January 13, 2006

FLASH: Sacramento housing bubble has popped: New home sales down 57% for the quarter


Holy crap.

Remember when IT companies reported in 2000 that orders just fell off the cliff (right when they had maxed out production to meet demand)?

Same story this bubble. So much inventory coming on line around the country, at the exact wrong time.

Here's Sacramento. Absolutely amazing numbers. Anyone who bought in 2005 is absolutely screwed. Anyone buying today because of incentives will be equally screwed. Like buying Cisco when it dropped 10%. It's a long, long, long way down.

Sales of new houses fall 57%
Region's builders try to lure buyers with lower prices and free upgrades.

Sales of new homes in the Sacramento region plunged 57 percent in the last three months of 2005, forcing builders to offer buyers sweeter deals.

The incentives include paying off fees for roads, thousands of dollars toward granite countertops and other upgrades, and the option to make no mortgage payments for six months or more.

In some cases, builders are simply lowering their prices. For example, KB Home, one of the region's largest builders, recently cut prices on many homes 3 to 5 percent to stoke sales, said Jefferey Fautt, the builder's local division president.

"Sacramento has always been a nice, affordable market, and our prices just got a little too aggressive," said housing analyst Greg Paquin, whose Folsom firm, the Gregory Group, collected the data.

"So there are some price adjustments in some (areas) right now."

32 comments:

foxwoodlief said...

Ah graphs and their use of RED! So things have cooled? So what? If you look at all the areas on the graph, most ended the 4th quarter up, some almost 20% for the year. So your Pepsi stock went up 20% and flatlines ya think the stock market has popped? You going to sell? Just because home prices rising 20% a year is unsustainable and returns to normal or flat isn't the end of the world for housing or new homes.

How many of you house-doom bloggers will sell me their house in California at 2000 prices...oh, and by the beach.

It is still too early to tell what 2006 will bring but a melt down NOT. There will be winners and losers as there has been for the past 20 years in all industries in this country, auto, housing, retail etc. Buy right, buy sound, you are okay. Not all the areaas on that graph showed a negative so some of those areas must be WAY more DESIRABLE than others...location, location, location.

Robert Coté said...

NEW Home Sales. Still a monster number but it doesn't help to mislead in either direction. In order for we bears to retain credibility we need to be better than the other side. Please change the title to "New Home..."

Anonymous said...

In 1999, I purchase a Condo for $83K. I got into deep debt due to my education and foolishness, so I decided to sell. I sold in April of 2002 for 130K. Thinking I sold at the top of the marked. The condo that I sold sells now for $340K. This is a wooping 400% increase from my purchase price. Even though now I am close to debt free. I am crying on the side lines with no hope of ever buyging a home. I can't afford to buy at today's price even though my income doubled.
I am not sure when will this insanity continue. I only want to buy a home not an investment. :(

Anonymous said...

Hey foxwoodlief...

Are you visiting all the housing bubble boards today spewing your inane idiotic "reasons" for people to go out and buy right now? Go back to the rock you've been hiding under Troll. Your posts are pathetic and not welcome!

Excessively Diverted said...

Interesting to see such a large decline. It will be even more interesting to see where it spreads to and how fast it spreads. I read not too long ago that sales have slowed and prices are starting to inch downward in all of the overheated markets except for Florida. I'm not so sure there will be a price decline in FL even if sales decline. So far, no price changes in my area even with inventory up. I think the babyboomers will keep FL's market high. I recently read a report from U of FL that estimated that by 2020, 30% of America's seniors will live in FL.

xSparta said...

We have a housing "Bull" among us. Lets wait and see.......who's right and who is wrong. I think the word is finally getting out to the public through blogs like this one...good work. As a long time homeowner, yes Real Estate is in the long run a good investment, and a place to live. However, during the last RE downturn, it took almost 8 years for my house to "Re-gain" the paper losses incurred. Just like the stock market it's timing, timing, timing..

xSparta said...

Excessivly Diverted stated: So far, no price changes in my area even with inventory up. I think the babyboomers will keep FL's market high. I recently read a report from U of FL that estimated that by 2020, 30% of America's seniors will live in FL.



I have lived in FL and owned a home for 10 years. I just read that the median age of Floridians is getting younger, not older. The article did not explain how this number was arrived at. Could be a number of reasons. Also the migration in FL a wash according to the association of movers. No gain no loss of population. What gives with the U of FL study?

Wes D said...

"I read not too long ago that sales have slowed and prices are starting to inch downward in all of the overheated markets except for Florida. I'm not so sure there will be a price decline in FL even if sales decline. So far, no price changes in my area even with inventory up. I think the babyboomers will keep FL's market high. I recently read a report from U of FL that estimated that by 2020, 30% of America's seniors will live in FL."

Go to www.patrick.net and look around November at the articles. There are numerous reports from Florida that home sales and price appreciation have stalled. (I'm too lazy to look up the article but clearly remember it).

"Also the migration in FL a wash according to the association of movers. No gain no loss of population. What gives with the U of FL study?"

I read that study too but it's incorrect. The Florida population is growing by 300,000 people a year, which is significantly slower than it was just 5 years ago. Not sure why the slowdown. It's also true that many people are choosing to leave the state because of high prices and lack of career opportunities. I shall soon be one of those people. Just trying to make it until May.....

It's still interesting to see what's happening in the housing bubble around here. Things have really slowed down in my area. Will be very interesting to see what springtime brings.

Eric said...

Lol - hey! I was one of those guys who bought cisco when it was "undervalued" (aka, 10% down... long way to go. )

Excessively Diverted said...

Hey, don't shoot the messenger. I'm just telling you what I read. Frankly, I hope the real estate market in FL sinks like lead ala 1926. Not that I want full-time residents to lose their shirts, but rather the bottom feeding speculators.

I live near Fort Walton Beach. Not including Eglin AFB, Ft. Walton only has about 25,000 full time residents. In 2005, 64% of all home purchases here were made by investors who have jacked up the prices to ridiculous levels for this area. It's so bad, the Air Force is having a crisis over where to house new families coming to the base after the base realignment.

Inventory is up in my area and prices are flat but they are not declining. Here is probably an example why: the people across the street from me bought their 1800 sq. ft., 3bd/2ba house in 2003 for $167,000. They have decided to sell and listed the house in July '05 for $310,000. They have not had a single offer since July, not even a lowball. Are they lowering their price? No. Why? Their brilliant realtor told them not to. She insists it just the "winter doldrums" and come spring, there will be offers galore. What she failed to point out is that from July to October, they had no interest and it wasn't winter. People in FL are still convinced that the market will go up 25% per year and realtors are feeding their delusion so they aren't lowering prices. It remains to be seen if prices go down or just stay flat. Down would be nice.

foxwoodlief said...

To Anonymous, what is your beef? I'm not a troll, nor am I a realtor, I'm a medical professional and in my circles homes are not an issue nor the incomes to support them. My point in this blog is balance. No one wants to discuss reality, true costs to build adjusted for inflation, historic norms, other countries home values for comparison, the fact that most homeowners in this country are not over-extended nor bought their homes at over-inflated prices and tapped out all their equity or have payments they can't afford.

Why do you choose to remain anonymous? You're probably like they Dr I use to know in Florida whose father back during the civil rights bought homes and sold them (self financed) to blacks in white neighborhoods to spook other whites into fire sales so could bottom feed and to hell with other peoples assests.

And you apparently hear and see only what you want to. Yes I think paying $400,000 for 1800 sq ft in Phoenix is not supported by numbers alone and yes sold my house last March because I've always used common sense and not greed in my house choices. I value...VALUE...and won't pay some ridiculous price no matter what someone tells me it's worth. Did that stop me from buying elsewhere? No. Just because I may not choose to buy at $200 a sq ft doesn't mean that it may not be justified or that others may feel it is worth it or that those prices will fall.

I just want an honest discussion based on real financial fundamentals and comparing apples with apples. I won't compare a 1600 sq ft house in 1978 with a 3300 sq ft house in 2005. I won't compare median house in 1956 with 2006 unless there is adjustments for inflation, location and home size.

I don't care that a house cost $85,000 in 1980 even adjusted for inflation if that house had 1 bath, a carport, and formica counters. What is the value of the house I buy to day with all its ammenities and location? Oh, and I also won't buy in a Master Planned community either.

Wishing for Jesus to return isn't going to make it happen. Get a grip on reality and be responsible for your life and your financial choices. If you can't afford a house, move, get a educated so you can earn more or just RENT.

Grinch34 said...

Nobody is talking about the Glass-Steagall act of 1933. To my understanding this law has been repealed.

desi dude said...

good idea to take a lesson in history. (thanks to bear on ben's blog)
Below you will find a chronological listing of
selected Los Angeles Times articles originally
published between the years of 1985 and 1997
(inclusive) culled from their archives. The similarity
among headlines from then and now is quite
informative. But of course, the housing bubble of
today is far, far more extreme than it was then.

1985-1986: Housing is booming, inventory is low.

Housing Starts Surge 14.9% During January, Best
Gain in 20 Months
Los Angeles Times (pre-1997 Fulltext); Feb 20,
1985; pg. 1

Inventory of Housing Dips in Southland Unsold New
Homes Declined by 3.2% from End of l984
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Mar 16, 1986; pg. 1

Housing Sales Boom Keeps Inventories Slim
DICK TURPIN; Los Angeles Times (pre-1997
Fulltext); Aug 24, 1986; pg. 1

1987: Housing still booming, prices increasing,
inventories low.

High-End Home Sales Push Up Median Price
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Mar 15, 1987; pg. 1

Inventory of Unsold Homes Sets New Low
Los Angeles Times (pre-1997 Fulltext); Mar 15,
1987; pg. 1

Fewer Homes, High Prices as Mortgage Rates Climb
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Sep 10, 1987; pg. 1

Fixed-Mortgage Interest Rates Surge Woes Mount for
Home Buyers, Brokers
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Sep 10, 1987; pg. 1

Unsold Homes Inventory Drops for Third Time
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Sep 13, 1987; pg.1

1988: People start to question the boom. Realtors
assure us the boom will continue. Houses aren't like
stocks afterall.

'88 Outlook Bright for U. S. Real Estate
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Jan 10, 1988; pg. 1

County's Median Resale Price of Homes Reaches
$179,999, Costliest in California
JOHN O'DELL; Los Angeles Times (pre-1997
Fulltext); Mar 23, 1988; pg. 5

Unlike Stocks, Home Prices Rarely Collapse
JAMES FLANIGAN; Los Angeles Times (pre-1997
Fulltext); Aug 28, 1988; pg. 1

Southland Inventory of Unsold New Homes Lowest in
Decade
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Sep 11, 1988; pg. 10

J. M. Peters Reports Skyrocketing Sales for Second
Quarter
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Sep 14, 1988; pg. 5

Limit Issue Driving Up Home Prices
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Sep 18, 1988; pg. 1

Hot Housing Sales Belie Doom Forecast
Ryon, Ruth; Los Angeles Times; Sep 25, 1988; Vol.
107, Iss. 297; 8; pg. 1

1989: Prices are very expensive; affordability an
issue. Sales slow and prices drop. Mention of risky
loan types.

Housing Prices in State Climb 3% in February
Furlong, Tom; Los Angeles Times; Mar 29, 1989;
Vol. 108, Iss. 116; 4; pg. 1

Stock of Unsold Homes Drops Dramatically
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Apr 2, 1989; pg. 9

How First-Time Buyers CAn Get Their Piece of the
Dream
Myers, David W; Los Angeles Times; May 21, 1989;
pg. VIII1

State's Home Sales Drop 14% Median Price Tops
$200,000 for First Time
Crouch, Gregory; Los Angeles Times; May 25, 1989;
pg. IV1

Sales of Existing Homes in State Fall During May
Furlong, Tom; Los Angeles Times; Jun 23, 1989;
Vol. 108, Iss. 202; 4; pg. 1

Orange County Home Sales Drop by 22% in May
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jun 23, 1989; pg. 1

Realtors Tackle New Topic: How to Handle Slow
Housing Market
Myers, David W; Los Angeles Times; Oct 1, 1989;
pg. VIII1

Prices Drop, Sales Slow in State's Housing Market
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 29, 1989; pg. 1

Housing Affordability Rises Outside L.A., Orange
County
Kristof, Kathy M.; Los Angeles Times; Dec 06,
1989; Vol. 109, Iss. 3; D; pg. 1

Survey Cites Four California Banks With Possibly
Risky Realty Loans
JAMES BATES; Los Angeles Times (pre-1997
Fulltext); Dec 30, 1989; pg. 1

----------------------------

This is where we stand right now(actuall 2005 dec)
for a forecast read the next post

desi dude said...

here is the forecast for 2006!

but you lookback to get a good idea.

1990: Prices take a serious plunge. One article claims
that housing booms are a bad thing and we should hope
prices stay low. Increasing mortgage rates are blamed
for the bust. The word "recession" is mentioned. Gloom
and doom.

Home Sales in Southland Plunge in '89
Samuels, Alisa; Los Angeles Times; Feb 8, 1990;
pg. D2

The Number of Homes for Sale Sets a Record Real
Estate: San Diego becomes buyer's market, with 4,000
existing homes listed in January.
GREG JOHNSON; Los Angeles Times (pre-1997
Fulltext); Feb 13, 1990; pg. 2.A

Pray That the Housing Boom Stays Dead
Jones, Robert A; Los Angeles Times; Apr 24, 1990;
pg. A3

Climbing Mortgage Rates Hurt Existing Home Sales
Samuels, Alisa; Los Angeles Times; Apr 26, 1990;
Vol. 109, Iss. 144; D; pg. 3

California Is Nearing the Edge of Recession, UCLA
Forecast Warns
Anderson, Harry; Los Angeles Times; Jun 29, 1990;
Vol. 109, Iss. 208; D; pg. 1

California Real Estate Market Continues to Cool
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jul 26, 1990; pg. 1

Home Sales in July at Slowest Pace in 4 1/2 Years
Furlong, Tom; Los Angeles Times; Aug 28, 1990;
Vol. 109, Iss. 268; D; pg. 2

Realtors Hear Gloomy Price, Sales Forecasts
Myers, David W; Los Angeles Times; Oct 7, 1990;
pg. K1

O.C. Home Resales, Prices Fall Sharply Housing:
Realtors group attributes slump in county and state
figures to fears of recession.
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Oct 26, 1990; pg. 5

Housing Slump in California Seen Worsening
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 21, 1990; pg. 1

Anonymous said...

Excessively Diverted-

Wow that takes the cake! Blaming a slow market in FLA. on the "winter doldrums"!!!

Isn't that when everyone and there brother is swooping down to FLA for a piece of the sunshine?

cereal said...
This comment has been removed by a blog administrator.
Alfred said...

I only want to note that it's only Natomas and Folsom whose prices are falling. (I used to live in Sacramento so I know these areas) Strangely enough, Elk Grove prices have continued to rise in the last 12 months.

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Anonymous said...

Already starting to get ready for another hurricane season in Florida. Starts in June. Not sure how it will effect my real estate work. Tough business right now. So I enjoy taking a break and seeing what other people are up to. Enjoyed visiting your blog. Visit my site if you have a chance.

Anonymous said...

The real estate market really . Overpriced homes. Underpricing buyers. Especially tough to sell in a market more interested in hurricanes than square feet under air. But maybe this is the way. Enjoyed your site. Thanks.

Anonymous said...

Hint #5 for . Loose knobs, sticking and squeaking doors and windows, warped cabinet drawers, and other minor flaws detract from home value. Fix them. Most buyers assume there will be ten hidden problems for every one they see.

Anonymous said...

Enjoyed reading some of your blog. Nice to take a break from my own real estate work. Selling homes is getting to be a challenging business right now. Good luck, and thanks for the read. Visit my site if you have a chance.

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