Think You’re In Trouble? Look at the Sacramento Real Estate Market
Author: Joshua Dorkin • URL: http://www.biggerpockets.com/February 21st, 2007 •
There are many areas around the country where foreclosures are about as common as an ice storm. As things settle from the great real estate bubble of the 21st century, more and more amazing stats emerge. Today, I’d like to share a fascinating statistic, by looking at the Sacramento, California real estate market.
About one of every five existing homes on the market is a “short sale.” That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors. That, in turn, puts pressure on the remaining 80% of sellers, who have equity in their homes, to cut prices.
I’m not sure that there is much I can really add here; I think the numbers say it all. I’m just wondering - is this a trend that we will begin to see around the rest of the country?
What are your thoughts??
If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!
Joshua Dorkin
Charles Feldman
Ted Karsch.
Troy Schuricht
Anwell Tsai
Richard Warren
Jim Watkins
According to some stats I’ve seen, 1 in 5 current sales is a “short-sale” and this is preliminary data. We’ve just started seeing the implosion of the subprime market (i.e., New Century Financial and Wells Fargo laying off 250 employees to name a few examples). The market is quickly correcting in halo effect areas; that is areas that are close enough to prime locations such as San Francisco or West Los Angeles but aren’t prime on their own. Now that the market is adjusting these are the areas that will massively correct first; look at Riverside, San Bernadino, and Arizona for how quickly non-prime property can go down.
Sacramento is simply losing the luster of benefiting from California-Equity-Giants
The trend has hit the Minneapolis and St. Paul, Minnesota market as well. Agents are asking, “Has anyone done a short sale, and know anything about it?” Years ago we had rarely heard of short sales. I see the downturn in the market (although our median prices held at 1-2% increase, the time on the market is much longer), 100%+ financing, up to 50% debit to income rations, and ARM mortgages that were not properly explained as contributing factors. Our job market remains strong, but when people can’t afford the change in their payment and can’t sell, that forces prices down and hence the short sales. Not a fun place to be.
But isn’t this what economic cycle is all about. This seems to be an excellent market for investors who will drive the prices down by low balling on their offers and get great deals before the market turns back up again.
1 in 5 is pretty bad.
What an amazing statistic. The worst I ever heard about in Indy was 1 in every 64 homes. I can’t imagine what that’s going to do to values out there.
That’s a very interesting and thought provoking statistic. We specialize in commercial real estate in Miami, Florida, primarily warehouses, office space, commercial leasing and investment properties. I’m anxious to see how Miami compares to other markets besides California.
Short sales are looking even better right now. I noticed the inventory is raising locally. Might be a good thing for investors.