Trends

June '08 Sacramento Home Sales Statistics

That’s right.  In January of this year, we saw barely 800 homes sell in the Sacramento region.  In June, we saw over 1600.  

Number of Homes Sold in Sacramento Region

What does this mean?  It means that as we sell through housing inventory, the market can begin to stabilize.

Average Sales Price in Sacramento

Over all prices are still low because so many of the homes that are selling are distressed, REO, and short-sales.  It is also why average prices are so low in specific communities but stay relatively stable in the urban core:  there are fewer foreclosures in the urban center.

From the Sacramento Bee:

The Sacramento-area housing market is still declining, but a surge of buying by investors in February helped spark the first major slowdown in Sacramento County’s long slide since 2005, DataQuick Information Systems reported Thursday.

February sales of new and existing homes in Sacramento County – the largest sector of the region’s real estate market – fell just 7.7 percent from February 2007, the La Jolla firm said. That’s the first single-digit decline in year-over-year home sales in Sacramento County since August 2005.

Likewise, the 1,015 existing Sacramento County homes that closed escrow in February were only six fewer than in February 2007. It was the first time in at least two years that year-over-year sales didn’t fall by double-digit percentages

DataQuick officials attributed the change partly to more investors buying foreclosed homes.

Investors who have been holding off have decided “to swoop down and grab what they perceive as a bargain,” said DataQuick analyst Andrew LePage. “That’s a natural part of the real estate ecosystem.”

But experts warn not to bet that the worst is over based on only one month’s data. February tends to be a slower winter month that is considered unreliable for trend-spotting.

Still, there’s no doubt the steep drop in home values – median prices in Sacramento County are almost 28 percent below last year’s figures – and relatively low interest rates have sparked interest.

LePage said investor buys accounted for 18.6 percent of February closings in Sacramento County. That’s up significantly from 12.7 percent in November and December. DataQuick counts investment homes as those where the property tax bill goes to an address different from the purchase site.

DataQuick said that median sales prices rose slightly in February from the previous month in five counties: Amador, Nevada, Placer, Sacramento and Yolo counties.

Overall, sales remained weak, though real estate broker Tom Zipp of Citrus Heights said Thursday that rising investor activity “traditionally signals the bottom part of the market.”

Closed escrows for new and existing homes in Sacramento County clung to a 10-year low for February, DataQuick reported. Placer County sales remained at an 11-year low.

Regionally, the 2,061 escrow closings in Amador, El Dorado, Nevada, Placer, Sacramento, Yolo and Yuba counties barely outpaced February’s 1,713 foreclosures, according to Fair Oaks-based Foreclosures.com. Sutter County sales figures were not available.

Those figures reflect a nationwide trend. Irvine-based researcher RealtyTrac reported Thursday that nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year, with Nevada, California and Florida showing the highest foreclosure rates. The overall U.S. foreclosure rate last month was one filing for every 557 homes.

Locally, LePage said first-time buyers are helping “set a floor” in the region’s most distressed areas for home sales and prices.

“They’re able to buy a house with safe and sane financing and a small down payment,” he said.

In Sacramento County only home builders saw a continued big decline in escrow closings. Builders, who are fighting for market share against the increasing dominance of banks selling their foreclosed homes, reported a 32.2 percent drop in closings in February compared with the same time last year.

Other highlights:

• Sacramento County showed a February median sales price of $257,000. That was down 27.7 percent from a year ago. But it was up from $253,000 in January. The median price is the point at which half sell for more and half sell for less.

• Placer County reported a 30.7 percent drop in sales of new and existing homes in February compared with the same time in 2007. Its $364,000 median sales price was down 15.3 percent from February 2007. But it was up from $360,500 in January.

• El Dorado County sales were down 25.3 percent from the same month in 2007. Its $405,000 median sales price for new and existing homes was 15.6 percent below a year earlier. Sales prices were down slightly from $407,500 in January.

• Yolo County’s February sales were down 27.2 percent from the same time a year ago. Its $318,000 median sales price was down 19.5 percent from a year earlier, but up from $307,500 in January.

The FOMC cut key rates by 75 basis points at their policy meeting today.  The fed funds rate now stands at 2.25%, its lowest rate since December 2004.  The discount rate was also cut by the same amount to 2.50%.  Under financial market turmoil and economic contraction, the Fed has abandoned a gradualist approach to monetary policy, cutting the fed funds rate by 300 basis points over the last six months, sometimes 50 or 75 basis points at a time and once between meetings. The aggressive rate movements have caused some divisiveness on the board, with two committee members dissenting today’s decision.  Nevertheless, the policy statement cites a weaker economic outlook with softer consumer spending and job growth, tighter credit and housing downturn as reasons for the large, simulative cuts.  The Fed also warned that inflation expectations have risen, making the task of reviving economic growth without sparking inflationary pressures a tricky endeavor.  The committee noted however that they expect inflation to ease under slower economic growth.  The Fed will maintain its easing bias for now and has room to cut further as is deemed necessary to promote moderate growth over time and price stability.

Federal Open Market Committee Policy Statement

Release Date: March 18, 2008

For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.  Recent information indicates that the outlook for economic activity has weakened further.  Growth in consumer spending has slowed and labor markets have softened.  Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.   Inflation has been elevated and some indicators of inflation expectations have risen.  The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.  Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully. Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity.  However, downside risks to growth remain.  The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were:  Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pinalto; Gary  H. Stern; and Kevin M. Warsh.  Voting against were Richard W. Fisher and Charles I. Plosser, who pursued less aggressive at this time.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2.5 percent.  In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York and San Francisco.

There’s some good news on the horizon for homeowners in cities like San Diego, Washington D.C. and Sacramento, Calif., where the real estate boom and bust has left those markets reeling from the effects of overbuilding, bad loans and foreclosures.

It’s a provision of the recently signed Economic Stimulus Act of 2008 that is designed to boost sales in cities where high home prices have historically prevented government-sponsored enterprise (GSE) lenders Fannie Mae (nyse: FNM) and Freddie Mac (nyse: FRE) from securitizing mortgages, a process effectively akin to insurance that lowers risk for both lenders and borrowers.

In Depth: Economic Stimulus’ Biggest Real Estate Winners

The provision calls for increasing GSE loan limits to 125% of a city’s median home price. Previously, all housing markets were subject to a $417,000 limit. The adjusted limit is capped at $729,750. The hope is that in raising the limit, more local residents will secure mortgages and buying activity will rise.

Before this took effect, in cities like San Francisco or New York, where the median home price is above $417,000, Freddie and Fannie couldn’t securitize homes at the median level. Without securitization in a tight credit market, home sales volume drops.

But now, loans originating between July 1, 2007 and Dec. 31, 2008, will see a temporary boost in the amount Fannie and Freddie can securitize. (Existing loans issued in the second half of 2007 can be refinanced under these new terms).

For some cities, that’s a monumental shift. Using median home prices that included condos, foreclosures and new construction, Radar Logic, a New York-based real estate research firm, calculated which markets’ housing stock would be most affected by new loan limits.

In Los Angeles, for example, a new loan limit of $700,000, or 125% of the current median price, would suddenly place 32% of homes in that metro under Freddie and Fannie’s umbrella, according to Radar Logic. In San Diego, another hard-hit market, the new loan limits open up 18% of the market to Fannie and Freddie securitization.

What do you think of the government’s plan? Weigh in. Add your thoughts in the Reader Comments section below.

In affected markets, this program helps in two ways. First, it makes home buying easier by making credit less risky for banks. Fannie and Freddie are backed by the federal government; the lower risk makes lenders more likely to offer credit because lenders know they’ll still recoup costs in the case of a default.

It also reduces consumer interest rates. Loans above Fannie and Freddie’s limit are known as “jumbo” loans, and because they aren’t backed by the government, these riskier loans carry higher interest rates. Under the limit increase in the stimulus package, loans that are recategorized from jumbos to conforming loans (54% in San Jose, 44% in San Francisco, 17% in New York) will carry lower interest rates. For potential buyers, this makes home buying more affordable, and for many current mortgage holders, it makes refinancing to a lower rate possible.

Taken together, these benefits should make credit less risky for lenders and cheaper for home buyers, which could help boost transaction volume and lead to price recoveries.

At least that’s what the government is banking on.