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Many obstacles still confront Elk Grove, the nation
Housing data released Monday by The National Association of Realtors showed December housing sales jumped 6.5% over November. The increase was the biggest month-over-month increase in over seven years.
The increase offered investors some hope in an otherwise dreary economic picture that is developing. While sales on a month-to-month basis jumped, they still dropped 3.5% from December, 2007.
The report also noted that 45% of December's transactions were distress sales conducted by mortgage holders often at a loss to the original loan value. The sales do have the effect of reducing inventories which can lead to price stabilization.
Locally, the Wall Street Journal's quarterly survey of local housing markets (see chart below) show that housing inventories in the Sacramento dropped 32.1% with a 4.2 month inventory. Housing prices continue to drop locally however with the WSJ index showing a 18.8% price drop for the year.
The same survey also shows 9.24% of Sacramento mortgages overdue by some measure. Of the 28 major real estate markets in the survey, Sacramento is the fourth worst trailing Miami-Ft. Lauderdale, Las Vegas and Orlando.
Aside from this glimmer of hope, Elk Grove faces many challenges in overcoming the housing bust. The most immediate obstacle is the worsening job environment.
With a local unemployment rate 0f 8.4%, this dire situation will be exasperated locally if Gov. Schwarzenegger's proposed two-day-month furloughs come to fruition in February. By some accounts, there are 14,000 state employees living in Elk Grove.
In addition to the on-going credit crisis, housing bust and declines in employment, Elk Grove is suffering from a self-inflicted glut of never-occupied and empty retail and commercial space.
Before Elk Grove's local economy stabilizes, employment will need to improve and the excess inventory of residential and commercial real estate will need to constrict. While the Elk Grove City Council can do nothing to substantially improve employment, it can move to control real estate inventory by limiting or even freezing new construction permits until excess inventory is absorbed.
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