From the Sacramento Bee
Housing outlook? Spin the wheel
Eleven months ago as the Sacramento-area real estate market stood at the beginning of a downturn, the National Association of Realtors said there was only one thing that could make the region’s home prices fall 5 percent.
That would be a simultaneous combination of 25,000 job losses and 7.8 percent interest rates, events the NAR called extreme and unlikely. The headquarters arm of a million real estate agents across the United States pronounced Sacramento’s housing market in “excellent shape with a potential for significant equity gains.”
Within months, area median sales prices fell 5 percent, proving how wrong experts can be.
In fact, home prices have managed to sink in Sacramento even as interest rates fell — to an average of 6.4 percent last week. Prices have dropped even as the region celebrates some of the state’s strongest job growth. The real estate industry publicly professes this an “excellent time to buy,” yet a sense of paralysis grips the market. And one question seems paramount for those with a roof over their head and their money on the line.
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Have you in the last 20 years ridden a roller coaster?” asks Scott Syphax, president and chief executive officer of the Sacramento-based housing firm Nehemiah Corp. of America. “They take you to the top of the ride and before they fall, they pause for a second to assure maximum terror. We’re at that pause point.”At such a dramatic moment, guessing how far this ride will fall has become a major sport of bloggers, economists, home builders, buyers, renters and an army of armchair experts. Should you sell now or wait? Buy or stay patient? Get out before it gets worse or jump in and ride it up next year or the year after?
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Arizona-based Ben Jones, who runs a nationally known “housing bubble” blog (thehousingbubble.blogspot.com), agrees wishful thinking can’t overcome what he sees as negative fundamentals in Sacramento.“Those home prices are out of whack with local incomes and rents,” he says. “There’s a lot of exotic lending going on. You add those together and that’s been the formula driving a lot of markets down. I don’t think you need much more than that.”
Jones says his beliefs are grounded in seeing thousands lose their homes during the 1980s Texas oil bust.