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The question is always, what are home prices doing? And specifically, what are they doing around me? A report released several days ago by the National Association of Realtors stated that: Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter of 200. The report does show some gains in CA home prices, but what about specifically Sacramento home prices? As always with raw home price statistics, I had to dig deeper(and besides, the N.A.R.’s advice has seemed, at times, “unbiased”. For one, they were predicting home price increases well into 2007,  ground zero for the subprime meltdown.)

First, a quick refresher. As reported by Dataquick, Sacramento home prices in December posted a minor 0.42% gain, year over year. For all of 2009, according to the Sacramento Bee, Sacramento home prices slipped 18.46% compared to 2008. For the 4th quarter of 2009, Dataquick does not, unfortunately, release quarterly data for Sacramento metro home prices. However, all indications point to a small price increase- for example, the number of new housing starts has been increasing(housing starts are just a counter for new housing developments). Remember that housing data lags about 60-90 days which is why we are only now getting 4th quarter 2009 home price statistics. As more data comes in about Sacramento home prices we will post it here.

**Update- According to Bloomberg.com, Sacramento home prices fell 37% in 4th quarter 2009.

These positive signs of Sacrameno home prices can be attributed to a few things.

1. The bank. Banks are much more willing to work out deals with in-trouble home owners, whether through a short sale or loan modification.
2. The inventory. Every granted loan modification or approved short sale means one less foreclosure that will hit the market in [probably] terrible condition and at a ‘overbid-me’ list price.
3. The money. Dramatic action by the Fed purchasing trillions of dollars worth of mortgage backed securities has put an artificial lid on rates, leaving them at 4-5.5% all last year.
4. The law. Changes were made to California’s foreclosure process last year, doubling the time courts took to issue a foreclosure. Additionally, bankruptcy judges were granted the unprecedented ability to ‘cram-down’ or modify debtor’s mortgages.

So are we in the clear? We are still bullish on Sacramento home prices and the status of the entire west coast. Here’s the issues facing home prices:

1. The iceburg. Data issued years ago shows a potential new wave of ARM resets from Alt-A loans, hitting right now. The potential for additional foreclosures and inventory is troubling.
2. The money. As mentioned, rates are artificially low. What happens when the Fed removes the lid? Analysts predict sharp jumps in mortgage rates if inflation rises. Additionally, credit score requirements for loans have increased and loan programs continue to be cut back. These changes lower qualifying home prices and remove buyers from the market.
3. The law. There are concerns that the first time homebuyer credit simply advanced demand, or pushed people forward that were planning on buying anyway. Economists are concerned home prices could be a false positive.

This is all speculation of course. And what happens to Sacramento home prices in the area that you live will vary. The real factor is the median price range your home is in. As the lower end has already had massive declines from the peak, if further decreases in home prices happen, there will be some protection. For example, some higher priced/exclusive communities in CA have had very small price declines only.

There was little fluctuation in the median sales price and volume in April but there was a 17% increase over last year’s 1450 sales. Foreclosures continue to be a huge percentage of sales, counting for 65% of all sales in April. This percentage has come down each month since January, where distressed properties were over 75% of sales. The median home price decreased from $167,500 to $167,100 in April. The biggest change is that listing inventory is down. It is showing a 14.2% decrease from 6,266 homes for sale to 5,377. The housing market supply has decreased to 3.1 months. This figure represents the amount of time, in months, that it would take to deplete the total listing inventory given the current rate of sales. (Stats from Sacrealtor.org) Anything under 3 months of inventory is typically considered a “seller’s market” and if you talk with many buyers out there, I am sure they are feeling like this is now the case. Most bank owned properties (REO’s) are priced very competitively and so buyers are having to come up over asking price to get the property they want. Not only that but with reduced inventory, buyers do not have as many choices as they used to. Also, many first time buyers are starting to feel the pressure of getting into a home by December 1st so they can take advantage of the tax credit from the federal government. Check out the graph below to see the changes in the Sacramento real estate market over the last four years.

sales_median_price_rates0

Some people may also be curious as to what I am seeing in the market on a day to day basis. I can tell you there are a lot more short sales than there used to be. If you or anyone you know is behind ,or is soon to be behind on your mortgage, please call me as banks are more willing to accept short sales than they ever have been. With these sales buyers have to be patient as they can take 30-100 days. Unlike an REO property, you will not get a response within 7-10 days. What I am also seeing is that buyers are having to come over and above the asking price but, on some occasions, are not always having to pay the original price they came up to during the initial “bidding war”. I have had two clients over the last month that have come up in price on a property in hopes of having the winning bid. The good news is that both clients came up high enough and got their offers accepted, the better news is that the appraisals didn’t come in at the original purchase price and so both sellers came down in price about 10,000 each! You can bet my clients were more than happy about this.

If I can answer any questions about real estate for you or anyone you know, please feel free to call or email me.

Thanks!

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