By Jim Wasserman , Sac Bee
There may actually be a bottom out there.
The first of several reports on first-quarter home sales is in, showing the number of new homes sold in the eight-county Sacramento region has fallen to the lowest level since possibly the early 1990s. But amid the dreary statistics there appears to be the suggestion of a market in the beginning stages of stabilizing.
Greg Paquin, president of the Gregory Group, a Folsom-based building industry consultant, says the 1,304 new homes sold in January, February and March were almost equal with those sold during the previous quarter. That mirrors a market trend seen in February, when year-over-year sales of existing homes declined in single digit percentages for the first time in three years.
'That's not much on which to build a case for recovery. But Paquin and other analysts whose reports are due in the next two weeks say that while the numbers remain discouraging, they can see what looks like a market bottom forming before year's end. They say the picture should be clearer by June or September.
"My sense is we're going through the worst of it now," Paquin said. "If that's the first half of the year, my impression is the second half is starting to dig our way out or moving forward."
Gregory Group statistics showed prices are still falling for new homes. The average $404,144 first-quarter price was off 5.3 percent from the previous quarter and down 13.1 percent from the same time last year. The silver lining: Paquin believes prices probably have just another 3 percent to 5 percent to fall.
That hint of hope comes with some pretty important warnings: That the nation's economic troubles don't substantially worsen or the financial system isn't shell-shocked by something like last year's subprime meltdown and subsequent credit crunch. What's more, the region is still working through a foreclosure crisis contributing to an oversupply of homes with "For Sale" signs.
Even finding a bottom doesn't mean it's over: The market may be slow to rebound and remain stagnant for a long time.
Still, after a free-fall in sales and prices that has lasted nearly three years, any notion of mere stability will appeal to thousands of area homeowners who have seen their values fall. It also will appeal to sellers who have lost bargaining power in a market where buyers rule.
"We've dropped the price twice, maybe three times," said George Vargas of Elk Grove this week. "We've had a few more people since our latest price drop, but it's slowed down in the last month." Vargas' situation is similar to that of home builders: Both are competing with mortgage lenders and banks dumping thousands of foreclosed homes onto the market and slashing prices to move them. Bank-owned homes have come to account for about half of the sales in the region, a factor that has scrambled standard market indicators.
Real estate agents such as James Becker of Sacramento see a sign that things are looking brighter in bidding wars occurring on bank-owned listings in the suburbs. He suggests the market already is "bouncing off the bottom."
Becker, managing partner of Becker Mortgage and Realty, said bank-owned homes in Elk Grove that once sold for $120 a square foot have risen to $135 per square foot and are going higher.
March closings of resale homes are, indeed, expected to show an "uptick," said Andrew LePage, an analyst for La Jolla-based DataQuick Information Systems. DataQuick is expected to release its figures on sales of new and existing homes next week.
Doug Pautsch, Sacramento division president of Dallas-based Centex Homes, maintains that buyers believe the market has bottomed and is bouncing back.
"We've seen prices stabilize and even go up in some of our communities," he said. Centex, the region's leading builder this year, has started saying no to buyers who ask for concessions that might have been routinely granted earlier.
Some market watchers aren't convinced better times are soon ahead. They're taking their cues from the 10,000 foreclosures last year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties – and the 5,573 more being reported in just the first three months of this year by Foreclosures.com, a Folsom-based Web site that tracks defaults.
That's a strong sign the downturn may still have a lot of strength, said Scott Syphax, president and chief executive officer of Sacramento-based nonprofit housing firm Nehemiah Corp. of America. Syphax said he wonders whether every time a bank-owned home is sold "there's another right behind it to take its place."
"As long as that's happening the market is not going to go up," he said. "The most charitable thing you can say is it's treading water. I still think the biggest part of that volume has yet to surface."
DataQuick's LePage said banks have sold only about 40 percent of the homes they foreclosed on in the region during the second half of 2007. The thousands more slated for sale will put a downward pressure on prices. Neighborhoods closest to downtown Sacramento likely will be the most immune. But not so the suburbs.
"There are just a heck of a lot of foreclosures to burn off before the market can kick into gear in any big way," he said.
But like Paquin, LePage said sales seem to be edging down toward a base level. "It's hard to go much lower than all the natural things that force people to move all the time," he said. "It seems we're getting closer and closer to whatever that number is."
