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Tuesday, November 12, 2013

Sacramento Housing: Total Sales down 25% Year-over-year in October, Conventional Sales up 19%, Active Inventory increases 93%

by Calculated Risk on 11/12/2013 01:10:00 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).  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 October 2013, 16.7% of all resales (single family homes) were distressed sales. This was up slightly from 16.0% last month, and down from 47.7% in October 2012.

The percentage of REOs was at 5.3%, and the percentage of short sales decreased to 11.3%. (the lowest percentage for short sales since Sacramento started tracking short sales in June 2009).

Note on Short Sales: I expect short sales will really decline next year with the expiration of Cancelled Mortgage Debt Relief provision of the Mortgage Debt Relief Act of 2007.

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 93.2% year-over-year in October.  This is the sixth consecutive month with a year-over-year increase in inventory - and inventory has now almost doubled from a year ago. 

Cash buyers accounted for 23.9% of all sales, up slightly from 23.6% last month (frequently investors).  This has been trending down, and it appears investors are becoming less of a factor in Sacramento.

Total sales were down 25% from October 2012, but conventional sales were up 18% 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.

As I've noted before, we are seeing a similar pattern in other distressed areas.  This suggests what will happen in other areas: 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.