April 2009

I’d be remiss if I didn’t post links to the following set of articles. As the Sacramento housing market descended into the abyss, the Sacramento Bee floated (or pushed depending on your point of view) a series of bullish arguments about the local real estate market. Bullish theories included: Rents are about to skyrocket Sacramento’s strong economy will blunt the effects of the housing downturn The housing downturn won’t be as severe/long as the 1990s housing bust Renewed Bay Area migration will save us as Sacramento homes are now so cheap in comparison High-end/”core areas” are recession proof The paper has conceded that the first three theories haven’t actually worked out as planned (to say the least). Now it looks like they have capitulated on the “Bay Area will save use” theory: In area conversations about real estate it’s often an act of faith that a widening gap between Sacramento and Bay Area home prices might soon spark a new migration east to buy houses cheap and put an end to free-falling prices here. Nice theory. But wrong. The once-widening gap that seemed to promise help has already closed. While 17 months ago the median sales price in Santa Clara County was $388,000 higher than in Sacramento County, it’s now $248,000 higher, says researcher MDA DataQuick. Prices have tumbled in both counties to narrow the original gap. It means we won’t be seeing thousands of Bay Area residents coming anytime soon to prop up Sacramento’s housing market or, by extension, its stores, office buildings and economy. When they capitulate on the last theory (high-end immunity), we should be much closer to bottom. More from the Stockton Record : If you’re a homeowner hoping for an equity-swelling Boom II, fed by Bay Area residents swarming back over the Altamont Pass again to start snapping up cheaper Valley home prices, forget about it – at least anytime soon. Home sellers and builders report that few Bay Area buyers are out shopping for homes in San Joaquin County, even with prices having been cut by almost 44 percent year-to-year to a median of $155,000 in February. Existing homes in Contra Costa County are moving at a median sales price of not much more than $200,000, for example, after prices shrank by 52.2 percent year to year in the foreclosure-hammered residential downturn. “I don’t see Bay Area buyers coming back yet, because the prices there are so affordable and the interest rates are so good,” said Jerry Abbott, president and co-owner of Grupe Real Estate in Stockton…When a “normal” market returns, Bay Area prices will regain its typically much higher, pricier ground, and Central Valley prices will look much more attractive again, they said. “It will come back but not anytime soon,” Abbott said.