Sacramento area misses move-up homebuyers -- they’re staying put
By Jim Wasserman
Almost four years into the real estate crash, a once-thriving sector of the Sacramento-area housing market – the move-up buyer – has become a virtual dead zone that must revive itself for a true recovery to take hold, analysts say.
Even as real estate rocks with enthusiastic first-time buyers and investors – accounting for up to two-thirds of area sales – one expert warns against being fooled by "the common belief that real estate is flying off the shelves."
Momentum needed for a true recovery rests on the shoulders of those who traditionally dominate real estate markets: people who sell one house and buy another.
And they aren’t doing it.
"Half to two-thirds of sales in the Sacramento region have not triggered a move-up," said Andrew LePage, an analyst for property researcher MDA DataQuick. "It was just some lender got its money back and then it ends. When that’s been two-thirds of your market for months and months, ouch."
Until the move-up sector of the market recovers, housing can’t recover, analysts say. (Everything above $400,000 is almost at a standstill. DataQuick says sales in move-up neighborhoods such as Land Park, east Sacramento and Arden Park are half their 10-year average since early 2008.)
And until housing recovers, many believe the economy will lag, and the state with it. The downturn prolongs the pain of layoffs, fuels the plunge in property taxes and deepens the local and state budget morass.
What are the problems confronting move-up buyers? Charlene Singley, president of the Sacramento Association of Realtors, counts three strikes against them:
• "First are the vast numbers" of distress sales and bank repos, she said. "Those people aren’t moving up. They’re not even moving down. They’re just going into rentals."
The National Association of Realtors says two-thirds of sales in California this year have been distress sales that don’t trigger a move-up.
• "Equally big are homeowners out there who aren’t in a foreclosure, not in a short sale," said Singley. "They don’t have the equity to pull out to put down on another house. They used to pull it out, move up, make money, do it again. You’d see it three or four times."
Many consider that real estate stairway the promise of California. The theory is you have to "get in" the market and then ride it up. But now about one-third of borrowers in El Dorado, Placer, Sacramento and Yolo counties are trapped where they are – perhaps for years – owing more than their homes are worth.
• "Finally, if they’re lucky enough to have equity, maybe their income is decreased or they’re worried about their job security," Singley said. "They could move, but they don’t have to. Why would they put their homes on the market? Not when they could wait a few years."
This large collective impact of distress sales, negative equity and job fears translates into "an outright collapse in organic sales that measure the true health of the housing market," according to Mark Hanson, managing director of Field Check Group, a Bay Area financial industry consultant. Hanson said California resales that trigger a second move – whether up, down or across – were down 60 percent in April from three years earlier.
That explains why Cynthia Hearden’s $459,000 house in Sacramento’s Land Park neighborhood has been slow to sell since its March listing. It tells why Kathy McKnight in the city’s Pocket neighborhood decided not to offer her house for sale after an agent suggested an asking price of $525,000, less than she had hoped.
Hearden, nearing retirement and aiming to downsize, showed one of the more creative responses to lack of move-ups. When she got an offer based on the potential buyer first selling her own house, Hearden waited as neither house moved. Then she looked at her potential buyer’s $289,000 house in South Land Park, and proposed a trade accounting for price differences.
The other homeowner was interested, but even that deal fell through last week.
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