Thank you from Land Advisors Organization California Division!

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California Division: 2012 Year in Review

LAO-CA Infographic 2012 YIR

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

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

Sacramento… Healing Period?

Over the last 6 months, the Sacramento region has posted solid housing numbers to give the new home builders optimism for the future of this area.  Stuck in the mud for the last 2-3 years, the region looks like it is pulling itself off the bottom and headed in a better direction.  Although REO sales are still plentiful compared to 2005, the trends are positive.

The region should see approximately 15,000 REO sales this year, but that is 15% less than 2011 and 30% of peak 2008 numbers (22,131).  New home sales for the region are expected to almost double what they were for 2011, climbing up well over 3,000 new home sales for 2012.  It also important to note that currently in the region, new home sales account for approximately 3.4% of total home sales and that at the peak of the market, new home sales accounted for approximately 26.3% of the overall home sale market.

With this further evidence of a bottoming of the housing market and plenty of room to mature, builders have anticipated the next boom and they are back buying again. Approximately a half dozen deals have been purchased over the last few months with more builder deals currently in escrow.

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

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

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

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

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

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

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.

Sacramento Region Catches a Glimpse

Northern California Report:

  1. Market experiencing more downward pressure on pricing. 
  2. New home sales are poor. 
  3. Most public homebuilders are not looking in the Sacramento region at this time.
  4. The Sacramento Region sub-market (including Sacramento, Placer and El Dorado Counties) has an abundance of developable, yet unavailable, residential lots.  Most of the finished lots in the area are controlled by the public homebuilders. Very few are distressed.

Glimpse of light: A few of the Bay Area secondary markets (a.k.a. the “commuter” markets), particularly the community of Mountain House, are starting to show signs of a comeback, which hasn’t happened in roughly 4 years. 

Source:  Jim Radler (916) 784-3329 x11, Senior Marketing Consultant for the Sacramento region sub-market