Archive for the 'Area Stats' Category
Sacramento Mortgage Rates: The Start of a Recovery?
I just received some statistics on the Sacramento County market that confirm what we in the Sacramento valley have been feeling: buyers have emerged like a dragonfly hatch and are swarming around a veritable feast of low-priced, bank-owned properties. Has Sacramento taken the worst of its lumps?
For April, new escrows rose 33%, and closed escrows skyrocketed by 35% from the previous month and 68% from the same time last year. But the number of new listings fell 30%, reducing the inventory level to 5.9 months from 8.3. To further underscore the market’s keen interest in foreclosures, 90% of April’s sales were under $400k, 85% under $350k. Activity is certainly on the rise. But how deep is the pool of buyers?
Is the Financial Crisis Over?
Lately, Wall Street murmurs suggest that the worst may be over for the financial crisis. This theory has found support in the March and April retail sales numbers. Sales, ex-auto, grew by 0.5% in April, faster that analysts’ expected, on the heels of a 0.4% gain in March. This week’s CPI figures will give further clues as to impending threat of inflation and whether the Fed will soon have to begin reversing the direction of interest rates.
However, there is a big question about whether the financial dislocation will disrupt employment, further reducing consumer spending at the same time that “import inflation” is redirecting consumer dollars from luxuries to necessities. Mohamed El-Erian from Pimco makes this point is his excellent article Why This Crisis Is Still Far From Finished.
As far as mortgage rates are concerned, don’t bet on lower rates any time soon. The “Treasury bubble” will certainly burst if investors begin to feel like the storm has passed. But if the economy gets worse, mortgage rates will remain high to keep MBS investors in the game. Keep your seatbelt fastened; it’s going to be a bumpy ride.
read comments (1)
The PMI Mortgage Insurance Company has published its Summer 2007 Economic Real Estate Trends. For Sacramento area home owners, the news is not good.
While PMI’s previous model was tuned for the rapid appreciation of the first half of the decade, the revised model gives more weight to current price trends, area volatility, and the increased use of unfriendly variable interest rate products. While the inputs have been updated, the output is the same:
“…a risk index that predicts the likelihood that home prices in a given metropolitan statistical area will be lower in two years.”
How does Sacramento stack up? How about 9th among the top 50 MSA’s in the nation, and a 56% probability of lower prices in 2009.
How’s this for divergent thinking? Granted, home builders are looking past the housing bubble as they try to anticipate future demand and position themselves in growth markets. But, if Toll is right, those who buy now will be richly rewarded.
Daily Real Estate News / April 25, 2007
Toll Bros. CEO Expects Housing Shortage
Robert Toll, CEO of luxury home builder Toll Bros., predicts that U.S. home prices will climb so high in the next five years that housing will represent 45 percent to 50 percent of household income, up from 21 percent in 2006. Why? Toll says restrictive zoning is reducing the number of new houses in the pipeline, making it likely that there will be a shortage in a few years.
Meanwhile, the business of building and selling new high-end homes isn’t easy. Commenting on the health of various markets, here’s what Toll told 3,000 executives attending the Michael Milken Global Conference in Beverly Hills:
“Boston is still in the pits and Connecticut looks better, although I don’t understand why this is the case. They’re just a few miles apart. New York’s exurbs are doing exceptionally well. We’re building in Fishkill and Peekskill – places I’d never thought I’d be in a million years. In North Jersey, things stink. Pennsylvania is OK. Florida is terrible – death takes a holiday. Texas is good; but in Phoenix, Indiana Jones did go off the cliff – his fingers did not hold. California was a comeback briefly but recently it has dipped. Chicago – not really. Minneapolis/St. Paul is not so good. Michigan might be a situation that never comes back.”
No sugar coating here. I love the candor!
Sacramento Mortgage Rate Update
The benchmark 30 year fixed rate mortgage climbed higher again this week, ending at 6.125% with 1 point.
Behind the Numbers
The week was a bag of mostly positive economic news, further eroding hopes of a Fed rate cut anytime soon. After briefly crossing 4.9% for the first time since August, the 10–year Note yield closed at 4.879%, up from last week’s close of 4.773%. (bad for rates)
The week’s news led off with an increase in the index of leading economic indicators, a sign that the economy may be picking up steam (again, bad for rates).
Thursday, existing homes sales dropped slightly, but that news was overshadowed by a median price figure that held its own and a drop of nearly 8% in existing home inventories. This prompted Davi Lereah, chief economist for the NAR to comment, “It appears we have established a bottom.” (not great for rates)
New-Home Cancellations Distort Housing Market
This just out from Mark Zandi of Moody’s Economy.com. I said the same thing in my post of November 30th October New Home Sales. Inventory levels are distorted by the HUD and the Census Bureau’s methodology, overstating the decline in housing inventory. The real estate hangover ain’t over yet folks
New-Home Cancellations Distort Housing Market Cancellations of new home sales are distorting the housing market, making it appear that things are better than they are, says Mark Zandi, chief economist at Moody’s Economy.com. If a contract to buy a home is signed in November, then cancelled in December, the Census Bureau does not subtract the failed transaction from the number of sales. In the last year, as the housing market has cooled, the volume of cancellations has risen to epidemic proportions. New homes on which contracts are cancelled are not added back into the inventory figure. The most recent report found that the seasonally adjusted estimate of new houses for sale at the end of November was 545,000, or 6.3 months of supply. Given the high rate of cancellations, Economy.com says it’s likely that inventory is substantially higher. Source: The New York Times, Daniel Gross (01/07/2007)
The large public builders, who have been killing the market with overproduction, are reaching their fiscal year-ends now and can slow things down if they choose. Unfortunately, each thinks themselves smarter than their competitors. That hubris leads them to continue the overproduction in the false hope of gaining market share. To paraphrase the old adage (probably inaccurately) “you can’t lose a little money on each unit and make it up on volume.”
Sacramento Home Sales Pick Up in December
It’s just a gut feeling. You may not see it yet in the numbers, but industry partners agree. Real estate activity in the Sacramento region is picking up, and at the most curious time.
Normally, sales are slow through the holidays. We expect that. And the weather often discourages serious home buying reconnaissance. This past October, after twelve difficult months spent coming to terms with the new reality, the market seemed to sag under its own weight. It was so quiet in fact, that I was predicting a “nuclear winter” for Sacramento real estate.
So I was the most surprised guy in town when the phones lit up in late November. Agents were calling with new pre-quals and buyers were writing offers. Prospects who had dropped off the face of the earth were calling again with questions, and my title companies, appraisers and wholesalers were all experiencing the same. Like a faint but welcome breeze, there also emerged a barely perceptible sense of urgency.
Sacramento Region Housing Forecast
What’s next for the high flying Sacramento real estate market?
To find out, last week I attended the North State Building Industry Association (BIA) Sacramento Region Housing Forecast in downtown Sacramento to see what four experts had to say.
Elliott Eisenberg is a housing policy economist with the National Association of Home Builders. Michael Lyon is President of one of Sacramento’s largest privately held residential real estate firms. Greg Paquin heads the Gregory Group, and Harry Elliott III is President of Elliott Homes, a national home builder based in Folsom CA. I figured that from their altitude, there might be a clearer view of what’s on the horizon.