Okay, people are truly starting to freak out in Sacramento. But not all the news is doom and gloom. Matt Woolsey at Forbes argues that Sacramento has the worst housing market in the country, stating that, “over-building and speculation helped the Sacramento housing market become one of the fastest gainers in the country during the housing boom. It’s now in a near free-fall.”
This past week, the National Association of Realtors noted that prices throughout the country are down 2% overall, but Sacramento has had one of the worst price drops this past quarter at a whopping 10.5%.
Sacramento Landing points to an article in the Wichita Eagle that reports that while speaking in Wichita, the Chief Economist for the National Association of Home Builders, Bernie Markstein, noted that: “‘This is fun talking to you guys…Imagine trying to pump up the people in Sacramento’.”
So, is there anything to be “Thankful” for this season? Well, if you look hard, there is a bit of a silver lining:
First, The National Association of Realtors predicts a “Modest Recovery for Existing-Home Sales in 2008 as Credit Crunch Subside“:
Lawrence Yun, NAR chief economist, said the housing market will improve from a steady unleashing of pent-up demand, and from a wide abundance of safer mortgage products. “The level of pent-up demand reaching the market next year is a bit uncertain, and it is possible for even higher home sales activity than we’re forecasting if buyers regain their confidence about the long-term benefits of homeownership. Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.”
Second, amazing news: Gov. Schwarzenegger met this past week with the for largest loan servicer of sub-prime loans and brokered an agreement for them to wait up to five years before adjusting them upward. This should offer much relief to many Sacramento residents who were fearing foreclosure. The Sacramento Bee reports:
The state’s voluntary arrangement with Countrywide Financial Corp., GMAC Mortgage, Litton Loan Servicing and HomeEq Servicing covers more than 25 percent of California’s subprime mortgage loans, which generally involve homebuyers with weak credit and require periodic increases in payments after initial low teaser rates.
The deal asks lenders to freeze low interest rates for subprime homeowners who reside in their property, are current in their payments and show they cannot afford a scheduled rate increase. Those homeowners who already have missed payments and who are threatened with foreclosure don’t appear to benefit from Tuesday’s agreement.
Third, there is plenty of evidence that a market correction was in much need after years of skyrocketing prices in the Sacramento area. This correction will most likely create a favorable environment for homebuyers to re-enter the market. The Bee reports:
Think back now to mid-2004 when Sacramento County’s median sales price for resale homes broke through the $300,000 barrier. It was a sensational moment.
“Housing prices hit milestone,” The Bee reported. The newspaper account said it took 13 years for prices to climb from $100,000 to $200,000 – and only two to “rocket” to $300,000.
Now it’s just as sensational seeing it slide back below $300,000.
That’s what happened in October, according to La Jolla-based DataQuick Information Systems. Half the resale homes that closed escrow last month in Sacramento County were priced below $295,000. From a buyer’s viewpoint, that’s an encouraging sign of growing affordability that will eventually revive this market.
Fourth, unless you just entered the Sacramento Real Estate Market within the past six months, you should be pretty happy. TrendGraphix reports that, since 2001, the average home’s value in Sacramento has increased more than 70% (if you live in the urban core, you saw an increase of 110%!).
Fifth, if you live in the urban core (or other more established parts of Sacramento), not only has the current market had much less of an effect on your home value, your homes are the most likely to see the quickest market turn-arounds (according to TrendGraphix).
While these little evidences of a silver lining do little to comfort those (especially in the suburbs) of Sacramento who have lost tens of thousands of dollars worth of equity, we are reminded that the current real estate market in Sacramento is a complex one. Over the next weeks in this blog, I will attempt to cut through some of that complexity an help to offer sober and realistic assessments of it. Please come back and make your comments.