Thank you from Land Advisors Organization California Division!

LandAdvisorsCA1B2014TotalConsiderationClick on image to enlarge

 

Land Prices Are Not the Only Thing Rising….

Ever heard of someone saying “when things are on a roll…enjoy it while it lasts, ‘cause it never does.” Well, I guess you could apply the same logic to interest rates.

Looking at how the tear land values have been in the last 12 months, it seems things are starting to cool off and the industry is taking a collective breath.  When the Federal Reserve Chairman speaks and hints at future actions regarding interest rates, the market is clearly listening.  In case anyone missed it, interest rates have risen for the better part of 100 basis points since May causing new home sales to slow and robbing buyers of purchase power, which illustrates that the housing recovery is still fragile and changes need to be addressed delicately as we move forward.  That being said, I think home buyers are realizing that low-interest rates will not last forever and they should engage while they can.

Link: http://blogs.wsj.com/developments/2013/07/16/rising-mortgage-rates-home-builders-shrug-them-off/

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

NorCal – Where’s the Inventory?

I keep reading that re-sale inventory is at historic lows and there are bidding wars on the small amount of re-sales that are sprinkled throughout the marketplace. This is good news on several fronts. The first being that pricing for both new home and re-sales are rising….and quickly I might add. The second is that people who are getting back into the market for a home are being beat out by all cash, quick close investors on re-sale inventory and therefore being directed to find homes from the builders. Finally, the builders themselves are running low on ready to build lots (inventory) and scrambling to backfill the demand which equates to land prices that are skyrocketing (30%+ increases in a matter of weeks depending on the market). Let’s hope that we find a normalcy in the market so we can enjoy the bull market ride in housing and land.

Links:
http://www.calculatedriskblog.com/2013/03/analysts-increase-2013-house-price.html#uh9KivlxCKGG4QDr.99
http://www.sacbee.com/2013/03/26/5292593/bidding-wars-breaking-out-in-sacramentos.html

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

Bay Area: Back to the future—Are condos the new apartments???

I have to admit it…I was dead wrong. I thought (like many others) that condos were going to be dead for a while.  Many people really don’t want to live in a condo but they end up “settling” for them because of the relative affordability closer to job bases. As prices in the Bay Area have resumed their pre-collapse march up at 10+% per year, condos are making resurgence.

Given the resurgence in attached for-sale product in the Bay Area, the “highest and best” use has now probably switched back to condos from apartments.  And it probably won’t be long before we see the reverse of what happened a few years ago where condo sites were re-entitled to apartment deals.  Now we’ll start seeing apartment sites re-entitled to townhomes and condos. If you have one of these sites feel free to give us a call to help evaluate all the options in the fast changing market.  There are many factors to consider in making this kind of decision; our in-fill experts can help you juggle all the factors to position your site for maximum sales proceeds!

http://www.contracostatimes.com/business/ci_22613042/bay-area-condos-tight-supply-has-buyers-scrambling.html

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

NorCal: 2005… Are we there yet?

It wasn’t that long ago when it seemed like the residential land market would never leave the cellar.  Amazingly, it seems that someone flicked a switch and land prices are surging to what seem like pricing we saw at the height of the market in 2005.

We are not there yet, but getting close.  How can this be when it seems like new home pricing and the re-sale market are still a good 30-40% below peak pricing?  With the sub-contractor trades still aggressively competing for work and construction materials that remain readily available at fair market pricing, the cost savings from the builders fall directly to the land.

I think it won’t be long before we see the associated trade and construction costs begin to rise and we see a plateau in land pricing.  Land owners need to catch the wave and enjoy the ride.

2005 vs 2012 Market Price Line

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

California Division: 2012 Year in Review

LAO-CA Infographic 2012 YIR

Source: Tom Reimers, President, (949) 852-8288 x28

SACRAMENTO EMPLOYMENT NUMBERS GETTING BETTER

Now that the election is over, everyone in the homebuilding industry can take a collective deep breath and get back to work.  In spite of our worst fears about policy failures, taxes and over regulation, new homes are selling in the region and selling well.  Even before the election, anxiety over the housing market seemed to be subsiding while confidence growing.  There are many factors including supply shortages, interest rates, and relative affordability but most notable, have been  the employment numbers for the Sacramento region.  They have finally dipped below the double digit level and it has provided a boost for the region so severely squashed by the residential market downturn.  If the trend continues on the employment side, look for positive growth in new housing no matter what our government looks like.

http://www.bizjournals.com/sacramento/news/2012/10/19/area-unemployment-dips-single-digits.html

http://www.bizjournals.com/sacramento/blog/sanford-nax/2012/10/job-market-improves-in-some-professions.html

http://www.builderonline.com/legislation/what-obamas-re-election-means-for-housing.aspx?utm_source=newsletter&utm_content=jump&utm_medium=email&utm_campaign=BBU_110812&day=2012-11-08

Source: Jim Radler, Senior Marketing Consultant, (916) 784-3329 ext. 11

Why is the market so hot?!!!!

It always boils down to the fundamentals — Supply and Demand. We know that the Bay Area is always supply constrained and the real estate collapse took many of the higher density projects and put them in a deep freeze, meaning we had even fewer new projects adding to the supply from 2008 ’til today. Now we have a new phenomenon, for all the people that got foreclosed on and were supposedly going to be renters the rest of their lives, it turns out they still want to buy homes and for the many that got foreclosed early in the cycle their time in the penalty box is over.

http://www.insidebayarea.com/business/ci_21865117/foreclosure-victims-buying-homes-again

And as foreclosures in CA and the Bay Area continue their downward trajectory, people waiting for that ‘distressed’ buying opportunity may never see it materialize.

http://www.foreclosureradar.com/foreclosure-report/foreclosure-report-september-2012

Rather than competing with 10-20 other offers as soon as a ‘bank-owned’ home hits the market, buyers are finding the process of buying a new home to be more appealing as builders ramp up community production.

http://www.sfgate.com/realestate/article/Bay-Area-new-home-construction-rebounds-3986773.php#page-1

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Sacramento is booming…

As far as residential land goes.

These past few months have been eye opening on the residential land front.  Just when folks were beginning to write the rest of 2012 off as another down and out year like 2011, someone “poked the bear” and got things moving again.  The past few months in Sacramento have been on fire with the builders knocking down the door trying to grab land positions in core markets.  With the finished lot inventories drying up, everything from paper to finished lots have been targets for both public and private builders.  It is reminiscent of the bump we saw in 2009 and 2010, but with the pipeline of finished lots dwindling, REO product drying up and interest rates in the cellar, this party may be just getting started.

Link:

http://www.bizjournals.com/sacramento/print-edition/2012/10/05/home-price-spurt-correction-new-bubble.html

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

California Dreamin’

Seems like the herd is gathering steam again in the Sacramento region and in the greater California market.  That herd I am talking about are the homebuilders.  It’s funny when a couple of builder deals get completed, it draws in the rest of the pack like a magnet and we are starting to see that in and around Sacramento.  DR Horton just closed on a deal in Folsom, Standard Pacific picked up about 100 lots in Rocklin and now the rest of the builders are combing the market looking for that next deal.  This is great news not only for the industry, but for developers and land owners.  If the new home construction numbers continue like they are in the Sacramento region, finished lots in core markets will be long gone by next year. FULL STORY

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

Let’s Make a Deal in the Bay Area – Door #1 or Door #2?

While the land market in the Bay Area has continued to improve and in many primary in-fill areas the market is back within 20% of peak values, the secondary and tertiary markets are still bouncing along the bottom with land values that are typically only 20% of peak values. This seems to be an unsustainable condition. Back in 2003 or 2004 when land prices in the Bay Area were approximately where they are today, land in outlying markets (think the cities of Brentwood and Gilroy, for example) was consistently trading for 2 to 4 times what it is trading for today.

So it seems that the market is at an inflection point, either the 2,000+ units per year that all the public and large private homebuilders combined in Northern California need to produce to cover their fixed costs are going to come in the form of 50 lot and smaller infill developments (Door #1), or the outlying Bay Area land markets are set for a major rebound. Maybe it’s time to see consider what kind of deals you can find behind Door #2.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Sacramento: Where’s the Dirt?

The Sacramento region finally appears to be emerging from the homebuilding doldrums.  Over the last several months, homebuilders seem to have a new found confidence as new home absorption levels have begun to tick up to levels not seen for several years.

Pricing on the other hand, is still lagging with maybe a small bump in appreciation.  All of this said, ready-to-build lots are becoming scarce within the Sacramento submarket, and at this rate, some areas could possibly end 2013 with a lot supply of zero.

The key drivers to getting builders back to Sacramento will be continued increased scarcity of deals in the San Francisco Bay Area, in addition to sustained new homes sales that we have seen in the area over the last several months.

The Wall Street Journal recently reported that the recent rise in homebuilding could be thwarted by an unlikely factor, a shortage of land in desirable locations.  Homebuilders are realizing they cannot focus strictly on the Bay Area locales just due to the fact that high land prices and land scarcity will forbid them from ramping up deliveries and allowing them to grow organically.  If they want to be able to produce new home delivery volume, they will have to start looking in the Sacramento region as well as some parts of the Central Valley.  If and when they move eastward, we will start to see homebuilders look at “paper” lot or entitlement deals, where in the past they were only focused on finished lots.  Time will tell.

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

N. Central Valley Gears Up for Recovery

Land Advisors’ Northern California Team is proud to announce that it recently closed 507 single family lots in finished condition in the northern part of the City of Merced, a project known as Bellevue Ranch West.  The buyer is a long-time local farming family who plans to hold the asset as a long-term investment.

Although little building activity is occurring in Merced County at the moment, K. Hovnanian Homes is currently open and selling homes in one project.  The project, known as Eagles Ridge, is an active adult community in the Santa Nella market.

Despite the fact that Merced County new home closings are projected to hit a post-crash low volume in 2012 (off 98.9% from peak new home closing volume), year-to-date home prices are starting to rebound for regular re-sale and REO transactions with each up 2.47% and 1.96% respectively from their troughs. In addition, foreclosure sales (borrower-to-lender) are down 75.13% year-to-date from the 2008 peak.  REO (bank-to-new-buyer) sales are down 71.38% from their peak in 2009.  Our interpretation is this represents a positive sign that the overall Merced County housing market is healing – slowly but surely. (Source: Housing Intelligence Pro by Hanley Wood)

BIG LISTING: As part of a recent major lender-owned land listing for the California Division of the Land Advisors Organization, the Land Advisors Northern California Team covering the North Central Valley is actively looking for buyers for six assets in the bank’s portfolio.  Collectively, the listed assets include 479 single family homes in varying stages of development.  These asset sales represent the last few remaining bank-owned deals in the North Central Valley.  They should attract multiple investors and likely a few builders as the chance to buy lots well below replacement cost dwindle statewide.

Asset Breakdown:

  • Atwater:  Stonecreek – 129 Single Family Detached Lots in Finished Condition;
  • Winton:  Winfield Station – 22 Single Family Detached Lots in Finished Condition;
  • Modesto:  Thomas Terrace – 9 Single Family Detached Lots in Finished Condition;
  • Ceres:  Bing Cherry Estates – 39 Single Family Detached Lots in Finished Condition;
  • Merced:  Amberly Court – 162 Single Family Detached Lots in Rough Graded Condition (on 15.93 acres); and
  • Sage Creek – 118 Single Family Detached Lots in Rough Graded Condition (on 13.55 acres).

Other North Central Valley Updates:  San Joaquin County is experiencing improved new home sales in the towns of Mountain House, Manteca, and Lathrop.  New home projects are getting started in Stanislaus County, with two in Oakdale and one in Patterson.

Slow and steady as they are… all signs of building activity in the North Central Valley show that we are on our way to recovery!

Source: R.J. Radler Senior Marketing Consultant, (916) 784-3329 ext. 12; and Jim Radler Senior Marketing Consultant, (916) 784-3329 ext. 11

 

Around the Bend in the Bay Area

It feels as though we’ve turned a huge corner in the Bay Area real estate market.

Silicon Valley is producing jobs again at a solid pace (many are anticipating stock option millionaires boosting demand), and the commercial market is rebounding as office space has been absorbed and demand for new space is driving new construction.

Vacancy rates, rent increases and CAP rates for apartments are all at all time highs, spurring tons of new apartment development.

While all these data points are great signs for the recovery, they come with one potential downside—increased construction costs. While we haven’t seen it dramatically impact land values yet, a demand for labor and materials increases, construction costs appear to be headed up for the first time in many years. This could act as a bit of an inhibitor in any large run up in land prices.

Source: Steve Reilly, Marketing Consultant, (925) 791-2194

The Good, Bad & the Ugly in Sacramento

Sacramento Arena Deal is DOA…  After a whirlwind of meetings between the NBA, the Maloof family and the City of Sacramento, the prospect of building a new arena for the Sacramento Kings is officially dead.  In countless meetings held in locations all over the country, the Maloofs agreed on the terms initially laid out by all sides to build a new arena, structure financing plans and establish a timeline for build out.  However, a number of empty promises from the Maloofs finally came to light as the owners did the Texas Two Step with the NBA and the City, revealing that the deal is not feasible, (even bringing in the family’s own economist to illustrate).

Now Sacramento and the NBA both have egg on their face, and the public and the fans have more questions and doubts that the Kings will ever be viable in Sacramento.

Along with the proposed new arena was the potential for a new wave of jobs – construction and permanent – as well as a start to the redevelopment of the Sacramento Rail Yards.  A new arena would have meant new retail shops and restaurants as well as an onslaught of new homes.

All of the redevelopment ideas will have to be put on hold while the City and Maloofs try to sort out their mess.  In the meantime, the people of Sacramento are angry – some prominent business leaders are even calling for the ouster of the Maloofs and want new ownership to lead the Kings to prosperity… we will see what happens.

Now onto some good news…  Sacramento foreclosures of existing homes are beginning to slow.  In fact, the number of default notices filed in the first quarter of 2012 is the lowest since early 2007.  This should be welcome news for both home buyers and homebuilders alike.

Sacramento Foreclosures

In the last several years, new homebuilders in the greater Sacramento area have been building and selling new homes with pricing that is in line with REO inventory, and in some cases even selling below it.  As the REO product has been dumped onto the market, home pricing and new homebuilder margins have been steadily decreasing.  The Northern California Team has even seen some builders impair lots that were bought just 18 months ago.

With the change of wind direction in just in the last couple of months, builders have started to sniff around again looking for deals and build pipelines for 2013 and beyond.  Furthermore, absorption rates have started to tick up as demand for new homes builds upward.

It looks like Sacramento is finally coming out of the ashes and is ready to start the slow grind toward home price appreciation.

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

Rebound in Sacramento …and We’re Not Talkin’ Hoops

The data says it all.  A look at the latest Ryness Report will tell you that new home sales are solid across the board in just about all actively selling communities in Sacramento, El Dorado and Placer Counties.

Pricing is still flat but absorption is clearly picking up.  Builder anxiety for the spring selling season seems to be subsiding and confidence in the market is growing.

More evidence to a turnaround is the fact that a very prominent publicly traded homebuilder who vacated the Sacramento Region a few years ago is back.  A new division president is once again at the helm and looking to grow the Sacramento Division, including the Central Valley and Reno.

See the data: Sacramento Regional Real Estate Trends for March 17, 2012

Sacramento foreclosures down 8.8% from a year ago: Foreclosure activity in Sacramento during February fell when compared with the same period a year ago but remained largely unchanged from January, according to figures released Thursday from RealtyTrac, an online foreclosure information company.  Full Story

Region home sales up by 16.6%, but prices are down: Homes sales in the four-county Sacramento region were higher by 16.6 percent on a year-over-year basis in February, according to data released Thursday by real estate information firm DataQuick.  Average prices were lower from a year ago, however, for all four counties.  Full Story

Source: Jim Radler, Senior Marketing Consultant, (916) 784-3329 ext. 11

Bay Area Tertiary Markets Recovering? Maybe…

In the depths of the downturn (say, March 2008), the City of Antioch had over 800 active listings of single family homes on the market.  According to the MLS, only 105 homes sold that month, which translated into an 8-month supply of inventory.  Needless to say those were also the months where we saw double digit price declines year-over-year.

Fast forward to today: In the first two and a half months of 2012, 247 homes sold in Antioch, or approximately 98 sales per month.  The current active inventory according the Contra Costa MLS is 103, meaning a 1.1-month supply of inventory!  While this may not mean that prices are going to rocket up anytime soon in East Contra Costa County, it is definitely a great sign that the market has found a “natural” bottom and might have even overcorrected on the way down.

This same story is being repeated in Brentwood, Oakley, Pittsburg and other tertiary Bay Area markets, which were first to fall off the “cliff” a few years ago.

This work-off of resale inventory is starting to show its affect on new home absorptions.  In 2011 builders in East Contra Costa County were struggling to get to 1 to 2 sales per month on average. In the first few months of 2012, absorptions have been running between 3 and 4 sales per month. If this trend continues we expect more builders to begin venturing back out to the tertiary markets to look for new residential land deals.

Source: Steve Reilly, Senior Marketing Consultant, (925) 368-3128

RED LIGHT: CA Foreclosures, GREEN LIGHT: Sacramento Arena

California Attorney General Kamala Harris has called on federal mortgage giants Fannie Mae and Freddie Mac to place a “good-faith pause” on all foreclosure sales in the state following the multi-state settlement with the nation’s largest banks over mortgage abuses. The nationwide settlement calls for more than $12 billion in relief for struggling California homeowners in the form of principal reductions and short-sales. Read more: California AG calls for Fannie Mae and Freddie Mac to halt foreclosures

Does this “good-faith pause” help the housing industry?  Will delaying the foreclosure process on thousands of homes prolong the time until the housing market recovers by creating an even bigger backlog of shadow inventory, potentially resulting in continued home price depreciation?  Interesting…   

Sacramento Arena Update:  The City of Sacramento, the NBA and the Sacramento Kings’ organization have come to a tentative agreement to build a new arena in the Sacramento Railyards development, with the potential of keeping the Kings in Sacramento for next 30 years.  This is welcome news for the Sacramento region, especially if the owners of the Railyards develop the area surrounding the proposed new arena. 

If the stars align and a financing plan takes shape, the new arena will be completed the end of 2014.  The development and construction of the entertainment site will provide a host of new jobs, both temporary and permanent.  The project will revive Downtown Sacramento and bring some much-needed life and dollars to the City.

Further, the Kings’ ownership and the City of Sacramento will need to sell the existing Power Balance Pavillion and surrounding property.  The sale should spur new re-development in the Natomas area, which will include a mix of residential, commercial and retail uses.  Given the site’s central location in Natomas and its development history, the property’s sale should garner national attention and interest from developers.

Maloofs pledge to contribute $75 million upfront for new downtown arena

VIDEO: Does Arena Deal Have Council Votes?

VIDEO: Kings owners, Sacramento, NBA reach arena deal

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

New Normal: Design Does Matter

Take a look at the recent potential small-lot single family projects in the Bay Area and you might notice an interesting trend… while most people would expect the average sales price for a typical small-lot single family home to track lower as the home is placed on a smaller lot, there is a point at which the home-buying market no longer differentiates between lot sizes.

Homebuilders selling homes on a 6,000 square foot lot versus a 5,000 square foot lot see a large difference in cost and purchase price, and the same goes for builders selling homes on a 5,000 square foot lot versus a 4,000 square foot lot.  However, right now in the Bay Area, when a builder drops its lot size below 4,000 square feet, the market levels out.  The design on the inside of the house dictates fluctuations in cost and asking price, not the lot size.

For example, during the peak of the homebuilding market in 2006 in San Ramon, floor plans were of less importance to attracting loads of eager home buyers.  But in today’s highly competitive marketplace, any perceived inefficiency in a floor plan can result in a house being passed by.  The current market environment is giving homebuilders the opportunity to create innovative and attractive floor plans on small lots in high density areas that were overlooked in previous market cycles.

Homebuilders looking to reach the ever-prized “qualified home buyer” need to focus on differentiating their new home communities more on the house itself and less on lot size.  Now, more than ever, they need to focus on the “livability” of the product from a floor plan standpoint.  In high density areas like the Bay Area, the way every square foot is used can mean the difference between big margins or big yawns.  All is not lost though; we can help point clients in the direction of new architectural innovations that allow formerly inefficient site and house plans to be reworked into projects that can meet the demands of today’s discriminating new home buyer.

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Big Moves and Bright Ideas in Northern Central Valley

Amazon.com makes a move (to CA): Even the cynics out there are saying that NOW is the time to buy a home.  With interest rates and home values at an all time low, it is certainly a buyer’s market these days.  The problem is remains however, that limited numbers of potential buyers have enough equity ready to put into buying a new home.  The unemployment rate in California and nationwide is still painfully high and we are all waiting for job creation to help boost the economy and the homebuilding industry. 

Good news for California:  Amazon.com made a promise last year to bring 10,000 new jobs to California, and now, according to SacBee.com, the online sales giant is apparently ready to make good on that pledge, starting in western Stanislaus County.  Amazon is expected to announce soon it will build a 1,500-employee distribution center off I-5 in Patterson, west of Modesto.

Patterson profile:

  • Although Patterson has experienced few to no home sales in last two years, the city has shown to be a viable submarket for home sales. From 2002 to 2009 just short of 3,000 new homes sold in this area.
  • Fewer than 200 “finished” lots remain within the City of Patterson.
  • 1,500 new Amazon jobs will dramatically reduce current 18.4% unemployment rate.

New Vision for Merced: At the Merced City Council meeting this month, the public weighed in on the Merced Vision 2030 General Plan, which City officials hope will turn Merced into a dynamic urban entity by 2030.

The concerns at the meeting varied… UC Merced officials were elated with the inclusion of the campus and the University Community housing project in the “Vision.”  On the other hand, some city residents were concerned about the population projections and the potential impacts on agricultural land.

The City Council approved the plan by a 6-1 vote.  Castle Farms, a proposed mixed-use development at Highway 59 and Bellevue Road, and Mission Lakes, a community plan bounded by Mission Avenue to the north, agricultural land to the south and Highway 59 to east, were both left out of the plan because some of the City Council members believe the footprint of the plan is too big.

Bright Idea on Campus: They say college is the time to “find yourself.”  Well the students of the newly-opened University of California, Merced are taking that idea to the next level, and are finding themselves in some pretty nice homes.  Many students are ditching the traditional, crammed on-campus dorms for a more spacious and luxurious option: the vacant foreclosed “McMansions” left behind by the housing boom.

Nearly 5,200 students attend UC Merced, but the university has only enough campus housing for about a third of its population.  The Merced community is hearing mixed reactions from the students who are renting the 5+ bedroom homes and using them in an unconventional way, but overall the sentiment is currently positive.  Neighbors are happy to not have homes left vacant on their street, and the current title holders are happy to be collecting some kind of income from the properties.

Source: RJ Radler, Senior Marketing Consultant, (916) 784-3329 ext. 12

2011 = 2012? Seeing Double in NorCal

2011 is gone and we now have upon us a fresh start to a new year (Ahh… deep breath).  But what does that mean for the housing industry?  The Land Advisors Northern California team is looking ahead, and is wary that 2012 might reflect more of what 2011 had to offer.

The Sacramento region is highly sensitive to State budget woes that will likely cut more jobs and hinder organic economic growth in the area.  Home prices appear to be on a downward trend, and foreclosure rates are still high.  A statewide court ruling last week that eliminated redevelopment agencies, threatens the revitalization of the Sacramento downtown area, and now two signature development projects may never see the +$80 million in redevelopment money they were scheduled to receive in coming years.

Among the doom and gloom, the general consensus is that a bottom in the housing market is within clear sight!   Local Northern California investors and developers can see more and more distressed opportunities ahead.  And while many public and private homebuilders remain on the land acquisition sidelines, and are still busy impairing projects that were purchased during the 2010 boom, they are optimistic that the market will gradually get better and home prices will soon start to appreciate.

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329

Naughty or Nice? New Home Shoppers Check the List Early in Sacramento

With Thanksgiving behind us and Christmas just around the corner, holiday shopping has officially started.  For housing in the Sacramento region, homebuyers started shopping early and are likely to continue through the New Year.  October 2011 showed a 19.5% year to year increase in volume. The reason?  Home prices are continuing to fall… 

San Diego-based DataQuick reported that the average sale price of homes in the Sacramento four-county region declined 9.5% from a year ago.  Although, the decline is not because of falling home values… It appears as though more buyers are flocking to less expensive homes, which is influencing the downward trend in average home price.

The number of months of new home supply on the market is down to 4.2, and even as little as 2.0 in some stronger markets.

Land Deals:

  • The New Home Company purchased a 128-lot subdivision in the master planned community, The Parkway in Folsom.  All but 44 of the lots were “mostly improved.”  Construction on the new homes within the subdivision is scheduled to begin in March 2012.
  • Most of the distressed finished lot deals have already sold in the Sacramento Region, leaving very few for opportunistic builders and investors.
  • The heavy multi-family activity in the San Francisco Bay Area has not yet moved east to reach Sacramento.   Multi-family builders are currently obtaining $1.00 to $1.20 per square foot revenues, which is not enough to justify construction for new product in the Sacramento region.

Source: Jim Radler, Senior Marketing Consultant, (916) 784-3329 x11

Are Some East Bay Submarkets Now Overcorrected?

Take this into account… According to Real Facts, the average 3 bed/2 bath apartment in Dublin is currently renting for $2,470 per month.  Compare this to the typical monthly payment based on a $450,000 mortgage at a 4.0% rate; the fully amortized payment is only $2,150 per month. Adding property taxes at 1.1% increases the monthly payment to $2,562. Finally, adding a couple more hundred dollars for homeowners’ association costs and/or insurance brings the total monthly housing cost to approximately $2,760.

While this example of home ownership is a few hundred dollars more than the average Dublin rental, it is also based on pre-tax income. To paint a true picture we need to factor in the tax benefit of ownership. In the case of our example above, the total interest and property tax deduction should be approximately $20,000 per year.  Assuming the potential homebuyer is within the 25% marginal bracket, this deduction is the equivalent of a $5,000 per year tax savings, or approximately $415 per month. Taking this into account the true cost of ownership is only $2,345 per month, which is $125 per month less than the average 3 bed/2 bath rental in Dublin.

While all this may not mean house prices are finished declining or that sales are going to double anytime soon, we can definitely read it as a sign that we have reached a key point in the housing cycle, and that bottom has to be close… if we haven’t already hit it!

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Move-Ups Step Up in Placer County

The Granite Bay / Loomis submarket is known primarily as an affluent re-sale, move-up market with great schools.  During last decade’s housing boom, the Sacramento region experienced unprecedented residential land entitlement.  However, the area has seen a lack of building activity in recent years, and now homebuilders are thinking of new ways to standout to attract buyers.  The Northeast Sacramento submarket has attracted several custom homebuilders looking to differentiate themselves from typical run-of-the-mill production homes, as standard production homes have seen heated competition (and downward price pressure) from the small number of qualified new home buyers looking for entry-level product.

Two builders in particular have found success finding move-up custom and semi-custom buyers in the unpredictable economic environment.  First, Kinetic Investments purchased Sierra De Montserrat in Loomis last year.  Initially, the private builder had no plans to begin construction right away, but it has already sold three of the 62 lots.  The home sites range from four to six acres apiece and are priced from the high $100,000 to $400,000’s.  At the market peak in 2006, “finished” lots in this submarket traded for anywhere from $600,000 to $900,000 per lot.  Now builders and investors can get their hands on the same lots for $100,000 to $300,000.

The Collection at Granite Bay is another community that has experienced notable success selling semi-custom lots.  Land Advisors Organization brokered the transaction in 2010 when The New Home Company purchased the community from Wells Fargo.  Of the 17 total lots, two semi-custom home sites have sold in the last couple weeks, and four more homes are currently under construction now. Pricing for The Collection at Granite Bay starts in the high $500,000’s.

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329

Spotlight on FOLSOM

Located northeast of Sacramento, the City of Folsom is just south of Folsom Lake in Northern California.  Folsom is currently the most desirable sub-market in the Sacramento Region for homebuilders, where average sales prices of homes are now close to DOUBLE those of the overall region.

Folsom Fast Facts:

  • Residential land north of U.S. Highway 50 traded for $1 million per acre (raw) at the peak of the market in 2005.
  • At the current absorption pace, Folsom will be out of finished lots by 2014/2015.
  • Folsom enjoys a 5.7% unemployment rate (current California unemployment is 12%), and thus has minimal foreclosure activity.
  • Folsom’s schools consistently rank in the upper echelon of school districts not only in the region but in the entire state.

Landmark Folsom REO Property Available for Sale:

Land Advisors Organization is currently marketing Carpenter Ranch – a 1,019-acre master planned community located in Folsom’s Sphere of Influence in Sacramento County.

The property rests along 1.5 miles of Highway 50, and was recently entitled for 2,263 residential units and over 3 million square feet of commercial uses.  Previous investment in the land totals over $100 million.

Source: Jim Radler, Senior Marketing Consultant, at (916) 784-3329 ext. 11.