Jay Emerson, Broker, e-PRO

Through July 2009

The magic "Swing indicator" numbers for May are 37-14-3. That means almost 69% of the 54 zip-codes and Counties tracked had a momentum "UP tick" in July. Going back to 1998, the only period that matched or exceeded this momentum turn was Spring/Summer of 2004. That's a mighty meaningful indicator.

• Does it mean this is a bottom? It is A bottom. I'm not convinced it is THE bottom.
• Can it turn and go down? Yes, in some zip-codes that is probable due to the supply still looming.
• What do you mean "in some zip-codes"? You remember that real estate is a local commodity. That means, for example, that parts of 95864 are in higher demand than other parts of that same zip-code. Likewise, adjacent zip-codes can have a material difference in supply and demand. That's why you should not generalize and apply a National statistic (or even a State statistic) to your targeted area. Check out the Communities and see how a local perspective makes a difference in your understanding.

Indicator Chart Summaries: (See the charts at www.JayEmerson.com/Indicators.asp)

• Resales (1 - Existing Home Sales) are increasing but are still understating the demand. My clients who are buying know that sometimes the competition wins. There is still competition and supply is sill low, relatively. The most telling indicator regarding resales is the "months inventory". Currently at 2.9 (normal between 4 and 6).
• The number of bank-owned homes that sold (2 - REO Sales) during the month has decreased on an absolute scale. Relatively, however, REO sales are still over 30% of the sold inventory. That's an indicator of waning supply (and wanting buyers).
• The median price for all of Sacramento County (3a - Median Price (Sac Cnty)) is unchanged and now equal to the median price back in February 2002.
• The El Dorado County median price (3b - Median Price (ED Cnty)) is also unchanged and is equal to the median price back in June 2003.
• The Placer County median price (3c - Median Price (PL Cnty)) is hard to comment on since Placer County hasn't published their numbers!
• NODs, which depict the beginning of the foreclosure process for a home (4 - Notices of Default) are lower than recent history. Banks, in their infinite wisdom only bested by our government, have learned that they should wait as long as possible to foreclose on homes. Accounting regulations require they dispose of non-performing assets within a short timeframe. That means they need to be ready to sell a property when they foreclose on it. THAT is why the supply is taking some time to hit the market.
• Builders are not clammering to get permits for construction of new homes (5 - New Home Permits). These developers and builders SHOULD guage the marketplace for demand and supply BEFORE starting a development. If there are plenty of homes for resale, a builder would have less demand for new homes and, hence, less motivation to get permits.
• The cost of money for homes (6 - Mortgage Rate) is still historically low. Recent financial news also suggests that investors still desire U.S. investment vehicles. With this news, interest rates may see a longer life at this low range. Then again, leave it to the government (a 'Housing Czar') to corrupt naturally occuring corrections.
• As a summarized and simple way of depicting "momentum", my proprietary Swing Indicator (7 - Momentum Swings) shows the remarkable cycles that are natural in real estate markets. And the statistics for July are at a relative peak going back many years.

There are no saviors except time and a functioning market. But a functioning market cannot be continually corrupted by short-sighted politicians. And now those lemmings have inserted things like HVCC (appraisal process) which is adding at least 2 weeks to the duration of every escrow (if a loan is involved). Worse yet is that those gun-shy appraisers are over-depreciating values. They don't want Congress to do any more stupid things. (I know that's a pipe dream.)

For all of you who think the process will get easier, I'm here to tell you that it's not likely. That's why you need an experienced real estate Broker on your side. The indicators are showing a change in the cycle but still not showing a true reversal.

There are points of resistance in certain areas of the region but much of it is artificially instigated by the all-knowing government. It will always be true that, all things remaining equal (e.g.,) Folsom will be priced higher than Florin.

Facts:

Inventory is "short", in more ways than one. The demand is waiting on the sidelines. The government keeps throwing band-aids at the symptoms. Homes are not on the market for long; the May NOD filings are down from April but you can see that they are not on the market; interest rates are at 40-year lows and staring to creep upward; median price momentum is mostly up (for 54 zip codes-see Swing Indicator); and new home permits are low but remained at the same number. When the inventory picks up, the choices will again be plentiful. No more band-aids, just Buyers. That's what we need.

The Swing indicator (#7; my newest indicator) is still showing a swing from "down " to "up ". Simple Ups and Downs depict the swings and gaps between Up ticks and Down ticks. I love it when simple truths are depicted in simple pictures.

What is YOUR NEXT ACTION?

• Investors - Even cash buyers need to move quickly in this market.
  • www.BuyHomesInSac.com - a proprietary and secured portal of information and listings.
• Buyers - this is a market for you! Call me immediately
  • I know some creative and resourceful lenders. Don't let fear win.
• Distressed homeowners - Don't pay anyone to help you. You can get free help. Call me.
• More information:
  • www.YouTube.com/JayEmerson0
  • www.JayEmerson.com
  • www.BuyHomesInSac.com

Bottom line: Call me to get started.

See the charts at www.JayEmerson.com/Indicators.asp

No BS Market Commentary and Indicators

This page is dedicated to you if you are interested in market changes and an education in the "core metrics" that explain, in part, the market dynamics. These charts are the product of my proprietary method for tracking changes. The charts do not only depict the raw data but, better yet, show the momentum of changes in that data.

Indicators & Chart Education
-- Part 1 -- Part 2 -- Part 3 -- Part 4 -- Part 5 --

Through July 2008

You hear the old news about real estate statistics. You read headlines that could, by themselves, cause a panic. But where are the forecasts? Better yet, where are the forecasts that are relevant to YOU? Some pay thousands to get this information. My treat, to you!

This commentary is my opinion of Sacramento's real estate market using history, current conditions, and the market forces. This is not a crystal ball. If I knew of guarantees, I would not be writing this piece.

This ongoing analysis is similar to the concept used in foreign exchange (forex) currency trading (a commodity much like real estate). While this is most useful to an investor, understanding the market is necessary even when buying or selling your family's shelter, not an investment property. This type of analysis is a speculator's tool to predict the direction of the NEXT data point. And those can be billion-dollar guesses. Explaining history should be done but it's your NEXT action that makes a difference. Refer to this month's charts and note where the Momentum indicator crosses it's zero axis (red axis & typeface) - it has been a predictor of the change in actual volumes. Specifically:

• Home Sales momentum crossed beneath zero at August 2005 coinciding with the marked decrease in Sales in January 2006. Momentum hit a bottom in December 2007 indicating the Sales spiking in March 2008. And momentum is still positive.
• Permits momentum hit above zero first in April 2002, spiked with the last big builder push, and has stayed at or below zero since September 2004. The builders that have survived are not going to repeat the mistake.
• NOD momentum went above zero in November 2005 which points to the increase in NOD volume in the first quarter of 2006. NOD momentum seems to have peaked in August 2007.
• REO Sales momentum went above zero in January 2006 pointing to the marked rise in volume in April and May 2006. REO Sales momentum seems to have peaked in March 2007 and heading down (but still positive).
• Mortgage Rate momentum went below zero in August 2007 pointing to relative drop in rates from October 2007 through May 2008. The momentum is still negative but it's meandering.
• Median Price momentum peaked in February 2005 which points to Price peak in August 2005. Momentum crossed beneath zero in November 2006 and Prices really started to fall in March 2007. Momentum is still negative.

What does this mean when mixed together? That depends on YOUR NEXT ACTION.

• If you are running for President - Don't increase taxes. Don't increase the size of government. Don't spend beyond your budget. Don't budget beyond your income. Don't leave the door unguarded.
• If you are a Buyer - Rates are still low. I don't foresee a drastic move by the Fed but our election may have some impact and momentum could turn upward. Loan options are changing. There are still good homes for sale and more every day. Prices are at 2002 levels and could still decline more, especially in certain zip codes. Other areas are doing well. Be prepared for a multiple-offer situation if your target is $350K or less.
  • ACTION PLAN: Hire me. Discuss market and decide on strategy. Put your cash in a bank account in order to prove you have it- increase your buying power. Talk to your lender or ask me for a suggested professional. Be prepared by understanding your housing/search requirements so I can build you a custom and private website for your search results - know your buying power first. Eliminate homes you won't consider. If you're considering a newly built home, I can get you more incentive or upgrades by representing you on your first (and every) visit. Come with me to tour the homes you desire. Make offer(s). Go into contract. Settle all disclosures, inspections, and conditions. Sign, buy, and move!
• If you are a Seller - If you don't need to sell, wait another year and ask again. Otherwise, you need to know your immediate and general market competition and forces. There is a perception that a REO listing is a better deal. You will have to be very realistic about the price a buyer will offer. Check your emotions at the door. That's what your competition is doing.
  • ACTION PLAN: Hire me. Discuss market and decide on strategy. Stage your home. Keep home clean and available. Market, market, market your home. Consider offer(s). Go into contract. Settle all disclosures, inspections, and conditions. Sign, sell, and move!

Whether you are buying, selling, or running for President, my service commitment to YOU is unequaled. If you know someone who is looking for a great Realtor and would appreciate the same service I would give you, please give me their name and number and I'll follow up. You know you can trust me.

Bottom line: Call me to get started.

See charts @ http://JayEmerson.com/Indicators.asp

If you read the local newspaper, you may have seen that April's home sales made front page news. By itself, it's a sign that there were more buyers in the market than in March. But more enlightening, and not understood by the news writers, is that inventory indeed dropped by a more significant amount. Instead of 8.3 months of inventory (length of time to sell all Active listings, all things remaining equal), there is now only 5.9 months' inventory. That is a healthy number. If it's too high, supply is higher than demand. If it's too low, well, it's the opposite. Anywhere between 4 and 7 is a sweet-spot.

But stories about the trenches from someone in a cozy tent cannot depict the truth when compared to someone actually in the trenches. Read my trench story here... http://JayEmerson.com/Indicators.asp

Banks are aggressively trying to reduce their inventory and there are a lot of buyers submitting offers on these and other homes. My momentum indicators are no guarantee of how a market will change in the coming months but they are leveling off in many areas like REO sales (indicator of bank-owned inventory) and Notices of Default (indicator of new, possible foreclosures). Likewise, the number of resales is increasing at an increasing rate (momentum heading upward). County-wide median prices are low but some resilient zipcodes (Fair Oaks, Folsom, Granite Bay) are doing better.

Read the rest of the story here: http://JayEmerson.com/Indicators.asp