Archive for the 'Sac Real Estate' Category
What will it take to shock the Sacramento real estate market back to life?
Behind the mask of false bravado and feeble optimism worn by industry insiders who think wishing can make things true, there is an undercurrent of worry. Let’s face it. The patient is ill. What will turn things around? In a word, affordability.
It’s pretty clear that we chucked the idea of affordability in the early 2000’s as home prices and incomes parted company. People bought homes they couldn’t afford with loans that offered low initial payment but blew up after a couple of years. The speculative fever that ensued was supported by low interest rates, easy-qualifying loans and 100% financing. Builders responded by flooding the market with new homes geared to the move-up market, at prices affordable mostly to those who had previously experienced windfall profits. Then the music stopped, and all the chairs were gone.
So here we lie. Too much inventory, too few buyers. Sales are slow at every level, though Sacramento real estate prices have retreated to mid 2004 levels. Despite sellers’ attempts to get in front of the decline, buyers pitch low-ball offers on everything. I attended a recent auction featuring the last 6 homes in a 220 unit Elk Grove subdivision. The seller, a national home builder, was able to unload only 3 of those 6 homes even at steeply discounted prices. What’s the problem? Again, affordability.
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I’ll apologize in advance for the length of this article. But it will enlighten you if you have the patience to finish.
Despite the bursting housing bubble and a fall in housing starts of over 30%, unemployment remains very low. How can that be? Home builders downsize crews, shrink their land acquisition and development departments, and put the brakes on construction.
Yet the employment statistics remain strong. Don’t get me wrong. I’m happy, but puzzled. So I’ve been poking around trying to understand this phenomenon since the real estate downturn got its full head of steam last year.
Recently I was talking with Jim Bayless of Treasure Homes, who shed first light on this for me. He explained to me that much of the construction labor employed by sub-contractors consists of undocumented workers. Since these folks are never officially on the employment rolls to begin with, they don’t show up in the unemployment numbers when the work dries up. That’s pretty nice for us, an extra big shock absorber on the plane’s landing gear so we get that “soft landing” everybody’s talking about.
But where do those folks go? Well they go on home, or they move on to someplace where there is work.
THE HIDDEN WORK FORCE
Then I ran across an article by Nouriel Roubini entitled: Falling Remittances from the U.S. to Latin America as Evidence of the Housing Slump which references a recent Wall Street Journal story and research by Walter Molano at BCP Securities, who writes:
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!
For those who missed it, the Sacramento Bee posted this article Tuesday. The 80 or so comments that follow the article make for a lively and sometimes ugly discussion. Not particularly cheery, but there is a silver lining.
Foreclosures in full boom
In ominous sign of more to come, capital region default notices also hit record highs during first quarter of 2007.
By Jim Wasserman - Bee Staff Writer
Last Updated 1:11 pm PDT Tuesday, April 17, 2007
Story appeared in BUSINESS section, Page D3There’s a new kind of “For Sale” sign appearing in the region’s neighborhoods — offering property repossessed by the banks — and there will be more, according to the newest round of statistics.
There is no denying the rapid decline in Sacramento home values and the challenge that creates helping home owners refinance into sustainable home loans. My appraiser says he has seen a 10% decline in values in certain areas over the past 90 days. Two agents I know that previously specialized in the REO (“real estate owned” by banks) business, are back in that business again, with around 300 bank-owned properties listed between them.
Here are a couple of the article’s statistics:
Is California Saturated With Real Estate Agents?
One of my agents emailed this to me today. It’s part of a newsletter from National Realty News….
An Open Apology From The Publisher of The National Realty News
Wednesday, March 14, 2007
Last November several of our staff attended the National Association of Realtors annual convention in New Orleans. Over the course of that event, we interviewed hundreds of agents, broker owners, and managers. During the course of these interviews, it became quite apparent that many seasoned real estate professionals, including many NAR executives and staffers, were predicting a noticeable decline in the number of agents as the real estate market continued to struggle.
Several senior managers from large brokerages voiced their opinion that many areas in the country were saturated with real estate professionals. A classic example of this saturation is in the state of California. In 2006, California had more licensed real estate agents than there were deed transfers in the entire state.
The article concludes by advertising for a seminar that will give attendees the “secrets” of the top producing agents who are surviving. I just thought the comment about California was interesting.
I Thought Flippers Were Out of Business!
I was talking today with a woman referred by a past client. She and her husband were in the middle of a 100% cash-out refinance on their home. They have a small handyman business and need a “stated income” loan because their tax returns don’t show adequate income. She was upset because her lender had quoted her 12% on her 2nd loan.
After telling her she should feel lucky to get any kind of 100% stated income financing right now, I asked why it was so important to pull all of their equity out. She replied that they had just paid $12,000 to go through an on-line school to learn how to flip properties, and they needed the money to get started. In fact, she said, they were just dying to get started.
Loan City Bites the Dust
Today’s announcement, posted on their website, entirely unexpected…
LoanCity is closed for business. Today March 20, 2007 is the last day we will be funding loans. To our customers, our staff and business partners - we thank you.
There are many people finding out as they near the close of escrow that they don’t have loans after all. What could be more unsettling than that?
Does your lender have the knowledge and experience to steer you away from trouble and weak lenders?
Got a question or concern? Email me.