Aug. 19—It's a sign of the times: Jim Eggleston, owner of Sacramento's biggest residential “For Sale” sign installer, predicts this will be his busiest week in 21 years in business. He's had to hire an extra worker and buy a new delivery truck since his crew planted a one-day record of 225 signs on Monday.
Sacramento is not a household name on the East Coast.
Unlike San Francisco and San Jose, it has not had a song written for it—at least not that I’ve ever heard—and if it did, the song would probably have been a Johnny Cash/Folsom Prison Blues/“I shot a man’s leg off just because he was bothering me and now I hear the lonesome Sacramento whistle outside my prison window” type of thing.
And, in fact, Folsom Prison happens to be right outside Sacramento, about 20 miles east along Route 50.
Sacramento itself lies 90 miles east of San Francisco, in the agriculture-rich Central Valley of California, on the road to Lake Tahoe, Reno, Salt Lake City and beyond. It is, for some reason, the oldest incorporated city in the state of California, and the State Capital to boot.
“There are whole lot of houses going up for sale,” says Eggleston, who promises next-day installation when a real estate broker orders a new sign. “The number of 'For Sale' signs we're removing keeps going down relative to the number we're putting up.”
Sacramento is also the home of McClatchy Newspapers—publisher of the Sacramento Bee, the source of this article—and one of the fastest growing metropolitan regions in the nation.
And while Sacramento is not a Speculative Housing Bubble-type market of the Las Vegas/Phoenix stripe, it’s close—having appeared alongside the San Diego, Los Angeles, Riverside, San Francisco and San Jose “Metropolitan Statistical Areas” in a listing of least-affordable U.S. housing markets earlier this year.
If this Sacramento Bee article is accurate, however, that region may be getting a little more affordable in the near term:
His [Jim Eggleston, the ‘For Sale’ sign guy] experience is just one more signal that the Sacramento region's housing market continues to cool off, as inventories rise, price reductions become rampant and homes stay on the market longer, particularly those in the $400,000-and-up price range.
In July, the monthly inventory of resale homes for sale in Sacramento, Placer, El Dorado and Yolo counties combined shot up to 7,263—the highest for any month since September 1998.
In other words, the number of Sacramento area homes for resale in July was the highest since September 1998, just before the Asian crisis hit the California economy.
And it appears that inventory actually increased in August:
As of Thursday morning [August 18], the inventory had risen another 26 percent to 9,141 homes, reports TrendGraphix, a local data firm affiliated with Lyon Real Estate of Sacramento.
"The inventory is ramping up and we're now seeing a changing market—the bell has tolled," said Michael Lyon, head of TrendGraphix and Lyon Real Estate.
Does Sacramento matter? Is it a canary in a coal mine? Is the Speculative Housing Bubble doomed to burst in a hail of fireworks?
Will angry ex-day-traders-turned-condo-flippers march on Washington to bemoan their top-ticking yet another market—The Million Angry-Ex-Day-Trader-Turned-Condo-Flipper March?
But I know this: human beings take comfort in the safety of numbers—and they are taking comfort, right now, in the safety of numbers of friends and family and neighbors and distant relations who are making money in the market…the housing market.
On Saturday night a proud father was regaling our table at dinner about his daughter who, to his amazement, had created a business fixing up and flipping houses out in Phoenix. “The first couple of houses, the banks needed our signature,” he said. “But now they don’t!”
Everyone at the table nodded in approval, and one lady said, “That’s the wonderful thing about children…they have no fear.”
Fifteen years ago, however, when the Resolution Trust Corporation was selling off bad real estate owned by failed savings and loans, there was plenty of fear. The average American considered buying real estate too risky. Proud fathers didn’t brag about their young daughters flipping houses—chances are Dad was already holding the bag on a condo he bought during the late-1980’s boom.
Besides, Dad couldn’t have gotten the financing anyway, given the state of the Savings and Loan industry.
But today there is no fear. Lots of headlines, lots of worried journalists and a few economists crying ‘wolf’—but among the young men and women taking out the interest-only mortgages, there is no fear.
And in at least one hot region of the country—Sacramento—inventory is rising and the market is “changing.” According to one real estate professional there, the bell has already tolled.
Too bad Johnny Cash is no longer around to write about it.
I Am Not Making This Up
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.