Money and Investing Thoughts

Business – Home Front: Home inventory trimmed in capital, W. Sac – sacbee.com.

The article from the Sacramento Bee linked above provides more clues that the bottom may be near for the Sacramento region real estate market. My contention has been that the recent sales increases in the Sacramento and Las Vegas regions are indicators of an approaching bottom in the real estate market, especially in the hard hit southwestern states and California. If you look at the recent national existing home sales report you will find that sales in the West were 4.9% higher last month than in August 2007. The driving force behind the increased sales seem to be first time home buyers and investors buying foreclosed properties at prices approximately 25% below the peak in 2006.

Returning to the Sac Bee article, I found two facts that further my contention that the bottom is near. First, available inventory has been reduced to a 3.9 month supply. This is considered a neutral market, between the less than 3 month supply seller’s market and the over 6 month supply buyer’s market. The inventory has been reduced from 16,262 homes in August 2007 to 11,369 last month. A year ago, experts were predicting that inventory would reach 25,000 in 2008. So much for experts and their predictions. And remember the month’s supply number is a combination of supply and sales, and the strong year-over-year sales increases are playing a big part. I like this quote best from the article:

Somehow, buyers have trimmed inventory into a neutral market – now leaning toward a sellers’ market – even as foreclosures kept adding to it.

The other item that caught my attention is that August was the first month in about 2.5 years that the median price did not fall. In the 4 months prior to August, increasing home sales had been accompanied by decreasing prices as buyers snapped up homes that banks were more and more willing to unload at any price. I will be eagerly awaiting the September numbers to see if this signals an end of the dumping of truly distressed bank owned properties.

I have been contending for several months that an end to falling real estate prices could set off a buying binge that could rapidly reverse the real estate market. The biggest negative factor is whether foreclosures continue at the same or higher pace. A slowing of the foreclosure rate is definitely needed to help start a housing recovery.

I know many believe that any housing recovery is many months if not years away. I have written several articles about what I believe is the start of the recovery in the Sacramento and Las Vegas markets. You can read the back articles in my real estate category.