"Inventory is up because of the psychological effect of the media reporting on the 'bubble,' " said Jeff Culbertson, who heads Coldwell Banker's capital region operations, of the barrage of news on a possible price bubble in housing.
Sacramento Bee:
More houses 'for sale' a sign of market chill? By Andrew LePage -- Bee Staff Writer Published 2:15 am PDT Saturday, June 11, 2005
http://www.sacbee.com/content/business/story/13046023p-13891765c.html
The number of capital region homes on the market has risen to its highest level since November 2001, suggesting the market might be seeing the first signs of cooling.
Experts caution that the 48 percent run-up in the inventory of existing homes in the past year might not mean much unless the number of homes hitting the market continues to rise sharply this summer, sales wane and price appreciation slows.
"It's too early to panic, for sure," said housing analyst Greg Paquin, president of the Folsom-based Gregory Group.
Although inventory at the end of last month rose nearly 20 percent from April, to 5,290 homes, the capital region's median resale price is a record $400,000 and sales volume remains near a record, according to TrendGraphix, a data firm affiliated with Lyon Real Estate. The region comprises Sacramento, Placer, El Dorado and Yolo counties.
"The market is taking pause even though the overall indicators are still strong," said Michael Lyon, head of TrendGraphix and Lyon Real Estate, the largest locally owned brokerage. "The fact we've had such a big (inventory) increase in one month means we all have to be watching this now."
The jump in the number of homes for sale is good news for home shoppers. More houses means buyers have more homes from which to choose, won't face as many bidding wars and are less likely to have to rush into deals. Sellers are more likely to be forced to drop their asking prices.
Housing analysts have said that inventory would rise substantially only if the local economy sours enough to force big layoffs - which hasn't happened - or if sellers conclude home prices have peaked. Some in the industry say more people are concluding the latter.
"Inventory is up because of the psychological effect of the media reporting on the 'bubble,' " said Jeff Culbertson, who heads Coldwell Banker's capital region operations, of the barrage of news on a possible price bubble in housing. "Some of those people (investors) bought those properties two years ago and have seen a 50 percent increase in value. A lot of them are saying, 'I rode this up, and maybe I'll relocate my equity someplace else now.' "
Bob Scheffel, 64, a retired video distributor, has had his four-bedroom, 2,251-square-foot Elk Grove home on the market for two months - twice the average time TrendGraphix reports for Sacramento County.
"I'm getting a little discouraged, to tell you the truth," he said. "There's just a lot of inventory out there now."
Scheffel's Camden Park house is in the 95624 ZIP code, where there were 182 homes for sale last month, up 153 percent from May 2004.
He's put an offer on a home in coastal Oregon but said he'll take his Elk Grove home off the market and stay put if he can't sell soon. He recently dropped his asking price on the house, which he bought for about $153,000 in 1997, from $479,000 to $475,000.
So far the capital region inventory has swollen only for homes priced above $300,000, meaning many entry-level buyers still have a hard time.
But Lyon sees the rest of the market downshifting. In addition to rising inventory, he points to TrendGraphix data showing three months of declining home sales - falling about 5 percent from March to May.
Lyon concludes the market is heading for a "soft landing," meaning no crash with plummeting prices.
"Buyers are gasping for air - they don't have enough buying power to come up to what people are asking," Lyon said.
He predicts the region won't see much more, if any, home price appreciation for the rest of the year, except for homes under $300,000, for which demand remains robust, and for exceptional homes of any price.
The capital region's $400,000 median in May was up 10 percent from January and up 21 percent from a year ago, TrendGraphix reports. Its data is based on a regional Multiple Listing Service, which excludes certain properties in which a Realtor wasn't involved.
Some housing analysts caution a big change in market indicators during one month could prove a statistical anomaly.
"I'd be cautious in trying to read too much into it (inventory spike)," said analyst John Karevoll of DataQuick Information Systems.
Last fall the number of homes for sale in some Southern California markets shot up as sales dropped, causing some to conclude a downturn had begun. Since then, sales have picked up and inventory remains relatively low amid rising prices. However, the rate of appreciation is lower and has declined recently.
Analyst Pat Veling, president of Real Data Strategies Inc. in Orange County, said the same scenario may be unfolding here.
"This is the initial stage of a soft landing in the market: a reluctance on the part of sellers to admit they can no longer get 15 to 20 percent more for their house than they could have last year, and a reluctance on the part of buyers to pay that same percentage more than they could have gotten the house for last year," he said.
"I'm surprised it's happening in the (prime) home buying and selling season," Veling continued, "but we need to cool the market's jets a bit because it's going far too far, and far too fast, and we don't want the market to collapse under its own weight like it did in the early 1990s."
About the writer: The Bee's Andrew LePage can be reached at (916) 321-1065 or alepage at sacbee.com.
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