Help for housing

With an estimated 100,000 people relocating out of the state this year what is going to sustain our housing market and keep it from falling like a rock?

Interest rates will continue to climb. The outlook for the year is 6.5 percent average which is a full percentage point above rates of a year ago. So forget about any super low interest rates.

Investors have quit buying and are holding their investment. Last year nearly 20 percent of all homes sold were to investors.

Flippers have deserted the market. They have put their properties up for sale or sold them already to reinvest their proceeds elsewhere.

Bay area buyers have been a force in driving up home values in the Capital Region but over the last few months Bay area buyers have had difficulty selling their homes. The market for 2,000 square foot, million dollar homes, in political blue counties has declined along with interest in our real estate.

Financing will still be available but probably not as creative as it has been. Federal regulators have issued instructions to lenders to be more cautious with their lending guidelines. Zero down loan programs, interest only payments and loose underwriting guidelines will makes qualifying for a loan more difficult.

So do we enter 2006 without any major force to sustain home price appreciation? Yes, jobs and income.

Employment and average monthly household income will cushion the housing market as it gently settles into a more traditional growth pattern. California employers keep expanding. Last month they added 20,000 new payroll positions according to the California Employment Development Department. The new hires were in all fields of employment.

Anyone looking for a job can probably find one. “The labor market is healthy. There is no real sign that there is danger on the horizon,” according to Scott Anderson senior economist with Wells Fargo & Company.

The job growth in the Sacramento Region continues to outpace the state. Between December of 2004 and December of 2005 there has been a 1.7 percent growth in employment in the region while the state’s overall job creation rate is 1.3 percent.

Employers like the Capital Region. Our work force is educated. Our housing prices are affordable (in comparison to the Bay Area or Southern California) and parking is available. Our highways may be congested but traffic usually moves unlike many freeways I can name in Southern Cal. Business usually is better in state capitals. State government added 1,500 jobs last year bringing the total employment to 103,000 and additional 2,000 state employees are expected to be added this year.

Unless the state enacts job killing legislation, employers will continue to add employees who will then require housing. Employment will sustain the housing market if taxes, fees and regulations remain stable. A big IF with our legislature.

New Home Sales Drop

Elk Grove and Natomas were not the only communities where new home sales have declined. The trend is everywhere. The Commerce Department reported national sales of new homes fell in November 11.2 percent from October. It was the largest drop for a single month in 12 years.
Builders have been adjusting to the decreased demand by dropping prices. The average selling price of a new home last month fell 4.1 percent.
Regionally the largest decline in sales was in the West where November’s new home sales dropped 22 percent. It was the largest decline seen since February of 1994.
Builders are still expecting 2005 to be a good year for new construction but anticipate a 6 percent decline 2006. The median price of a new home across the country is $225,200. In Natomas and Elk Grove the median price is twice that amount.

Get out of Sacramento investments

There are a number of reasons not to own a rental in the city (not the county) of Sacramento. Crime is higher in Sacramento than any other area in the Tri-county area. While a shooting in Placerville or Roseville will make the six o'clock news broadcast, they are few. Each day, somewhere in Sacramento, there is a shooting. There were over 400 reported shooting incidents last year. They are so common that the local news media will only cover the most bazaar.

Traffic, noise and parking are other reasons to avoid owing an investment property in the city. Street violence isn’t confined to gangs and shootings. Random assaults and property damage are higher in the city than in all of Placer and El Dorado County combined. Now there is another reason to liquidate rentals in Sac and move investments to a friendlier place.

Mandatory rental inspections are under favorable consideration by the Sacramento City Council. The proposed new city ordinance would require city inspectors to inspect each rental property periodically for any code violation. If adopted into law, landlords would be required to pay a fee to the city for the privilege of the inspection. Landlords would be required to make arrangements for access between their tenants and the new cadre of city code inspectors. The inspectors would insure the rental unit complies with all health and safety standards set by the department.

Max Fernandez, the city's director of code enforcement, isn’t satisfied with the current number of 3,000 rental units that his department declares substandard each year. “There are probably a lot of properties out there that for whatever reason don’t get inspected by anybody” he said in a recent interview. Yes, Max you’re right and there is a good reason. It’s called, tenants rights.

The City of Sacramento has been loosing owner-occupied housing for years. Forty-seven percent of all housing units in Sacramento or 75,000 are currently rented. Many are single rooms or small apartments in older boarding houses. Theses historic Victorians, however stately, are rife with modern code violations.

The proposed city ordinance is full of pitfalls. What happens if a tenant will not allow an inspector access for the inspection? It is then incumbent upon the inspector to obtain an inspection warrant from a judge. So, who pays that cost? Must a tenant take time off from work waiting for an inspection? What happens when a code violation of found? A citation is issued and an re-inspection is scheduled? Does the tenant need to be present?

Tenants as well as landlords need to leery of this proposed city ordinance. Where is the ACLU on this privacy issue? There are government officials entering a tenant's home without cause. If they protest, a warrant will be issued. If the property is found to be in violation, they may be evicted until repairs have been made to the property.

Current law already exists mandating that landlords maintain a rental up to certain health and safety standards. There are reporting procedures already in place for a tenant who has a problem with the habitability of their rental. The tenant also has the option of moving and terminating their lease if they are denied their right of “quiet enjoyment” of their leased property.

If we are concerned about the National Security Agency eavesdropping on phone conversations between suspected terrorist in a foreign county and US citizens, shouldn't we be concerned about government officials entering our property (without cause) and conducting a mildew test in our bathroom? Will our homes be next?