Year 2009 can be described as unprecendented. Much has been said about the national real estate and financial meltdown, and these national issues remain relevant, however, all real estate markets are local, and the real estate purchase eventually becomes a neighborhood decision. So in terms of Sacramento real estate prospects the economic engine for the region still is state government. State government slows the booms and insulates the bust in usual circumstances. As of this writing the budget process remains hopelessly stalled, with the reality of stateworker furloughs upon us. The good news in this mess is that the state does not appear intent as to layoffs, which should fill employees with the confidence that their jobs will still prevail
The series of foreclosure sales that have gripped the multiple listing service continue at about 200 foreclosures per business day. The accumulation of inventory should expand at the rate of 4,000 homes per month. Apparently many financial institutions are holding onto to their distressed inventory and this addition to regional supply seems in check for the moment. But the possibility of an influx of inventory remains the wild card in any discussion of home prices.
Consumer behavior depends upon price expectations, and for consumers to expect continued falling prices will keep many of them on the sidelines until some evidence of a turn can be found. Looking at the rate of price movements among pending sales for the region, the data show a firming in price per bedroom during the fist quarter of 2009. Given favorable mortgage rates, REA expects this price firming to hold. The real estate industry is closing around 2500 sales per month, which is a rate not sufficient, at this time, to absorb the increase in inventory, the so-called shadow inventory, that exists beyond the active market.
Much of confidence rests with the action of government. Fortunately or unfortunately consumers look to government as the solution to this real estate problem. While REA would not suggest that the public sector can fix a market phenomenon, consumers hold the key. Prices have indeed fallen to the point to make home ownership the rational choice for residents, and we believe this reality will eventually increase the number of buyers in the market. The run-up of home prices left many potentail buyers on the side lines, so considerable pent up demand likely exists. Once this pent up demand is matched with confidence, REA expects the market to adjust .
So .....all one can do is watch the governement, and hope that their plans hit the market at the appropriate time. Should spending projects be delayed by bureaucratic process into 2010, these projects will add to the inflationary pressures that are expected. Inflation will raise interest rates, and severly impact any housing recovery expected or intended by government decision makers.
Steven J. Krohn
LISTINGS OF RECENT PROJECTS:
Residential Sales Activity with Real Estate Analytics and Brokerage
Site analysis for Fast Food Franchises Economic Model of City of Sacramento's Mixed Income Housing Policy
Comstock's Magazine Article on Data Centers in Sacramento
Articles on Downtown Housing Development
Building Security Analysis for Comstocks
Discussion of the Railyards Project
Development of Strategic Planning Data Base for SHRA
Report on the Housing Trust Fund Activities in Sacramento
Economic Impact of Chino Institution for Men
Carson Creek Economic & Fiscal Impact Study
Manufacturers & Processors List
Regional Economic Newsletter
Development of Regional GIS Information Database
Send comments regarding this site to: Steven J. Krohn.
For more information about our services, contact the people mentioned within these pages or telephone (916) 456-6085.
