Sacramento, El Dorado, & Placer County Real Estate
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Weichert, Realtors® Galster Group
5006 Sunrise Blvd #100
Fair Oaks CA 95628
916-966-8700 office
916-966-8706 fax
DRE Broker #01788488
5006 Sunrise Blvd #100
Fair Oaks CA 95628
916-966-8700 office
916-966-8706 fax
DRE Broker #01788488
No BS Commentary and Market Indicators
COMMENTARY: Timing, Location, Location. Many of my clients agree that now is a great time to buy. Prices are affordable, interest rates are adorable, lenders are affable, and buyers are not pressured into the unthinkable. Beyond that, we are accustomed to the new “normal”:
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Short Sales and REOs dominate the inventory.
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There is still active competition for nice homes.
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Buyers expect a deal.
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New is relative.
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I’ve noticed that appointments for showings are becoming an oddity since so many homes are vacant. More than 70% of the homes on the market are in distress (Short or REO sales). Many of the REO listings barely get broom-swept until the new owner purges and disinfects. Short Sales, if occupied, are still experiencing deferred maintenance. After all, not many are motivated to spend money on a house no longer theirs. Appraisals are done months after an offer is submitted and, in this market, the opinion of value can materially change in 60 days. Key learning: Offers should be submitted in consideration of the seller’s lack of motivation or ability to renegotiate after inspections.
Demographics and housing are constantly changing. Since the “housing birth-rate” (new construction) has been so low for 5 years, the housing population is aging. That means there is a higher chance of finding a “fixer” than something without issues or deferred maintenance. Although there are always some beautiful homes on the market, most of them are quickly put into contract (or Short Sale Contingent). Key learning: If you will require an FHA or VA loan, don’t bring grief onto yourself by expecting a fixer to pass the appraisal(s).
Investors, to the rescue [again]. Investors made up 30% of the sales for the last several months. These are diligent buyers picking
the low-hanging fruit. Because a loan is typically not a consideration, these buyers can take the fixers off the market, improve them, and thereby improve the neighborhoods and mitigate the declining age of our homes. Thank you, Investors.
Here is a current (January 23rd) data point for Short Sales and the level of buyer competition: Over 33% of the homes on the market in Folsom are Contingent. That means almost 70 buyers are or have been waiting for Pending. Not only is that a strong leading indicator (much easier to correlate with a SOLD), it also reduces the truly-available listings for other buyers thereby keeping prices relatively high. But there’s a catch to all of this: The buyer has a new “normal” too. That is “the buyer’s in charge”. It is almost a universal expectation that a seller is asking too much. In most cases (except for Fannie Mae), the asking price should be in close proximity to reasonable market value. But most sell for about 2-5% off of asking price. When buyers demand 10%+ percent discount and THEN want seller credits, it’s hard to swallow.
Key learning: The success rate for Short Sales has jumped and will continue to strengthen as we get better at navigating the various online and paper-intensive processes needed to negotiate a successful project. But the future may prove different if the HARP II program attains any level of success.
We are at the tail end of the contraction. After contraction comes recovery. The business cycle reflects reality. And the data, not the media, tells the truth.
Call me for the best listing or buying experience. You will become a raving fan. No B.S.
Here is a current (January 23rd) data point for Short Sales and the level of buyer competition: Over 33% of the homes on the market in Folsom are Contingent. That means almost 70 buyers are or have been waiting for Pending. Not only is that a strong leading indicator (much easier to correlate with a SOLD), it also reduces the truly-available listings for other buyers thereby keeping prices relatively high. But there’s a catch to all of this: The buyer has a new “normal” too. That is “the buyer’s in charge”. It is almost a universal expectation that a seller is asking too much. In most cases (except for Fannie Mae), the asking price should be in close proximity to reasonable market value. But most sell for about 2-5% off of asking price. When buyers demand 10%+ percent discount and THEN want seller credits, it’s hard to swallow.
Key learning: The success rate for Short Sales has jumped and will continue to strengthen as we get better at navigating the various online and paper-intensive processes needed to negotiate a successful project. But the future may prove different if the HARP II program attains any level of success.
We are at the tail end of the contraction. After contraction comes recovery. The business cycle reflects reality. And the data, not the media, tells the truth.
Call me for the best listing or buying experience. You will become a raving fan. No B.S.
These charts depict the momentum of changes in the underlying raw data to help forecast direction. These are not a guarantee of future direction but aid in the prediction of cause/affect in the various market forces. No single indicator tells the whole story. Also charted is the raw data itself. For an explanation, call or email Jay Emerson (916-517-9606, Jay@JayEmerson.com). The data is deemed reliable but not guaranteed. Sources include DataQuick, CBIA, Sac MetroList, and other public information.
Indicator #1 - Existing Homes Sold
December was another good month relative to last December and the number of Pending sales is at a healthy figure right now. Opinion: The bears are waking and the rains may be coming. Investors are out for the fruit.
Indicator #4 - Foreclosure Notices
November NOD filings were down 13% compared to October but NOTS (Notice of Trustee Sale) surged over 50%. Opinion: Banks are growing weary of the REOs on their books and are commencing final foreclosure actions. The best way to avoid foreclosures and REOs (and neglected homes) is to do Short Sales (or Deeds In Lieu).
Indicator #2 - Distressed Sales
REOs are under 35% of homes sold - that’s a low since February 2007. And Short Sales spiked to over 44% YOY. Opinion: At this rate, the purchase experience will be different but the inventory “should” be maintained by Short Sellers as we all await the lender’s decision(s). Banks are involved in most transactions so be prepared to wait, then hurry. Make sure you understand your rights and duties.
Indicator #5 - New Home Permits
Wow! Not only was this data posted in a timely manner, there are new homes being started. November was lower than October but still up 34% YOY. Opinion: Permits probably won’t be higher in the coming months as the weather may not “permit”. It’s still cheaper to buy than build.
Indicator #3a - Median Price (SA)
Sacramento has been sideways all year. Even the momentum is flat-lined. Opinion: This range will continue for the foreseeable future as supply is low and demand is now starting to grow.
Indicator #6 - Mortgage Interest Rate
They are standing on the rate but momentum is heading toward the zero axis. Some are warning of rate increases, which is logical. The cost of funds is almost free. Opinion: It is easy to get a quote. It is much harder to get a lender to commit to their quote. Ask me for a lender who has integrity. The politicians want YOU to have today’s rates (HARP).
Indicator #3b - Median Price (ED)
The El Dorado County median has been choppy and has let off what may be the last gasp as the momentum shows stability since July. Opinion: El Dorado County accommodated many high-end homes which have helped the overall price resilience. And, let’s face it, the beautiful homes on the hills bring it closer to heaven.
Indicator #7 - Listing Inventory
Supply is low. Equity sellers are only 30% of the market. Short sales are going into Contingent status at a greater clip. This chart now includes Contingent short sales – these are quasi-available, may become available, and may be occupied. Opinion: Inventory will slowly increase as will Short Sales successes.
Indicator #3c - Median Price (PL)
The Placer County median has been the most stable over the year and the momentum has not been negative since March. Opinion: Placer County, like parts of El Dorado County, accommodated many high-end homes which have helped the overall price resilience.
Indicator #8 - Months’ Inventory
Also known as “turn-over” as it equals the number of months required to sell all listings at the average Days on Market. This is a low number. The media is yelling “12 months” and that may be true for Gary, Indiana. It is not true for our 3 counties. Opinion: Throughput will remain low as buyers take time (or remain on the fence) and suppliers wait for sunshine.
Indicator #3 - Median Price (All)
This chart shows the comparison of the 3 counties. It doesn't include the momentum indicators but it's interesting to see the responsiveness of Sacramento's price changes compared to the other 2 counties. It is easy to notice the bubble is gone. In fact, the entire decade of appreciation is gone. Whether the appreciation was merited or not, we are back to 2001. To appreciate again, at a valid rate, many regulations and issues must be remedied.
Indicator #9 - Swing Indicator
This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. For November, 21 zip codes went up, 14 were unchanged, and 19 went down. Opinion: The pattern in the chart suggests that the cycles have been expanded with much more “red” above the half-way point. The green hump from June ‘09 to December ‘10 is what economists call the “upsurge between the two dips”. Whether the down-ticks continue to retreat depends on the supply and demand forces mentioned throughout this piece.
December 2011
CAVEAT: This commentary is my opinion of the Sacramento, El Dorado, and Placer County real estate markets using my eyes, ears, major market data, momentum analysis, current conditions, and the forces which affect our area. This is not a crystal ball and I am not a financial advisor. I am an actively licensed California Real Estate Broker with a passion for information and knowledge sharing. My method of collecting and analyzing this information (“momentum analysis”) is similar to that used in commodity trading. This is a speculator’s tool to predict the direction of the NEXT data point. (We all speculate every day.) A trader analyzes granular momentum data in order to take immediate ACTION for a lot of money. Traders can’t let the media paralyze them but they can’t ignore the various forces in play beyond the obvious change in plotted data. The value you obtain by following my system is the tip of the iceberg that comes when you hire me to represent you. Action is the key.
Indicator #10 - Consumer Confidence
This indicator shows the aggregate level of confidence as tracked by the Conference Board. The indicator is up for the last couple of months. Opinion: Merry Christmas and Happy New Year! That changes a lot of attitudes.
Summary of Major Indicators
