Sacramento, El Dorado, & Placer County Real Estate
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Weichert, Realtors® Galster Group
5006 Sunrise Blvd #100
Fair Oaks CA 95628
916-966-8700 office
916-966-8706 fax
DRE Broker #01788488
5006 Sunrise Blvd #100
Fair Oaks CA 95628
916-966-8700 office
916-966-8706 fax
DRE Broker #01788488
No BS Commentary and Market Indicators
COMMENTARY: Let’s get this out of the way: It is currently a seller’s market by definition. This is defined as “demand is higher than supply”. And you can see this is true in the daily happenings. Listed homes are receiving multiple offers. Sellers are able to skirt some of the costs demanded by buyers. So if you are a buyer, the last 5 years of media brainwashing will NOT serve you well. If you low-ball a seller’s asking price, you really don’t want the house.
The other media messages seem to have an opposite effect on market participants. The infamous “shadow inventory” is causing many to sit back and wait. I hope they are waiting for the right house because prices are only slightly lower in the last 6 months. Distressed sellers are waiting to get their “bailout” in the form of a modification or a refinance. But these government programs are helping VERY few people. In the meantime, the shadow inventory is not decreasing and borrowers are exacerbating their delinquent balances [and stress levels].
In fact, the average Median price for the MLS sold listings ticked upward to $165,900. That’s not a big increase but we hope that we don’t get forced upward too quickly. We are still living with the consequences of hyper-appreciation.
Sales of existing homes is at a healthy level. This number exceeds the number of new listings. This is another element of the definition of “seller’s market”. And if we consider “Active Short Contingent” listings as Pending (with a very long escrow period), then over 140% of active listings are stuck in this contingent period. With so little available inventory, even the contingent short sales should be bid upward if the seller wanted or could obtain more offers.
Distressed sales are staying fairly static in terms of percentage of sold listings. I don’t see this changing in the near future and depending on the success of the government programs, we may see many more short sales. The government programs don’t work very well.
Foreclosure notices (first is NOD then NOTS) have increased after a lull over the holidays. This is proof of the shadow inventory. It used to be true that more than 80% of borrowers in default (received a NOD) are headed for foreclosure. BUT the success rate of short sales has increased in the last 4 months. Even Bank of America wants to streamline their process for approving short sales. If you have a BofA loan, it may become easier to refinance but you cannot be delinquent on your mortgage.
Home permits have not been reported for March but builders are still highly motivated. Please call me before you visit a builder’s sales office. The sales people for builders CANNOT represent you. That means you cannot hope for good advice UNLESS you take me on your first and every visit.
The other media messages seem to have an opposite effect on market participants. The infamous “shadow inventory” is causing many to sit back and wait. I hope they are waiting for the right house because prices are only slightly lower in the last 6 months. Distressed sellers are waiting to get their “bailout” in the form of a modification or a refinance. But these government programs are helping VERY few people. In the meantime, the shadow inventory is not decreasing and borrowers are exacerbating their delinquent balances [and stress levels].
In fact, the average Median price for the MLS sold listings ticked upward to $165,900. That’s not a big increase but we hope that we don’t get forced upward too quickly. We are still living with the consequences of hyper-appreciation.
Sales of existing homes is at a healthy level. This number exceeds the number of new listings. This is another element of the definition of “seller’s market”. And if we consider “Active Short Contingent” listings as Pending (with a very long escrow period), then over 140% of active listings are stuck in this contingent period. With so little available inventory, even the contingent short sales should be bid upward if the seller wanted or could obtain more offers.
Distressed sales are staying fairly static in terms of percentage of sold listings. I don’t see this changing in the near future and depending on the success of the government programs, we may see many more short sales. The government programs don’t work very well.
Foreclosure notices (first is NOD then NOTS) have increased after a lull over the holidays. This is proof of the shadow inventory. It used to be true that more than 80% of borrowers in default (received a NOD) are headed for foreclosure. BUT the success rate of short sales has increased in the last 4 months. Even Bank of America wants to streamline their process for approving short sales. If you have a BofA loan, it may become easier to refinance but you cannot be delinquent on your mortgage.
Home permits have not been reported for March but builders are still highly motivated. Please call me before you visit a builder’s sales office. The sales people for builders CANNOT represent you. That means you cannot hope for good advice UNLESS you take me on your first and every visit.
The interest rate for loans has been the most obvious “government program” as the treasury is holding them low. If left to the market, the rates would be higher. They SHOULD be higher.
Back to the definition of seller’s market; throughput or Months’ Inventory is at 1.1. A normal market is between 4 and 6 months. This is NOT a normal market and NOT a buyer’s market.
My favorite Swing Indicator shows that more than 50% of the local zip codes have experienced a positive change in momentum. It’s hard to say when or why this market would change but it will.
These are the key learnings from the current market:
Back to the definition of seller’s market; throughput or Months’ Inventory is at 1.1. A normal market is between 4 and 6 months. This is NOT a normal market and NOT a buyer’s market.
My favorite Swing Indicator shows that more than 50% of the local zip codes have experienced a positive change in momentum. It’s hard to say when or why this market would change but it will.
These are the key learnings from the current market:
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Don’t low-ball unless you really don’t want the home. Sellers are able to choose from a handful of offers and yours, if not close to the highest and best offer, will not stand a chance. You will end up “back to the grind”.
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Don’t wait unless your timeline requires you to wait. The nice homes are flying off the shelf, especially in the good areas.
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Sellers are wary of inspections because most buyers think they can renegotiate based on the minor issues that all homes have. Don’t mention “pest” on your offer unless you want to drastically increase the chances of failure.
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If you are an FHA or VA borrower looking for a home, you have to eliminate or ignore “fixers”. Your lender won’t want to appraise the home UNLESS you are getting a renovation loan. Those are a little more expensive, take longer, and have to appraise at the full value as if the renovation is done.
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If you must sell, this is a great time to put your home on the market relative to the last 4 years. Short and equity sales are in high demand [while REO listings are low-hanging fruit for investors].
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If you are an investor, this may also be the best time in the last 6 years to start your flipping exercises. But you have to apply ample “lipstick” to get the next buyer’s appraiser to agree with your price. (Especially if the buyer is getting an FHA or VA loan – the government frowns on other people making a profit. Bad profit. Bad bad profit.)
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The success rate for Short Sales has jumped and will continue to strengthen as we get better at navigating the various online and paper-intensive processes needed to negotiate a successful project. But the future may prove different if the HARP II program attains any level of success.
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We are at the tail end of the contraction. After contraction comes recovery. The business cycle reflects reality. And the data, not the media, tells the truth.
Call me for the best listing or buying experience. You will become a raving fan. No B.S.
Call me for the best listing or buying experience. You will become a raving fan. No B.S.
These charts depict the momentum of changes in the underlying raw data to help forecast direction. These are not a guarantee of future direction but aid in the prediction of cause/affect in the various market forces. No single indicator tells the whole story. Also charted is the raw data itself. For an explanation, call or email Jay Emerson (916-517-9606, Jay@JayEmerson.com). The data is deemed reliable but not guaranteed. Sources include DataQuick, CBIA, Sac MetroList, and other public information.
Indicator #1 - Existing Homes Sold
Indicator #4 - Foreclosure Notices
Indicator #2 - Distressed Sales
Indicator #5 - New Home Permits
Indicator #3a - Median Price (SA)
Indicator #6 - Mortgage Interest Rate
Indicator #3b - Median Price (ED)
Indicator #7 - Listing Inventory
Indicator #3c - Median Price (PL)
Indicator #8 - Months’ Inventory
Indicator #3 - Median Price (All)
Indicator #9 - Swing Indicator
March 2012
CAVEAT: This commentary is my opinion of the Sacramento, El Dorado, and Placer County real estate markets using my eyes, ears, major market data, momentum analysis, current conditions, and the forces which affect our area. This is not a crystal ball and I am not a financial advisor. I am an actively licensed California Real Estate Broker with a passion for information and knowledge sharing. My method of collecting and analyzing this information (“momentum analysis”) is similar to that used in commodity trading. This is a speculator’s tool to predict the direction of the NEXT data point. (We all speculate every day.) A trader analyzes granular momentum data in order to take immediate ACTION for a lot of money. Traders can’t let the media paralyze them but they can’t ignore the various forces in play beyond the obvious change in plotted data. The value you obtain by following my system is the tip of the iceberg that comes when you hire me to represent you. Action is the key.
Indicator #10 - Consumer Confidence
Summary of Major Indicators
