Sacramento Slide

The Sacramento Bee is reporting Sales of new homes plunge.

Sales of new homes fell again in November to their lowest level since September 2001 as builders continued to be hammered by canceled deals, the local Building Industry Association reported Wednesday.

A separate analysis of sales during the six weeks ending Nov. 15 shows a particularly sharp decline in new homes sold in West Sacramento and Lincoln. Both are areas where prices have zoomed in recent years to levels that analysts said might not prove sustainable.

"Some local markets appear to be overvalued, and in those markets there may be some price adjustments to bring sales and pricing back in line," said analyst Greg Paquin of the Gregory Group, a Folsom-based real estate data and consulting firm. "In other markets, it may already be in line, but we're not projecting significant price increases over the next year or two."

The 368 new homes sold in November, the lowest number for that month since 1997, marked a 55 percent decline from a year earlier, the North State Building Industry Association said. The group tracks about 55 percent of the new home subdivisions in the capital region and reports net sales - the number of escrows opened each month, minus any canceled deals.

Such cancellations are up dramatically over a year ago, in large part because more would-be buyers are finding they can't sell their existing homes fast enough or for as much as they had hoped, said John Orr, the BIA's president. November cancellations represented about 40 percent of sales last month, BIA data show, compared with just 16 percent in November 2004.

Among the areas hardest hit by the new home slowdown is West Sacramento, where the average sales rate per project fell to 0.1 sales a week in the six weeks ending Nov. 15, from 1.23 sales a week in the third quarter (July-September), the Gregory Group reports.

The abrupt downshifting in sales this fall signals a slower market ahead but "isn't a sign that the market is going to fall off a cliff," said economist Matthew Newman, who tracks the Sacramento market for the SPHERE Institute, a Burlingame-based research institute.

Building association officials cautioned that their monthly sales figures tend to overstate the extent of the slowdown because the BIA members who report sales don't sell many condominiums, a growing market segment accounting for nearly 20 percent of sales in the third quarter.

Once again skepticism about a prolonged slide is pervasive

• The slowdown is said to be "overstated"
• The market is "not going to fall off a cliff"
• "We're not projecting significant price increases over the next year or two"

Increases?
What about decreases?

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/