Sacramento Real Estate Voice » Sacramento Hits Bottom? Any Thoughts?

Sacramento Hits Bottom? Any Thoughts?

May 6th, 2009 categories: Real Estate Market, Real Estate News

smoke-and-mirror Some say Sacramento has hit the bottom of the real estate market. The New York Times and the Sacramento Bee along with many bloggers are busy typing those long awaited words…

Sacramento has hit the bottom of the real estate market of homes for sale.

Lots of twittering about hitting the bottom on twitter and facebook.

It is true that new home buyers are busily buying foreclosed homes for sale but equally true there are many more foreclosures yet to hit the market. Due to the moratorium of banks foreclosing on homeowners as set forth by Obama, to seek loan modifications, inventory of newly foreclosed homes declined over the past few months.

There have been 28,898 foreclosures in Sacramento County since 2005. Also, 24,000 homes and apartments are currently vacant with 3,500 of them empty longer than two years.

In my opinion, this is just smoke and mirror…we have NOT reached the bottom.

We are still going to see declining prices and many more foreclosures in and around the Sacramento area. The moratorium has been lifted and it’s my guess that over the next few months we will see many more foreclosures. There are still homeowners loosing their jobs in our area which can only have a direct impact on their ability to pay their house payments. There is no loan modification if you don’t have a job in which to pay house payments.

I think we have another year to go before we reach true bottom with another slew of foreclosures in the upcoming years from those who have currently been granted loan modifications.

It is further my opinion that based on the loan modifications I have seen that this is just a temporary band-aid and those same homeowners will eventually go into foreclosure. Time will only tell but I think that this will come back to haunt us.

Why you ask? Loan balances on loan modifications have NOT been reduced. The mortgage loan has simply been extended from 30 years to 40 years. Granted, many have lower interest payments and lower monthly payments but unfortunately, this will NOT help when these homeowners when they need to sell due to job relocation, divorce, job loss, retirement and life in general in the next few years.

The only way loan modification, in my humble opinion will work is to reduce the principal. Cram-Down seems to be the only way loan balances will be reduced. But many reject this idea so here we are.

Some are waiting for prices to sky rocket and values to go back to 2005 but this is a pipe dream. In my opinion…ain’t going to happen anytime soon. Prices when they do inch up will be slow and gradual. But, as I’ve said before, until we have finished the foreclosures don’t look for stabilization in the real estate market.

Banks need to get those foreclosed homes on the market that they are holding onto so we can hopefully see the bottom next year.

The other aspects that no one seems to address are:

Vacant homes bring squatters
Vacant homes are being defaced
Homeowners are stripping their homes and selling items on CraigsList before vacating
Vacant homes further reduce the neighborhood value
Vacant homes bring crime

And to this end, most new home buyers are FHA home buyers which means they can’t buy these homes that the banks will not fix and restore…means more vacant homes over the long run which means less property taxes for the cities and counties…which means higher taxes for the rest of us and less fire and police protection. Got the picture?

Do you agree or disagree and why?

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This entry was posted on Wednesday, May 6th, 2009 at 5:00 am and is filed under Real Estate Market, Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Rob Saxe said at May 9th, 2009 at 6:14 pm
As usual, you hit the nail right on the head. Moody’s is saying that the last quarter of 2009 will be the bottom of the market in our region…don’t know and I don’t think anyone else does either.
Nice article, Gena!
Gena Riede said at May 11th, 2009 at 10:03 am
Always interesting to read when others think Sacramento will hit bottom especially when they aren’t in the trenches.