New Home Sales Suck!

I meant to blog about this last week. Did you see that for July, Aug, and Sept, only 616 new homes were sold in the 6-county Sacramento region? In the whole region! We're on track to maybe sell 3,000 homes in the greater Sac area this year! When I was working for a big public homebuilder during the first half of this decade, I remember that over 17,000 homes were sold in 2004. That's an 82.5% drop. Ouch...

And the local BIA wants to reinstate the $10,000 CA New Home Tax Credit. That would be good for homebuilders, but let's face it--bad for everyone else. There is too much inventory in this town, and until a LOT more of the resale inventory (particularly short sales and foreclosures) is absorbed, the last thing we need is additional housing inventory.

Check out this article on high-end homes in today's Sac Bee:

http://www.sacbee.com/736/story/2275726.html

I live in Carmichael near the American River (95608). Since the beginning of this year, I've been tracking homes listed on the MLS in 95608 and 95864(Arden Park and Sierra Oaks) listed at or above $700K. The number of homes in this price range in these two zip codes at any given time has fluctuated between 95 and 120 listings. Today there are 100 homes, so let's call it an average of 100 homes listed above $700K at any given time. How many of these homes are selling? 1 or 2 per month. So let's say that 16 homes in this price range sell this year. With an average of 100 homes listed, that's 6.25 year's worth of inventory. Holy crap! How can prices do anything but drop once individuals or banks start deciding that they really want to sell.

And in the really expensive stuff, there are currently 25 homes listed at or above $1.7 million in these 2 zip codes. You wanna guess how many homes have sold above $1.7 million in these 2 zip codes this year? ONE. One listing was recently dropped from $2.8 million to $2.3 million. Do you think anyone cared? I don't, and it certainly hasn't sold yet.

How can these not come down a lot more in the near term?

Unbelievable article on CNBC.com today.

http://www.cnbc.com/id/33310096/comid/1/cache/765#comments_top

Looks like buying an entry level home in Las Vegas today is pretty tough. One word--Investors. There are a lot of folks out there with a spare $100K or two who want to be the next Donald Trump and own investment property. The only way to compete is to (a) offer to pay all-cash (no loan) and (b) let the greedy listing agent take both sides of the commission. Otherwise, your offer will be ignored.

Why is there so little inventory? Because banks are no longer just automatically foreclosing when people don't pay their mortgages. Banks are now doing a lot of other things instead of foreclosing, including:
1-Being more receptive to short sales
2-Selling for less than what is owed at the courthouse steps auction
3-Allowing people to live in their homes without paying their mortgages for longer periods of time (sometimes in excess of a year!)

The net result is banks are taking back fewer properties, and holding on to some of the properties they have taken back because they don't like the prices they'll get if they list these properties for sale.The big question is, Will the rising number of defaults lead to more foreclosures next year???

Kimball Hill - Bye bye

Kimball Hill, one of the nation's formerly 20 largest homebuilders, just declared that it will not emerge from bankruptcy and is going out of business. Opperations will wind down for 15 months and then cease.

Interest Rates

Damn! Interest rates are down to 5.5% for a 30 year fixed this week. Might be time to refinance. Too bad so many homeowners are under water.

The Refinance Myth

All this talk of refinancing a significant amount of the "toxic" mortgages out there doesn't make much sense to me. As far as I can tell, for most people who are under water on their mortgages, their problem isn't that they have the wrong loan product, it's that they make $50K/year and have a $500K mortgage on a house that's now worth $325K. Unless the bank is willing to flat out forgive a huge pile of debt, I don't see how the promise of refinancing is going to help them.

There is only one reason I don't live in a $5 million house--I can't afford it. My problem isn't that I can't get the right loan product.

Las Vegas - Dealers, Cabbies and Strippers

You know the Las Vegas housing market has hit the skids when every dealer, cabbie and stripper that you chat with tells you that they own 2-3 houses and they’re upside down or defaulting on all of them. Try having these conversations next time you’re there.