Placer County Sales Report

The number of homes listed for sale in Placer County has increased 115 percent between last year and this. Currently there are 1,800 homes for sale while last year at this time there were 850.
January’s median price for a home in the county was $462,000, up a measly 3.8 percent from a year earlier. With home prices remaining at last year’s level and twice the number of homes to choose from, shouldn’t buyers be lining-up to write offers on homes for sale? Well, not exactly.
Closed sales of homes in Placer County are down 22 percent from last year and new escrows are off 31 percent.
Granite Bay, Rocklin and Foresthill had not only declining sales but declining home prices as well while Roseville, Auburn and Lincoln had declining sales but higher average selling prices.
March will set the pace for the rest of the year. If we have a good month for sales, we should experience a good but not great spring and summer. But if March is really slow then the recovery process is going to take longer than most real estate agents expected.

New home sales report

New home sales in the Capital Region are down nearly a third from their sales pace last year. Builders are responding by offering many incentives to home buyers and asking local Realtors for help in marketing. If that doesn’t work, a last resort will be to reduce their selling price.
Price reductions are not pretty. New home buyers who just paid $500,000 for the “Heritage” model take a dim view when the builder sells the same model for $450,000. Then the next buyer gets the same model for $440,000 and you can easily see the direction of neighborhood values.
A recent member survey by the National Association of Home Builders, NAHB found one in five reporting more cancellations of new home orders than six months earlier, with 4 percent saying that the increase in cancellations was significant. “When you start to see cancellations, you really get worried,” said the association’s chief economist, David Seiders. Of those who said they experienced an increase in cancellations, 45 percent said it was due to a buyer’s inability to sell his existing home and a third cited buyers not being able to qualify for financing at a time of rising mortgage rates.

But the concern of Seiders and others is that cancellations are being driven by real estate investors who were ordering homes with the intention of selling them quickly in a hot real estate market. “If you’ve overbuilt the market and sales get cancelled, you have to do something with the homes,” Seiders said. “The incentives we’re seeing builders offering are clearly designed to support prices and stop cancellations.”

Weekly interest rates

Mortgage rates continued their roller coaster ride in February, according to Freddie Mac's weekly survey. The rate for 30-year fixed rate mortgages ended the month at an average of 6.26 percent, down ever so slightly from the week before's average of 6.28 percent. A year earlier, the average was 5.69 percent, which is just a mere difference of 58 basis points. (A basis point is 1/100th of 1 percent.)
Putting that in monetary terms, the difference between a $400,000 mortgage at 6.28 percent and 6.26 percent a practically minuscule $5.00 a month.
The average for 15-year fixed loans slipped, too. But only by half as much. It was 5.91 percent vs. 5.92 percent the week before. But a year ago, the 15-year rate was 5.22 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages were the anomaly as February came to a close. They averaged 5.96 percent, up a basis point from the week before. But the average on one-year Treasury-indexed ARMs dipped from 5.36 percent to 5.32 percent. A year ago, the rates on these two loan products were 5.05 percent and 4.16 percent, respectively.
Expect more of the same in the coming months, according to Freddie Mac's chief economist, Frank Nothaft, who says, "Over the long term, we expect mortgage rates will bounce back and forth a bit, remaining near current levels."
Although long-term interest rates have only climbed from 5.75 to 6.25 or a measly one-half a percent, loan programs that have been based upon the Federal Funds Rate or the Prime Lending Rate are receiving more attention.
Last February I helped some buyers obtain a Home Equity Line of Credit. At that time the prime lending rate was 5.5 percent. Over the weekend I took a loan application for another Home Equity Line of Credit. The prime lending rate is now 7.5 percent. The prime lending rate is a common index for home equity loans.
So while the long term rates have increased by one-half a percent, the prime has increased by a full 2 percentage points and is expected to increase another quarter percent within the next few months. Many borrowers who have home equity loans are converting into long-term fixed rates before further rate increases. Watch for this trend to continue.

Potentially wet Natomas

It’s a little wet this morning in the foothills so the Sacramento River is probably rising. It appears that this storm is going to leave behind four inches of rain. It was probably coincidental that the Governor recently declared a State of Emergency announcing that the levees protecting Sacramento warranted a Declaration and much needed attention.
If the levees ever do fail in the Natomas Area, the city officials at that time will likely blame the Bush Administration. They will carry-on endlessly to the media about the lack of response time to the devastation. There will be investigations and various department heads will be called before Congress. There will be a public outcry that the levees were inadequate to protect the city from a 100-year flood. Everyone will blame someone.
Now, after we have billions of dollars in new commercial and residential development in Natomas why are city and government flood officials just recognizing that the flood protection in the area may be, probably is, inadequate to stop the big one. Maybe someone should have pointed that out a few years ago before thousands of people moved into all the new homes there.
Flood insurance isn’t required of new home buyers in Natomas. New home buyers are not advised of the potential hazards of living within a few feet of a leaking levee. State law requires that a home buyer be advised of any earthquake fault lines, airports, and manufacturing zones near a neighborhood but a potential leaking levee isn’t on the disclosure list. It should be.
Where was the Sacramento Flood Agency when the city was approving the building of 7,000 homes adjacent to inadequate levees? Now Butch Hodgkins, the former director says that there were enough signs in the 1990’s to investigate further. Well……? Mayor Heather Fargo, who sits on the Sacramento Area Flood Control Agency and was an advocate of the Natomas development, said in a recent interview, “We kind of put Natomas behind us and focused on other projects”. Maybe the city needs to again focus on the safety of the levees in Natomas.