I can’t help being sarcastic. We had a spate of posts along those lines, “it it time to buy” about a year ago. Since then, the Sacramento area has fallen around 30%. Everybody Sacramentan who took their advice has lost their down payment and much more.
I now live in Yuba City, which is a backward little cowtown an hour north of Sacramento. We act as a suburb of Sacramento, and house prices here are down about the same as Sacramento, year over year. Last fall I found a house I just loved listed at $340,000 that sold last July for $250,500 at $120/SQFT — a drop of 26% in 8 months.
With the avalanche of foreclosures set to hit when the Option ARMs reset over the next 18 months, price pressure will be further down, and down hard. Sacramento area house prices can’t go down forever. A bottom has to come in. But a bottom has to be based on fundamentals, and those fundamentals are not saying the bottom is in.
In the meantime, lenders like Fannie and Freddie will get their heads handed to them while all those Option ARMs reset and the default rate goes through the roof.
Interesting that some of the troubadours here have forever held...
“Hold stocks for the long term” and
“The DJIA has outperformed all other investments”
are now changing their tune to..
“The stupid investors deserve to lose all they had...”
“ARMs reset “
I was questioning at dinner tonight how many of those ARMs are for homes that will not have the 20% equity or the 36% income ratio required and will not be able to be approved for a 30-year fixed. I suspect that number is in the millions.
When I was a kid, we moved to Sacramento in 1974 and bought a home for $29K. 6117 Jeanine Drive. Had an 18 foot deep back yard and faced I-80. We sold it in 1974 for $32K. In 1979, it sold for $95K. Today, I just checked, it has an assessed value of $237k.