Sacramento Bee article offers some clues. Personally I think manic Bubbles and "flat prices" are highly incompatible. July data will be the ugly one, and it will just accelerate into August when (if?) there is a rate hike:
sacbee.com
House market in flux
Rapid shifts putting chill on hot June data
By Andrew LePage -- Bee Staff Writer
Published 2:15 am PDT Sunday, July 24, 2005
If you've been waiting for the housing market to cool, then your moment may have arrived.
While the latest sales statistics for June show more of the same - a strong market with rising prices - many agents and brokers say the lagging data don't reflect recent market trends. The number of homes for sale has risen to levels not seen since the late 1990s, they say, and buyer psychology is changing fast.
"We are in a shifting situation right now," said broker Pam Petterle, the manager for Prudential California Realty's Sacramento-Tahoe region. "The biggest change is that we have a much greater inventory ... and that's a major change because it shifts the balance from sellers driving this market to a more balanced market. There are not as many multiple offers, and listings are staying on the market longer."
At the end of June, the inventory of resale homes on the market in Sacramento, Placer, El Dorado and Yolo counties rose to 6,246. It was the highest for any June since 1999 and the most for any month since September 2001, according to TrendGraphix, a local data firm affiliated with Lyon Real Estate.
At the same time, there's a new reason to worry about mortgage rates rising, which could tame housing demand. Experts say China's decision to revalue its currency will translate into at least a mild reduction in that country's appetite for U.S. bonds. That could mean upward pressure on mortgage rates.
"It's going to become clear now that interest rates have been kept low to a degree by the Chinese," said G.U. Krueger, chief economist at Institutional Housing Partners, an Irvine investment firm.
However, Krueger said even if mortgage rates, now averaging about 5.75 percent, rise a full percentage point, the housing market shouldn't tank.
Last month, the number of resale transactions fell 6 percent in the four-county capital region compared with record levels in June 2004. Yet the median sale price in June climbed to record highs in all but Yolo County, which barely missed its prior peak in May, DataQuick Information Systems reports. Its statistics are derived from county property records.
The caveat is that home purchase deals that closed escrow in June were struck as far back as April, so the June closing data wouldn't reflect changes in the market over the past six weeks or so.
"There's still a healthy market for properties from $250,000, if you can find it, to about $450,000," Petterle explained. "Above that, prices are just hitting a wall right now. Those (priced $450,000-plus) are the listings not getting snapped up right away. There's no frenzy around (them) when they hit the market, and we're not seeing multiple offers."
Plenty of home shoppers still fear continued price escalation. But there's also a growing realization that prices can't skyrocket forever and that buyers are gaining ground.
"I think we're going to flatten out, if not see a slight dip" in prices, said Kelly Cederstrom, 35, while perusing an open house a week ago in her Folsom neighborhood, Natoma Station. "We can't keep going up 20 percent a year (in price). Real estate is cyclical, but people have forgotten that. I see a lot of people losing their houses (with risky financing). If you're on an interest-only loan, that's scary."
Cederstrom, a stay-at-home mother of three, said she's certain the market will "correct" at some point, though she isn't sure when, and she and her husband hope to "pounce" on a bargain once it does. Their home is under 1,700 square feet, and they'd like one closer to 2,500.
Home buyer Norberto Jaimes said he expects home prices to fall at some point but felt compelled to move now for practical reasons, such as a desire for a larger home and yard and concerns about mortgage rates.
"What I've heard is that interest rates will go higher, and I think property values will come down," said 33-year-old Jaimes.
He runs a lawn maintenance business and distributes products, such as piñatas, spices and peppers, made in his native Mexico.
He and his wife, Brenda, who have three children ages 2 to 8, just sold their roughly 1,300-square-foot home of seven years on Florin Road in south Sacramento and have purchased a 1,974-square-foot home in Elk Grove for $407,000. They used an interest-only loan that will help keep their payments manageable.
"Right now, it's crazy," said his wife, Brenda, 32. People's raises aren't keeping up with home price increases, she says, and now higher gas prices are taking a toll.
The couple purchased their Elk Grove home from Carol Davis, who left California this month, during what she figures is the peak of the housing market. The sale of her Elk Grove home allowed her to pay cash for a $185,000, 1,758-square-foot home on 5 acres in Yerington, Nev., a town of about 3,000 68 miles from Carson City. Her son and grandchildren live there.
"I can't afford California anymore," said Davis, 56, who two years ago retired from the state after 34 years. "It's time to move on."
She's shedding a house payment of more than $1,000 for the Elk Grove house, she said, while "in Nevada all I have to worry about is utilities."
Davis is not the only local owner cashing out huge equity gains in recent years. This group is helping to fuel the growing inventory.
Agents and property managers report that more and more investors are selling their rental properties. Some are hoping to time what they consider the market's peak, while others have found they can't afford to keep chipping in hundreds of dollars every month to cover the mortgage on a second or third home, given the rent doesn't come close to covering the loan payment.
Also, some neophyte investors didn't anticipate the cost of maintaining and repairing their rentals.
"They (rookie investors) are being led down a primrose path by the real estate agents who say you've got to buy -- buy more," said Deborah Janelli at ALL-IN-ONE Property Management in Citrus Heights.
Some experts worry that if too many investors decided to sell at once, and also stop buying here, it could have a profound impact on the market.
DataQuick analyst John Karevoll considers that unlikely.
"For every investor not buying, there are five people lined up looking to put a roof over their head," Karevoll said. "I don't think it's going to mean much for the market, certainly not this summer or fall." |
