Archive for March, 2008
Santa Cruz is Better than Salinas
March 24, 2008
The title of this blog entry may sound outrageous to some, but I expect that most folks in Santa Cruz would greet it with a shrug, perhaps a roll of the eyes. “Well, of course Santa Cruz is better than Salinas.” Like, what could be more obvious?
Well, now the people at no less an authority than Forbes Magazine, have weighed in on the subject. It seems Forbes magazine published a list of the 200 “Best Places for Businesses and Careers.”
Salinas came in dead last at 200 while Santa Cruz was not too far ahead, ranking 187.
So there we go, it’s official. Santa Cruz is better than Salinas, but according to Forbes, Santa Cruz can take scant consolation, as we are pretty down near the bottom of the list. The full list can be viewed here:
Forbes Magazine 2008 Best Places for Businesses and Careers
It seems that California just isn’t a good place for business or a career, despite the fact that California is the largest and most dynamic economy in the United States, and in in January 2007 (some ways into the slide of the dollar), California was ranked the eighth largest economy in the world.
The highest ranked city in California on the Forbes List? Santa Ana, California - at Number 94.
Posted by SantaCruzBroker at 7:40am
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From Santa Cruz to Mount Diablo and Back
March 23, 2008
Ahh. I took most of the day off yesterday, a well-deserved break after a very intense couple of months of hard slogging. It was a beautiful day, and I arranged to go hiking with my wife, a couple of our friends, and my brother. I’ve hiked pretty much all over Santa Cruz county (it took me years to see it all, or most of it, anyway), so this time, I thought we’d go somewhere different. I made a joke that I’d like to go somewhere I that I could write off the expense of the trip. Where’d we choose? Mount Diablo State Park.
What’s in Mount Diablo State Park that would allow me to write the trip off? It turns out, Mount Diablo is one of three initial points for all public land surveys done in California. Here, read about it on Wikipedia:
I thought it would be neat to hike up to the top of Mount Diablo to find the original survey marker from way back when. I thought I’d be hunting around the scrub brush to find it, but of course, it was much easier than that. It turns out, they long ago built a huge monument to this initial point. I took some pictures!
Even though I grew up in Berkeley, I had never visited Mount Diablo State Park before. It was beautiful, especially on a spring day like yesterday, with all the grass still green, and without any kind of stifling heat like I imagine I’d find there in a few months’ time.
Mount Diablo is another one of the long list of things that makes Santa Cruz great - and not just because all surveys in Santa Cruz emanate from that initial point. You see, despite what many of the delightful characters who reside inside our hallowed borders may wish to think, Santa Cruz does not exist in a vacuum. There’s life outside our borders - a lot of it. Santa Cruz is a beautiful, special part of an amazing region. We’re close to so much - Carmel, Monterey, Big Sur, Silicon Valley, San Francisco, the California Wine Country, the Sierra Mountains. There’s plenty to explore within the county, and there’s an incredible bonanza of things to see, do, and experience all around us.
But at the end of the day or weekend of exploring our surroundings, it’s always nice to come back to Santa Cruz and chill. Like I’m going to do today. Peace out. 
Posted by SantaCruzBroker at 8:40am
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There’s No Such Thing as Market Price
March 22, 2008
There. I’ve said it. I’ve blown the lid off one of Real Estate’s greatest secrets. The “Market Value” or “Market Price” of a home is purely fantasy. Let me explain.
There are many values attached to any piece of property. If it’s on the market for sale, there is the List Price. But, that’s just the asking price. When people are looking to buy property and searching on the internet, I encourage them to search a bit, maybe a good bit, over the their budgeted price, because the list price is not necessarily what the home is going to sell for - often, homes sell for far less than list price.
After the list price, there’s the assessed value. People are always telling me, “Well, the assessed value of the home is only $X, so I don’t want to pay anything more than that.” The assessed value is almost meaningless, thanks to California’s Proposition 13. That’s the figure the government uses to calculate property taxes. It’s no more of an indicator of a home’s value than Zillow is.
Next, let’s say that you’re going to buy a piece of property, and your bank, naturally, requires that you get an appraisal done on it. So the licensed appraiser comes out to the proeprty, does his (or her) thing, and comes up with a value - the appraisal value. Now, you’d think this would be a pretty good indication of value. I’d say it is, at most, a fair indication of value, because if you have two, three, or four appraisers come out, you can easily have two, three, or four different appraised values. That, and there’s this strange thing that happens - the home almost always appraises for just a little tiny teeny bit over the contract price. Miraculous. Now, why is that? It’s because if an appraiser consistently brings in values that are lower than the contract price, who is going to hire that appraiser? Nobody.
Having said that, I’m in escrow on a property where the appraiser just valued it about 9% more than the contract price. That’s pretty wild. And that’s cool. I’m not saying that the house is actually worth 9% more than we’re paying for it - my feeling is it’s worth about 2-3% more than we’re paying for it, but it’s nifty to have a high appraised value, it makes for good talk when drinkin’ beers with your buddies, you can tell them what a steal you got on the place.
After appraised value, there’s the sale price. That’s what the house sells for. Actually, this is a very good indication of market value. The best comparable sale for any property is…itself, because that shows what a ready, willing, and able buyer was willing to pay for a property. In fact, that’s one of those truism-cliches that we bat about in the ol’ real estate office. The buyer sets the price of the property, not the seller. Once the buyer buys that house, he establishes market value for that property.
Now I’m coming to the crux of the matter. These days, there’s such a fever for buying property below market price. After all, why would anyone want to pay market price is a buyer’s market, one in which property prices are declining? Surely you’d want to buy under market price, to provide yourself some protection against declining values? Of course you would! But how can you know what is the market price? There’s the rub.
I’d like to point out what happened a little while ago at 208 Elk Street in Santa Cruz. It was a foreclosure home. It was listed by an out-of-town agent for $539,000. Somehow, someway, someone was able to con the bank into selling it for $500,000. The dirt is probably worth $400,000. It’s a 1500 square foot house. The improvements had to be worth $225,000 - which to me, gives it a value of around $625,000. But the banks, they like to sell the property quick, sometimes to the point where they are practically giving it away. Anyway, some dumb asset manager somewhere let that house go for $500,000.
Was that market price? Well, if you listened to the Realtors ’round the market cooler and all their banter about the buyer setting the price and being the best indicator of market value, blah blah, then you’d be led to believe that’s all the house is worth. Don’t believe it. That house is now back on the market, just right after it closed escrow for $500,000 - only now it’s $599,000. That’s much closer to the $625,000 that I figure it’s worth. So, it’s still selling for below market price - only now, this time, when it sells for $599,000 (or whatever) - will it now set the correct market price?
Yep. It’s a tricky business. When you’re listening to the Real Estate Gurus and buying books about buying 40% under market price, be wary. In my experience, it’s impossible to buy here in Santa Cruz for 40% under market price, whatever that is. That’s because there just aren’t that many stupid people around, unfortunately. Maybe we could get the Bush administration to move to Santa Cruz in January and then we’d all be able to scoop up some deals, I don’t know. But 40% under market value? That would mean 208 Elk Street could have been bought for $375K. Nobody’s that stupid. Well, almost nobody (they’ll greet us with flowers and candy, remember?).
Now, you may, once in a while, be able to buy a property for 40% below it’s highest and best value. That’s another thing. That’s where you buy a property where, in its present condition, it is worth 40% less than it could be, if you poured tons of time, money, and/or sweat equity into the property. That’s possible. But that’s another thing entirely. That’s buying a property, adding value such that it becomes more than the sum of its parts, and selling the profit you’ve just created. That’s a neat trick, too, and if you can do it, well, we all should be reading your blog.
OK, that’s it for now. I gotta go. I’m taking the day off today, after working a grueling 100 hours last week. Have a good weekend y’all!
Posted by SantaCruzBroker at 8:34am
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My 15 Minutes of Fame
March 18, 2008
Who was it who said everyone gets 15 minutes of fame? I think I’ve just had mine.
[From Agent: Foreclosures mean opportunities - Santa Cruz Sentinel]
Frey, 37, works at Thunderbird Real Estate in Capitola. Last month, he invited a reporter to join him as he checked on two newly foreclosed properties in the Las Lomas area, just over the Monterey County line.
Yeah, that’s pretty cool alright. An article about me, in the Sentinel. Next stop, 60 Minutes.
Posted by SantaCruzBroker at 11:52pm
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Median home price rebounds to $682,500
March 18, 2008
Oh ye of little faith. I bring you good tidings:
[From Median home price rebounds to $682,500 - Santa Cruz Sentinel]
The median sales price for a single-family home in Santa Cruz County rebounded to $682,500 in February, up from $599,000 in January.
I can’t say that I’m surprised. That was a huge, whopping drop, all the way down to $599,000. I don’t have the numbers at the tip of my fingers, or tongue, or any worthwhile extremity for that matter, but I do believe that it was down from about $700,000 or so the month before that (December 2007). So we’re back up closer to $700K - but we’re still down, going down now…
Posted by SantaCruzBroker at 11:48pm
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