Is it time to buy? (San Jose, Sacramento: sale, foreclosed, renting)

[DMenscha]

Originally Posted by edwardius

Unlike the stock market, real estate prices have momentum. When prices are going up they tend to keep going up, when they are going down they tend to keep going down.

The stock market is a liquid marketplace. Real estate isn't. So while the stock market can zip up and down on a daily basis, it also has momentum. So do commodities.

There's other posts around here talking about multiple offers on some properties and some price firming at the bottom end. I don't know the Sacramento market at all and I'm pretty sure I'm glad I don't participate in it, with your reliance on statistics from the past, I'd expect you to be able to call the bottom, yet you just keep repeating that prices have fallen.

You're obviously a bright guy, so tell us when the bottom will be and what the median price will be at the bottom.

[keoilani]

Hi All,
I am new to this forum but I am not new to the real estate market in the Sacramento area. I have been in the biz here for 21+ years and this is my second nasty market as 1990 was no picnic either. . My suggestion to understand what is happening in our market and to get a feel for when or if we have reached the bottom would be to check out the Sacramento Association of Realtors statistics.
If you put a search in goggle for just that you can read the actual facts current up to end of October this years. You can also check out Placer Association. But understand that Lincoln and the general Placer county area is a suburb of the Sacramento area. The numbers overall are looking better than they did and that is good news.
Also, yes we are starting to see multiple offers on some properties. We are seeing more and more investors coming into our market for one and when a property is priced right everyone gets on the band wagon. My husband who is also a Realtor here recently closed one REO listing that he had 21 offers on and the property sold for $40,000.00 more than the listed price, all cash to an investors. We also just put one couple into escrow that were on offer number 4 because they got beat out in price on the previous 3 offers.
So is it changing have we hit bottom?? Who knows for sure.
Prices are good now, investors can now cash flow on rentals and properties are more inline with the average income in the area.

In my personal opinion, I see that as we those that have employment, sit and wait for a better deal, there is less flow in the economy because we have all shut our wallets. Which creates employers needing less employees and raises unemployment which cause people to not be able to afford their homes and more foreclosures and the ball rolls farther..... and on and on.

Keoi

[edwardius]

Let us look at the forecasting record of the National Association of Realtors.

Back in 2005, the National Association of Realtors said that it was highly unlikely that housing prices would drop significantly in Sacramento. "With housing prices rising strongly throughout most of the country, there has been widespread media coverage of the possibility of a housing market bust. A thorough analysis of the Sacramento-Arden-Roseville metro market, as detailed below reveals little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for buyers who plan to reside in their homes for a long time. " In their forecast, they thought a 5% decline would only occur under extremely unusual scenarios.

http://web.archive.org/web/20051231064046/http://www.realtor.org/Research.nsf/files/Sacramento.pdf/$FILE/Sacramento.pdf

Now lets look at there forecasting record. In Aug of 05, housing prices peaked in Sacramento County at $392,750.

http://www.sacrealtor.org/documents/...tics/aug05.pdf

As of the latest release for Oct 08, the median for Sacramento County is $195,100.

http://www.sacrealtor.org/documents/...ctober2008.pdf

Today housing prices are just under 50% of what they were at peak.

The forecasting record of the National Association of Realtor's is so bad that it has spawned two different websites dedicated to pointing out the misdeeds of the current and past chief economists for the National Association of Realtors.

Lawrence Yun Watch - Follow the NAR's hack as he denies the housing bubble and crash
David Lereah Watch

When the chief economist of the NAR is responsible for books like this, it calls into question the credibility of the entire organization.

Amazon.com: Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today's Expanding Real Estate Market: David Lereah: Books

These guys are worse than Enron.

[edwardius]

Originally Posted by DMenscha

The stock market is a liquid marketplace. Real estate isn't. So while the stock market can zip up and down on a daily basis, it also has momentum. So do commodities.

There's other posts around here talking about multiple offers on some properties and some price firming at the bottom end. I don't know the Sacramento market at all and I'm pretty sure I'm glad I don't participate in it, with your reliance on statistics from the past, I'd expect you to be able to call the bottom, yet you just keep repeating that prices have fallen.

You're obviously a bright guy, so tell us when the bottom will be and what the median price will be at the bottom.

In past real estate downturns, the real price of housing in this area has always bottomed out below 150K, so I definitely think that is likely. In fact until 1989, it was highly unusual for the real price of housing in this area to be above 150K and in the past the real price of housing in this area has been as low as 105K.

http://mysite.verizon.net/vodkajim/h...e%20Prices.xls

The difference between 150K and 195,100 (the current median price for Sacramento County) is large enough where I think its prudent to see if price levels are going to drop another 25%. If prices turn around before they drop to that price, I will change my recommendation. But given the momentum in real estate prices, in a down market, I don't believe in betting against that market until I see evidence that the market has in fact turned around.

http://www.sacrealtor.org/documents/...ctober2008.pdf

[zen_klown]

I appreciate your thinking. Nevertheless, I think there are places like this where right now it makes sense to buy the property.

Even if you got 100% financing, and offered the full asking price, your payment probably wouldn't be over $250 a month, the HOA is $185.

Cameron Park and Placerville Real Estate

On craigslist, you can find similiar condos in that neighborhood, where they are asking $725 a month.

A Nice Upstairs Foothill Farms Condo

That means by buying now instead of renting, you are saving roughly $300 a month, granted you have to pay for maintence and insurance out of that $300, but on paper the argument for waiting here seems pretty weak.

There are a lot of places like this in Oak Park, in Del Paso Heights and some even in Natomas or Elk Grove where on paper buying now seems to pencil out right now.

I grant that in the more expensive neighborhoods, I think there is significant risk for further drops, but in the low end, I think we have seen the worst of it.

[edwardius]

First given the weaknesss of employment in the local and national economies, I am not sure how well rents are going to hold up and I suspect that vacancy rates will also be going up overall in the Sacramento region.

As to this specific deal, on paper it does look pretty good. But its a short sale and in practice those can take a fairly long time to get approved and they don't always go through at the listing prices. I would also like to see the condition of the property, is there mold damage, termite issues etc? Often properties are priced really cheap for a reason. But assuming that these issues weren't there, I grant you that it might be worth the risk to buy now.

But I also think that is the exception to the rule. In most of the Sacramento region, I still think that properties are still too high and still face a significant downside risk. Property price levels can overshoot in both directions. During the boom property prices got higher than were probably justified. I think at botoom price levels are going to overcorrect the other direction. In Texas and Az after the S&L crisis, real housing prices hit new lows. I could see something like this here as well.

[AuburnJack]

We bought in July. It's a brand new house in a nice, quiet West Sac neighborhood, close to shopping, schools, parks, and downtown Sac. It had the layout and features we wanted, and is large enough to start a family in.

Prices have dropped a little bit since then, so it's conceivable that we might be 10K or so underwater right now. Prices will probably drop a little more in the next year or two, as well. So our imaginary money that we would hypothetically get if we put our house back on the market tomorrow isn't as much as it could have been. So... okay. Our mortgage payment hasn't changed, and we can still afford it. Ever bought a car? Did you buy it as a monetary asset, or did you buy it because you wanted to own a vehicle?

If you feel like you want to own a home, and have found one that has everything you want and is affordable now and in the foreseeable future, then buy it.

[CMKM-Miller]

Originally Posted by wburg

When it's right for you, basically. If you can afford the payment comfortably, and you can get the credit without an ARM or other tricks, and you want to move, buy. Don't worry about gaming the market; you're buying a place to live, not trying to break the tables in Vegas.

Listen to this advice. When your buying a home, your buying it for the longterm. Not to make a quick buck. I think now is a great time to buy if you plan on being in the home for a long time. Trying to sell a home now can be a different story....

[DMenscha]

A case in point. Earlier this month a bank repo came on the market and the agent managed to convince the bank to put it on at $145K. The house is easily worth 200K and I would have made an offer on it except that we had 2 clients who also made full price offers. Another agency also had an offer in and my 2 clients didn't want to engage in a bidding situation.

So while I could spout statistics about the market in general, at least 4 people wanted this house at that price. Should they have waited to see if the bottom had been reached? I'm thinking they got instant equity because if I had bought it, I would have invested $1000 in repairs and put it back on the market at $200K, which would still be a good buy. The right price is now and will always be a subjective judgment based on what is happening at the moment, not a statistical exercise.

[edwardius]

Originally Posted by CMKM-Miller

Listen to this advice. When your buying a home, your buying it for the longterm. Not to make a quick buck. I think now is a great time to buy if you plan on being in the home for a long time. Trying to sell a home now can be a different story....

I agree that its important to think about the long term, but even you are planning to be in the home for a long time, there is an excellent chance that if you buy today, you will be upside down for the NEXT 10 YEARS. We know this because it has happened in the past in Sacramento County.

In July of 1990, housing prices peaked at 140,000 and it was not until May of 2000 that housing prices to recovered again back to 140,500. In short if you bought in July 1990, you were upside down for the next ten years. See pg2 here.

http://www.capitalvalleyrealty.com/d...ket_trends.pdf

Now in terms of real housing prices, housing price levels are still higher today than they were at the last housing peak in 1990.

Central California OFHEO Home Price Appreciation Tracker

It is quite possible that if you buy today, you will be upside on this property for the NEXT 10 YEARS!

People don't do a good job of thinking in real terms and they are suspect to something that behavior finance folks call the endowment effect. Because property is cheaper today than it was in 2005, people think housing is cheap. But what was really unusual was the tripling in housing prices from 130k in 2000 to 392.800 in 2005 and the complete ignorance that the median price of a house in Sacramento County was 112k as recently as 1998.

Endowment effect - Wikipedia, the free encyclopedia