great for agent exposure, bad for clients.
• What to make of the claim “I will list your home on Realtor.com” and how valuable that is.
• How buyers find your home, and what you can expect from our online marketing.

We have a local version of the video here, but a couple of folks mentioned some technical trouble with that one, so even though it’s smaller you might try the YouTube version if the big one gives you trouble.

Those of you who do real estate searches from the either our main search page or many of our other search pages have access to listings that are updated six times per week.

I’m not sure why it’s six and not seven.  Presumably it’s to give FTP a Sabbath.  The point is, it’s practically daily, so it’s about as up to date as you can get without calling a Realtor up and asking him.

In addition to the search pages, there are also a lot of pages where you can browse listings, such as our foreclosure pages, the condos pages, and the new homes pages.  These pages are driven by a separate database that we maintain, that we update once per week or so.  We’ve recently improved the import mechanism on these pages to fix a few issues, so we expect these pages to more closely match our MLS (Metrolist) as time goes along.

We just did an import as well, so we’re pretty current as of now.  Enjoy!

The real estate market for Sacramento for September, 2007 was the slowest we’ve seen since the MLS data begins in August, with 730 units (down 41.3% from last September’s volume of 1244 units).  By itself, this is fairly depressing, but fortunately we have somewhat better news in that 1314 units are pending sale, so it’s possible the unit volume will pick up some for October.

In terms of price, this year’s average home sold in Sacramento County for $342,640, 12.4% less than last September’s average of $391,165.  Sold price per square foot declined more, 14.2%, from $235.08 on average last year to $201.79 on average this year.  The median price fell 12.1%, from $353,750 last year to $311,000 this year.

The total number of expired listings was down slightly this September, but because of the sharp drop in unit volume, the expired to sold ratio stood at 153.6% in September, as opposed to 96.2% a year earlier.

Bank owned properties, making up just over 25% of sales in August, accounted for 26.2% of sales in September (i.e., 191 of the 730 units sold).

There are currently 11.4 months of unsold inventory in Sacramento County.

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We’ve improved our Sacramento Foreclosures portion of the site this morning with two enhancements.  First, if you scroll past the foreclosure listings offer, you’ll be rewarded with a set of foreclosure “Frequently Asked Questions”.  Actually, to be perfectly frank, I think the best questions here are the ones that aren’t frequently asked — and that may keep some people from ignoring the real opportunity that buying a foreclosure represents.  We’ve tried to answer those as well.

The second improvement is that we’ve now added Placer County and El Dorado County to the areas where you can browse short sales and bank owned foreclosures.  Those links are all available from the main foreclosure page, but for your convenience, here they are again:

Bank Owned Properties:

El Dorado County

Placer County

Sacramento County

Short Sales:

El Dorado County

Placer County

Sacramento County

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This August, eight-six condos sold in Sacramento County, down 4.4% from last year’s volume of 90 units. The average price of condos sold in August was $227,889, down 5.5% from last year’s average of $241,267. On a sold price per square foot basis, however, the drop was a much more bubbler-friendly 16.2%. Last August’s average condo was 1098 square feet in size and sold for $219.73. This year, on average the size was 1238 square feet and the sold price average was 189.36 per square foot. The median price is down 8.8% from August to August, from $225,000 last August to $206,000 this August.

Interestingly enough, however, some of the changes in the condo market are in a positive direction. The expired to sold ratio is down, albeit slightly and still well within the “buyers’ market” range, from 102.2% last year to 94.2% this year. Average days on market however have dropped 16.7%, form 90 days last year to 75 days this year.

Anecdotally, we’ve noticed some really dramatic discounts in condos we’ve been showing recently, especially among short sales and foreclosures.

Twenty-four of the eighty-one units that sold (27.9%) in August were bank owned. There are 11.4 months of unsold inventory, with 902 units active and 79 units per month selling, on average, over the past year.

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The number of foreclosures in Sacramento has been the subject of many articles and a great deal of press attention. I thought I’d take a look at a few of the areas that are experiencing a high number of foreclosures to get a feel for how many foreclosures are currently active and what sort of discount they represent for buyers.

With this in mind, I focused my research on the three areas that are showing highest numbers in the Multiple Listing Service (raw numbers, not percentages) of bank owned properties in Sacramento County. These areas the Franklin Blvd / Freeport area (95823 — see zip code map), Sacramento Florin 95828 (map), and Elk Grove 95758 (Map). In fact, when you look at the map, you can see that the choice of calling these “three areas” or “one area” is pretty arbitrary, since they roughly border one another.

The Boring News — How Many Are There?

Let’s take them as one area of Sacramento County that’s high in foreclosures first. In these three high foreclosure areas, the number of active listings that are bank owned, is 17% of the total. At the same time, 11% of the total listings are short sales — properties where the seller’s proceeds from the sale do not cover the cost of repaying the loan. So for both types of “distressed” properties, we come up with a figure of 28%. Once again, the Sacramento Bee’s summary claim that for every two homes sold, one is in foreclosure seems to overstate the case. (I critiqued those numbers from another angle here). However, to give the bee their due, here are possible reasons for the discrepancy:

• The Bee was reporting on August foreclosures and sales only, whereas my current report concerns active listings that have accumulated over some time.
• As we’ve shown earlier in one market, foreclosures outsell non-foreclosures. This isn’t hard to understand — they’re cheaper. This being the case, you’d expect the “absorption rate” for short sale and REOs to be faster than for non-distressed sales.

The Interesting News — How Much Money Can You Save?

Of course, the debate about how many foreclosures there are generates a lot of heat, but not much light. A much more interesting question is, as always: “What’s in it for me?”

If you’re a buyer, plenty!

The following numbers are all expressed in list price per square foot.

In the Franklin Blvd area (95823), short sales are presently discounted 9.2% from their non-distressed counterparts. Bank owned properties are even better, discounted an average of 15.5%. In Elk Grove (95758), the average discount for a short sale is 11.9%, while for an REO it’s 17.1%. The Florin area boasts some of the best numbers of all in this respect. Short sales are discounted 12.4%, while the average foreclosure is discounted a tasty 18.3%! If you’re willing to put up with doing whatever repairs are needed yourself, that difference is huge, and it means the difference between purchasing something at roughly $320,000 and roughly $260,000. $60,000 buys a lot of carpet and paint!

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Antelope’s real estate market is one where a large number of short sales and foreclosures are driving prices down. Our foreclosure list puts Antelope at number six in our unfortunate hit parade of high foreclosure areas. Between them, short sales and foreclosures make up slightly more than half of the available inventory in Antelope. There are 500 active listings in Antelope at present, of which 103 (20.6%) are bank owned, and 150 (30%) are short sales.

In August, the average home sold in Antelope fetched $302,588, 18.3% less than last year’s average of $370,212. Some of that difference was size related, with this year’s home coming in 5.5% smaller. The average sold price per square foot dropped somewhat less, therefore, 13.5%, from $215.24 last August to $186.09 this August. The median price was down 16.9%, from $361,200 last year to $300,000 this year. Units sold were down from last year’s 62 units to 46 units this year, a 25.8% drop.

Interestingly, though short sales in inventory outnumber bank owned properties, when you look at what sold, the numbers are reversed. Though bank owned properties (REOs) make up 20.6% of the inventory currently, they represent 32.6% of the sales in August. Conversely, short sales make up 30% of active inventory, yet accounted for only 10.9% of the sales in August.

This difference is not surprising given the price discrepancy. Looking at the current list price in Antelope, homes that aren’t short sales or foreclosures average $200.41 per square foot, while short sales are priced 9% less at 182.42 per square foot. REOs are priced even lower, 15.0% less, at $170.43 per square foot. In addition, most agents probably feel that REO sales are a bit less problematic, so to the (limited) extent that buyer choices reflect our opinions, that may have something to do with this as well.

To view current REO properties in Antelope, click here. We do not yet have short sale listings available yet directly on our web site (except mixed in with other listings), however please feel free to contact us if you’re interested in listings from this (or any other) custom search. To view all Antelope listings, click here. We’ll have short sale listings coming soon and will post links when they’re up.

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This report covers residential real estate sales for East Sacramento (95819).

East Sacramento’s real estate market continues to defy the statistics for the rest of Sacramento County, with strong prices and low inventory. This year’s average home sold for $486,300, 11% more than last year’s average of $438,041. Granted, this year’s home was just over 100 square feet bigger, but even adjusted for square footage, prices rose slightly from August to August. Last August the sold price per square foot was $346.55, while this August that number had risen .4% to $347.85. Only the median price showed any wear and tear, dropping 1.9% from $415,000 to $407,250.

As we reported for July, the numbers for East Sac continue to be strong. For example, in August, where average days on market decreased. This year the average was forty days, 13% lower than last month’s forty-six. Likewise the expired to sold ratio is down this year, from 56.5% to to 26.7%. Inventory is low at 3.63 months, down from 3.91 months last month.

Foreclosures are the exception to the rule in East Sacramento. Of the eighty-four active units in inventory, only 3 of them (3.6%) are bank owned. No bank-owned homes sold in August of this year or last year.

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We’ve put up a new section on the web site dedicated to listings of Sacramento foreclosures. Here we have a complete list based on the MLS that we’ll update every week or so of bank owned properties (also known as REO or “Real Estate Owned”) throughout Sacramento County. Those areas with no foreclosures in inventory don’t appear here — those that do are arranged in order from the areas with the most foreclosures on top, on down.

The current page is a kind of “browse” interface, but I may also put together a minimal sort of search interface on top of this as well, probably featuring price range and area to start out with.

As far as I know this is the only complete and free list of foreclosures available in Sacramento. All the properties here are listed in the MLS and so are available to buy now.

The queries are a tad on the slow side but are not too bad. If it gets too painful I may go ahead and do some tweaks to optimize that. Let me know if you have any problems using the list — otherwise enjoy! Let me know if there’s any particular statistical data that might be useful, and if it’s not too heavy on the rocket science I’ll put it together.

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