Sacramento Real Estate Views

Inventory Of Single Family Homes Continues Decline

3 County Area at Lowest Level in Years

According to Metrolist Services, Inc., there are only 5403 detached, single family homes currently available for sale in “active” or “active short sale” status’ in the Sacramento, Placer and El Dorado counties area.  This is down from around 14,000 homes for sale at the same time in 2008.

This is the lowest level of detached, single family homes for sale that I’ve seen since beginning to track this type of information 8 years ago.

Average Sales Price Increases

When comparing the average sales price in January to December, we see an increase of 13% in the 3 county area.  While that may seem like a lot of appreciation, there is evidence that this level of appreciation will not last in the Sacramento region and that a reversal of this trend may occur.

Information from several sources seems to indicate that the current housing “recovery” seems to be very dependent on government based incentives/programs and some pundits believe that when these go away (if they do) and interest rates rise (which they are) that the housing market nationally will see another dip in values.

Another Housing Crash?

Most of the Realtors I speak with are so tired of this market and many have thrown in the towel.  The government intervention has perpetuated what most thought would be over by now.  But this is where we are so now what?

There are many indicators that there is another mini crash on the horizon and that values have yet to hit bottom.

More Foreclosures?

Yep, more foreclosures.   There seems to be, from what I’ve been studying, at least two more layers if not more of foreclosures to come from the following sources:

1)  We have more mortgage resets. Apparently, someone was still selling negative amortization loans or 5 year ARM’s that have yet to reset.

2)  Just giving up. Some are seeing a housing market that will not be recovering for the next 10 years.  While I think that’s a little extreme, we’re in a stand still for the next 5 years at least in the Sacramento region depending on what price range your home falls into.  It has made owning your own home look like it isn’t the great investment it once was.  People are walking out on their homes and renting.  For some, it looks like a better financial decision.

This could translate into more homes available for sale which will be exacerbated by:

3)  Interest rates are going up. While interest rates bounce up and down in every moment, they have been kept artificially low by the Fed’s purchase of mortgage backed securities.  That program will soon be gone as well and economists are predicting mortgage rates above 6% by year end.

4)  Tax credit is expiring. On April 30th, if you’re not in contract on a home purchase, the tax credit will no longer be available to you.  If you are in contract and you don’t close by June 30, the result will be the same.  Some believe based on the November demand for housing which declined that buyer demand after April 30 will wane, reduce sales and inventory of homes for sale will increase driving prices lower.

More inventory, lower demand is the prescription for lower values.

Who Knows?

All of this is speculation, to be sure.  If the “experts” really knew what they were doing, we wouldn’t be in this mess in the first place.  There could be a knight on a white horse coming to recover the country from what it’s gotten itself into…ya think?!  Not so much.  For now speculation is what we’re left with.

And of course blog fodder!

Thanks for visiting!

Related posts:

1. First Quarter Home Sales Decline

Tags: sacramento homes for sale

This entry was posted on Thursday, January 7th, 2010 at 12:13 pm and is filed under Home Sales Reports, Sacramento. 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.

1. Rachel said at January 7th, 2010 at 1:13 pm

   Excellent article…. grim news, but pretty much how it is. When do you think we will start seeing the shadow inventory making its way onto the MLS?

2. robsaxe said at January 7th, 2010 at 1:40 pm

   Hi Rachel, Thanks for your comment. That’s a tough one to pinpoint as no one seems to have any clue as to how or when. I’ve heard anything from the next 30 days to after the first quarter to the government creating a “asset clearing house” much like the RTC of the late 80′s. (’89 I think) No one really knows but even if it doesn’t come on all at once, with demand down after April 1st, even a trickle will quickly increase inventory levels.
   In December, 829 detached single family homes sold in the 3 county area. Since January 1, 220 have come on the market. (these numbers are estimates) It’s not hard to see that if sales decline by 25% and the inventory increases by just 25% we would’ve had 622 sales in December and 275 new on the market so far in 2010. In a month that’s 1100 homes new with 622 sold leaving an excess of 478 in the month. That would add almost 6000 homes to the inventory in this example if a condition like this continued. (unlikely but fun to extrapolate)
   Thanks again for your comment!

3. Mark Hanson said at January 9th, 2010 at 7:29 am

   Great blog. Don’t forget the supply source from failed mods. Remember, foreclosures have only been running about 33% of potential because of the govt endorsed mortgage mod plan – HAMP. But as you have read it is not performing well. 2010 will be the year that these millions of foreclosures held up in the pipeline in 2009 are sorted out either through foreclosures, deeds in lieu or preferably short sales. Because of the pent up foreclosures supply hung up in the pipeline, foreclosures could double in 2010 and short sales go up exponentially.

   The 2009 market was not a real market in that the distress supply was held back and demand was artificially stimulated through the tax credit and rates that likely will not exist in 2010. This year the market will have to absorb this extra inventory with higher rates and perhaps no tax credit for part of the year, which could prove challenging.

   Just my 2 cents.

4. robsaxe said at January 9th, 2010 at 7:32 am

   You’re absolutely right, Mark. GREAT comment, thank you so much for adding it.

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