Sacramento Mortgage Costs Put Pressure On Sellers
Here’s an interesting (and alarming) truth about the Sacramento housing market:
About one of every five existing homes currently on the market is a “short sale,” meaning the home is worth less than the value of the California mortgage loan.
Moreover, the mortgage lender is subsequently willing to accept less than full repayment of the loan to avoid a messy foreclosure.
Tracey Saizan, president of the Sacramento Association of Realtors, says that this puts enormous pressure on the remaining 80 percent of sellers, who have home equity in their homes, to cut prices.
The median price in the Golden State capital, one of the most overheated metro areas during the real estate boom, fell by 4.3 percent in December compared with December 2005.
“Sellers are having to give concessions and cut home prices. It’s all about making the house show the best it can and aggressive pricing,” Saizan said.
Though there’s only a 4.3-month supply of homes for sale — a bit lower than the long-term average — that figure doesn’t include the 3.5-month stock of unsold new homes that are also on the market, especially in some suburbs.
New-home sales in the fourth quarter were up nearly 57 percent, but that was compared with a dismal quarter at the end of 2005, according to The Gregory Group, a new home information and consulting firm.
The median new home price fell 4.7 percent to $434,990, which doesn’t take account of all the builder incentives being giving away nowadays, such as kitchen upgrades and other perks.
Still, builders are now seeing a decline in the number of buyers who are biting the bullet and announcing contract cancellations.
“There is a sense that we are going through the tunnel, and the light at the other end is sunshine, not another train heading at us,” says Greg Paquin of The Gregory Group.
With home loans more expensive than many residents can afford, one can only wonder if the worst days are yet to come for this overheated market. Some speculate that prices have already hit bottom, though, and that we may even see some modest growth in 2007.
SOURCE: USA Today