Sacramento Real Estate Views

Is This The Bottom of the Market?

Some Indicators Say This Could Be It

I keep my ear to the tracks regarding the real estate market in the Sacramento region.  I love it.  Analyzing data about the market is a lot of fun for me.  Lately, things aren’t adding up though.  I’m going to present a theory here that may be totally inaccurate.  It is plausible however and, after talking to a couple of my teammates about it, it could be that this market has reached the bottom.

I have seen the predictions that our region will lose another 15% to 20% this year.  Until today, that’s what I thought was most probable.  Here’s what we’re seeing now:

#1  The Foreclosure Rate Increased

From November to December, the number of NOD, notices of default, the first step in the foreclosure process, increased well over 30% in the Sacramento region.  The moratoriums that have been instituted by state legislation failed to work.  Delaying the inevitable?  Yes or maybe?  The January numbers won’t be out for another 9 days.

#2  The Inventory Decreased

The inventory, homes actively for sale, has decreased from January to February by 2.25%.  Not a large number but if you look at it, all moratoriums aside, it still doesn’t add up.  Seasonal you say?  The NOD’s increase but the inventory decreases?  What about homes that were foreclosed on prior to the start of the September 1 moratoriums?  Where are they?

#3  70% of Foreclosures Are Not on the Market

I read last night that of all the homes that have received an NOD over the last few months 70% of them are sitting there vacant.  They are not being actively marketed for sale.  These homes weren’t affected by the moratorium or the homeowners or tenants would still be in them.

Are they going to auction?  Are they going to be sold bulk?  No one seems to have that answer.

Some say the banks are waiting to defer their losses.  It used to be that when a bank had an non-performing asset on the books that Fannie and Freddie penalized them by not giving them as much money to make new loans.  That doesn’t seem to be bothering the banks right now. If it were, the inventory would be increasing. I’m no economist but it looks like this is no longer an issue.  Government policy intervention?  Hasn’t the stake in those GOVERNMENT SPONSORED ENTITIES gone up lately?  Yes it has.

#4  Are Prices Going Up?

A colleague of mine told me today that she has noticed that many homes have the “up arrows” (price increases) in the MLS more than have the down arrow (price decreases).  An investor told me last week that he has noticed what seems to be an uptick in prices throughout the region.

Econ 101:  Lack of supply increases demand.  Increased demand increases prices.

Are the banks trying to control the market, release fewer properties at a time to hopefully get a higher price for their asset by increasing demand?  Honestly, I haven’t seen the banks making good decisions like this.  What I’ve seen is that they take a home back that has 3 full price offers, put it into a bulk sale and sell it for .50 cents on the dollar.

#5  The Moratorium Has Been Extended

The moratorium on foreclosures has passed two end dates and has been extended to the end of February.  I’m told that this is a soft date and that, in fact, it could go on for longer.

#6  We Have a New President Who Has a Point To Make

I’ve been saying for months that I could tell you about what was going to happen up to January 20th but after that, all bets were off.  I felt that if he wanted to, President Obama could stop this foreclosure crisis on a dime.  Could it be that this crisis has been “Obamaized”?

I don’t know if this has happened but the indicators appear to point to the fact that something is going on at the highest level that we have no knowledge of….yet.

There is Only One Solution To This Crisis

I’ve read and listened to countless economist say that this crisis can be controlled by lowering interest rates and principal balances to near or below market levels for existing homeowners and that this is the only solution to stop foreclosure in it’s tracks.

To do this, the banks will need an incentive..how’s $850 BILLION incentives!  They will need to know that the government is going to back this or at a minimum there will be some advantage to them writing down the loan balances.

A final thought.  Can you say RTC?  That’s my .02 cents, what’s yours?

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Tags: sacramento foreclosures, sacramento homes for sale, sacramento real estate

This entry was posted on Wednesday, February 4th, 2009 at 7:32 pm and is filed under Real Estate Market Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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