Through August & September 2008

Well I’m glad you and I don’t rely on the government to solve our problems and bail us out of debt. Strangely, when you know a US Senator, you could get funding from the feds; bad management or not. If my investment goes bad (some do), do I get bailed out? No, and I don’t expect to be.

Some people, maybe you, have a serious issue that could not be avoided. When you put your money in a cyclical investment (real estate, pork bellies, gold, etc.), and the cycle happens, it is YOUR ACTION that provides the best long-term solution. No bird-feeders!

Some pay thousands to get the information in this report. It is the tracking and explanation of key indicators that, together, can FORECAST the real estate cycle and sub-cycle changes. My treat, to you!

The commentary is my opinion of Sacramento’s real estate market using history, current conditions, and the market forces. This is not a crystal ball. If I knew of guarantees, I would not be writing this piece.

This ongoing analysis is similar to the concept used in foreign exchange (forex) currency trading (a commodity much like real estate). While this is most useful to an investor, understanding the market is necessary even when buying or selling your family’s shelter, not an investment property. This type of analysis is a speculator’s tool to predict the direction of the NEXT data point. And those can be billion-dollar guesses. Explaining history should be done but it's your NEXT action that makes a difference. Refer to this month’s charts and note where the Momentum indicator crosses it's zero axis (red axis & typeface) — it has been a predictor of the change in actual volumes. Specifically:

• Existing Home Sales — Momentum fell below zero Aug 2005 pointing to the Sales drop in Jan 2006. Momentum hit bottom Dec 2007 indicating the Sales spike in Mar 2008. Momentum is still positive. Seasonal “sub-cycles” could explain the Aug 2008 drop.
• Permits — Momentum exceeded zero first in Apr 2002, spiked with the last big builder push, and has stayed at or below zero since Sep 2004. Infill is taking most attention from buyers. And infill doesn’t result in high volume developments.
• NOD (through Sep. 08) — Momentum exceeded zero in Nov 2005 which points to the increased in NODs in the first quarter of 2006. Momentum peaked in Aug 2007. Seasonal “sub-cycle” from 3-5 years ago may explain sharp drop in Sep NODS. If most homes sell in the summer months, then that’s when annual interest adjustments occur too.
• REO Sales — Momentum exceeded zero in Jan 2006 pointing to the rise in volume in Apr and May 2006. Momentum is positive but is approaching zero.
• Rate (thru Sep 2008) — Momentum went below zero in Aug 2007 pointing to drop in rates from Oct 2007 through May 2008. Momentum is negative.
• Median Price — This is county-wide. Momentum peaked in Feb 2005 which points to Price peak in Aug 2005. Momentum fell under zero in Nov 2006 and Prices really started to fall in March 2007. Momentum is still negative but August Price increased.

In a nutshell, the change in season is upon us; days are shorter, home viewing can be messy and cumbersome, and families are preparing for the sequence of holidays. That, however, is not how the bank’s are perceiving the coming months. They still have non-performing assets and holding them means they can loan less money. This may be the time to really get some deals.

Bottom line: Call me to get started. 

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 or for a monthly subscription to this periodic report, 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 public escrow information.

If you know someone who is selling or buying and who would appreciate my level of service and expertise, send me their name and number and I'll be glad to follow up.