Sacramento Real Estate Blog

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 inventory to get through in Franklin / Freeport, of which 41.7% are foreclosures, and 30.2% are short sales.  Some time in early 2008, we expect to see combined inventory for short sales and foreclosures top 75% of active inventory.

How’s Florin doing?  Well, the alternate title for this post should give it away:

“Florin Maul”.

If real estate is local, and there are local winners (Land Park, East Sac), of course there have to be local losers as well.  Enter Florin, the area encompassing the zip codes 95828, 95829, and 95830.  Florin is roughly bounded by Sunrise Boulevard on the east, and by Kiefer Blvd, Jackson Highway, and Elder Creek Boulevard on the north, by Stockton Blvd in the west and Calvine Boulevard in the South.

From November to November, the median selling price of a Florin home fell 21.5%, from $325,000 to $255,000.  Last November the average selling price was $361,962 — this average fell 25.4% to $269,932.  Insult to injury, this year’s home was larger — so the average price per square foot fell 29.1% from year to year in Florin.

A year ago, bank foreclosures made up 1.6% of sales, though there were any number of short sales in inventory.  This November, bank foreclosures accounted for 61.3% of all homes sold, and together, foreclosures and short sales make up 62.7% of the 18.6 months inventory. 

Rounding out a perfect storm of numerical bad news, unit volume is down 50.8% from year to year, and as of this November the expired to sold ratio is 212.9%

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!