Existing-home sales fall 30% in Sacramento, Calif.

Sales of existing homes in the capital region fell 30% in December compared with a year ago, but the market also showed signs that it's beginning to right itself.

The inventory of homes on the market dropped 21% over the past two months, to 8,525 homes as of Dec. 31, reports TrendGraphix, a local real estate data firm. Fewer homes on the market means less competition for sellers and less choice for buyers.

But offsetting the tighter market last month was a substantial decline -- 30% -- in sales compared with record resale activity in December 2004. The 2,392 homes that resold in Sacramento, Placer, El Dorado and Yolo counties in December was the lowest sales total for that month in four years, DataQuick Information Systems reported Thursday.

The market gave mixed signals on home prices: The median sale price fell for the fourth consecutive month in Sacramento County, to $355,000, marking a 4.6 decline from a peak of $372,000 in August, DataQuick said. Yolo County saw its median price decline slightly last month, to $410,000, from November.

But Placer and El Dorado counties saw small gains in their median resale prices to $485,000 and $455,000, respectively.

Experts are divided over what the four-month decline in Sacramento County means. Some view it as evidence home values are falling across the board. Others say the decline would have to continue into the spring to know for sure.

One thing is clear: The market has softened in the region for the priciest homes. In El Dorado County, for example, it would take nearly 3.5 years to sell the 122 homes priced $1 million or more at December's sales pace, TrendGraphix data show.

Still, in each of the region's four counties the December median remained 11 to 20% higher than a year ago.

The big question is whether the recent decline in the number of homes for sale marks the beginning of a sustained tightening trend. One possibility is that it was simply the result of sellers pulling their homes off the market for the holidays in hopes of a stronger market in the new year.

Tim Yee, executive vice president of RE/MAX Gold in Sacramento, said he doesn't expect to see most of those homes back on the market.

"A lot of sellers were just testing the market to see what they could get," he said.
Veteran Sacramento agent Carlos Kozlowski of Coldwell Banker chalked up much of the inventory decline to investors cashing out here to re-invest elsewhere.

"The investors who needed to sell have put their property on the market and they have sold," he said.

Agents say one upside to the slower market is that fewer first-time buyers have to compete with investors for entry-level homes.

First-time buyer Darius Sharpe said he feels like he got a good deal last month on a two-bedroom, one-bath condo that an investor was selling in south Sacramento, near Florin Road and Franklin Boulevard. The seller dropped the price from $135,000 to $125,000, he said -- then dropped it again after the unit appraised for $120,000, which is what Sharpe paid.

A native of the Napa area, Sharpe, 22, found Sacramento a bargain after shopping for homes last year in Fairfield. He says a similar condo in a similar neighborhood would sell there for more than twice as much. A paramedic, Sharpe now commutes to work in Vallejo.

"Prices are way too high for a 22-year-old guy to even rent" in the Bay Area, Sharpe said.
Many experts say it's unlikely Sacramento's housing market will see a severe decline in home values as long as it continues to draw Bay Area buyers. Analysts also point to the region's continued job growth and relatively low mortgage rates as reasons the market won't tank.

Still, most do see Sacramento's market losing steam. They predict modest, if any, price appreciation over the next year or two. Evidence is mounting that home values are dipping a bit in some areas, especially for ones priced over $500,000.

The region's upper-end market is "overbuilt and may take years to recover," Michael Lyon, head of Lyon Real Estate in Sacramento, stated this week in his monthly written commentary on the housing market.

Lyon's TrendGraphix data firm reports that in December there was a 17-month inventory of homes priced over $1 million in the four-county region. That's how long it would take to sell all of the homes on the market at the current sales pace. There was a 6.5-month inventory of homes priced $750,000 to $1 million.

Experts consider an inventory greater than six months an indication that the market favors buyers in negotiations.

"Those high-end homes are already softening in price, but the $400,000 homes are going to hold their own (in value)," contends economist Sean Snaith, director of the Business Forecasting Center at the University of the Pacific in Stockton.

Last month there was a 4.5-month inventory of homes priced $400,000 to $499,000, which put that price category in "neutral" territory. That means neither buyers nor sellers enjoyed a clear advantage in negotiations, TrendGraphix reports.