“It’s No Surprise To See Price Cuts” In California
The Sacramento Bee reports from California. “On a wintry weekday in California’s fastest-growing small city, Bryan Petersen steps from a sales office to discuss how eager home builders are to make any kind of deal with people like him.”
“‘They’re asking $453,000 and offering $60,000 in incentives,’ he says. He nods back toward the sales rep and grins. ‘And she said, ‘Make me an offer.’ I think you could get this probably for $375,000,’ says Petersen.”
“The nation’s largest publicly traded home builders overbuilt and then jostled for a shrinking share of area home buyers last year. They turned the boomtown suburb of Lincoln, population 39,000, into one of the Sacramento region’s most ruthless sales battlegrounds.”
“It’s no surprise in Lincoln to see advertised price cuts on new homes of $96,000, $103,000, $150,000, even $221,000.”
“The price-cutting battles reveal how pressures on big public companies to sell extra stock can also impact individual sellers and small-time speculators, even entire counties. Real estate experts blame Lincoln’s price wars for fueling a 55 percent drop in new home sales in Sutter and Yuba counties.”
“But the competition among big corporate builders has had a number of collateral effects. Speculators who missed the the window to ‘flip’ their investments now find them nearly impossible to sell. And the alluring discounts for new Lincoln homes have flattened sales to the north in Yuba and Sutter counties.”
“Builders in those two counties sold 811 homes in the first nine months of 2006, after selling 1,789 during the same time in 2005, according to consultant Greg Paquin.”
“Sacramento’s Protrades Connection ran as many as 100 tradespeople and laborers a day to local construction sites at this time last year. Now the demand has dwindled to 40 a day. ‘Construction is very down,’ said branch manager Jay Evans.”
“A survey of quarterly employment trends released Monday shows that caution flags are being raised across all industries as the new year starts. Nearly half of the 100 regional companies in the survey will not hire new employees in the first quarter of 2007. About one in 10 area companies anticipates layoffs during the period, the survey found.”
“By the end of 2006, with the housing slump worsening, Protrades radically changed direction from its emphasis on residential construction, focusing almost entirely on providing workers for commercial construction jobs. ‘If we continued in what was our bread and butter, we’d be looking at going out of business right now,’ Evans said.”
The Bakersfield Californian. “A housing development near Cal State Bakersfield is aimed at young, sophisticated customers with active lives. The company anticipates starting prices may be in the mid- to high-$200,000 range.”
“The company believes future buyers will include young people looking for their first homes or those who are ready to purchase home No. 2. The concept appeals to Isaac Ramos, 20.”
“‘I don’t think there’s something like that to appeal to the younger market. I think Bakersfield could use something like that,’ Ramos said. He’s about to close escrow on his first home, and he’s interested in buying more properties.”
The Orange County Register. “(Realtor) Steve Thomas in Aliso Viejo calculates it would take 7.51 months for buyers to gobble up all homes for sale at the sales pace at Dec. 28 vs. 6.88 months two weeks earlier BUT still way above 3.59 months a year ago.”
“Thomas notes: ‘The active inventory for Orange County continued to grow from the beginning of 2006 until it peaked at the end of August at 16,006 homes on the market. Since August, the inventory has dropped consistently to 11,879 homes today, 4,636 additional homes compared to last year at this time. I am EXTREMELY concerned about the potential for the inventory to grow to 16,000 homes in May and even 20,000 homes in August.’”
“We finish our eyeballing with Leslie Appleton-Young, chief economist for the California Association of Realtors trade group.”
“Us: How do you think O.C. will differ from the nation or state market? Leslie: Because of the greater-than-average inventory of unsold homes on the market, sellers in Orange County will need to be especially motivated and realistic if they are really interested in selling in today’s market. Only those homes that are priced to sell and are in excellent condition will sell quickly.”
“Us: What events might change your outlook, pro or con? Leslie: A recession or spike in mortgage rates is the most obvious negative scenario for housing.”
The Voice of San Diego. “The San Diego Daily Transcript ran a story pointing out that over 3,000 condo units are currently under construction downtown. Additionally, another 7,000 downtown units are either approved or proposed.”
“Friends in the industry tell me that once a building is under construction, the odds are high that it will be finished, which implies that most of those 3,000 units in progress actually will be built to completion.”
“At the moment, ZipRealty.com indicates that there are 505 dowtown resale condos listed for sale. The pace of recent downtown sales has been so weak that it would take almost a year just to burn through that existing inventory. It is into this already serious oversupply that a further 3,000 or so units will be released over the next two or three years.”