Archive for October, 2007
It Keeps Getting Better
October 26, 2007
Every week I get an e-mail from C.A.R. (the California Association of Realtors) called the “C.A.R. Newsline”. It’s basically a summary of select news items of interest to California Realtors. This weeks’ bulletin contained some more “delightful” news: C.A.R. reports a sales decrease of 38.9%, and a median home price drop of 4.7%. Here, read for yourself:
C.A.R. Reports September Price Decline
Often times, I don’t pay stories like this much heed, since it isn’t particularly useful to look at California as an entire market. In fact, it isn’t particularly useful to look at Santa Cruz County as a whole market - some areas are doing well, others…not so well. But this article is good in that it breaks down the sales by county. You can see the numbers for Santa Cruz county buries in there.
What’s interesting is that we are seeing a sales decline and a median price decline in almost every county. There are a few regions where we see that prices are going up, still - but I’ll bet that this is because, as in Santa Cruz county, it’s the mid-and-upper-end houses that are selling, not the lower end. However, regardless of area, there is a large (some would say alarming!) drop in the number of home sales - for example, it says that sales in Santa Cruz County are off 34.3% from September ‘06. And September ‘06 was quite a bit off from September ‘05 (but I don’t have those numbers handy).
So, let’s see. We’ve gone from a hot hot seller’s market of 2-2.5 years ago, then we went into a “balanced market” where prices were not going up so fast, but there was still a good mix of supply-and-demand…to today, where for almost all properties, it’s definitely a buyer’s market.
Buyers, what are you waiting for? I no, don’t tell me - you are waiting for prices to drop even further. I can’t say as I blame you - if you don’t need to buy now, it seems there’s little to be gained by doing so. It’s an interesting time: prices are dropping, but there has been no corresponding rise in interest rates or unemployment, the two factors which traditionally bring on price declines. No, this time, it looks like the price declines are attributable solely to…the bubble deflating.
To the chagrin of many who prognosticated a great implosion of home prices, it seems that is not our fate. What we’re seeing is a slow (but steady) decrease in home prices in many areas. When exactly the turn-around will come is anyone’s guess. Many folks are saying it’ll be another 12-18 months. It’ll sure be an interesting wait. 
Technorati Tags: market data, real estate sales, sales data
Posted by SantaCruzBroker at 2:39pm
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Median Home Price Drops to $702,500
October 10, 2007
Wow, did you feel that? The big thud, as home prices just dropped through the floor? It was front page news in today’s Santa Cruz Sentinel:
Santa Cruz County median home price drops 8.8 percent to $702,500
Yep, housing prices are down 8.8% apparently. Take a look at the article, then come back and read the rest of this blog entry here.
As the article states, there isn’t really one housing market. There are many many housing markets, so it is very hard to generalize. Actually, it’s easy to generalize, but it’s harder for a generalization to mean much when you’re talking about the Santa Cruz housing market. We just had this discussion in our office meeting today, actually: what to say when someone asks, “How’s the market doing?” The correct answer is: “Which market?” As the article points out, many segments of the market are doing just fine, and other segments are doing very poorly.
The headline in the paper was all about home prices, but when you read a little further down, you see that the article also goes into sales volume - how many homes were sold in September. Last month, just 88 single-family residences were sold in all of Santa Cruz County - that’s an 11-year low. What’s that mean? Well, it means many things. It means that only 5% of Realtors sold a single-family residence in September. It also means that if you want to sell our home in this market, you need to price your home aggressively.
Of course, if you’re one of the few buyers out there, it means that in many market segments, you are in the driver’s seat. It is, however, very important to know the state of the market you’re trying to buy into. If you are buying in Watsonville, you can really take advantage of the weak position that sellers are in down there. But if you’re buying on the west side of Santa Cruz, or down by the beach just about anywhere…forget about picking up a bargain. There’s good demand in those areas, and any seller who has priced their property according to recent comparable sales will probably get very close to their asking price.
Technorati Tags: market data, real estate sales, sales data
Posted by SantaCruzBroker at 5:13pm
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October in Santa Cruz
October 01, 2007
Yesterday was a beautiful day, no doubt about it. We had a bit of rain last week, and a bit more the weekend before - which is pretty unusual. I wondered if we were going to skip our icing-on-the-cake - that is, the beautiful Indian summers that Santa Cruz is famous for. The tourists thin out, and the morning fog is gone, and we typically get about four to six weeks of absolutely beautiful, stunning weather.
Other than those couple of rainy days, we’ve been having it - in spades. Just beautiful. Warm, sunny, blue skies, just a hint of a breeze. I walked down to Capitola Village yesterday with my wife and a friend of ours, and I took this picture of the pumpkin patch at the corner of Bay Street and Capitola Avenue. Happy Halloween!
Technorati Tags: halloween, puppy, weather
Posted by SantaCruzBroker at 11:02am
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Cancellation of Escrow
October 01, 2007
A few weeks back, I posted a blog entry about an escrow I’m in where it was discovered that the septic system had failed. We spent about a week on pins and needles, waiting to hear back from the sellers about what they were going to do about it. Apparently, they were working on something, but they never communicated to us what they were looking at. My buyers have an urgent need to move into another home soon, and of course, a home isn’t really habitable without a working septic system or sewer connection, so this issue was of utmost importance.
It is pretty difficult to sell a home without a working septic system, so it was kind of a no-brainer that the sellers would do something - the question was, what? In the end, the sellers got a slightly cheaper bid from another local septic company here in Santa Cruz, to do a traditional leach field system (versus the pit system recommended by the contractor who we had look at it). I’m still wondering where that leach field is going to go, since there’s not much land at all to work with - I’m thinking they’ll have to tear out the driveway.
After we received the news that the sellers would, in fact, be putting in a whole new septic system, we proceeded to do more inspections. We called out a home inspector, who, of course, flagged a number of items for further review. Chief among these items was the electrical system - it was pretty wobbly. My buyers also decided to bring out a general contractor, to review the other items flagged in the home inspection, as well as the termite inspection which the sellers had prepared. The termite inspection report the sellers provided indicated that there was about $10,000 worth of repairs to be made, including a fumigation. The report was issued by a reputable, respected termite inspector.
If you’ve seen a few termite inspections, you’ll know that they often say “Will Bid” for many items, or “if upon further inspection additional damage is discovered…”. That’s reasonable - many times, wood gets damaged in areas that cannot be easily inspected, without tearing into the drywall, etc. The general contractor, though, came with a metal probe (same as the termite inspector uses, normally), and virtually everywhere his probe went, he found rot. Lots of it.
It was his opinion that everywhere the termite report said “if additional damage is found…” that there was, in fact, lots of additional damage. He put together a bid which, he stresses, was a conservative one: about $140,000 to repair the damage. He also said it could be far worse than that, in fact, he said, it could be so bad that it might be better just to tear down the house and begin anew.
I raised my eyebrow at that one - with construction costs at around $350/square foot, that’s about $420,000 to rebuild a 1200 square foot house. That’s a pile o’ dough, and to me, it didn’t look like the house was going to need that kind of work.
My buyers were then in a sticky situation: either cancel the contract, or ask re-negotiate the purchase price with the sellers. My buyers weren’t going to ask for the full $140K - instead, they were asking to lower the purchase price by $70,000. Sounds reasonable, but of course, that is a big chunk to swallow on the part of the seller’s part - that on top of the new septic system they were putting in.
I drove out to the seller’s agent’s office (his office is out-of-the-county), to present our case in person. I didn’t have a lot of hope that I’d be able to convince him of the righteousness of our request, but I did want to show that we were acting in earnest, that this wasn’t just a shakedown for $70K, that we did, truly, believe that the house was badly damaged and we wanted to buy it, but we needed to adjust the price. I did stress that we’d be open to having the sellers bring their own contractors out (as they did with the septic system) to get a second opinion.
But no second opinion would be forthcoming. A couple of hours later, I got a call from the seller’s agent who informed me that they’d lower the price a tiny bit, but nothing like the $70K we were requesting. However, what we were offering was our best offer, so yesterday, I faxed over the Cancellation of Contract to the sellers.
I wish the sellers the best of luck with the property. It is a cute house, and it’s got a sweet location. Given that it’s been on the market for months already, and we’re heading into the slow(er) time of year, I suspect it will be a while before they find another buyer at their asking price. I’d be curious to hear what they say to future buyers who ask why the last escrow fell apart.
Technorati Tags: cancellation of contract, escrow, pest inspection, septic, septic system, termite inspection, termites
Posted by SantaCruzBroker at 10:57am
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