How’s the Market? (Part 2)

March 1, 2011 By Rowland Leave a Comment

Last week I attended a presentation at the Sacramento Association of Realtors made by the Chief Economist from Freddie Mac – Frank Nothaft. He spoke about the housing market in the US, in California, and in the Sacramento metro area. We know what’s happened to us here in Sacramento. What we don’t know is that it’s worse here in Sacramento, than the rest of California – and it’s worse in California than in the rest of the US! Freddie Mac tracks the reasons people become delinquent on their home loans. Reason number 1, with 60% of the total, is “unemployment or curtailment of income!” So with higher unemployment rates in California than the rest of the US, and higher unemployment rates in Sacramento than the rest of California, that makes sense.

Housing prices are not helping. Since September of 2005, Sacramento prices have declined 58%!

This results in large number of homeowners that are under water on the their mortgages. According to Freddie, one-third of all homeowners in California have negative equity. I’ve heard estimates of 40% in the Sacramento area.

The thing that will turn us around and head in the right direction is employment. Unfortunately, the employment figures from the last year aren’t so hot.

What to expect for the next year or two? Well for one, Sacramento has the most affordable housing in the state. This means that if you are buying your first house, or want to upgrade your living situation with a new home, home prices are better now than they have been in a decade. Many of my 1st time home buyer clients are paying less per month for their house payments than they were paying for rent! The market is attractive for real estate investors too! We’re finding that investors are “cash flow positive” right away on their investments. This was not possible 5 years ago.

Back to the predictions made last week by Freddie Mac’s Chief Economist, Frank Nothaft. He predicts that Sacramento home prices will not make a rebound in 2011. In fact, he says, it will be the end of 2012 before we see any upward movement in home prices…

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How’s the Market? (Part 2)

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