More than 50,000 Yolo County residents could find themselves shelling out upwards of $1,000 next year on flood insurance.  Potential first-time buyers include the entire population of West Sacramento, Knights Landing, Yolo, Clarksburg and a third of El Macero.

The Federal Emergency Management Agency is updating the county’s flood maps, which determine where there’s a one percent chance of flooding in any given year.  The so-called 100-year flood is the threshold many banks use when requiring homeowners to purchase government-backed flood insurance.  FEMA delivered draft maps in December to local planning departments. A three-month public comment period extends to late May or early June.  Based on public input, FEMA will issue final versions around August. Six months later the maps will take effect.

Yolo County lies in a natural floodplain. Flood zones already run along the Colusa Basin Drain near Dunnigan and Knights Landing, Cache Creek (including north Woodland), and the Sacramento River (including the Yolo Bypass)  The current flood zone stops at the western levee along the Yolo Bypass.
Under the new maps, that flood zone would stretch westward to include thousands of acres currently outside the floodplain.

Nothing has happened to the integrity of the levees, said Will Marshall, an assistant city engineer for the city of Davis. ‘This doesn’t mean the levees aren’t going to hold water back.’  After Hurricane Katrina and the 2005 levee failures in New Orleans, FEMA decided to enforce quality standards established in 1986, Marshall said.  Yolo County’s 215-mile levee system is controlled by a hodgepodge of owners ranging from the state Department of Water Resources to private landowners.  ‘FEMA told the owners, ‘If you don’t certify the levees to the 1986 standards, we’re going to pretend the levees aren’t there … If you can’t demonstrate that it’s a good assumption that they can withstand the one-percent event, we’re going to assume they can’t,’ ‘ Marshall said.  None of the owners certified their levees.

The quality of the levees hasn’t changed, but tens of thousands of people will have to buy flood insurance come spring 2010.  Marshall estimated about 100 homes in El Macero would fall in the new flood zone.  That could cost them as much as $2,721, said Duff Devine, a local agent who deals in flood insurance.
Devine crunched some numbers on a few El Macero homes that would fall in the new flood zone.  Right now they could buy flood insurance for $348 a year as part of a ‘preferred risk’ policy.  That number could skyrocket eight fold to $2,721 if the draft maps still include El Macero when they take effect.

‘It’s huge,’ Devine said. ‘That’s the biggest premium I’ve ever seen in my time doing this.  Devine questioned the numbers - which he stressed were only hypothetical - saying homeowners typically see premiums jump three or four times.  Residents could avoid higher costs by purchasing flood insurance before the maps take effect, said Eric Simmons, the FEMA engineer for Yolo County. The lower cost would be grandfathered in even after they fall in a high hazard zone.  ‘The idea is to reward loyal policy holders,’ Simmons continued.
Buying flood insurance is a good idea even without the flood maps, said Mark Cocke, Woodland’s senior civil engineer.  ‘People make the assumption that they’re protected because they see a levee,’ Cocke said. ‘But every levee is going to have an event that exceeds its design capacity, and when that happens, bad things are going to happen.  ‘Every levee has a failure point,’ he added, ‘and people need to know that.’

Dec 2008

2008 Housing Market Wrap-Up
By Oscar Wei, Senior Research Analyst

Statewide sales continued to be strong in December, as deeply-discounted distressed sales remained at high levels in many parts of the state. After dropping slightly in November, home sales bounced back in December and rose to the second-highest seasonally adjusted and annualized monthly sales level for all 2008. With sales of 544,580 homes, transactions improved by 5.9 percent over the (revised) November 2008 figure of 514,000 homes, while increasing 84.9 percent over (revised) sales of 294,520 homes a year ago. Sales have exceeded 500,000 for four consecutive months.

Annual sales of existing homes for 2008 increased 26.7 percent from a revised 2007 figure of 346,940 to 439,740 in 2008. Large year-to-year percentage gains in sales will likely continue but at a diminishing rate in the next few months, as current sales are compared against extremely low numbers that prevailed during the early months of the Credit Crunch in the late 2007 and early 2008.

Meanwhile, the statewide median price declined 2.0 percent from $286,850 a month earlier to $281,100, and dropped 41.5 percent from the prior year median of $480,820.  The significant decline in price was attributed largely to the dramatic change in the mix of sales since late 2007 and the increase in the share of distressed sales. Prior to the beginning of the Credit Crunch in August 2007, the sub $500K price range accounted for 43 percent of sales, the middle segment ($500K to $1 Million) made up about 42 percent, and the over $1 million segment captured 15 percent of the market. As of December 2008, the shares had shifted to 82 percent, 14 percent, and 4 percent, respectively.

For the year 2008, the annual median price fell 38.1 percent from $560,270 in 2007 to $346,750. With the economy deteriorating and the financial system struggling to stay above the water, distressed properties with deeply-discounted price will continue to affect the market. Home prices may not show clear signs of stability until the mid of 2009.

Showing more positive on the supply side of the housing market, the unsold inventory index was 5.6 months in December, down from 6.9 months a month earlier and was less than half of the inventory level of 13.4 month a year ago. The index has been below the long run average of 7 months since July 2008, and the current inventory level of 5.6 months was the lowest since March 2006.

For the year 2008, the index averaged 8.9 months, as compared to 11.2 months in 2007. The decrease in the index was due primarily to the increase in sales in the second half of the year. The average year-to-year percent change of the monthly sales for the second half of 2008 was 80.1 percent, as compared to 7.4 percent in the first half of the year. As a result, the inventory level averaged 6.4 months from July 2008 to December 2008, whereas the average from Jan 2008 to June 2008 was 11.4 months.

To learn more about our Trends Newsletter, please contact the Research & Economics Department at research@car.org or (213) 739-8352.

An estimated 29,458 new and resale houses and condos were sold in California last month. That was down 22.1 percent from 37,836 in December and up 53.9 percent from 19,145 in January 2008. Sales have increased on a year-over-year basis for the last seven months. California sales for the month of January have varied from last year’s low of 19,145 to a high of 47,138 in 2004, while the average is 30,837. MDA DataQuick’s statistics go back to 1988.

The median price paid for a home last month was $224,000, down 10 percent from $249,000 for the month before, and down 41.5 percent from $383,000 in January a year ago. Around half the drop in median is due to price depreciation, the other half due to shifts in the types of homes selling, and how those homes are financed. Last month’s median was the lowest since it was $220,000 in May 2001.

Of the existing homes sold last month, 60.4 percent had been foreclosed on in the prior 12 months. A year ago it was 29.6 percent.

The typical mortgage payment that home buyers committed themselves to paying last month was $969. That was down from $1,110 in December, and down from $1,790 in January last year. Adjusted for inflation, mortgage payments are 54.5 percent below the spring 1989 peak of the prior real estate cycle. They are 62.0 percent below the current cycle’s peak in June 2006.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Indicators of market distress continue to move in different directions. Foreclosure activity waned in the fall but edged higher in December and remains near record levels, while financing with adjustable-rate mortgages is at an all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity has edged a bit higher, MDA DataQuick reported.

Copyright MDA DataQuick Information Systems. All rights reserved.

By Jeff Hudson | Enterprise staff writer | February 18, 2009 08:30

What’s the trend in residential real estate? That depends on where you look.

First, consider the Sacramento region as a whole. The median home price in most neighborhoods tumbled steeply during 2008 - in some locations by 30 percent, or more.

At the same time, the volume of home sales over the Sacramento region picked up dramatically, as first-time home buyers, investors and bargain hunters began scooping up foreclosure bargains in significant numbers. Industry experts say more than 70 percent of the homes being sold in the Sacramento region in the last few months are foreclosures, which are moving at rock-bottom prices.  Prices in some parts of Sacramento County have come down so far that you can buy a house for less than you might pay for a luxury car.

‘On Feb. 1, there were 122 single-family homes for sale in Sacramento County priced under $50,000,’ said Doug Arnold, owner of Coldwell Banker Doug Arnold Real Estate. ‘They’re in places like Rio Linda and North Highlands. … With the prices down, and interest rates low, the number of sales in Sacramento just about doubled’ in late 2008, as compared to the preceding year.   This same trend was evident over Yolo County as a whole.

‘During the second half of 2007, there were 566 Yolo County homes sold. During the second half of 2009, there were 1,097 homes sold - it almost doubled,’ Arnold said. ‘Of course, most of those homes were in West Sacramento and Woodland - which is where the prices have come down the most.’

Now narrow the focus on Davis, where the figures tell a somewhat different tale. Contrary to the regional trend, ‘the number of Davis homes sold is still slowing down,’ said Herb Cross, vice president of Lyon Real Estate, and manager of Lyon’s offices in Davis, Woodland and West Sacramento. ‘Year over year, since 2005, we’ve seen the number of Davis homes sold slowing down’ for several years in a row.

And while Davis prices have declined, they are generally holding steadier than in most parts of the region. Overall, Davis home prices dipped an average of about 6 percent when 2008 is compared with 2007 - even as much larger declines were seen in many other communities. The median home price in Davis continues to hover in the low $500s - while the median price in many other nearby ZIP codes is in the $200s, and in the case of a few ZIP codes, the $100s.

‘Davis doesn’t have the REO properties that the other communities have,’ Cross said, referring ‘real estate-owned’ properties that have been taken back after a foreclosure. Such homes have driven prices down in West Sacramento and Woodland. ‘Davis doesn’t have that’ to nearly the same degree, Cross said. ‘It’s a supply-and-demand thing.’

Arnold said that while the pace of sales in Davis continues to slow, some buyers ‘are picking Davis because they like the fact that there’s not a lot of homes for sale, not a lot of new homes, no big subdivisions.’

A low inventory of homes for sale in Davis also contributes to the comparative price stability. ‘There’s less than a three-month supply on the market, maybe 110 houses for sale’ at a given time - sometimes less, Arnold said. By contrast, Woodland and West Sacramento have a four- to five-month supply of homes for sale.

Arnold added that when you compare the cost of condos, there’s also a big contrast over the region.

‘The No. 1 unit of a McKeon condo (in northeast Davis) in Davis lists for around $280,000,’ Arnold said. ‘But in the Hillsdale/Madison area of Interstate 80 in Sacramento, I saw one of those units listed for $28,000.’

‘Location, location, location,’ Arnold mused.

Wait? Or move?

Naturally, the economy plays a big role in the decisions made by many buyers and sellers.

‘Mortgage interest rates are pretty good,’ Cross noted. But with home prices still moving downward, many potential buyers are waiting. And many potential sellers are ‘reluctant to put their properties on the market’ until prices start coming back, he added. ‘So we have reluctance on both sides,’ even though interest rates remain favorable, and prices are down.

Some first-time buyers also were waiting to see if there would be a $15,000 incentive in the federal stimulus bill. (As it turned out, that provision was taken out of the bill.)

It’s also difficult to put together financing for properties in the $1 million range. On Feb. 3, DataQuick, a firm that monitors real estate data nationally, reported ‘a bone-dry mortgage market for prestige home financing, as well as a decline in the value of many homes,’ contributing to 42.65 percent decline in the sale of California homes priced over $1 million, comparing 2008 (24,426 homes) against 2007 (42,506 homes).

‘It’s more difficult to get the larger loans. The lenders are much more cautious,’ Cross agreed.

But that doesn’t mean there aren’t any high end homes selling.

‘We recently sold the most expensive home ever in Davis, $2.7 million, in El Macero,’ Arnold said. ‘And we already have a $1 million home in Lake Alhambra Estates that’s pending. Some of them are moving.’

‘Both of those upper-end homes sold for all cash,’ he added.

Arnold said he’s seeing cash deals in other market segments as well. ‘Probably about 10 percent of sales are all cash, which always surprises people,’ he said, adding philosophically, ‘There’s always a group of buyers that have money.’

Cross likewise said he sees ‘a significant number of cash buyers,’ and they’re active in different price segments, high and low.

Kim Eichorn, an agent in Lyon’s Davis office, said she’s seeing interest from families with kids living in nearby communities, who are ’surprised that Davis prices are down to where they are.’ Eichorn said that for these families, the decision to move is ‘kid-driven. They want to get into the Davis schools.’

‘I recommend they get their house in Sacramento (or wherever) sold, and get intermediate housing. I’ve worked with three families like that,’ she said.

Eichorn has also worked with some ‘move-up’ buyers, who are taking their equity from a smaller Davis home, which has declined somewhat in value, and moving that equity into a larger Davis home, which has seen a proportionally larger price drop.

The local market can be highly variable, and some homes can take a long time to sell. Eichorn recently sold a Central Davis home that had been on the market for nine months. The seller dropped the original asking price from $649,000 to less than $529,000.

‘Well-located homes in nice condition continue to sell close to the asking price,’ she said. ‘It’s homes that are challenged - with a bad location, or in poor condition or REO -that’s where you see the drastic price reduction.’

Trends for 2009?

One thing’s for sure - there are very few housing starts anywhere in the Sacramento region, because new homes can’t compete with low-priced foreclosures.

‘Right now, you can’t build new homes for what they’ll sell for. So new construction is almost nonexistent,’ Cross said.

The layoffs being announced at many companies, the talk of pay cuts for teachers and the mandatory furloughs of many state workers undoubtedly will play into some families’ financial calculations.

Many potential buyers continue to play a waiting game, hoping to time the ‘bottom of the market’ - the point at which prices level off, and then begin to rise.

Cross and Arnold said they expect to see some homes that were listed for sale last summer, and then taken off the market in the fall, coming back on the market as sellers test the waters in the new year.

‘There are a lot of people waiting on the sidelines,’ Arnold said. ‘People aren’t in any hurry. But there are people coming to the open houses on the weekend, window shopping. And some of them are pretty serious buyers. They’re just waiting to see what the fallout is from everything.’

Cross said that ‘for the overall trend in prices in Davis, I think we might see a slight decline looking into the year 2009.’

Arnold is more optimistic. ‘I actually think that things are going to get better. I think we’re very close to the bottom. Obama’s getting his act together. And I think the second half of 2009 is going to be good. Interest rates are going to be low, and things are going to start to move again.’

As of Sept 6, 2008

CENTRAL DAVIS

WEST DAVIS

EAST DAVIS

SOUTH DAVIS

NORTH DAVIS

Davis’ General Plan was written to guide the city through Dec. 31, 2010. Because of limited time, cost, and the need for more outreach, however, city staff members are recommending the update be delayed to 2013.

City Manager Bill Emlen and Community Development Director Katherine Hess don’t expect the delay to hinder city policy decisions, but will allow residents to more fully engage in the process.

‘Updating the General Plan isn’t required on any regular schedule,’ Hess said. ‘We’re still working through the current one, and it was adopted fairly recently. It doesn’t turn unreal at midnight.’

Many cities have a General Plan that hasn’t been updated in decades, Hess said, but Davis tends to update more frequently.

‘Because our policies are so specific as compared to other general plans, it does lend itself to the likelihood that it will have to be changed more frequently,’ Hess said.

But there are benefits to pushing back an update: It will give the city more time to educate the public, and it will allow Davis to align the General Plan with the Housing Element update, also due in 2013. The state-required Housing Element update was completed earlier this year.

The Housing Element determines where the city will meet its demands for housing and is updated every five years.

‘It’s generally expected to relate to decisions in the General Plan,’ Hess said.

Waiting three years to update the General Plan should not have an impact on the City Council’s policy-making decisions, especially since the city hasn’t changed its philosophies drastically since 2001, Emlen said.

‘I think the key with the General Plan is, they set out a vision, but they also have to have flexibility,’ he said. ‘I think so far our plans have worked that way pretty well. I don’t expect there will be a problem in the next few years if we do have to make some adjustments.’

Citizens’ plan Davis’ General Plan is a lengthy document that guides the City Council’s policy-making decisions. It outlines the philosophy of the city, explaining how Davis wants to look in the future, how and where it will grow, what the economic climate should be and the quality of life it aspires to have.

In 1994, the city convened 215 volunteers and assigned them to subcommittees to examine everything from culture, art and history to economic development, neighborhood preservation, technology, youth and education.

Eight years - and about $1 million - later, the City Council adopted the 2001 General Plan update.

It was meant to guide the city until Dec. 31, 2010, leaving Davis only about 18 months for an update and only $150,000 budgeted so far to do it.

Growth and planning have become the prism through which Davis politics are viewed, and the General Plan reflects that.

‘The way we use the land, today and in the future, is at the heart of the General Plan,’ the 2001 update reads. ‘Land use decisions affect all other aspects of the city including traffic, noise and air quality; opportunities for jobs, housing and businesses; community character and design and the need for public facilities and services of all types.’

Davis resident Jon Li, who worked on the 1987 and 2001 updates, said the General Plan should focus more on the city’s budget and less on land use.

‘The financing of the city is an enormous headache,’ he said. ‘That’s where the city and the City Council should be focusing their concerns, not on growth. Davis in particular with its obsession with the growth question ignores and neglects the rest of the city and skewers whatever discussion we’re trying to have.’

Too detailed?

The General Plan, which runs into the hundreds of pages, goes into great detail about how infill should be developed, how neighborhood shopping centers should be designed and how growth should be patterned, among other things.

Conversely, Bryan, Texas, near A&M University, has a one-page general plan. Li has presented the truncated document to the City Council for consideration.

‘I think the problem with the 2001 General Plan is it says way too much,’ Li said. ‘It’s not a policy statement, it’s a micromanagement tool. It’s intended for adding new lands in city limits and it’s intended for redevelopment. That’s what a general plan is for, the growth side.’

The elaborate detail included in Davis’ 2001 General Plan can sometimes hinder city staff members, as well, Hess said.

‘Sometimes the specifics get in the way because the specifics may not apply to the question you have,’ she said. ‘It’s also very long. If you were going to try to distill it to the top five messages, that would be hard.’

It also makes determining the value and appropriateness of a project or policy difficult, Hess said.

‘If you’ve got a lot of policies and (something under consideration) is consistent with 79 of them, and it’s not consistent with No. 80, is it still a good thing?’

But Davis resident Eileen Samitz, who also worked on the 2001 General Plan update, said the huge community effort should be respected.

‘The new update really needs to respect the citizen based 2001 update of the General Plan,’ she said. ‘The visions, the goals, the actions and the policies they were basically developed by over 200 people. It’s a reflection of what the citizens wanted.’

Emlen agreed.

‘I will say on behalf of the current plan, it was a very ambitious effort,’ Emlen said. ‘It acknowledges that a general plan is more than just land use. It’s a broader perspective. There was reasons behind it.’

But there is room for improvement, he said.

‘We have to go back and look at if there are contradictions that need to be cleaned up as well. Because I think there are.’

Student housing

Although a Davis General Plan update isn’t likely to have any policy U-turns, some new aspects could be added.

‘My guess is that there would be some tweaking of the policy documents,’ Hess said. ‘The question would be how much we revise the map.’

Samitz said she’d like to see the map that indicates future residential growth left alone. But she would also like to see strong language added encouraging UC Davis to provide more housing for its students near the core of campus.

‘This is affecting our ability to provide housing for our nonstudents,’ she said. ‘This is putting excessive pressure on the city. The city needs to start leaning on the university to take responsibility for its own growth, that is key, that is so important.’

It’s hard to determine how much change the General Plan would undergo, Hess said, because much more public input is needed before the process can begin.

The General Plan update could incorporate the work of the Climate Action Team ad hoc committee, which is researching ways to increase Davis’ sustainability and reduce its greenhouse gas emissions. The updated General Plan could also address the aging baby boomer population.

‘It’s a significant increase in the percent of the population that’s going to be seniors,’ Hess said. ‘How does that affect the ways we look at our land use? What facilities do we have to address that?’

And, the General Plan could incorporate more focus on the city budget, as Li would like to see, as well as language that encourages the university to build more housing, as Samitz wants. The public at large will likely want to see many things added to the plan, and that’s why the city needs to ensure that all voices are heard.

Refined process

The City Council is expected to discuss the General Plan - its direction, whether an update should be delayed, how the update should be handled - in late fall, Emlen said.

Emlen and Hess said they expect the process to be more streamlined and less expensive this time around, though it will ultimately be up to the public and the City Council.

‘We will try to do a refined process this time,’ Emlen said. ‘What we do know is we’re going to continue to explore bringing in as broad a spectrum of the community as possible, and that hasn’t always been easy. We’re certainly going to try new ways of doing that and make it a collaborative document for the whole community.’

- Reach Claire St. John at cstjohn@davisenterprise.net or (530) 747-8057. Comment on this story at www.davisenterprise.com

Roller coaster growth predicted in past plans

If one were to chart growth simply by looking at the expectations of past general plans, Davis has had a roller coaster ride.

The city’s first General Plan was adopted in 1958, and said the community was expected to grow slowly from 1958’s 7,735 residents up to 35,000 people by 1980.

But UC Davis grew on its own timetable, and in 1964, the General Plan was amended to reflect a student body population that could swell from about 12,000 students to 75,000 by 1985.

In 1969, Davis’ population was expected to boom to 90,000 people by 1990, but the General Plan said the city should have room for up to 110,000.

The 23,450 people living in Davis in 1970 were unnerved by the projected growth, and 110 people were appointed to redraft the 1974 General Plan. That General Plan determined that Davis would only grow to 50,000 people by 1990.

In 1977, the plan was again amended to say the city would only have 50,000 residents well into the 2000s.

By 1987, Davisites were ready to talk about compact growth, and a new General Plan was drawn up to address potential developments outside of city limits. The plan assumed that about 75,000 people would be residents of Davis by 2010, and about 9,700 new residential units would have to be built to accommodate them.

In 1986, Davis approved Measure L, which said Davis should grow as slow as legally possible.

In 1989, Davis approved the 600-acre Mace Ranch, and in 1996 it gave the okay to the 419-acre Wildhorse development. Between 1980 and 2000, the city’s population doubled, going from 36,640 people to 60,308, according to the U.S. Census.

Today, the population is estimated at 64,000.

The rapid growth led to several slow-growth measures, including the election of slow-growth City Council candidates. Once council members, they passed Measure L, which said the city should grow as slow as legally possible. They approved an ordinance that said the city would grow no more than 1 percent per year - which is still too fast, according to some. Measure J, which gives voters the final say on any development that proposes to change agriculturally zoned land to urban use, was also approved.

Measure J is up for renewal in 2010. If the General Plan update is pushed to 2013, the city and voters will have more opportunity to focus on Measure J. Measure J just might be a more powerful tool for controlling growth than the General Plan.

‘In 1990, the building started happening, and people started seeing all this land get developed on the outskirts, and by 1994, ‘95, people were saying ‘Davis is growing way too fast,” said Jon Li, who worked on the 1987 update and the 2001 update. ‘And those were long-time, conservative middle-class residents. By the time we got to 2000, a lot of people supported Measure J. It wasn’t just the no-growthers.’

Marta Juliao and her husband Carlos Puente look at samples of new kitchen tile colors in their new home in Wildhorse. The couple sold their Mace Ranch home this summer and moved to a larger, four-bedroom house fairly nearby. (Wayne Tilcock/Enterprise photo)

Who buys a home in today’s market? People who have a good reason to do so.

Marta Juliao, who teaches Spanish at the Davis Waldorf School, and her husband Carlos Puente, a professor of hydrology at UC Davis, have two children, ages 8 and 11. Juliao and Puente felt they needed a little more elbow room.

The family had been living in a three- bedroom, two-bath home in Mace Ranch, ‘but it had been small for a long time,’ Juliao said. They considered homes in Woodland, but didn’t want to make their kids change schools. So they started looking in the northeastern part of Davis.

‘Our old house sold fast. There were three offers in a week,’ Juliao said. That house fetched a price in the lower $500,000 range.

The couple looked at somewhat larger homes in the $600,000s and $700,000s. They found themselves making offers on houses that were attracting other offers as well. They finally purchased a four-bedroom house in Wildhorse. In addition to picking up a bedroom, their new place has an office. Juliao likes having a room to do her grading and lesson plans.  ‘And there’s space for the kids to play. And the lot size is bigger in the back,’ she said.

‘In 2005, it would have cost too much for us,’ she said. But prices have come down.

Other Davis sellers, however, are finding it takes longer to find a buyer, if they can find one at all. Some houses linger on the market for months, particularly those on the higher end. Herb Cross, who manages the Lyon Real Estate offices in Davis, Woodland and West Sacramento, said that during the first six months of 2008, only four Davis homes sold in the $900,000 to $1 million range, and four more sold in the $1 million to $1.5 million range, plus one home that sold for more than $1.5 million.

‘It’s a tough market in the upper price brackets,’ Cross said.

The pace is busier in the middle range. Cross said during the first six months of the year, 42 Davis homes sold between $300,000 and $400,000. Another 52 Davis homes sold between $400,000 and $500,000, and 49 homes sold between $500,000 and $600,000.

A quick start

In fact, the summer started out pretty briskly for local Realtors.

‘We had our best June in four years’ in terms of the volume of homes sold, said Doug Arnold, owner of Coldwell Banker-Doug Arnold Real Estate. ‘But in July it went back exactly to where it was last year at this time,’ and things slowed down again.

Prices in Davis continue to run considerably higher than in surrounding communities. The median price in Davis has been hovering in the low $500,000s, and dipped to $489,000 for the second quarter of 2008.

Coincidentally, the median home price for the San Francisco Bay Area also dipped to $485,000 in June - the first time in more than five years that the Bay Area median moved below the $500,000 level, according to DataQuick Information Systems. DataQuick includes Solano, Napa and Sonoma counties in its Bay Area figures.

Davis home prices are unquestionably down compared to last year, about 7 percent.

In Woodland, by comparison, the median home price is running in the upper $200,000s. Pretty much the same goes for West Sacramento. And in both cities, prices have come down around 25 percent from last year.

Prices around the Sacramento region are taking a tumble. The National Association of Realtors released quarterly statistics Thursday for the metropolitan area, and concluded that ‘the steepest declines in single-family home prices in the second quarter were in the Sacramento-Arden-Arcade-Roseville area of California, where the median prices of $229,500 dropped 35.6 percent from a year ago.’

In 2005, the National Association of Realtors pegged the median home price for the Sacramento region at $375,900.

DataQuick’s city-by-city breakdown showed a median home price at $179,000 in June for the city of Sacramento, a figure that looks almost Midwestern to many California real estate analysts. The median of $179,000 (based on 1,200-plus homes sold for the month) represents a 40.3 percent price decline for Sacramento compared to June 2007.

By contrast, there are virtually no homes in the under-$200,000 price category in Davis. In fact, there are very few in the $200,000 to $300,000 range -just eight transactions during the first six months of 2008.

Foreclosures high

The current prices in the Sacramento region are being depressed by the huge number of foreclosures. An article by Bloomberg News on July 31 said foreclosed properties accounted for 63 percent of June home sales in Sacramento County. Banks are selling foreclosed homes at steep discounts - in some cases, for roughly half of the price that the same homes fetched at the market peak in 2005. The banks want to get those foreclosed homes off their books.

The foreclosure numbers get even scarier as you move south. Bloomberg reported that foreclosures accounted for 66 percent of June home sales in San Joaquin County (including Stockton), 72 percent of June home sales in Stanislaus County (including Modesto), and 75 percent of June home sales in Merced County.

On Thursday, Irvine-based RealtyTrac reported July figures showing Merced now has the nation’s second-highest rate of foreclosures, with one in 73 homes receiving a foreclosure filing. Stockton and Modesto were described as ‘in a virtual tie’ for third place, with one in 82 homes receiving a foreclosure filing. The Vallejo-Fairfield area in Solano County was No. 8 on the list.

Davis is getting off light by comparison, and the less-volatile prices in Davis are related to the smaller number of foreclosures here. A check of RealtyTrac’s statistics on Thursday listed 24 Davis homes in ‘pre-foreclosure’ (meaning two or more late mortgage payments), with four homes in the auction phase of foreclosure and another 25 homes that are ‘bank-owned’ (taken back by the lender).

Neighboring Dixon, with less than one-third the population of Davis, had 105 homes in pre-foreclosure, 73 in the auction phase and 148 bank-owned homes, according to Thursday’s RealtyTrac summary

In Woodland, there are 257 homes in pre-foreclosure, 93 in the auction phase and 376 that are bank-owned.

Arnold told The Enterprise his company is handling foreclosed homes in Davis and Dixon that were financed through Countrywide Mortgage a few years ago. ‘We have two agents doing that full-time right now,’ Arnold said.

Who’s buying foreclosures in Woodland, Dixon and West Sacramento?

‘Investors,’ Arnold replied. ‘They see what were $400,000 homes that are now $250,000 or $225,000. They’re going to hold them, fix them up, rent them for three or four years. And someday, prices will start going up.

‘We’re also seeing some first-time buyers’ going after foreclosures in the region, Arnold said. ‘I don’t that know I’ve seen many in Davis.’

There are plenty of foreclosures in West Sacramento. The listings on RealtyTrac on Thursday indicated 315 homes in pre-foreclosure, 99 in the auction phase and 396 bank-owned.

For Sacramento, RealtyTrac reported 5,189 homes in pre-foreclosure, 3,182 in the auction phase, and 8,651 that are bank-owned. And for Elk Grove, the figures were 1,350 homes in pre-foreclosure, 709 in the auction phase and 1,799 bank-owned.

Solano County is getting hit as well. For Vacaville, the figures were 420 homes in pre-foreclosure, 259 in the auction phase and 562 bank-owned. And for Fairfield, the numbers were 796 homes in pre-foreclosure, 499 in the auction phase and 1,124 bank-owned.

The Los Angeles Times estimated this week that statewide, approximately 1,300 California homes are going into foreclosure on a daily bases.

Others feel the chill

Locally, the slowdown and downturn in the housing market also has meant hard times for real estate-related businesses. A few years ago, six title companies were doing business in Davis. Now there are only two, Placer and Fidelty.

‘Thirty years ago, First American Title was number one around here,’ Arnold reflected. But First American pulled out last fall.

The economic drag of declining home prices also has contributed to a drop in sales of large recreational vehicles - La Mesa RV in Davis will be closing in October. Sales at furniture stores and home improvement centers also have suffered.

The low median home price and large inventory of homes for sale in Sacramento is also making life difficult for home building companies. Asked about the $179,000 median home price for Sacramento during June, Arnold remarked, ‘The home building industry can’t build for that.’ Little wonder that the California Building Industry Association reported that in June, the Sacramento region had less than half the number of new home starts reported in June 2006.

The North State Building Industry Association, which serves the Sacramento area, is now touting the region as ‘the most affordable metropolitan area in California’ when median family income and median home prices are factored together.

Timing is everything

So is the market cycle approaching the much-discussed ‘bottom’? When is it a good time to buy?

That depends.

‘I think in the upper end, it’s certainly a good time to buy,’ Arnold said. ‘Some of the houses that were $1.2 (million) or $1.3 million are now $1 million, or under. And they’re going to go back up eventually, because Davis is Davis, and there are only so many homes in certain areas.’

Arnold also mentioned the traditional things that Realtors stress when showing Davis homes - good schools, attractive parks, low crime.

Cross said, ‘If you’re looking for a place to raise your family, now is a good time. There are advantages to owning property - pride of ownership, tax advantages, putting down roots, raising a family in a stable environment. You buy a piece of property, get a 30-year fixed mortgage, you know what your payment’s going to be. Your income will increase over time, your mortgage payment stays the same. That’s a huge advantage.

‘But if you’re looking to speculate, if you want to buy property and sell it for more in two years - you’re on your own,’ Cross said.

Cross advised that the difficulty with calling the bottom ‘is that there isn’t a light that goes on, and someone declares ‘We’ve reached the bottom.’ We won’t know we’ve reached the bottom until six months after we’ve reached it’ - and by that point, prices in the ever-cyclical realm of real estate have once more started to rise

Many homes in foreclosure today were purchased with subprime financing around 2005 - promoted, in some cases, by home builders who were eager to sell their product and relied on new methods of financing to do so.

This is part of the reason so many subprime-related foreclosures are found in areas like Elk Grove and Natomas that saw a lot of building around 2005, and so few subprime-related foreclosures are in Davis, where there were no major new subdivisions at the time.

Some observers think the two-year tide of subprime-related foreclosures has peaked, and most of the faltering subprime loans will have cycled through the financial system by the end of this year.

But real estate experts are concerned that a second category of mortgages, called ‘Alternative-A’ or ‘Alt-A’ mortgages, could send a new wave of homes into foreclosure in coming months. The New York Times, in a front-page story on Aug. 4, reported that the percentage of Alt-A mortgages in arrears ‘quadrupled to 12 percent in April,’ compared to a year earlier.

Herb Cross, who manages the Lyon Real Estate offices in Davis, Woodland and West Sacramento, described the difference between subprime and Alt-A.

‘A subprime mortgage is one that’s risky,’ he says. ‘Those kinds of mortgages were made to people that didn’t really qualify for a conventional loan.’

In some cases, buyers put no money down, or didn’t have to prove their income.

‘The Alt-A mortgages are probably closer to a more reasonable guideline,’ Cross said. ‘These people have a better chance of making the payments on the initial terms of the loan.’ Other observers describe Alt-A as ‘one rung above subprime.’

The problem, Cross said, crops up when the terms of the Alt-A loan start to reset.

‘They may have had the ability to make payments when the payments covered interest only, and the payment was $2,000. But when the adjustment occurs, and the interest rate goes up, and you include principal (as well as interest), you may raise the payment to $3,000. And people may not have the ability or the will to make these payments.

‘We’re being told by the banks that we work with that there may be as many as 2,000 (more) foreclosures coming on the market in the next three months over the Sacramento region,’ Cross said. ‘And that’s going to have an impact on the market.

‘We think we’re going to start seeing some foreclosures occurring in higher price ranges, up to $400,000 or higher,’ he added. ‘It’s been mostly in the lower price ranges so far. We think it’s going to move up.

‘The unknown factor is how many people will have the ability to make the payments, but find themselves in a situation where the mortgage is greater than the value of the property,’ Cross said. ‘They may make a decision to walk away from the property, with the idea that they can escape the high payments, and rent a property for considerably less.

‘During the five-year period of time when their credit will be very limited, they can try to save the money they would have paid on the mortgage’ - and eventually re-enter the housing market.

A concentration of empty, foreclosed homes can have a negative effect on a community. According to reports by the BBC and other news agencies, many homeowners in the Stockton/Tracy area have ‘walked away’ from their mortgages, and moved to less-costly rented homes closer to their jobs in the Bay Area, saving on gas.