What the heck has happened?

The real estate market has changed pretty dramatically in the Sacramento Region since mid 2005. A market that saw appreciation nearing and exceeding 20% a year for the 4-5 years preceeding, has sinced cooled, with prices adjusting downward, and in some neighborhoods, pretty dramatically.

Areas that had seen the largest growth from 2001-2005, especially those that included lots of new home construction, with inventory and open lots left in 2005 seem to be getting hit the worst. These areas include Natomas, Elk Grove, Rocklin and Roseville, and El Dorado Hills to name a few. With so many people purchasing in between 2001-2005, often times with very aggressive financing, and with builders still sitting on excess inventory they do not want to hold, prices have come down pretty significantly, 20-30% in some cases because of the amount of supply in inventory.

In addition, the Sacramento market had been influenced so greatly by an influx of investor money and equity rich buyers from the San Francisco Bay Area, that the median home price far outpaced what a median income here in Sacramento could afford. It was only a matter of time before that scenario contributed to an 'adjustment' in the market.

A large percentage of mortgages being issued to buyers over the last 4-5 years are adjustable rate loans, with many buyers having taken second mortgages at the time of purchase or at some time since, having run their debt ratio on their homes up to or near 100% are now finding themselves in trouble, and not being able to afford their mortgage, and also not being able to refinance, because the home will not appraise at a value high enough.

My advice to people in this situation: Make some lifestyle changes if at all possible. Cut back on your cable or satelite tv charges, cell phone usage, downsize your car, anything else you can do to save money elsewhere. Call your mortgage lender if you payments are more than you can afford and see if you can work something out.

If you have the savings to bring to the table, and refinance, then do it. It is money you should have probably put down originally, or money you took out on a second mortgage to buy a boat, car or something else.

If you simply cannot make payments any longer, talk to your lender immediately and explain the situation.

What does this mean for home buyers and sellers:

For sellers, it varies based on where you live. While the values have come down across the region, some communities have held up better than others. Folsom and Granite Bay, for example, along with the internal areas of Sacramento (Downtown, East Sacramento) with not a ton of new construction over the last couple of years, have held value fairly well. And regardless of where you live, the well maintained, nice homes still sell, pretty quickly if priced right. Pricing is the key. You don't want to be sitting in this market heading into the fall and winter, because I believe it will get worse (maybe much worse) before it gets better.

For buyers, patience is the key. With the number of homes available at an all time high in Sacramento, the options out there for you are many. New home builders are offering great incentives (landscaping, window coverings, even cars and boats in some cases!). Distressed sellers are offering homes at great prices, and/or willing to consider offers well below ask price or recent comparable sales. And, if you don't narrow yourself to a single home, there is a good chance of getting a bargain; if you narrow your choise to 3-4 homes, there is a good chance one of the sellers is willing to bargain.

New homes buyers: There are still some terrific programs for you, and the benefits of home ownership still apply in terms of tax savings, etc. Call or email me and I will introduce you to a lender who can help you today.