Sacramento Housing Bottom Driven by Low Inventory

The monthly real estate report from Mike Lyon’s Trendgraphix report has some interesting data. Mike says it better than I can so here are a few selected quotes:

In a reaction to REO inventories now below one month’s supply, more buyers are turning to short-sales in hopes of snagging the home of their dreams. (emphasis added)

…the price-per-foot is on the rise in Sacramento, Placer and Yolo counties…

Even the Non-REO inventories have dropped down to a 4 months’ supply which is very different from last year at this time when we had 9 months supply of inventory.

We still anticipate large numbers of REO properties to enter the market in late spring but if they are spread out and absorbed quickly there is the real possibility that prices under $200,000have seen the bottom.

Sacramento is experiencing very high unemployment and the state of California’s financial woes do not bode well for the local economy. The price per square foot gains are only a couple of percentage points and that number is about 1/2 of where it was 4 years ago.

It appears a bottom is forming in the Sacramento real estate market driven by a shortage on the inventory side. I would not want to see homebuilders rush in and pump up inventory, but at the same time, some renewed construction would be positive for the employment side.

I have theorized that when home prices started to uptick it would unleash a buying gold rush. It now seems the gold will be in short supply and the banks holding foreclosed properties may be able to hold out for better prices than the current going rate. It will be interesting to see what happens.

Comments

[ThePhoenix:]

You do not really believe that do you? The shadow inventory is huge and what you really have is market manipulation. Foreclosures are coming in at record numbers and the buyers are investors and some first time homebuyers. This is the spring, an uptick was totally predictable but once you go through the small pool of buyers, this monster will roar its head with rising inventory populated with shadow inventory and the wave of new foreclosures coming after the moratoriums ended two months ago.

May 14 08:29 AM

[cobblestone:]

I agree with ThePhoenix and would add:
* interest (mortgage) rates expected to rise due to excessive printing of money, making homes less affordable;
* rising federal and state taxes and fees;
* state and local government layoffs continuing as there are no building fees to support personnel infrastructure;
* rising unemployment (in most industries);
* devaluation of dollar;
* expiration of state and federal tax credits (I hope they extend), thereby reducing demand;
* rising foreclosures from Option ARM and Alt A loans starting first quarter 2010 through first quarter 2012; and
* continued lack of home buyer credit and construction financing.

It's not going to be pretty.

May 14 12:46 PM

[Urbane Gori...:]

Tim.... You've been calling a bottom in Sacramento Real Estate for about a year now.

The last time I posted a response, I noted my once $230K home off of Florin was now worth about $110K ... I just rec'd a housing update. Of the 8 recent sales in my area, all were REOs and under $90K ... One was less than $30K ...

When I see prices at $1 as they are in parts of Detroit, THEN I'll know we have hit a bottom ...

Time to stop that wishful thinking ;=)

May 14 02:15 PM

[Alan Young:]

Sacramento also lies in a flood plain. Rising sea level and disrupted weather patterns (which may cause early snowmelt, overlapping the rainy season) will add to the risk. Homeowners in the area may be underwater, in more ways than one, for a long time.

May 14 04:51 PM

[couchy:]

Yah, and you all haven't even taken account when Zeus releases the kraken starting third quarter this year!

May 14 10:32 PM