It is true we are starting to see some subtle shifts in the Sacramento real estate market.  But the only thing dramatic is the anecdotal comments of other Realtors who are saying there is increased activity.  Well, we always see increased activity as we move into spring.  Is this different than we saw last spring?   We will have to wait for some of the monthly activity numbers to start showing up to have any real sense of how this March compared to last year, but everyone I talk to seems to have a good feeling about where this is headed. 

I am feeling a bit more cautious than some, but I have been dealing with a good number of short sales and don’t see that slowing anytime soon.  These are homeowners who are trying to avoid foreclosure by demonstrating to their lender that they owe more on the house than it is worth and that they have suffered a financial setback that prevents them from continuing to make payments and will not allow them to make up the difference in what they can sell the home and how much they owe.  We have a team at MagnumOne dedicated to this business. 

What I remain concerned about is the rate of foreclosures we are seeing in the Sacramento area.  We had one of the hottest markets in the country and builders were pumping new homes out as fast as they could, while creative lenders were finding ways to put almost anyone in a new home.  There are huge subdivisions where almost every home is worth less today than what the original owner paid for it.  If the homeowner financed most of the purchase or borrowed on their equity they are most likely underwater when it comes to value compared to mortgage debt.  Many of these homeowners are already facing foreclosure and it will not take much of a financial shock to put other in the same boat.

In California during 2007 almost 2 percent of our homes were in foreclosure and it was even higher in the Sacramento area.  This is nearly twice the national average.  I don’t see any solutions to this trend and suspect our rate of foreclosure to continue to outpace the rest of the country through 2008.

Watching the housing market is interesting but it is what happens with the overall economy that is important right now.  Our Sacramento economy is tied to construction and government and neither is a strong driving force right now.    The number of construction permits for residential property declined 35 percent in 2007 compared to 2008 and there is no line of builders waiting to get their permits today.  The fact that we are still relatively affordable within the state is a positive but is it enough to attract new business and jobs?  Only time will tell.

Is there any good news other than some agents saying they are busy?  Maybe we are busy because so many agents are now working in other industries.  Actually there is some good news. Despite what I believe is a continuing growing foreclosure problem the buildup in inventory of existing homes has not followed the trend of the past two years of rapid growth at this time of year.  In 2006 the average inventory on the market in the Sacramento area, according to HousingTracker increased from 12,457 in March to 14,112 in April.  For 2007 the increase was just about 1,300 home to an April average of 16,523.  As of the end of March we had 15,143 homes on the market but the number has been holding in the low 15,000’s since January and is actually down .5 percent for the past month. 

At the same time we are seeing some stabilization in the median asking price.  Again, according to HousingTracker, the median asking price in the Sacramento area was $309,900 as of March 31.  This is down 1.6 percent from the previous month but holding steady for the past three weeks. 

I learned my lesson with some previous overly optimistic predictions for our local real estate market.  Right now I am being cautious and want to see the foreclosure numbers come down before I start to smile.