As we end the year in which we went from an overheated market to a completely cold market, the big question in real estate circles is how the Sacramento market will perform in 2007. This morning’s Sacramento Bee story by Jim Wasserman, “Hope seen at home,” details the slowdown in price declines in January. There are others who are not so hopeful in the market and continue to beat the cloak of collapse by pointing to the surge in foreclosure activity as the tool of doom.

Looking at MLS data released earlier this week by the Sacramento Association of Realtors, it showed new listings in January were up more than 75 percent from December and nearly 20 percent growth in inventory. . This is normal and expected as we move away from the holiday season and year-end rush. Compared to January 2005, there were fewer new listings (2.9 percent) and current inventory was down 4.8 percent from a year ago to 4,926. The average price paid in January is practically the same as in December, but 3.5 percent less than in 2005 at $355,000. The full report is available on the SAR website.

In Placer County, the MLS data for single-family homes shows the same pattern as in Sacramento County. There were 826 new listings in Placer County during January. This is more than double the number reported in December, but only 48 more listings than last January. Inventory rose 3.4 percent to 2,178 from December and 17.5 percent from a year ago. During January there were 211 closed transactions representing a median price of $430,000. This is a 30 percent decrease in month-over-month closings and a 2.2 percent decrease in median price paid. Compared to a year ago, current closings are down nearly 14 percent and the median price paid is down 6.9 percent. Previous MLS data is available on the Placer County Association of Realtors website.

A quick review of some of the communities in Placer County shows some interesting numbers and leads to a question about the quality of reported values ​​when looking at small samples.

In Roseville, we had lower year-over-year sales in January compared to last year, higher backlogs, and an increase in on-hand inventory. There were 73 homes sold in Roseville during January with a median price of $415,000. This is down from last year’s January average of $432,500.

Rocklin MLS data shows a modest increase in sales this January compared to last year. The trend continues when looking at pending sales, which are reported to have increased by 3 sales to 52 compared to last year. There is also a small increase in listings this year compared to last year, with 236 homes reported as available for sale. Unlike most areas, the median price paid for a home in Rocklin in January increased compared to last year. The Placer County Association of Realtors reports an average price increase of $20,000 to $445,000.

The median price in Granite Bay also showed an increase compared to last year. MLS data for January reported a median price of $802,500 compared to $705,000 a year ago. Remember that these numbers are calculated on a small number of sales and can be misleading. In January this year there were 18 sales compared to just 11 last year.

Many experts argue that real estate is local and that looking at national, state, or even county or city results cannot be used when doing an analysis on a neighborhood or a single property. Reports for small communities and zip codes often do not have a large enough sample to make accurate statements about price trends. Home value site Zillow has developed a home valuation index they call Zindex in an effort to establish a median value for all homes in a given geographic area, not just homes that sold during the period.

Regardless of what you think about Zillow, their Zestimates is an interesting concept and one worth looking at.

In Sacramento County, where we just learned that the median price paid for a home in December was $355,000, the Zindex for the same area at the end of the year was $357,148. Incidentally, this is lower than the $371,148 reported at the end of the third quarter of 2006 and 6.74 percent lower than a year earlier.

The reported Zindex for Placer County was $460,466 at the end of the year. This compares to the median MLS data price paid in December of $430,000. Zindex’s value was down 5.11 percent quarter-on-quarter and 5.97 percent from a year ago.

Going down to the community level and looking at my earlier example, Granite Bay, we found MLS data on 11 sales in December 2006 that returned a median price of $705,000. The Zillow Zindex reports a valuation for Granite Bay of $703,382.

Based on this cursory review, it would appear that although the numbers come from different methods, the MLS data and the median price determined by homes sold during the period are not inconsistent with Zillow’s valuation method. This is something that clearly requires further examination and observation. If you’re interested in seeing Zillow’s full report for the Sacramento area, it’s available for download on their site.

Based on all of the above, it appears that prices in the Sacramento metro area are beginning to stabilize. Inventory, as expected, is building as we leave the holidays behind us and head into the spring selling season. Sales activity remains anemic, but reports from agents I have contacted over the past few weeks indicate that things are picking up. The next 60 days of sales activity will be affected by weather. If we continue to have some dry days, we could see a good increase in sales. If, on the other hand, it starts to rain and continues like last year, it may be at the end of March or beginning of April when the buyers go out to look. January looks a lot like what some of us were hoping for, but it’s clearly too early to set the tone for what we’ll see throughout the year.