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As the regional housing market struggles in 2009, some signs of normalization are beginning to emerge. First the number of listings in the market continues to hover around 10,700. Much has been made as to the shadow inventory that may exist in the market.....shadow inventory being defined as those properties held in inventory by banks who through foreclosure have taken properties back. The possiblity of over supply is certainly calculable. Typically 200 properties are offered on Sacramento County's courthouse steps, and very few are sold to 3rd party investors. Assuming 200 properties are taken back by banks, some 4, 000 propertie would be included per month to the shadow inventory. During the past three months, we have not seen the deluge of these properties.
On the other hand, as long as the market can absorb additional properties, distressed or not, the increase in supply will be averted. The monthly rate of sales in January hovered around 2,000 homes, after slowing from a mid 2008 rate of 3200 home. REA expects the current rate of sales will increase, as the spring and home buying season begins. LIstings published in November and December hovered around 5,000. In January listings hit 6,300 giving some merit to those oversupply fears mentioned. For the first days of February listings hit 5,056. So the challenge and dynamic between the forces of supply and demand will be at work during the first quarter.
Mortgage rates dipped in Mid January, and since have trended higher, admittedly only 30 basis points. Lower rates support housing prices, and higher rates will create pressure on a firming house price. Given expected increases in demand for mortgage money, REA expects that rates will trend up in 2009 as opposed to down. The influsion of trillions of capital by government also supports the longer term view that the country will experience inflationary trends, as these capital funds move through the systems. Banks, unfortunately, are holding their bailout funds which suggests the lending community of fearful of future financial fallout. Eventually, their fears will subside, and the credit markets will function again. In terms of oversupply of the components of the real estate market, REA suggests there is an oversupply of mortgage capital which once broken will flow into mortages, thus counteracting the rise in the mortage rate based upon inflationary fears.
So...what about the turn? Trends are easy, turns are not. REA moniters closed price per bedroom in the Sacramento Regional resale market. To date the trend continues downward. However, review of pending sales data (some 3700 transactions) so support in the price per bedroom. These data could support evidence for the turn, and combined with expected behaviors on the part of buyers, suggest the market may struggle toward price stabilization. Price stabilization and the expectation that prices are done falling will encourage even more buyers to enter the market., a positive outcome. All markets do turn, and REA believes some evidence of a house price turn exists.
Overall, the real estate market presents tremendous opportunity for those with cash or funding seeking to add to thier real estate holdings. Properties can be purchased at levels than can be supported by rental. Most of the markets uncertainty remains a function of the governments expected intervention in market function. As soon as markets can have confidence in their function, a more normal market will appear. So the time is now.... to overcome forecast concerns and invest in the asset least impacted, historically, by the inflation which is likely 2010 on towards 2011.
Currently REA offers three bedroom one bath rehabbed home in Sacramento located at 5401 Esmeralda St for a sales price of $129,500 or a monthly payment on the order of $850 per month. Contact us for details or showings of this property listed on the METROLIST MLS or appearing on www.realtor.com...search properties in zip code 95820 .
