07 December 2010
November Market Trends
Sacramento, CA
! ! !
Traffic
(2,445 single-family permits in 2009, 41st largest market in the country)
Home Prices
Traffic remains below expectations. Our buyer traffic index came in at 25 in November (from 7 in October), remaining below a neutral reading of 50, suggesting traffic levels failed to meet agents’ expectations (readings lower than 50 indicate traffic was below agents’ expectations). 60% of agents said traffic was lower than expected, 30% said traffic met expectations, and 10% said it exceeded expectations.
Incentives
Prices fall, incentives increase. Home prices fell further in November, as our home price index fell to 15 from 21 in October, with readings lower than 50 indicating sequentially lower prices. 70% of agents said prices were lower and 30% said they were unchanged. Meanwhile, incentives increased in November, as our incentive index came in at 29 (from 25 in October), still below a neutral reading of 50 (readings lower than 50 point to increased incentives). 57% of agents said incentives were higher, 29% said they were unchanged, and 14% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 25 in November (from 18 in October), staying below a neutral reading of 50, pointing to an increased time to sell over the past 30 days (readings lower than 50 suggest a longer time to sell). 50% of agents said the time to sell was unchanged and 50% said it increased. We view an increased time to sell as a negative step toward price stabilization.
Comments from real estate agents:
■ “One word - apathy. Buyers are not interested in committing to a mortgage right now.”
■ “Buyers do not think the employment outlook is safe. Mortgage criteria have also been very tight.” Pulte, Hovnanian, Lennar and KB Home have the greatest exposure. The Sacramento market represented approximately 2% of sales each for Pulte, Hovnanian, Lennar, and KB Home. Exhibit 36: Traffic Below Expectations, Lower Prices, Higher Incentives, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...
Traffic Levels Versus Expectations
10% 80% 70% 60% 50% 40% 30% 20% 10% 0%
30% 60%
70% 57% 50% 50% 30%
14% 0%
Home Prices
More than expected
Meets expectations
Less than expected
29%
Increased
0%
Incentives
Time to Sell
Remained the same
Decreased
Source: Credit Suisse estimates
Monthly Survey of Real Estate Agents
40