In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Monday, August 12, 2013

Sacramento: Conventional Sales up Sharply Year-over-year in July, Active Inventory increases 54% year-over-year!

by Calculated Risk on 8/12/2013 01:03:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales). Note: I used Sacramento because the data was available!

For a long time, not much changed. But over the last 2 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market, although some of this is due to investor buying.  Other distressed markets are showing similar improvement.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In July 2013, 23.1% of all resales (single family homes) were distressed sales. This was down from 26.5% last month, and down from 54.4% in July 2012. This is the lowest percentage of distressed sales - and therefore the highest percentage of conventional sales - since the association started tracking the data.

The percentage of REOs was at 5.1% (the lowest since the data was tracked), and the percentage of short sales decreased to 17.9%. (the lowest percentage for short sales since July 2009).

Here are the statistics.

Distressed Sales Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales recently (blue). 

Active Listing Inventory for single family homes increased 54.3% year-over-year in July.  This is the third consecutive month with a year-over-year increase in inventory - the first three months in two years - and strongly suggests inventory has bottomed in Sacramento. 

Cash buyers accounted for 25.5% of all sales, down from 29.9% last month (frequently investors).  It appears investors are becoming less of a factor in Sacramento.

Total sales were down 9% from July 2012, but conventional sales were up 53% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

We are seeing a similar pattern in other distressed areas, with a move to more conventional sales, and a shift from REO to short sales.  

Possibly the most important number in the release this month was the strong year-over-year increase in active inventory.  This suggests price increases will slow in Sacramento, and I expect to see a similar pattern in other areas.

If this data is a hint at what will happen in other areas, we can expect: 1) Flat or declining overall existing home sales, 2) but increasing conventional sales. 3) Less investor buying, 4) more inventory, and 5) slower price increases.