Sacramento Real Estate Blog

It’s that time again.  The agents and brokers who subscribe to Metrolist have entered  their sales data for the previous month, so we can take that data and mine it to within an inch of its life.

As we often do, let’s start with Sacramento County, which experienced a sharper than usual drop in the sold price per square foot from the month before.  In September, the average sold price per square foot was $130.50, down 7.4% from the August average of $140.87, and 35.2% from a year ago, when the average sold price per square foot was $201.35.  In September, the average home in Sacramento County was 1595 square feet in size, down 6.1% from 1699 on average last year, and sold for $208,212, down 39.2% from last September’s average of 39.2%.  The median sale price in September was $185,800, down 40.6% from last year’s median sale price of $313,000.

With prices down so much, unit volume continues to be high compared to last year.  Indeed, in September we sold 2084 units, up 60 units from August, and more than doubling last year’s pathetic showing of 803 units.  We’ll have some charts appearing soon that show the unit sales and price data back to about 2004.

As usual, the bulk of the demand in September was for distressed properties.  Bank owned foreclosures (also known as "Real Estate Owned" or REOs) accounted for biggest piece of the pie, making up 69.7% of the sales in September.  With banks still slow to approve short sales, however, this category made up the smallest percentage of the sales at 10.5% of the sales in September, even though at present they make up 43.4% of active listings.  Finally, non-distressed sales comprised some 19.9% of the sales in September.

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Here are the sold prices per square foot for various areas of Sacramento County.  I’ll let you make what you will of this.  Feel free to compare to last month’s numbers and make even more of what you will.  (That way you don’t run out).

At some point I need to add the unit volume numbers in since sometimes we’re really only looking at one or two sales so the number is less significant.  But it gives you an idea.

Meantime, both the winner and the loser in terms of price change is East Sacramento, so like Bill Clinton and the definition of what “is” is, it all depends on what you mean by East Sacramento.  If you mean the area of East Sacramento that includes, among other things, Oak Park (95817), homes lost 62.7% of their value from year to year.  On the other hand, if you mean the area of the East Sacramento that has, among other things, the Fabulous Forties (95819), homes lost only 2.2% of their value from year to year.

Bonus question:  which neighborhood more accurately reflects the socioeconomic bracket toward which the $700 Billion Paulson Bailout is targeted?  Oh, excuse me:  I meant to say the $810 Billion Paulson bailout, now that the Senate has made it “better”.

Come on, class warriors!  You know this one…

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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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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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About once per week I update the listings from Metrolist to my web site database.  This database serves several web site features such as my foreclosure listings, condo listings, and investment properties listings.

As time goes on, I’ve also started to write a number of proprietary reports to this database that help me publish my market updates periodically.

I write these reports month to month, but whenever I update the database I can’t help but wonder how we’re doing now.  This morning when I took my usual sneak peak, some of the numbers surprised me.

Prices Are Up, Non-Distressed Sales Are Up

First of all, average sold price per square foot rose slightly (1.7%) between July and August.  In July it was $140.48 per square foot, and so far in August it’s $142.98 per square foot.  We may see it dip again later in August (for some reason I’ve noticed the entries posted later in the month sometimes do this), but so far, so good.

The other interesting fact about August so far is that the number of non-distressed homes (as a percentage of all sales) was 22.2% in July, but rose to 26.6% in August.  Of course, if you know about the price increase, a shift away from foreclosures makes sense, because non-distressed homes are listed and sell higher.  The more interesting question is:  why is this happening?

Yes, I Do Feign Hypotheses (But I’ll Let You Pick Your Own)

I don’t really know why the data did what it did in August, but here are some possible explanations:

1. It’s a Fluke
   All the data’s not in for August, and by the end of August the data won’t look like it does now.  Much as I’d like to see prices turn around soon, this wouldn’t surprise me too much, since I’ve often seen the end-of-month data surprise me.  Most real estate bears will probably want to opt for this one more wholeheartedly.
2. The Market Recovery is Well Underway, and Prices Will Rise Steadily From Now On
   I don’t really believe this, but I do believe the next one.
3. The Market Is Close To Reaching Price Equilibrium
   I don’t expect the market to suddenly start rising after falling for so long.  What I do expect is several months where the market just sort of sits there and behaves ambiguously — rising in one month and falling in the next.  So, for example, declining foreclosure sales in August means more foreclosure inventory available in September, so we may see prices fall again in September.Moreover, we’ll probably also see some more seasonal drops in the winter months even if we have already entered a more or less steady increase in prices.
4. Foreclosure Inventory Got Low After the huge sell-off in March to July.
   I think this partially accounts for the increase in sales of non-distressed homes, but only when coupled with the next point.
5. The Most Motivated Non-Distressed Home Sellers Are Starting to “Get It”
   The market has now been down enough, long enough, that more and more sellers are starting to understand that they need to get pretty competitive on their prices or their home is just going to sit there.

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The number of homes that have sold in Sacramento County through August 19th have already beaten 2007’s year-end numbers.  According to our MLS data, year wide home sales in Sacramento County in 2007 totaled 10,698 units.  As of August 19th, 2008, we’ve already sold 11,132 units, and we still have more than a quarter to go.

Looking at it on a month by month basis, sales volume was up from the previous year in each month of 2008 so far except January (which was down .4%).  The increase was modest in February at 1.6% over the previous February, but grew to a high of 134.3% in May, when 1,879 units sold compared to only 802 in May of 2007.  The average increase in each month over the same month the same year is 57.3%.

So far as of August 19th we have 864 units reported sold this month, beating the month end figure we have for last August of 846 units.  By the end of the month we are likely to see at least a 50% increase over last year’s numbers, especially since it generally takes several days for all sales to be recorded.

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Sacramento County’s market continued to be characterized by strong demand for bank owned properties and falling prices as banks continue to discount homes to move them off the books.  Once again, prices are down sharply from last year, but sales are up sharply. 

The average home sold in Sacramento County in July for $228,656, down 38.3% from last year’s average price of $370,770.  On a sold price per square foot basis, homes lost 35.5% of their value county-wide, averaging $217.74 per square foot in July of 2007 versus $140.53 in July of 2008.

Compared to last July, sales have more than doubled in Sacramento County.  996 units sold in July in 2007, versus 2024 (reported so far) for July of 2008, an increase of 103.2%. 

This is the sixth month in a row that our unit volume has increased substantially over last year.  Indeed, with today only August 4th, Metrolist affiliated agents and brokers have already reported 10,338 sales for Sacramento County this year, so we’re on track in the first couple of weeks of August to have sold more homes than we sold in the whole calendar year of 2007 (10,698 homes).

Inventory in Sacramento County is currently at 7.1 months (or 5.5 months if you use the more recent sales for the last six months as representative).

Some of the data on which this report is based is in the tables 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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I generally write my first real estate market update of the month on the fourth, since our MLS, Metrolist, gives us three days to enter any sales results.  So by the fourth the data is usually about as good as it’s going to get.

However, I don’t want to be in the position of writing a market update on Fourth of July.  I may have no life, but I know where to draw the line so that I at least look like I have one!

Unit Volume Continues Strong

Of course there’s the usual bad news about prices and the high foreclosure rate in Sacramento County.  We’ll get to that in a minute.  On the plus side, unit volume continued its rally.  Unit volume was not only a smidgeon higher than May’s (with 1900 units sold reported to date for June, versus 1879 for May).  Year on year, however, unit volume is up 75% from last June’s figure of 1086 units.  So June was the fifth month in a row where unit volume was up compared to both the year before and the month before.

Prices Down Substantially

Two thirds of the homes that sold in Sacramento County in June were bank foreclosures.  With another 8.4% of June’s sales being short sales, distressed sales accounted for 75% of the total sales in June.  Not surprisingly with this many foreclosures on the market, prices have been dropping quickly. Homes lost a third (33.3%) of their sold  price per square foot value from June to June, going from $218.98 in June of 2007 to 146.07 in June of 2008.  The average home sold for $237,900 in June of 2008, down 35.8% from last June’s value of $370,787.

Strong Competition for Better Priced Homes

With foreclosures priced as low as they are, competition for individual properties is fierce.  Most of the successful offers I’ve seen come through lately have been over full price, and the average discount on bank foreclosures is growing more razor thin each time I look at it.  In June the average bank owned property sold for 99.93% of list price, meaning there was less than $150.00 difference between the asking price and the offered price.   (Note, however, that price alone does not include any concessions such as having the seller pay buyer’s closing costs). 

As usual, foreclosures account for the bulk of the sales, with non-distressed sales in second and short sales a poor third.  Making up only 28% of the active listings, foreclosures accounted for 66.6% of sales in June.  In contrast, short sales currently make up 40.3% of the listings, but only accounted for 8.4% of the closed sales in June.  Non distressed sales account for 31.8% of the active listings, and 25% of June sales.

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Here’s a Short Version of This Article

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

Here’s the Long Version

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

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

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

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

The Problem With Averages

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

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

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

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

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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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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).

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Short answer for the median priced home in Sacramento County:  $8,150 up front, plus $1,835 per month.

Read on for the longer answer.

If you’re buying a home (in Sacramento or anywhere — even, God help you, Boise), naturally you want to know what it’s going to cost.

In this article, I’ve taken the median priced Sacramento home and worked out how much it would cost you to buy it, and when you’d be paying what.  We’re going to be buying a $255,000 home, which as of a few weeks ago was our median selling price.

What I’ve tried to do in this article is put together a scenario that is:

• Accurate given current rates and information.
• Doable.  By doable I mean you won’t have to pitch lowballs all day in the hope that someone will bat your home out of the park, or write an offer using a program that wouldn’t work on a bank foreclosure.  (Most of our buyers are interested in foreclosures because of the savings).  In other words, I’m presenting you with what I believe is a reasonable scenario for an offer that stands a fair chance of getting accepted and that will actually close.

I’ve also tried to estimate high on some of these costs such as inspections, which may be $25.00 or so cheaper in some instances than I’m quoting here.  In any case all numbers are estimates, so actual numbers may differ.

For our scenario, I’ve assumed you’re going to get the seller to pay  your closing costs, but you’re going to be bringing in a 3% deposit for an 30-year, fixed rate, FHA loan at 5.875%.  Actual rates and APRs vary, but that’s approximately what we’ve been seeing lately.*  The 3% can be gifted, so if you don’t have savings, you can purchase a home using that perennial favorite — the same program my wife and I used — PDPMAP.  (Parental Down Payment Mooching Assistance Program).

OK, so what will you need in the way of cash, and when?

When you write your offer:   First, you’ll usually need $1,000 for a good faith deposit.  This amount is not set by law, but rather by local tradition.  Some bank owned properties require a 1% deposit (i.e. $2,550), but unless that’s the case, I usually recommend a $1,000 deposit.  Whatever the amount, you’re going to write a check to the title company when you write your offer and give it to your Realtor® — we send a photocopy of the check to the listing agent when we submit your offer.  The check itself is held in the file uncashed until your offer is accepted, then it is cashed by the escrow company.  When you close escrow, it’s credited toward either your down payment or closing costs.  If you cancel the escrow during your inspection period, you get your deposit back. 

While you’re in escrow:  Once your offer is accepted, there are a few more costs, including an appraisal ($400), a pest inspection ($100), and a whole house inspection ($400).  For all of these, you’ll typically need a check up front, but the cost of the appraisal will be credited back to you in escrow.

Closing Escrow:  Remember our scenario. There are a number of closing costs, but we’ve asked the seller to pay those.  We need a 3% down payment, but we’re getting a credit for the good faith deposit and the appraisal that we’ve already paid.  Three per cent of $255,000 is $7,650, but with the $1,400 credit, our remaining cash to close is $6,250. 

In other words, between the point when you wrote your offer and when you got the keys to your house, your total cost was your $7,650 down payment plus your pest inspection and whole house, for a total of $8,150.

Monthly Payment:   

Because you’re financing a fairly high percentage of the cost of the home, your lender is going to want you to use an impound account to pay your tax and insurance.  You’ll also be paying principle and interest, plus MIP.  MIP, or Mortgage Insurance Premium, is the FHA equivalent of PMI — it’s insurance you pay because you’re borrowing a large percentage of the cost of your home.  (Once you’ve paid down your mortgage to 78%, the MIP is canceled).  Your total estimated monthly payment for all of these (Principle, Interest, Tax, Insurance, and MIP) will be $1,835.

So there’s how we got to our answer.  The median priced home in Sacramento costs $8,150 up front and $1,835 per month.

For those of you who would like a bit more detail on what we mean by closing costs, the following is a somewhat more detailed version of what we just went over:

* This is an estimate from a Realtor — not an offer to lend.  We use independent lenders.  Please consult a lender for accurate APR information.

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We’ve updated our listings database.  It was getting pretty long in the tooth there.

Most people who are users of our web site(s) probably don’t know it, but many of our web sites including this one, our Roseville real estate site and our Elite Properties company site actually rely on two different databases of listings.  When you use our search page, for example, you’re using a listings database that’s our IDX company gets from our Metrolist database.  These listings are updated daily, so when you do a search, you’re looking at listings that are within twenty-four hours of being as current as the ones that we as Realtors® can look at..

In addition to the search tools that our IDX company provides, however, we also wanted to allow you to browse for certain types of listings.  One thing our IDX system doesn’t do, for example, is show you short sales and foreclosures.  Because we don’t have direct access to the database our IDX company uses, we’ve created a second database that we can use in various ways.

For example, our foreclosure search page lets you search for foreclosures and short sales, or browse them by county.  Similarly our new homes section let’s you see homes that have just been built that are listed in the MLS, and our condo pages contain links to condos grouped by price and county.

As we mentioned above, we’ve also used this database on some of our other sites.  Many clients find us through our the maps of listings by zip code that we maintain on our company site.  These maps include zip codes in El Dorado County, Placer County, and Sacramento County.  Within each zip code you can find active listings and get recent market data.  We publish similar data for Placer County only on our Roseville site.

Unlike our IDX system, which is updated automatically on a daily basis, these other resources are updated manually as time permits.

We realize that from a software perspective, that’s not the brightest way to do it.  But if you’ve ever tried to get someone from Metrolist to call you back about a data feed, you probably have a good idea that it’s not half-dumb from an organizational perspective.

The good news is, it’s up to date now.  So as my wife is fond of saying, “Get your red hot houses here!”

Enjoy.

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I took a few minutes today to look at the discounts for short sales and foreclosures based simply on list prices.  In other words — how much are they discounted before you negotiate with the seller? 

Foreclosures may have a little more negotiating room between list price and sale price, but not as much as you may think.  The reason is that homes that are priced well to begin with tend to get more competition, so even in the case of bank owned foreclosures, buyers typically only negotiate something between 5-6% off the list price for foreclosures, as compared to about 4% for all sales.

The real bulk of the discounts for foreclosures and short sales already appears in the MLS.

So with that, let’s look at the results.  How much are foreclosures and short sales discounted in Sacramento County?

In active inventory, the list price for non-distressed sales are currently averaging $228.62 per square foot.  Short sales are discounted, on average, 27.8%, with the average list price for short sales being $165.00 per square foot.  Foreclosures are discounted even more — 36% compared to non-distressed sales — with the average REO in Sacramento County currently listed at $146.19 per square foot.

One caveat, however.  If you look at short sales and foreclosures on a neighborhood by neighborhood basis, you generally see foreclosures still having better discounts than short sales — but the overall magnitude of the discounts are somewhat less than they are when you look at the entire county.  This is because part of the 27.8% and 36% numbers reported above reflects the fact that in many cases more expensive areas also have fewer foreclosures. 

In Antelope, for example, Short Sales are currently listed at a discount of 26.3%, and foreclosures are currently discounted 30%, from their non-distressed counterparts.

“Only” 30% off?  That’s still not bad!

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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.

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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.

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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.

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Depending on where you focus your attention, there’s news, there’s good news, and there’s bad news.

We began our look back on Sacramento County real estate in 2007 with a look at the overall “big picture” for the Sacramento County Real Estate Market for the entire year. Later last week, we reported on one area in the county market that’s consistently held it’s value better than others and enjoy’s low inventory and brisk sales, East Sacramento.

This week we turn our attention to an area that may well be the “worst case” in terms of rising inventory and price declines for Sacramento County, Sacramento’s Franklin / Freeport area (95823). I should probably point out before we begin that I have not sampled all the MLS areas, so my sense that Franklin / Freeport may be the worst case comes from the foreclosure numbers. There may be other areas that have fewer foreclosures but more inventory or lower prices, for example.

Franklin’s decline in 2007 has been rapid. Comparing full year numbers first, the average price lost 19.2% of its value from year to year, and dropped 21.1% in terms of sold price per square foot. The median sale price in 2006 was $314,850, in 2007 it fell 20.6% to $250,000. In 2006 one per cent of sales in Franklin were foreclosures. In 2007, that number was 41.6%.

Comparing December of 2007 to December of 2006, we find that by December, the trend of selling more and more foreclosures and deep price drops had continued apace. By the end of 2006 the average sale price was $282,327. A year later the average had fallen 34.9% to $183,914. Another way to say this is that the average home in Franklin lost slightly more than 1/3 of its value in a year. On a sold price per square foot basis, Franklin closed out 2006 at $200.21 per square foot, and had fallen to $126.61 a year later, a decline of 35.8%.

The percentages of short sales and foreclosures available in Franklin / Freeport are staggering. Almost three fourths (73.9%) of inventory in Franklin / Freeport is either a short sale (35.9%) or foreclosure (38.1%). At the same time, if you needed a case study of REOs outselling short sales, Franklin / Freeport is it. Last month no short sales closed, but twenty-five of the twenty-nine closed sales in the area were bank owned properties. That works out to 86.2%, or close to 7/8 of all sales.

The contrast between East Sacramento on the one hand and Franklin / Freeport on the other shows how local real estate markets are. East Sac enjoys less than three months of inventory and a brisk seller’s market where the prices have remained flat while nationwide prices are falling, while Franklin / Freeport currently has almost two years (23.6 months) of inventory, and homes there have lost two thirds of it’s value in a year.

If you’re a buyer or seller, the right question to ask is not “How’s the Market” overall, but “How’s the Market” for your particular area. Is there an area you’re interested in particularly? If so please contact us and we’d be happy to get you specific market data or comparable sales.

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I n our year in review article for Sacramento County, we talked about East Sacramento, Midtown and Land Park being exceptions to the general cooling-off trend of Sacramento Real Estate. Regular readers will know that I’m pretty bullish (that’s “bullish” — don’t read it fast, and there’s no “T” in it) on East Sacramento, 95819.

Of course, since this year’s home was slightly smaller (1.8%) than last year’s, average price was down slightly. The average price fell 1.7%, from $511,785 in 2006 to $503,142 in 2007. The median sale price fell 2% during that time, from $443,750 in 2006 to $435,000 in 2007.

Adjusted for square footage, however, things looked quite rosy in East Sac, especially comparing it to the whole county. Looking at the year gone by, while other areas in Sacramento lost 11.7% of their value on a sold price per square foot basis, East Sac’s prices held steady, actually gaining .1% on the sold price per square foot indicator ($350.54 per square foot for 2006 versus $350.87 for 2007).

REOs and Short Sales, which make up more than 50% of inventory county-wide, comprise just 16% of active inventory in East Sac. (7.1% REO and 8.9% short sale). Sold foreclosures in 2007 accounted for 3.1% of sales, versus about 20% on a county-wide basis.

Unit volume is down 5.6% from last year, but inventory is hot-buyers-market low at 2.64 months. Days on market are actually from last year by 24%. In 2006 it took 50 days on average to sell a home in East Sac, whereas in 2007 that number was down to only 38 days. The contrast to Sacramento County is clear: In Sacramento County, Average Days on Market rose 56.4%, from 39 in 2006 to 61 in 2007. This year, moreover, fewer listings expired, and the expired to sold ratio dropped even though unit volume was off slightly. Currently the expired to sold ratio is a low 36.1%.

Thumbs up photo by Joe Telling, licensed under Creative Commons.

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We lumped three zip codes together when dealing with Florin, now we’ll tackle the no less than five zip codes that the MLS considers “North Sacramento / Florin / Del Paso Heights”: 95833, 95834, 95835, 95836, and 95838.

The average home in Natomas sold for $292,763 in November, down 16.5% from the $350,415 average of November of 2006. The median price fell 16.2% from year to year, from $340,000 last November to $285,000 this November. Sold price per square foot fell 22.3%, from $215.11 last November on average to $167.20 this November.

Currently there are 13.5 months of inventory in Natomas. Of this, 27.1% are bank owned foreclosures, and 35.1% are short sales. Of the 92 units that sold in November, 33 were bank foreclosures (35.9%).

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The Franklin / Freeport area in South Sacramento is the area that’s been hardest hit by foreclosures in Sacramento County.  As you’d expect, in connection with the high number of foreclosures there have been especially deep price decline, high inventory, and large numbers of listings expiring unsold.

Only about five homes sell per month in Franklin / Freeport.  Therefore, in order to have enough numbers to discuss this area somewhat intelligently, we’ll look at the first eleven months of 2007 compared to the same period for 2006, rather than looking at a single month.

From 2006 to 2007, homes in the Franklin Boulevard area lost about a quarter of their value.  The average price fell 27.2%, from $335,800 in 2006 to $244,628 in 2007.  At the same time, sold price per square foot fell by 24.8%, averaging $220.92 in 2006 and falling to $166.19 in 2007.  The median selling price was $314,000 in 2006, and has now fallen 20.4% to $250,000.

In 2006, only 1.1% of sales in this area were bank owned foreclosures, versus 58.5% in 2007.  There are more than two years (28.3 months) of unsold inv