Monday, April 11, 2005

Sacramento Area Slows

New home sales are actually down in the Sacramento area, for the first time in many months. "Local new-home sales dropped 7 percent in the first quarter from a year earlier, producing a fresh sign that the market is slowing from last year's record pace."

"The median price, the point at which half the homes cost more and half cost less, slipped by about 1 percent, the first quarterly decline in years."

Some people seem to be worried. "John Schleimer, owner of Market Perspectives, a local firm that studies housing. "The bubble is starting to seep a little. The market is ready to enter hysteria in the sale of new homes and resales. If cost continues at the same pace," he said, "we could see a drop in the second quarter. People are getting priced out."

16 Comments:

At 3:50 PM, Anonymous Anonymous said...

From the article -

"The median price -- the point at which half the homes cost more and half cost less -- slipped by about 1 percent, the first quarterly decline in years."

I repeat "the first quarterly decline in years."

To me most interesting is that MSNBC is posting an article on a local RE market!

 
At 4:02 PM, Anonymous Anonymous said...

Not sure where to leave this comment, but this is as good a place as any. I keep coming across reasons why So.Cal's last bubble burst in the early 90's as a con for the bubble bursting today. People argue that there won't be a significant job loss like the what defense industry faced in the 90's which led to a substantial decrease in home prices and what many have called a crash. Being from San Diego and in a large defense hub home to the military, no one has brought up the fact that in May of this year there quite possibly could be some bases up for reclocation, consolidation or closure. I see this as a problem in addition to the speculation and extreme mortgage lending. Dose anyone else have any other information about the defense realignment that may occur across the country??

 
At 4:41 PM, Anonymous Anonymous said...

Heck, we don't need a base closure here in SD to make a mess, most of the people who work on base probably can't afford housing anyways.

More likely to contribute to the problem is this: I'm seeing a substantial number of people at my company just plain leave due to housing costs. Our number of open positions is skyrocketting because prospects won't move here at the rates we can afford to pay. It looks like we're slowly moving head office to a combination of India and Texas based on our hiring patterns.

 
At 4:43 PM, Anonymous Anonymous said...

On the issue of significant job loss: how about the loss of the real estate industry itself? If housing begins to stagnate, incomes related to housing will stagnate, leading to weaker housing prices, leading to further deterioration in housing related jobs, and so on and so on. A self reinforcing trend. I wonder how many "jobs" these days are somehow connected to RE? Anyone with some stats on that?

Just a few more 1/4 point rate increases from Uncle Al and this thing is dead, I think. Then they have to begin to cut again...

 
At 4:47 PM, Anonymous Anonymous said...

I don't think the Fed is going to be able to cut rates anytime soon. I've already moved most of my money out of the country due to the absolutely disaster that the dollar is facing due to the CA deficit and the only thing that can address that is increased savings rate caused by increased interest rates.

 
At 5:15 PM, Blogger deb said...

The LA Times recently printed an article on the forcast of the Anderson School at UCLA. Their belief is that the housing bust will cause California to go into another recession, as opposed to last time when the recession caused the housing bust ('90). If I recall correctly, they said over half of all jobs created in CA over the last 4 years were real estate related. I have to agree that a slow down in housing would be harmful to the CA economy in oh so many ways.

 
At 5:48 PM, Anonymous Anonymous said...

So how long until there is a 5% or 10% "slip" ? That is when Joe Average, with 10% equity in his home starts to pucker. That and when he has to start paying principle on his "interest only" mortgage. (He won't be able to sell at a loss, so he has to start paying. His original plan was to refinance a new house before that happened.)

That is when the market will start to collapse.

It doesn't look like that will be far off. It looks like this market has reached a top. It will probably stay there for a few months. Suddenly people will realize that the appreciation has stopped and then... PANIC.

That panic is going to identify who really can afford/wanted to be in the house they are in and who is speculating.


This is going to get interesting.

 
At 7:27 PM, Blogger Ben Jones said...

(I'm seeing a substantial number of people at my company just plain leave due to housing costs)

Yeah, when I started this blog, part of the reason was I could see that at some point, this boom was going to kill itself. Thanks for commenting..Ben

 
At 7:30 PM, Blogger Ben Jones said...

(It looks like this market has reached a top. It will probably stay there for a few months. Suddenly people will realize that the appreciation has stopped and then... PANIC)

A likey senario that I agree with. I may be wrong, but the sentiment seems to have changed in the last few weeks..Ben

 
At 8:52 PM, Anonymous Anonymous said...

I live in the Sacramento area so this is good news. I've sold my house in the late 2004 with a profit of nearly $250,000 just in 3.5 years (That is more than doubling original price). I sold my housing because I truly believe a housing bubble exists (I been bearish on housing for a couple years now and still surprised how far this bubble has come).

I am currently renting a much nicer home for about the same payment I was paying at the home I owned.

It still looks like homes are selling well in Sacramento and most people I talk to seem to think "housing is good investment" and "housing Always goes up" They usually don't believe or want to hear my arguments to the contrary.

But I think slowly but surely the tide is turning...

- Sac Renter

 
At 9:55 PM, Anonymous Anonymous said...

(I'm seeing a substantial number of people at my company just plain leave due to housing costs)

But of course there is no CPI...

 
At 11:04 PM, Anonymous Anonymous said...

I think AG will make sure the RE party will last at least 6 more months.

 
At 3:53 PM, Anonymous Anonymous said...

For anonymous who said that people in the military couldn't afford housing... I must disagree. What about all the defense contractors in SD? The last housing bust was a direct effect from not only base realignment, but contracting companies closing as well. What about all the military families that bought before the sudden rise in prices when homes were affordable? What if they cash out the equity in their homes and then all of a sudden have to move to another base? Sounds like trouble to me.

 
At 4:44 PM, Anonymous Pete said...

I am a San Diego homeowner and I firmly believe that the entire housing industry (RE agents, mortgage brokers, contractors, etc.) will be the cause of its own demise. Statistically, over 50% of the job creation in CA was housing related the past few years. This number is huge and I think the anaylsts are missing this very important point. Even if housing just goes flat, which I doubt, I personally think it will drop here due to the unrealistically high prices, the housing industry and its related support companies will begin to layoff personnnel. This would start the cycle and continue in a downward spiral that could be devastating despite virtually no reductions in other industries.
I also believe housing can crash just as fast as stocks now due to the extreme amount of leverage and creative financing going on today that was not prevalent in the last bust. My opinions for what they are worth.

 
At 5:20 AM, Anonymous Russ Winter said...

YOY March sales in South Bay area of Calf, really slipping:

http://www.dqnews.com/ZIPSJMN.shtm

 
At 6:07 PM, Anonymous Anonymous said...

russ,

Thanks for the link, this is awesome stuff. I didn't realize that the Mercury had weekly updates. I'm waiting for the March monthly figures for Sacramento. These should be out any day now. Usually Sac lags behind the Bay Area in most trends, though so I don't know if these will be as hot as what you've found.

I wonder if Ben saw these, they are really dramatic sales decreases pretty much across the board and NOBODY is talking about this.

I'm sure the realtors would just spin it, though and say something like "We expected a slight cooling from last year's torrid pace and these figures show there is a lot of life left in the Bay Area market..." blah blah, blah Or they'd just concentrate on the median house price increase.


On another note, I really appreciated pete's comments because I have thought the same thing on numerous occasions. I personally have 3 friends that recently got real-estate licenses and joined the fray here in Sacramento. It's like the "thing to do." Although none of them has completed a sale yet, and I doubt they will the way things have been sitting on the market recently.
Kind of reminds me of when everybody and their brother was a day-trader in '99.

 

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