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Double Dip Recession A REALITY!
Sacramento and Placer Counties Continue Value Declines
The May numbers are out and, from the county level, the region is still losing value. I was a bit surprised by this as, when you look at it from a city to city perspective, I saw value increases for both April and May in all Rocklin and Roseville zip codes.
The Rocklin and Roseville markets both gained in value or stayed flat in April and May. That said, how long can that last? When the values of other homes in the county are continuing to slide, it’s hard to imagine that the individual markets within the county will continue to go up for the long term.
When I first came to the region, Realtors who had been here awhile said plainly that the Sacramento region follows closely but slightly behind the Bay Area in terms of real estate market trends. Personally, I haven’t noticed that at all.
The Bay Area hasn’t lost 50% to 60% of it’s value while the Sacramento area has as a for instance.
Sacramento County
In addition to losing value, the values themselves are now under what they were at the market’s previous low point which for Sacramento county was $187K in February of 2009. As you can see by the graph, in May, the values were down to $185K.
Placer County
In Placer county, the previous low reached in January of 2009 was $312K and as you can also see by the graph below, the current low in Placer county for May is $295K.
Just like Placer county, Sacramento county will have communities where this isn’t the case. Given that value losses have now been going on since October, it’s considered a trend.
The downward pressure on values is expected to continue until at least mid 2012 based on third party information supplied by HousingWire.com. While I don’t know that our region will lose 25% more of it’s value, it doesn’t seem very likely.
Have An Underwater Mortgage?
The problem with continuing to lose value is the length of time it will take for values to recover. Values have now dropped, percentage wise, lower than during the Great Depression. Housing lost 33% of it’s value then and this time around, we’ve lost 35%.
The recovery time from peak to decline to peak reached prior to the Great Depression was 19 years. Even if we cut that number in half this time around it would be 9.5 years before most of the underwater mortgages held in our region are worth what is owed.
This makes a strong case for selling short now, renting and buying in a few years. If what economists are saying is true, values won’t be much different then than they are today.
(Click here for an a page regarding this scenario)
Are you considering selling your home but have an underwater mortgage? We are available for a free short sale consultation. Please call, text, email or just fill out the form below and we’ll be in contact with you promptly.
If you’re looking for the value of your home in Rocklin or Roseville, please go to Rocklin House Values.com or Roseville House Values.com for neighborhood by neighborhood values, up to date and free of charge.
Thanks for visiting!
Links:
#1 – Housing Wire.com article – http://www.housingwire.com/2011/06/09/shiller-predicts-further-home-price-declines-up-to-25
#2 – Values have now dropped – http://www.dsnews.com/articles/economists-weigh-in-on-home-price-double-dip-2011-05-31
#3 – Click here for a page regarding… – http://www.sacramentorealestateviews.com/underwater-mortgage-no-one-wants-to-lose-their-home/
#4 – Rocklin House Values.com – http://rocklinhousevalues.com
#5 – Roseville House Values.com – http://rosevillehousevalues.com
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Top 3 Reasons Why Now Is A Great Time To Buy!
The Long Term Housing Outlook Is Looking Stronger
This weekend, the Wall Street Journal came out with an article that reminded me of why now is a great time to buy a home IF your strategy is to buy and hold that property for the long term.
Long term in my mind is 7 to 10 years. Generally, every 7 years, people move into a new home. That may change now with the most recent downturn but the statistic is still valid.
Real estate cycles tend to be in the neighborhood of 7 years long. We started this downturn in the late 2006 to mid 2007 time frame. This means we are roughly 4 to 4 1/2 years into this cycle.
While this is one of the worst housing downturns in the history of our country, possibly the worst of all time, we are turning the corner of this downturn. Albeit slowly but just the same, there are indications that housing is beginning to settle.
Many economists that I’ve read and quoted have said that when the recovery begins it will be begin slowly. It may be difficult to detect at first but we’ll begin to see some indicators that look “hazy” but they will be there.
According to the Wall Street Journal, they may be coming into focus now.
Reason #1
Mortgage rates have been bouncing around over the last 6 months but as of June 2nd, they were hovering right around 4.55% for a 30 year fixed rate mortgage, one of the lowest rates in the last 50 years. Additionally, the spread between a 5/1 ARM and the 30 year fixed mortgage now makes the 5/1 ARM attractive to many borrowers.
I know, I know…that’s one of the loans that got the market into trouble in the first place but that’s not really the case. 
When the market is appreciating or set to appreciate, getting an ARM type mortgage product is not a bad idea.
The trouble was that when the market declined and you had a 5/1 ARM, there was no refinancing out of it as they value of the home secured by that mortgage had declined to the point where borrowers were stuck with their mortgages.
When the market is appreciating, refinancing out of an ARM product before it resets isn’t an issue. (^ from FreddiMac.com Weekly Mortgage Survey ^) The housing market locally isn’t appreciating yet and may not appreciate until 2013 but we’re closer to appreciation than we are further away at this point according to all indications.
Reason #2
Homes are more affordable now than they have been in the recent memory. The ratio of incomes to home prices is 20.9% lower than the 15 year average through 2010 and 12.5% lower than 1989 to 2004 average.
Simply said, housing hasn’t been this affordable since the 1980’s.
I usually wait until around the 10th of the month to report the sales and averages sales price numbers but this morning I took a quick look at the May sales numbers and across the board, we’re seeing two straight months of average sales price increases in Rocklin and Roseville real estate.
This is still not enough time to establish a trend but with pending sales numbers being through the roof all year so far, it would surprise me if we are done with any major value losses. Time will tell.
Indicators seem to be pointing that way…for now. 
Reason #3
Foreclosure numbers are down and this has been the pattern for the last 6 months at least. Once the we burn through the foreclosures, the normal forces of the market will begin to take over UNLESS the government sticks it’s nose in where it doesn’t belong further delaying the recovery.
Most economists see it being roughly 5 years before we burn through the foreclosure mess. Once the foreclosure mess has been reduced to rubble then we’re dealing with a standard market.
People have been sitting on the sidelines. We have a generation of buyers who are not comfortable with purchasing a home right now. It will take time for them to come around to being comfortable and until that time comes, they will continue to wait it out living with parents or renting/home sharing.
Getting them off the fence will be about jobs and the economy. That is already showing signs of improvement, sluggish, but improvement none the less.
Lenders are beginning to lend to people who have been through a short sale or foreclosure. Those buyers are going to come back into the marketplace over the next 2 years creating demand even more demand for homes.
Housing starts have been incredibly low and when the economy begins to recover, there may not be enough homes to meet demand. We could run into a situation within 3 years where, if the economy and jobs outlook significantly improve, we don’t have enough housing units for the demand.
The short version is simple. We could be closer to recovery than we were if this real estate cycle stays true to history. Wouldn’t be nice to buy at the perfect time for a change? I know a lot of people who would love to.
As I’ve said before, time will tell.
Looking for a Realtor to help you purchase a home in Rocklin, Roseville or anywhere in the Sacramento region? Please call, text, email or simply fill out the form below and I’ll contact you promptly.
If you’re considering selling and are curious about the value of your Rocklin or Roseville home, please go to Rocklin House Values.com or Roseville House Values.com for neighborhood by neighborhood home values.
Thanks for visiting!!
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QUICK STATS: Distress Listings Comprise 68% Of Homes For Sale
Rocklin & Roseville Markets Short Sale Ravaged
We all know that the real estate market has been tough but not even I thought it would get this bad. (click to expand graph)
I ran some numbers, just out of curiosity, and found that distress sales, short sale and bank owned foreclosures, make up about 70% of the Rocklin and Roseville real estate markets currently.
- I generally don’t add in the “active short sale cont.” status properties but thought I should considering these homes are not in pending sale and could go in a few different directions:
1. Get bank approval and close.
2. The buyer could walk and it could come back on the market. (this happens A LOT)
3. It could not sell, go to foreclosure then be sold at auction.
As such, they should be included in the statistics until they are in pending sale or sold/closed. “Active short sale cont.” is to real estate what being in “limbo” is to hell.
So Are We In A Double Dip or Aren’t We?
The Case/Shiller index just came out for the first quarter that reflected that most of the nation is in a double dip housing recession. I did a quick check on values in our area and values did tick up in April in all zips of Rocklin and Roseville. Sacramento county has remained the same.
I ran the preliminary numbers for May in 95765 zip of Rocklin however and the values, preliminarily, look like they came back down in May. The average sales price in April was $313,000 and in May it looks like it declined again to $295,000.
It looks like we’ve entered into a period of volatility in housing where we’re going to be seeing the same basic pattern in values that we saw in the early 90’s going forward. Up a little, back down some, up a little, back down some.
It’s fun to watch and very interesting to dissect.
Looking for an agent to help you buy or sell a home in Rocklin or Roseville? If so, please call, text, email or simply fill out the form below and I’ll contact you promptly.
If you’re considering selling your home in Rocklin or Roseville, visit Rocklin House Values.com or Roseville House Values.com for neighborhood by neighborhood home values. Both sites are brand new and under construction but check them out and if you need the value of your home, just let me know.
Thanks for visiting!
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“…Worse Than The Great Depression”
I Thought I’d Never See This
UPDATE 6/5: I just found this article and wanted to include it.
In an article today DS News, analysts are now calling our current housing downturn worse than that of the Great Depression. The article cites that during the Great Depression housing values lost 31% and in our current downturn, we’ve lost in the neighborhood of 33% nationwide.
Simply an amazing time to be in this industry. We’re seeing what our grandparents saw in the 1930’s.
Now the really bad news…
If There Was Ever A Case For Walking Away From Your Underwater Mortgage, This Is It
The article goes on to say that, after the Great Depression, it took 19 years for the peak in home values to be reached from where they first fell.
Let’s say that there’s no way that’s true now and take 5 years off. That’s still 14 years to get back to where we were in 2006. Sorry, in no way is it a good financial decision to hold onto an underwater mortgage for that long.
More Value Declination
Well I thought that was the bad part…the article also says we’re not at the bottom and we’re looking at 5% to 15% more losses in value this year.
Please keep in mind that real estate is very local and that what is occurring nationwide may or may not happen here. That said, based on the past 6 months, it looks like the national and local pictures are pretty close.
I don’t think I have anything else to say here…for a change, I’m speechless!
If you’re considering a short sale, please call, text, email or simply fill out the contact form below. I’ll be in touch with you promptly.
Looking for the value on your Rocklin home? Please go to Rocklin House Values.com for neighborhood by neighborhood values in Rocklin.
Looking for the value on your Roseville home? Please go to Roseville House Values.com for neighborhood by neighborhood values in Roseville.
Thanks for visiting!
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Case/Shiller Index Shows Double Dip In Home Values
Not A Surprise
I’ve been talking about there being a double dip in home prices for months and it’s been confirmed by the company leading the way in home sales statistics.
Case/Shiller came out with their report on housing prices in the first quarter of this year. We are in a double dip housing recession. When things looked like they were getting better mid last year, the rug has been pulled from underneath the housing market.
What is a surprise to me is the national sentiment that is gaining ground on a local level.
I didn’t pay attention to it a year ago when it became clear to me but there seems to be a growing segment of the population that sees home ownership as a negative thing vs. a positive thing.
I was sitting with a client and close personal friend of mine last year and we were discussing getting their home sold short. She has two beautiful and very talented daughters one of which, she’s almost 30, said point blank that she was in no way considering purchasing a home now or in the near future.
Both her mother and I were a little shocked by this but she said she was deterred from considering a home purchase due to what her parents have gone through.
That was echoed this morning in an article I read that cited that those who had been renting for the last 10 years and investing the difference of what they had saved by not purchasing actually were financially better off than those who had purchased a home.
Additionally, the sentiment that was verbalized by my clients daughter is also out there among people her age nationwide.
My how things change.
Local Vs. National Housing News
Real estate is a very local thing. Each economy, as is indicated in the Case/Shiller report, is experiencing similar but not the same results. It’s important to consider the following things when comparing this report to what is actually going on in our local market:
- Our inventory, homes for sale, has been declining since last October. Nationally, there seems to be a glut of homes for sale.
- The amount of time a home stays on the market has been declining along with the total number of homes for sale. Homes are moving faster than they were 6 months ago. Nationally, this doesn’t seem to be the case.
- Pending sales have increased every month this year. While sales don’t seem to be skyrocketing, the pending sale numbers have.
- While most of the region saw the prices bottom out in April, May is reflecting a slight recovery in prices in the areas I report on.
- There are multiple offers on just about any home that is decent. In the below $150K market, houses are flying off the shelves to all cash investors.
This doesn’t sound like the picture being painted nationally does it? That’s because real estate is local and statistics, as far as trends are concerned, take a few months before they are considered “trends”.
I’m not saying that the Sacramento regional real estate market is in recovery mode. I believe we are far from anything that looks like a recovery but I don’t think that the national picture fits our market perfectly either.
Real Estate A Good Investment?
Whether or not buying a principal residence is a good investment depends on how long you intend to live in your home. Historically, real estate cycles turn every 7 years. We’re almost 5 years into this cycle and right now it seems like this recovery will take longer.
This downturn is unprecedented in the history of our country. Only the Great Depression was worse but we recovered nicely from that and I have no doubt that we’ll recover from this downturn as well.
Being that we’re more than halfway into this cycle, even though we’re in a double dip, buying a principal residence is still a good idea just based on the tax benefits of owning a home.
Is it a good investment? That is another question all together. One thing is for sure…you can’t create a home from a stock portfolio. We all need a roof over our heads. The trick is to buy when the market is low and it seems like we may be close to that.
When that will be though is anyone’s guess and we won’t know until after it happens.
That’s my take, what’s yours? I’d sure like to read your thoughts so comment away!
Looking for a Realtor to help you purchase your next home? Please email, text, call or simply fill out the form below and I’ll be in contact with you promptly.
If you’re looking for the value of your Rocklin home, please go to Rocklin House Values.com or if you’re looking for the value of your Roseville home, please go to Roseville House Values.com. Neighborhood by neighborhood values unlike any local website out there. FREE!
Thanks for visiting!
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28% Of Homeowners Underwater…..Nationwide
It’s Almost Double In Sacramento
An article on HousingWire.com this morning reveals that 28% of homeowners are underwater nationwide. Nice huh?? 
I think the rest of the nation should feel good about that. The reason being is that the Sacramento has almost double the amount of homeowners underwater as the nationwide average.
According to Zillow, over 51% of homeowners in Sacramento are underwater and it’s not getting any better in fact over the last 6 months, most areas have lost more value and the region, Placer county included, is double dipping meaning that we’re beyond the lows were set in late 2008 and early 2009.
The table below shows the 4 highest negative equity cities in this sampling of metropolitan areas.
Economic Disaster
Economically, this is about as unhealthy as it gets for homeowners and the toughest thing about this is that there isn’t getting any better in the near term. Based on what the market looks like right now, this will a long term problem for the Sacramento regional real estate market which will affect the long term financial stability of the region.
Recovering from this will depend on so many stars aligning that I don’t know if we can count on any prognostication to tell when this will start to turn around.
If you’ve purchased a home in the last 7 or 8 years, you’re probably looking at it being another 10 before values even come close to where you purchased and it may not even come close then. It depends on so much turning around and I’m afraid that it just won’t happen fast enough.
If you’re thinking of selling your home but owe more than the house is worth, I may be able to help. The State of California has, as of the first of this year, passed Civil Code 580e which absolves a homeowner from legal liability from your lender (first mortgages only) regardless if it’s a purchase money loan or a refinanced loan.
Not sure what that means? Essentially it’s a free pass from your first mortgage. Please call, email, text or simply fill out the form below if you have questions.
Thanks for visiting!!
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Housing Takes A Double Dip
California Dipped In March….The Rest Of the Nation?
Well…
Dip, dip, dip…
The numbers are in and folks, we are in double dip recessionary times!! Yippee!! I’m giddy with delight!! 
I’d rather have a double dipped World Class Chocolate cone…and spill it all over me than this.
HousingWire.com, my most recent resource for housing information relevant to the Sacramento and Placer counties real estate markets, is reporting that the nations home values have now dipped down below their lowest levels back in 2008.
With that, what’s going on in our market?
We’ve been talking about the possibility of a double dip in housing values but, while we were always “riding a razor blade” with the possibility of tipping either way, that time has past.
We have tipped.
The graphs below show the Sacramento and Placer county real estate markets where we were at the previous low and where we are today.
Sacramento County
The double dip, according to Metrolist Services Inc. TrendVision, hasn’t happened in Sacramento county but it’s a close as you can get – within $1000 of matching the low of 2008.
The previous low, in February and March of 2008, is $187,000.
The graph below shows where we are today at $190,000 but in February the average sold price was $188,000, just $1000 off the low of 2008.
Placer County
Placer county has not been as fortunate as Sacramento county. Placer county has gone below the previous low’s of 2008 to new low’s in 2011, a true double dip in housing values. The low in 2008 was $312,000 while the low, so far, is $302,000 in 2011.
In both counties, home values had begun to recover then, after withdraw of government intervention from real estate markets nationwide, they leveled off and began to decline once again.
How Low Can We Limbo??
Who knows? Anyone who says they do is scary, plain and simple. Most were calling the bottom of the market in 2008. Surprise!!
One thing about thinking or stating that you think the values will continue to go down is that if you’re wrong, no one notices. But if you’re calling the prices to go up and you’re wrong, the world notices.
Where the bottom will be, and I hope it’s this year, no one knows. Values in Placer county have breezed through the low of 2008 like the Germans breezed through France in WWII. No resistance whatsoever.
Sacramento isn’t giving up the ghost so easily.
Incidentally, the last time before 2008 the values in Sacramento county were below $187,000 was March of 2001 when the average sales price was $185,000.
For Placer county, the last time values were below an average of $302,000 was March of 2002 at $297,000 before going up to $314,000 in April of 2002.
This is your source for local real estate trivia!!
Looking to buy or sell real estate in the Sacramento or Placer county region? Whether you need to sell short, looking for bank owned foreclosures, investment property buying or selling, we can help.
Please call, text, email or simply fill out the form below and we’ll get right back to you.
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