The New York Times sees a possible bottom in Sacramento area real estate.
Investors and first-time buyers, the traditional harbingers of a housing rebound, are out in force here, competing for bargain-price foreclosures. With sales up 45 percent from last year, the vast backlog of inventory has diminished. Even prices, which have plummeted to levels not seen since the beginning of the decade, show evidence of stabilizing.
Indications of progress are visible in other hard-hit areas, including Las Vegas, parts of Florida and the Inland Empire in southeastern California. Sales in Las Vegas in March, for example, rose 35 percent from last year.
The Seattle Times reports today that sales to first-time buyers at the low end of the market are up in the Seattle area.
The Northwest Multiple Listing Service reported Tuesday that pending single-family home sales in King County topped 2,000 in April, the first month that level has been reached since August 2007.
Pending sales — offers that have been accepted, but haven’t yet closed — were up 25 percent from March, and up nearly 15 percent from April 2008.
Sales numbers were even stronger in Snohomish County, up 28 percent year over year.
These increases in sales volume are due to lower prices and record-low interest rates. With all this activity, it’s amazing that so many still think that the prices should be artificially propped up with all kinds of government programs.
I think the New Yorks Times analysis is prematurely optimistic. The Sacramento Bee reports that there are now over 24,000 vacant housing units in the Sacramento area, up 40% from last year. Most of those units have not hit the market.
Nearly four years into California’s housing downturn, close to 24,000 Sacramento-area homes and apartments are vacant, a number that climbed 40 percent in the past year, according to a Bee analysis of federal data.
Roughly a third, or about 7,200, of the six-county region’s vacant homes have been empty longer than a year. About 3,500 have been empty longer than two years.
The vacancy count, revealing a vast excess of unused shelter in a region that overbuilt during the housing boom, stems from a U.S. Postal Service survey of houses and apartments where mail has not been picked up for 90 days.
Unoccupied houses put further stress on neighborhoods already hit hard by foreclosures.
[...]
Meanwhile, 8,189 homes were for sale in El Dorado, Placer, Sacramento and Yolo counties as March ended, reported Sacramento researcher TrendGraphix. It was not known how many were empty.
“There’s several houses in my neighborhood that were supposed to go into foreclosure in November of last year,” said Coldwell Banker real estate agent Mike Toste of Roseville. “They’re still sitting vacant. Banks are trying to keep this excessive inventory from coming into the market like last year and the year before.”
Empty homes are often vandalized and sometimes taken over by squatters. When nobody has an incentive to take care of the property, it will quickly fall into decay. Local government often fine property owners for allowing properties to fall into disrepair, so the incentive is to destroy them if they are vacant.
In some areas, banks are now bulldozing vacant homes rather than sell them at lower prices. Some of the homes are new or close to completion.
This harkens back to the Great Depression when FDR’s administration created the Agricultural Adjustment Act.
The Agricultural Adjustment Act (AAA) (Pub.L. 73-10, enacted May 12, 1933) restricted agricultural production in the New Deal era by paying farmers to reduce crop area. Its purpose was to reduce crop surplus so as to effectively raise the value of crops, thereby giving farmers relative stability again. The farmers were paid subsidies by the federal government for letting a portion of their fields lay fallow. The Act created a new agency, the Agricultural Adjustment Administration, to oversee the distribution of the subsidies. It is considered the first modern U.S. farm bill.
TheFreeManOnline reminds us of the destruction of pigs and other foods during the Depression in an attempt to prop up prices. The article also notes that it didn’t work.
When Roosevelt appointed [Henry A.] Wallace secretary of agriculture, American farming was changed forever. Their program, the Agricultural Adjustment Act (AAA), was a response to the Great Depression, which had beaten down farm prices to all-time lows. It would artificially raise prices by cutting production—farmers would be paid not to produce. In 1933, the first year of the program, Americans were forced to pay farmers to plow under corn and cotton and to kill and destroy six million pigs.
Sometimes the hypocrisy of Democrats is almost too much to handle. As crooked as Republicans are, at least they don’t pretend to be working for the poor and working classes and then enact policies that cause them even more harm.
Farm subsidies are now as American as apple pie. Farmers are still paid to not produce food in an effort to keep the prices artificially high.
In the Great Depression you had people who couldn’t afford to eat being forced by the government to pay for the destruction of food to keep the prices artificially high. Obviously, such programs are not there to help those who have already lost their jobs and homes.
In today’s falling economy, the taxpayers are being forced to pay billions in subsidy bailouts to insolvent banks that worked with the government to artificially inflate the value of housing. With the banks collapsing after the housing and derivatives bubbles burst, the government created one program after another to keep the price of housing artificially high. Even with housing artificially propped up, some of the nation’s largest banks have been declared under-capitalized by the government’s own stress tests.
To add insult to injury, some banks are bulldozing vacant homes in some states including California, Texas and New Mexico rather than sell them at lower prices. What’s in store for places like Sacramento where so many homes are vacant?
If FDR’s administration hadn’t made the taxpayers pay to kill so many pigs in the Great Depression, perhaps those waiting in soup kitchen lines would have had more food to eat.
If housing prices were allowed to reach their natural market level, there would be a lot less vacant properties and less homeless people.
As for foreclosures, that’s a matter for another post. But briefly I will say that fraudulent contracts are unenforceable. Many mortgage contracts that were signed in recent years were based on prices that were artificially inflated by fraud, mostly on the part of banks and the Federal Government.
