Elizabeth Weintraub • Sacramento Short Sale Agent • Land Park

An investor called me from the Bay area yesterday to inquire about the real estate market in Sacramento. She asked the familiar question: "Is this a good time to buy?" That's sort of like asking a street vendor with hot dogs for sale if it's a good time to buy a hot dog. What's the vendor going to say? No? He's got product to move.

But I am straight-forward with people. It seems like a good time to be an investor in Sacramento but it's a struggle. It's not easy to buy a house in this market. I suppose Bay area investors read the paper and see foreclosure filings are increasing. This fact would cause them to believe our market is flooded with foreclosures, which is not the case.

I just ran a check in MLS for status on real estate listings in Sacramento. At the moment, we have 3,691 active listings. If you include the active short contingent listings, there are 6,429 total homes, of which 62% are either active short sale listings or active short contingent listings.

According to Trendgraphix for September, regional inventory for the Tri-County Sacramento area has decreased 62% over the record high of 15,302 set in August of 2007.

There is little for sale; removing the short sales, we have 2,420 homes in Sacramento County, to be precise. At the moment, we have more real estate agents in Sacramento County than homes for sale as active listings.

On top of this, the average per-square-foot cost in Sacramento continues to rise, as evidenced by this first chart below:

Below is a snapshot of the number of homes for sale in Sacramento, the pendings and the sold listings for September:

The one thing Sacramento investors have going for them at the moment is very few first-time home buyers are chasing the short sale listings right now. That's because newer short sale listings are unlikely to close escrow by November 30th, when the home buyer tax credit vanishes.

It's a seller's market in Sacramento with buyer's market prices. Multiple offers are the norm because we have many buyers competing for the same homes. The pending sales are increasing and have shot up 9% in the Tri-County region over August.  You can get a good deal, but you'll need to hire an experienced Sacramento real estate agent to get it.

Trendgraphix, used with permission.

Sarah, not her real name, is retired and just sold her home in the Bay area. She is in a position to pay all cash for a home and prefers to live around other seniors in Sacramento. I suggested an area of Natomas called Heritage Park. This is an active adult community for people over the age of 55.

We toured 5 homes yesterday, one of which was a foreclosure. Now, Sarah really doesn't want to buy a bank-owned home. The problem with foreclosures is many of them need repairs. She also does not want to wait for short sale approval on a short sale.

After tour, Sarah's daughter asked me if there were any single story homes for sale in Natomas, near Heritage Park. I ran a search on that ZIP, looking for homes priced under $350,000. I found 5. Two we had already toured. Two were not yet built. One was not suitable. I looked in Gold River, too. But none of those was newer homes.

It pained me to advise Sarah that she either choose among the 5 we toured or rent for a while. This is the reality of the Sacramento real estate market.

Above is the Trendgraphix chart for August of 2009, covering all areas in Sacramento County over the past 15 months. You can easily see that inventory is continuing to drop. In June of 2008, we had 8,524 homes for sale. Today, that number is 3,281. Here is the percentage breakdown of homes that sold last month by price point:

• Under $200,000: 54%
  
• Between $200,000 and $400,000: 41%
  
• Over $400,000: 5%

I'm seeing a bigger increase in the number of homes selling between $200K and $400K. For most of the year, the pressure was on the under $200,000 market, but now it is shifting to a higher price point.

Another buyer called me last night to say she wants to buy a home in a certain Elk Grove ZIP code. Nothing fancy, just a two-story with four bedrooms. Needs to close soon, so no short sales. Do you know how many homes she has to choose from in her price range? Two. Exactly two.

Not a day goes by when a Sacramento home buyer doesn't ask if the foreclosure shadow inventory is about to hit the Sacramento real estate market. Everybody knows that we have practically no bank-owned homes for sale in Sacramento, yet banks keep foreclosing. Realty Trac's web site reports Sacramento has 25,834 bank-owned homes but they are not on the market. To top it off, a week from Monday we're facing a 90-day moratorium on foreclosures.

Here is the average per-square-foot-cost in Sacramento County over the past 15 months, supplied by Trendgrahix:

The question, should you wait to buy in a down market, is a reasonable question to ask. Let's look at Trendgraphix average sales prices in Sacramento since January, 2009:

• January: $189,000
  
• February: $187,000
  
• March: $187,000
  
• April: $190,000
  
• May: $199,000

Do you see the trend moving upwards? Want more stats? Let's look at Trendgraphix median sales prices in Sacramento from January, 2009 to May, 2009. The median sales prices mean half the homes sold below and half sold above that number:

• January: $165,000
  
• February: $166,000
  
• March: $166,000
  
• April: $167,000
  
• May: $179,000

The bigger question, however, is where are interest rates heading? About a week ago, a Sacramento home buyer could get an interest rate of 4.875%. Today, a buyer is lucky to lock a loan rate at 5.375%. Many rates are higher, for example, Quicken shows a rate of 5.75%.

There's been a lot of discussion about whether sales prices are more important or interest rates. It depends on your local market. Obviously, if a property value falls by 50%, sales prices are more important. But when you're thinking about buying a home in a down market such as Sacramento -- where the market was one of the first in the nation to crash and is now hovering at the bottom -- you might want to pay more attention to the interest rate.

Every 1/2 point a rate rises takes away $25,000 of your purchasing power, if you're looking at a loan around $400K. If last month you could afford to pay $400,000 for a home mortgage, maybe this month you can afford only $375,000. If interest rates jump a full point, your $400,000 loan approval price could fall to $350,000. And prices are rising. Competition is fierce. Inventory is shrinking.

In April of 2009, we had 4,062 homes on the market through MLS in Sacramento. By May, that number shriveled to 3,652. By comparison, in March of 2008, we had 8,594 homes for sale. Over the last 15 months, the number of Sacramento homes for sale fell by 58%.

Sacramento short sale buyers will be hit the hardest. That's because while they may be receiving a great price on that Sacramento short sale home, most buyers will not lock a loan rate until short sale approval is received, which could be 2 months to 6 months. Where will interest rates be then? My advice is if you can lock your loan rate, do it.

We live in interesting times, my friends.

Elizabeth Weintraub is an author, columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.

Photo: Trendgraphix, licensed exclusively to Lyon Real Estate in Sacramento. Used with permission.

The Short Sale Savior, by Elizabeth Weintraub, available in bookstores everywhere and at Amazon.com.

Sacramento Short Sale Agent, Elizabeth Weintraub, has the answers to your Sacramento short sale questions.

Home sellers and buyers in the Sacramento market are advised to ask their Lyon real estate agent for Trendgraphix reports specific to their neighborhood. After all, only Lyon agents have access to Trendgraphix; these reports are exclusive to the company and show precisely what is going on in any given area.

I use Trendgraphix with my clients, especially with my first-time home buyers, to help them understand what the market is doing, and from there we form a strategic plan. Newspaper and TV stories are mostly general and some pertain to national statistics. And, quite frankly, sometimes people who read articles don't always read the whole story.

Here are the April 2009 market stats for Sacramento. The first graph is the entire county, consisting of homes for sale, pending and sold in April:

Closed sales increased over April of last year, and pending sales are definitely on the rise. No surprise is the fact that our increasingly low inventory continues to fall. There are fewer and fewer homes for home buyers to choose from as we move forward into the year. At the moment, we have about 2 1/2 months of inventory on the market, meaning it would take fewer than 3 months to sell everything that is for sale.

What is this? This is 15 months of the average price per square foot. Look at April. The average P-S-F fell month by month since February of 2008. But this April reflects a slight increase in the P-S-F. Why is that? Because there's no inventory! Buyers are fighting over listings; multiple offers are the norm.

Does this mean the Sacramento market is turning around? It's too early to tell. Could be. Much depends on whether the banks dump more foreclosures on the market, which is expected to happen by this June. If there are large numbers of foreclosures hitting the market, that could depress prices. If the foreclosures are slipped into inventory a few at a time, prices could continue to go up.

Here is how the numbers break down for April in Sacramento County. The average sold price rose to $189,000:

• Homes priced under $200,000: 62%
  
• Homes priced between $200,000 and $400,000: 32%
  
• Homes priced over $400,000: 6%

Images: Trendgraphix, licensed exclusively to Lyon real estate agents

Elizabeth Weintraub is an author, columnist for The New York Times'-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.

The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com

If your home is on the market in Sacramento and you're not getting any offers, the problem might not be price.

It might be price range.

The Trendgraphix report for January 2009 shows that only 5% of the home sales closed at sales prices exceeding $400,000. Wow. I looked at older Trendgraphix reports to see how far that percentage has fallen. By comparison, in May of 2006, 42% of the home sales in Sacramento had sold for more than $400,000.

Below is a chart reflecting the last 15 months of home sale activity in Sacramento County. Inventory, the number of homes for sale, has fallen by almost 50%. Check out those pending sales, the red line, 2205 homes, which means we'll most likely see a big jump in closed sales next month. The number of homes that closed in January decreased 26% over December, but that's primarily because that number reflects December's pending sales, which is always a slower time of year.

• The average sales price in Sacramento is $189,000.
• 60% of the homes in January sold for less than $200,000
• 35% of the homes in January sold at prices between $200,000 and $400,000.
• 5% of the homes in January sold for more than $400,000.
• The average per-square-foot cost fell by 4% to $116.

Real estate agents who refuse to work in the under-$200,000 market are missing the boat because that's where all the action is in Sacramento. It's a great time to be a first-time home buyer in Sacramento. Why? Because homes are affordable and interest rates hover around 5%. Many Sacramento homes for sale are foreclosures and short sales. Still hesitant? If you look back to May of 2006, only 1.2% of the homes in Sacramento sold for less than $200,000.

Now is the time to start hunting for that dream home you've always wanted to buy. If you'd like more information about home buying in Sacramento, call Elizabeth Weintraub, Sacramento short sale agent at 916.233.6759.

The Short Sale Savior, by Elizabeth Weintraub, coming in June from Archer Ellison.

Image: Trendgraphix

This chart shows the average listed sales prices (the green line) of homes in Sacramento County and the average sold prices (the red line), from September of 2007 through November of 2008. First, let me explain what this doesn't mean. It doesn't mean that homes were listed for a higher price than the eventual sold price. It means the homes that are selling are selling for less than the average prices of the homes for sale -- the lower end of the market is moving, while the higher end is not.

Homes that are priced around $200,000 are a hot commodity. That seems to be the price point where many first-time home buyers are entering the market right now. There's a huge gap in a monthly payment between a home that sells for $350,000 and a home at $200,000. A payment on $150K at 5.5% is $852. That's a big savings to first-time home buyers.

The average listed sale price fell from almost $400K to $286K from September of 2007 to November of 2008. However, the average sold price plunged from $354K to $203K. Numbers for December will undoubtedly dip as well, but come January, we could see an uptick; primarily because there is no inventory and buyer interest is high.

The Short Sale, by Elizabeth Weintraub, coming from publisher Archer Ellison in January 2009.

Image Chart: Trendgraphix