April Showers

Traditionally, Northern California home sales usually rise along with the monthly temperatures. I call this phenomenon the sales/temperature curve. February sales are usually better than January’s. March sales will be greater than February and April better still. This sales/temperature curve continues until September when monthly sales decline, reaching their lowest point during the coolest months of December and January. The gradually increasing sales/temperatures are pretty predictable as we move from winter through early and late spring and into summer. This year was different. March weather was warmer than April in the foothills of El Dorado County and so were home sales. Well, that’s my excuse anyway, for the dreary sales report in April.

Depending upon where you get your real estate information, the market has: slowed-down, leveled-off, in a slump, plunged, plummeted, collapsed, corrected, burst, is landing softly or has returned to normal. For the 1,700 home sellers in the county who currently have their homes listed for sale, it’s a lonely time. The El Dorado County Board of Realtors reported 167 home sales for the month, down 9 percent from the 185 in March. That was the good news. It was the fewest number of April sales since 1997. A more typical April would account for 240 sales. In April of 2004 the Board reported 290 home sales and in 2005 we had 286.

The median price on the homes that did sell during the month closed at $445,000. It was a 14 percent decline from April of 2006 when the median price was reported at $521,000 and the lowest monthly median price since February of 2006. The “median” sales price is defined as the middle price point where half the homes sold for more and half for less. The “average” selling price is derived from the sum total divided by the number of sales. Our Board of Realtors reports the county’s “median” and “average” home prices but only reports neighborhood sales as “averages” not the “median.” This can be slightly misleading since the “average” price of a county home is $77,500 higher than the “median.” The difference results from a few albeit, very expensive home sales last month.

There were 10 reported home sales in excess of a million dollars with the highest at 2.4 million. Nine of the 10 homes that sold for over a million bucks were located in El Dorado Hills. That pushed the average selling price in the neighborhood to $759,000, slightly above where it was last year. High prices, however, didn’t lour many buyers to the closing table. Monthly sales dropped to 40 on a total inventory of 490 listed properties. That’s a new record high for the number of available properties. Cameron Park has an inventory of 195 homes for sale. Twenty-two sold last month for an average price of $493,000. Sales were less than half of what they were a year earlier while the average selling price remained the same. Thirty-seven percent of all county sales occurred in El Dorado Hills and Cameron Park.

The Placerville area nearly mirrored Cameron Park last month with the exception of the average selling price. The area currently has 190 homes for sale and buyers closed escrow on 22. The average price that buyers paid for a home in the area was $360,000. Diamond Springs/El Dorado has 90 homes listed, 10 sales were reported for the month at an average price of $445,000. Camino/Cedar Grove has 55 homes with a “For Sale” sign in the front yard. Seven sold in April for an average price of $600,000. Pollock Pines/Sly Park has 150 homes to choose from, 12 sold last month for an average price of $313,000. Monthly sales were nearly the same as a year-ago but the average home to close escrow was $70,000 less.

Over on the Divide (above Folsom Lake between the South Fork and the Middle Fork of the American River) the grass is growing faster than home sales. With 200 homes on the market, spread out between Pilot Hill, Cool, Georgetown and Garden Valley, there were only 13 sales for the month. The average price for Pilot Hill and Cool was reported at $435,000 while Georgetown and Garden Valley’s average was $371,500.

The number of land sales and their price continues to free-fall. Last year the price of a typical vacant residential lot sold for $385,000. This past month the priced had dropped to $231,000. With 750 residential parcels listed there were only 22 sales.

Another interesting phenomenon besides my sales/temperture curve is my theory on new listings. The postulate states: Sales will decline proportionately to the number of new listings. Thus, the more new listings that get added to the existing inventory of available homes, the greater number of buyers will postpone making a buying decision. Last month, 477 new residential listings came on the market, which resulted in fewer sales than the prior month. May and June will be pivotal months for county sellers and their agents.

Foreclosure activity

Good Morning,

The number of foreclosure filings across the nation exceeded 100,000 for the ninth consecutive month in April, with foreclosure activity increasing in all but 12 states, according to RealtyTrac's "April 2007 U.S. Foreclosure Market Report." Florida and California led the country with the most foreclosure filings last month, with 30,505 and 14,318 foreclosures, respectively. In California, foreclosures decreased 3 percent from the previous month but we were up more than 200 percent from April 2006.On a month-to-month basis, foreclosure activity may subside during the upcoming summer months, according to the report. However, slower home appreciation and tighter lending standards in the mortgage market are likely to push the number of defaults above last year's levels for the remainder of 2007. The national foreclosure rate in April 2007 was one new filing for every 783 households.

People's Republic of Santa Monica

There is no end to the ideas put forward in both state houses that would have an impact on the real estate business and real estate ownership.

Today's topic comes to us courtesy of state Senator Sheila Kuehl, representing the People's Republic of Santa Monica and outlying communities. Ms. Kuehl offers us SB 464, a bill whose purported intent is to preserve (certainly not create) low cost rental housing stock. The bill would accomplish this in the following way: Owners of rental units in jurisdictions having rent control would be prohibited from going out of the rental business unless they had owned their property for at least five years.

Imagine this scenario: The Elders, just a couple of years away from retirement, decide that they would like to spend their golden years near the ocean, in a city like Santa Monica or San Francisco. So they make a financial move similar to one made by thousands of others in comparable circumstances. They sell (technically, exchange) their rental property in Fresno and use the equity to purchase a rental unit in the beach city of their choice. It doesn't really bother them that the city has rent control, because they will only rent the property out for a couple of years. Then they will sell their long-time residence, and move into the beach property. Unless SB 464 comes into effect. Were that to be the case, the Elders would have to hold that rental property as a rental for five full years, before they could move into it.

I'm not making this up. I know this is America. But that is what the bill proposes. Moreover, its proponents say it will stand up in court. To those of us living in the jurisdiction of the 9th Circuit Federal Court of Appeals, a large bet against them would seem unwise.
I would be the last to deny that California has a problem when it comes to affordable housing -- a problem for renters as well as would-be owners. Nor do I lack sympathy for those who suffer the effects of that problem. But it's fair to wonder if SB 464 proposes a viable, not to mention just, solution. Perhaps, just perhaps, even better results could be accomplished if our lawmakers would apply equal diligence to finding ways to lower the costs of construction by simplifying the permitting process, reducing and removing outlandish fees, and granting zoning concessions to providers of low cost housing.

Californians who have opinions about SB 464 certainly ought to let their elected representatives know about it. And those outside of California? Beware -- the political winds often blow from west to east.

Fewer sales forecast

Housing activity this year will be lower than in earlier forecasts, with clearer analysis of the effects of stricter lending standards and a decline in subprime mortgage origination, according to the latest projections by the National Association of Realtors®.

Lawrence Yun, NAR senior economist, said one benefit for the market is the disappearance of speculative behavior, which contributed to abnormal price growth. “Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time,” Yun said. “Housing first and foremost is shelter. Second, it’s a long-term investment that slowly builds the greatest amount of wealth for most families. It’s good that we’re getting beyond the tendency of some buyers to view housing as a temporary asset to accumulate short-term wealth, which is not to be expected in a normal market.”

Existing-home sales are likely to total 6.29 million this year and 6.49 million in 2008, compared with 6.48 million last year. New-home sales are projected at 864,000 in 2007 and 936,000 next year, lower than the 1.05 million in 2006. Housing starts should total 1.46 million units this year and 1.52 million in 2008, down from 1.80 million last year.
“If it weren’t for a favorable economic backdrop, housing would probably have a hard landing. As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later,” Yun said.
The 30-year fixed-rate mortgage should rise slowly to 6.5 percent by the fourth quarter. Last week, Freddie Mac reported the 30-year rate was 6.16 percent.

The national median existing-home price is forecast to slip 1.0 percent to $219,800 this year, and then rise 1.4 percent in 2008. The median new-home price is expected to be essentially unchanged at $246,400 in 2007, and then rise 2.2 percent next year. The unemployment rate will probably average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is estimated to decline to 2.5 percent in 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is projected at 2.1 percent in 2007, lower than the 3.3 percent growth last year. Inflation-adjusted disposable disposal income should rise about the same as it id did last year.