Market Report by Lloyd Leighton

April 4, 2008 - It has been a long time since we have had the time to keep this page updated. Three pages that you will find to be much more updated and contain current market information are:

Yuba City Real Estate Market Newsletter - This contains information about recent real estate sales and lots of charts showing sales activity, median home prices, interest rate trends and foreclosure activity.

Real Estate Market Forecast - Includes our forecast for the real estate market and a discussion of the factors that are driving our market.

Bargain Hunting - A page devoted to showing you the best values in Yuba City. This is a great page to look at for a quick gauge of where the market is right now.

December 13, 2006 - Reuters News Service ran a story titled "Foreclosures Expected To Rise." The story says "Late payments and foreclosures are likely to grow as another wave of adjustable-rate mortgages reset at higher interest rates, the Mortgage Bankers Association warned yesterday.

Almost 14 percent of sub-prime borrowers with ARMs were behind on their payments last quarter, the highest rate since the start of 2003.

That figure is all but sure to rise next year, when at least $1.2 trillion in ARMs will reset to higher rates. About half that amount is expected to be refinanced into lower-rate fixed or adjustable loans, the association calculates.

Bankers don’t think this will turn into a financial crisis. 'Only 7 percent of all loans out there are sub-prime adjustable loans. We’re talking about a 12 percent delinquency rate on 7 percent of all home mortgages and the foreclosure rate is much lower than that,' says Doug Duncan, MBA’s chief economist."

December 13, 2006 - Reuters News Service reports that "Housing's 'Wealth Effect' Could Be Ending." The article says "Home owners extracted $113.5 billion in equity from their homes during the third quarter, a 52 percent drop from the $235.9 billion they took out during the same period in 2005, according to data compiled by James Kennedy, an economist with the Federal Reserve Board."

"The equity extracted was the smallest amount since $87.7 billion was removed during the fourth quarter of 2003."

"The numbers are very clear that fewer households are able to extract as much equity as they were in the past from their homes and this will have a negative effect on the broader economy, starting now, but the biggest impact will be in about a year" according to Celia Chen, an economist for Moody's Economy.com in West Chester, Pa.

December 12, 2006 - An Associated Press story today says, in part, "Although few experts predict home values will fall dramatically in 2007, many economists say prices throughout the West - particularly California and the Southwest - won't improve for 12 to 18 months."

November 30, 2006 - The Office of Federal Housing Enterprise Oversight (OFHEO) issued a report today entitled "HOUSE PRICE APPRECIATION SLOWS FURTHER."

It says, in part, "U.S. home prices rose in the third quarter of this year, but the rate of increase continued to slow and some areas experienced actual price declines. Nationally, home prices were 7.73 percent higher in the third quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was 0.86 percent, or an annualized rate of 3.45 percent."

Regarding the California real estate market, the report went on to say, "Quarterly price declines occurred in more than half the cities in California. Fifteen of 25 California cities in OFHEO’s list of ranked Metropolitan Statistical Areas (MSAs) and Divisions experienced price declines relative to the second quarter."

November 16, 2006 - The Appeal-Democrat reported that, in the past year in the Yuba-Sutter area, single family sales volume has declined 31%, the median home price fell from $310,000 to $280,000 and the projected marketing time more than double to 9.3 months.

November 10, 2006 - The National Association of Realtors (NAR) issued a press release that says, in part, "Existing-home sales, expected to fall 8.6 percent to 6.47 million this year - the third-best performance on record - are projected to be essentially even in 2007 with a 0.6 percent decline to 6.43 million. New-home sales, likely to drop 16.8 percent to 1.07 million in 2006, are forecast to fall another 8.7 percent next year to 975,000, largely due to a significant reduction in construction by builders."

November 3, 2006 - Recent news stories have focused on declining vacancy rates around the country. In response to this, we developed a new chart that tracks rental vacancy rates back to 1986 in order to give you a better perspective on the significance of these news reports. You can see this and other charts that reflect market conditions by viewing our October Market Newsletter.

November 2, 2006 - The Appeal-Democrat reported that the City of Yuba City has issued only 192 building permits this year. Just 1 permit was issued in the month of September. This compares to about 900 permits per year that were issued in the last few years. Nationwide, "the Commerce Department said that spending on construction projects dropped by 0.3 percent ... in September. It was the biggest decline since a 0.7 percent fall in July and the fifth month in which overall construction activity has either declined or been flat."

In separate news, the number of single family homes and half-plexes listed for sale in Yuba City has dropped to 420 as of November 1st according to the Sutter-Yuba Association of Realtors' Multiple Listing Service records. This is a 16.5% drop in two months. The number of homes listed for sale during the same two month period a year ago increased 29.5% from 285 to 369. While the trend now seems to be headed in the right direction and projected marketing time is declining, it still remains at about 8.4 months. This means that, in the short term, we will continue to see downward pressure on home prices.

October 29, 2006 - An Associated Press story in the Appeal-Democrat says "Apartment rents and demand are soaring nationwide as the economy produces good jobs and people who might have bought homes a year ago settle for apartments while they wait for housing prices to tumble."

The article went on to say that "in the quarter ended September 30th, the average advertised rent reached $978, up 3.9% over the year ago period, according to an analysis of 75 markets ... Some of the biggest increases were seen in Florida and Southern California.

The article indicated that "the nationwide vacancy rate for rental housing dropped to 5.4 percent during the quarter from 6.7 percent in the same period of 2004."

October 27, 2006 - Too Funny To Pass Up. Peter Schiff, reacting to NAR.'s press release of October 25th, said "This week the National Association of Realtors heralded the first back-to-back monthly decline in home prices since 1990 as 'setting the stage for a stable market' and indicated that 'the worst was behind us.' My guess is that if the NAR's chief economist David Lereah had been the newscaster covering the arrival of the Hindenburg in New Jersey in 1937 (rather than Herb "Oh the Humanity" Morrison), it too would have been described as a "soft landing."

October 25, 2006 - The National Association of Realtors (NAR) issued a press release that says, in part, "Existing-home sales eased last month, as did the number of homes available for sale – indicating the housing market is stabilizing..."

The release went on to say, '"David Lereah, NAR’s chief economist, said stabilizing sales should build confidence in the housing market... "When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market, and sales will be at more normal levels in the wake of the unsustainable boom that we saw last year."'

October 20, 2006 - The Appeal-Democrat reported that slowing home construction is causing rental rates to rise in many areas of the Western United States. It noted that this trend has not reached the Yuba-Sutter area.

However, don't expect that we will be exempt from this trend. The population in California continues to increase while the number of housing units constructed continues to decrease.

Here is what you can expect to see in the next year or so in California (including the Yuba-Sutter area). First, expect to see home prices continue to decline because there is an imbalance between the number of homes for sale and the number that are actually selling. Right now, only about 10% of the homes on the market are selling in any given month. Second, new home construction should continue to slow with declining home prices. Third, rents will rise as an increasing population chases fewer available rental properties. This means that landlords will finally start to see rising capitalization rates.

October 19, 2006 - The California Association of Realtors released it's "California Housing Market Forecast For 2007" today. Among the predictions are;
The median priced California home will decline by 2%
Sales volume is expected to decline 7%

October 11, 2006 - More than 110,000 foreclosure filings were reported nationwide for the second consecutive month in September, when 112,210 properties entered some stage of foreclosure, according to RealtyTrac's "September 2006 U.S. Foreclosure Market Report." September's foreclosure rate was down 1 percent from August 2006 but up 63 percent from a year ago. "Foreclosure filings are up 39 percent year-to-date and already have surpassed the total number reported in all of 2005. If they continue at the current pace, foreclosures will exceed the 1.2 million mark by the end of the year," said RealtyTrac CEO James Saccacio.

In California, foreclosure activity rose 19 percent on a month-to-month basis and has increased more than 40 percent during the last two months, according to the report. With one new foreclosure filing for every 825 households, the foreclosure rate in the Golden State is 1.3 times the national average of one new filing for every 1,030 households. The highest state foreclosure rates were reported by Colorado and Nevada.

July 4, 2006 - After some signs of coming back to life, the market has shown weakness over the last few months. The number of homes listed for sale in Yuba City is at an all time high. There were 488 single family homes and half plexes listed for sale as of July first. That is an increase of over 100 in just the last two months. During the same period, closed sales have been around 50 per month. That projects to a typical marketing time of about 10 months. Our analysis indicates that projected market times of over 5 months create an atmosphere where you can expect to see declining values.

April 4, 2006 - There are three positive results to announce. First, there are 77 homes currently in escrow with contract dates in the last 30 days. That is approximately what we saw during the last half of 2005 and is significantly better that what we have seen during the last four months.

A second bright spot is that number of single family homes listed for sale in Yuba City dropped to 381 as of April 1st. There were 398 homes listed for sale on March 1st and the number of homes listed for sale during March exceeded 400 at times. The combination of higher sales and a slightly lower inventory will help to bring projected marketing time down and relieve some of the pressure on sellers to continue reducing prices.

The third bright spot to report is that the Yuba City Market Value Index increased slightly from 258 on March 1st to 260 on April 1st.

March 18, 2006 - Today, we are releasing the latest version of our Yuba City Market Value Index. In it's current form, it traces market values from January 1, 1998 to the present. This now gives more more information than the previous version which only traced property value changes back to January of 2002.

Based on our analysis of the market, we are estimating that the market has lost about 9% of it's value since the peak in September of 2005.
Yuba City Market Value Index

The benefit of using the Market Value Index is that it utilizes benchmark property analyis to measure changes in real estate values. This is the most accurate method of measuring changing real estate values that I am aware of.

March 18, 2006 - We continue to see relative weakness in the market. As of today, the projected number of home sales for March is 48. There have been 53 pending sales of Yuba City homes in the last month. There are currently 404 single family homes listed for sale in Yuba City. Projected marketing time is about 7.5 to 8 months. This is slightly better than last month's projection of a 10 month marketing time but is nothing like the 1 to 2 month marketing time that we saw at this time last year.

While real estate economists continue to project increasing values for the year, our assesment is that values will remain weak in the near term and are likely to fall farther before we see any rise.

March 17, 2006 - The Appeal-Democrat reports that homes sales dropped both at the state and local levels.

"Home sales declined statewide in February and the rate of price increases slowed, a reflection of growing pressure on sellers to dial back prices to lure increasingly tentative buyers.

In all, 37,900 new and resale houses and condominiums were sold in the state last month, a 9.3 percent decline from 41,800 in February 2005 and a drop of 1 percent from January's sales, real estate research firm DataQuick Information Systems reported Thursday."

The article went on to say, "The median home price in California last month hit $457,000, up 1.1 percent from January and up 12.3 percent from $407,000 in the same period a year ago."

March 13, 2006 - The National Association of Realtors released the following statement;

"A lower level of home sales expected this year will create a more level playing field for buyers and sellers on the heels of a five-year sellers' market, according to the National Association of Realtors®.

David Lereah, NAR's chief economist, said the number of homes on the market has been improving nicely. "The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they've seen in the last five years," Lereah said. "Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year."

The national median existing-home price for all housing types is projected to rise 5.8 percent in 2006 to $220,300. The median new-home price should increase 5.4 percent this year to $250,200."

March 7, 2006 - Yuba City sales for the last three months have been soft with January posting the lowest number of closed sales since February of 2000. This is typically a slow time of the year for sale closings so it is not something to be overly concerned about. However, these numbers combined with only 48 homes that have gone into contract in the last month does not bode well for March and April closings. The number of single family homes listed for sale as of March 1st was 398.
Yuba City Real Estate Sales Activity

Average marketing time has also increased dramatically. Average marketing time ranged from about one to two months between March of 2001 and June of 2005. Projected marketing time today is around ten months. Long marketing times put pressure on sellers to reduce prices.

Not unexpectededly, we have seen real estate values declining over the last several months. This happened even while the median home price continued to increase (property values peaked in Septmeber). If this sounds somewhat contradictory, think of it in this way. The median home price does an excellent job measuring how much buyers are willing to spend. A stable or increasing median home price at a time when home values are falling simply reflects a situation where home buyers are getting more for their money.

Median home prices peaked in November of 2005 and have declined 7% since then.
Home Sales & Listings

Our conclusion here is that the market, while it is softing, is still O.K. and there's no reason to panic. In fact, what we have seen is pretty consistant with the market forecasts by both the California Association of Realtors and Hanley Wood.

The numbers on the charts above primarily reflect the sale of existing homes because most builders do not participate in the MLS. New home construction has added a significant supply of homes to the market over the last several years.

The City of Yuba City appears likely to increase builder fees by approximately $40,000 per home some time during the early part of 2006. In addition, the City is also implementing an "affordable housing" requirement that will likely add another $10,000 to $20,000 to the cost of a typical home.

It is not clear if these dramatically increasing costs will affect the rate of construction in the near future. In recent years, builders have taken full advantage of the strong housing market to raise prices whenever the market allowed them to.

Now, most builders have begun to offer compensation to real estate agents selling their homes. Many builders are also offering concessions to buyers. These two new developments indicate that builders realize that prices have topped out for now. Given that, it does not seem that builders will attempt to raise prices to cover these increasing costs.

November 24, 2005 - Builder Confidence Declined in November. The National Association of Home Builders released it's Housing Market Index (HMI) for November. November's HMI dropped 8 points from October and now stands at 60. While an HMI above 50 indicates that more builders view sales conditions as good versus poor, the HMI has not stood as low as 60 since May 2003. "In the West, the HMI fell from a very high level of 91 in October to a still-impressive 78 in November, while in the South, it declined from 76 to 68. In the Northeast, the gauge slipped six points to 61, while continued job-market weakness in the Midwest brought that region's HMI down from 45 to 38." View the Full Release

November 22, 2005 - Hanley Wood (formerly The Meyers Group) released it's Housing Market Key Indicator Alert yesterday. In it, they say;

"...investment properties add volatility to the market, and are the first housing units to be "dumped" when signs of a market shift come about. ...the edgier investors will fear they've missed the boat and drop their prices to ensure a sale. Will this sort of behavior cause a market-wide decline of prices? It's very unlikely, but we probably will see a few months of volatility in pricing sometime during the next year as the market finds a new equilibrium and deals with an outflow of some of the investment monies that the robust market has soaked up."

October 18, 2005 - PMI Group, a large issuer of private mortgage insurance (PMI), issued a news release indicating that several real estate markets around the country have an approximate 50% risk of price declines within the next two years. It's analysis shows that the Sacramento market has a 45% risk of seeing price delines within the next two years. To put it another way, there is a 55% chance that there will be no price declines within the next two years in the Sacramento market.

September 21, 2005 - The California Association of Realtors (C.A.R.) released it's Housing Market Forecast For 2006. They are predicting a 10% rise in median home prices in California for next year.

In releasing the forecast, C.A.R's chief economist, Leslie Appleton-Young, indicated that the inland areas of California will likely see some of the strongest growth in the state as people are forced out of more costly coastal regions.

C.A.R. economists expect economic growth next year to remain at about the current level, they expect interest rates to remain relatively stable with just a slight increase and they point out that new houshold formation in California is about 250,000 per year while the building industry is only supplying about 200,000 new housing units per year. It will be interesting to watch inventory numbers and prices over the next few months as speculators and investors continue to sell off homes. While the longer term market appears to be sound, increasing inventory numbers may put further downward pressure on prices over the shorter term.

September 6, 2005 - Most people agree that the current rates of appreciation are unsustainable. There has been a great deal of discussion in the news media aobut "the housing bubble bursting." However, I have yet to hear an economist actually say that the market is deteriorating. In fact, today's Appeal Democrat newspaper quotes Patrick Lawler, chief economist for the Office of Federal Housing Enterprise Oversight as saying, "There is no evidence here of prices topping out. On the contrary, house price inflation continues to accelerate, as some areas that have experienced relatively slow appreciation are picking up steam." Click here to read the full story.

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