The real estate market in the Sacramento area, sometimes referred to as the Capital Region, is showing signs of improvement.  But everything is not rosy and you have to look closer to see where the improvements are coming from.

A Jim Wasserman story in the Sacramento Bee yesterday, proclaimed “Area home sales bounce back.”  The story also had a secondary headline letting the readers know that 25 percent more escrows were closed region wide in April than a year ago.  I think the market can use all the help it can get and when the big media players start saying things positive you won’t hear me complaining. 

Yes there are good things happening but, in my opinion, we still have a long and bumpy road to travel before we can say we have weathered through this long storm and have a balanced and healthy real estate market in the Sacramento area.  The overall region is comprised of eight counties, Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba.  The bulk of the activity is concentrated in Sacramento, Placer and El Dorado. 

When you breakdown the April sales by counties you find most sales were resale’s of detached homes.  In other words, these are existing homes and do not include condo sales.  Sacramento County experienced more sales in April than March and a 40.8 percent growth from April 2007 which is very good news.  The median price for the homes sold in April was $226,250, down a staggering 34.4 percent from a year ago and down almost 6 percent from last month.  So sales up but prices still falling in Sacramento County.

Moving over to Placer County we find 383 existing homes were sold in April, up from 319 in March and 7.9 percent more than last April.  The median price was up 5,000 from March to $350,000 but off 22 percent a year ago when the median sales price was $448,500.  Considering how hard Placer has been hit this is pretty positive news, especially the median price increase over the past month.

El Dorado had 149 sales of existing homes in April, down 21.2 percent from a year ago but up from the 134 sold in March.  The median sales price in April was $365,000 which has grown from the previous month but down 11.6 percent from a year ago. 

In the existing home sales arena year-over-year growth in sales was experienced in five of the eight counties with Amador, El Dorado and Nevada counties selling less this April than April 2007.  All counties reported median sales price declines from last year with Sacramento and Yolo counties experiencing the largest drop at 34.4 and 33.3 percent respectively.  The best performing county in was Nevada with only a decline of 7.9 percent in the median sales price. 

The condo market across the region only amounted to sales of 105 units in April compared to 81 a year ago and all counties where there were sales reported significant drops in the median price.

Based on April sales, new home sales were nothing for builders to celebrate.  With the exception of El Dorado County, where 29 new homes were sold in April compared to 26 last year, every county reported double digit sales declines.  The median price declined in Sacramento on new home sales by 15.1 percent year-over-year and 25.6 percent in El Dorado.  Placer County, where only 124 new homes were sold had a median price decline of 22.1 percent.

The overriding issue remains the level of inventory of homes for sale combined with the continuing flow of foreclosures and tightened credit standards. 

According to TrendGraphix there were 12,606 homes for sale in El Dorado, Placer, Sacramento and Yolo counties at the end of April.  Although down from the peak of 16,262 in August 2007 this is still a good deal of excess inventory and will continue to place downward pressure on sellers to lower their asking price.  Even with more buyers it is going to take time to work through this inventory. 

Over at HousingTracker they are showing 14,793 homes for sale in the Sacramento area.  The good news about this number is that it is down 3.2 percent in the past three months and 1.5 percent in the past month during a period we would normally expect to see inventory increasing.  The same trend in pricing is noted here.  HousingTracker shows the median asking price for the homes on the market to be $300,000.  This is down 24.8 percent from a year ago and 1.6 percent in the past month.

During the first quarter we experienced a record number of foreclosures in the Sacramento area.  There is no reason to believe that it won’t be even higher in the second and third quarters.  There are so many homeowners who bought toward the end of the boom and now live in homes that are worth less than they owe on their mortgages.  With reduced financial flexibility to refinance or borrow against the equity, if there is any, it doesn’t take much of a financial shock to end up losing their home to a foreclosure.

As mentioned above the mortgage crisis has reduced the borrowing flexibility of existing homeowners as well as reduced the number of people who can qualify for a mortgage.  Clearly a more conservative mortgage lending industry is good for the market and economy but right now we are seeing and experiencing a pendulum swing that is less conservative and more ridged.  Loans requests are taking much longer to get approved, it is not uncommon to have the request go through several passes in underwriting with new and sometimes strange requirements being imposed and getting an approval these days is like a pre-qualification letter.  Until it is funded it is not approved.

Sales of existing homes are up, we have buyers anxious to find homes, there are investors who think this is the time and inventory, although high, is not growing.  These are all good signs for our struggling Sacramento real estate market. 

Consumer confidence is low, inventory of available homes is still way too high, foreclosures are not anywhere near being behind us and the mortgage industry remains in flux.  These are among the issues facing our real estate market over the balance of the year.  With bank owned property making up a good deal of the market we can expect to see continued price declines until inventory is significantly reduced.

If you have comments you would like to add to this article or questions for the author, please feel free to email me at juliej@jalone.com