The Broker's Record

New Year, Old Challenges for Santa Cruz Real Estate

January 07, 2011

The cobwebs have grown thick on The Broker’s Record, my Santa Cruz Real Estate Blog! I’m so sorry – so much work to do, and so little time. As much as I would like to be blogging on SantaCruzHomeBroker.com, there just hasn’t been enough time in the day. As many of you know, my wife and I had a child back in April of ‘09 – Aiden Santiago – and when it comes to choosing between playing with him or blogging for the masses, well…Aiden wins.

For the moment, though, Aiden is happily napping in the other room, and I have some free time and a burning desire to talk about the Santa Cruz Real Estate market.

The latest edition of my newsletter just came out, and this issue is as sobering as most have been over the past year: county-wide, the median home price declined 6.7% from December 2009 to December 2010. The number of homes sold in December was only 132; that’s up from November, but down 10.8% from the number of homes sold in December 2009. To make matters worse, inventory is up for the 7th month in a row – up 22.7% over a year ago.

Here we are at the beginning of 2011, and the question before us is, what will the housing market do this year? If you pay attention to the good folks at the California Association of Realtors (C.A.R.), you may know that back in October 2010 they issued a report. According to what C.A.R. was saying then, the median home price in California was supposed to climb a whopping 11.5% in 2010, and from there climb another 2% in 2011. Sales volume (number of homes sold) is likewise supposed to increase by 2% in 2011, again according to C.A.R.

The big question in my mind is, what are the underlying economic assumptions that people like the economists at C.A.R. are using to base their forecasts on? Leslie Appleton-Young, C.A.R.’s Chief Economist, said:

“A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end.”

It’s interesting that she says there is a lean supply of homes. What she doesn’t say is that there is a lean supply of homes because so many people are waiting for the market to turn around before they sell – and many many other people who would like to sell cannot, because they are effectively trapped in their homes which are “underwater” (that is, they owe more on the homes than they are worth). The “less attractive financing” bit is funny, too – actually, jumbo money (loans over $729,500) isn’t so expensive – rates are overall similar to conforming rates. The difference is the size of the down payment that’s required – and of course, the need for borrowers to document their income. It is unlikely that we will soon return to the crazy-easy-money days when they lent out millions to people based just on their good credit and stated income – so what does that mean for the high-end of the market? Continued softness, ad infinitum?

Appleton-Young also went on to say:

“What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy.”

So here we find another key component of the 2011 forecast: historically low interest rates. But have you checked interest rates out lately? Back in October when the forecast was made, rates were about 4.25% for a conventional 30-year fixed conforming loan (under $417,000). Today, they are closer to 5.0%. That means your $417,000 mortgage used to cost $2051.38 per month (principal/interest only). Now, you’re looking at $2238.54 per month for that same money – a jump in cost of about 9%.

Given today’s stricter lending practices, many lenders are being very conservative with their debt-to-income ratios. A $187.16 difference in payment might not seem like much to you – but it could mean the difference between the ability to finance a $417,000 house vs. a $382,500 house. In other words, if rates rise by 9%, it means, roughly, that a buyer will qualify for a maximum loan amount that’s about 8% less (in this example) than before the rate increase.

What does that mean? It means that in the face of weak employment and stagnant incomes, when interest rates rise (as they are apparently rising now), the prices people will be able to pay for housing are going to drop – and that’s going to bring house prices right on down too.

I really don’t see – especially given the interest rate trends – that home prices are going to be going up 2% this year. It’s possible, of course – but I think the greater likelihood is that prices will continue their gradual downward trend for the foreseeable future.

Now, I know what you’re saying – didn’t the unemployment rate just drop? Why, yes – HousingWire.com just reported today, for example, that the unemployment rate fell to 9.4%. The funny thing is, though, that just yesterday, HousingWire reported that jobless claims rose 4.6% last week. Now how’s that possible? It’s possible through the dark art of statistics, and while I could take a stab at explaining it, I’d rather not. Suffice it to say that while it may be true as the President says that there is a clear trend of lower unemployment – that trend could be easily reversed and, as the article I linked to notes, the drop in unemployment is largely due to the fact that 206,000 more people have given up looking for work and are no longer counted as unemployed.

I’ve sipped the last of my Earl Grey and I’m looking down at what’s left in my cup, and I’m trying to make sense of what I see there. I’m having difficulty, I think, because I really have no idea how to read tea leaves. But I can do a fair job at reading headlines written in English – I read them pretty much every day. Actually, I usually read a bit down further below the headline, just to see if there’s anything more to the story that might be gleaned by reading in some detail.

As far as I can tell, there’s nothing but great uncertainty when it comes to the national housing market – and the same goes for the Santa Cruz market as well. It could be that the “recovery” starts getting some teeth, that people start finding work and those who do have jobs start seeing some extra money in their pay checks. That’s definitely a possibility – I think even the most ferocious bears will tell you that it could happen.

For many, though, the downside risks are too great and too real to ignore. Absent any signs of a genuine, down-deep recovery in jobs and wage growth – especially in the face of rising interest rates – it is really easy to surmise that the market still has some ways to fall yet, and that only fools will rush in to buy today.

Well color me a fool, then, with that big old broad brush of yours! I for one am delighted to say that after waiting and searching for a considerable while, I’m in escrow to buy a house, back in my beloved Aptos. I sold my house in Seacliff (Aptos) back in 2007 (good timing, eh?) and have been sitting on the sidelines ever since, waiting for just the right replacement home to come up.

And now it has – escrow should be closing in a couple of weeks (knock on wood). I know what you’re thinking – do I have rocks in my head? Don’t I know that prices will probably be going down more still? Am I CRAZY?

That’s perfectly debatable, of course. But here’s the scoop: we found a house we love. It’s in a location which we are also very happy with. The house itself is beautiful and in great shape. We’re putting 20% down, and our after-tax payment will be around $2,000 a month. Our pre-tax payment will be considerably higher than that, of course – so I for one really hope they don’t pull the plug on the mortgage interest tax deduction – which could, of course, have a really deleterious effect on home prices depending on how it is implemented.

That $2,000 a month is an after-tax payment I can live with – for years to come. I waited and searched for so long because I wanted to buy a house I knew I could be happy with – at a price I could afford – for ten years or more. So who cares if the value drops another 5-10% over the next year or two? Not me, because I don’t plan on going anywhere anytime soon.

Of course, my plans could change – anything can happen, and I might end up with the short end of the stick, as so many folks who bought in recent years have painfully discovered. But we ought not make too many of life’s choices based on fear of what might happen if things go wrong, as they very well might. For me, I’d rather make choices based on what I can reasonably expect to make work through my own planning, work, and diligence.

Hat’s off to nut-jobs like me who plan to buy this year. And a big high-five-right-on to those of you who continue to sit on the sidelines and plan to wait it out for calmer seas and blue skies. Whatever your choice, whatever 2011 should bring for you, me, and all the rest of us on this spinning blue marble – I wish you all the best in the coming year.

And if you do decide to buy or sell a house – please don’t hesitate to call. I’ll be there, in Aptos, standing by.

Posted by SantaCruzBroker at 5:35pm
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Santa Cruz Real Estate Great Debate

May 17, 2009

Spring has definitely returned to Santa Cruz! We’ve been having some incredible days, and I’ve been enjoying being a new dad here in town, cruising around with wife and baby in the stroller, around the neighborhood, over to Aptos Village Park, down to the Capitola Beach, West Cliff Drive, soaking it all in. It’s been an incredible what, almost six weeks now since Aiden was born?

I must admit, with all the fabulous weather and my beautiful bouncing baby boy to take care of, I’ve taken my eye off the real estate market somewhat. And that’s a good thing – truth be told, I’ve been working, on average, over 80 hours a week for nearly the past two years, and I think that for me, it’s not a sustainable pace. I reckon these days I’m down to something closer to 40-50 hours a week, which does leave some precious time to spend with my wife and amazing little man.

I think that many of us started off the year thinking there would be some Change, right? I think we were promised that, and for good or ill, change has come. Certainly, the real estate market has changed over the past month or two. If you are a subscriber to my newsletter, you may have noticed that last month (April 2009), the median price of housing in Santa Cruz has risen.

Well, I guess that puts the lie to me, right? Here I am saying no no, we’re not at bottom – and now we see rising prices? Scant months after I got up on my high horse and said, “Wait out the storm, ye long-suffering would-be buyers!”

Let’s take a look at these numbers. First, the summary:

So from a median price in March of 2009 of $405,000 we have skyrocketed to a median price of $449,000 – nearly an 11% rise in a single month. Now let’s look at the breakdown of those numbers, divided up into different market areas in Santa Cruz county:

You’re going to have to click on the chart to open it up in a bigger window to actually read the numbers. Taking a closer look, you can see that in every market area except for Rio del Mar (Aptos) and Soquel, the median home price in April was lower than it was in March. Those two areas, however, showed such strong month-over-month gains that they did lift the entire median price up about 10.9% for the county as a whole over the month before.

Except for those two areas, every other market area in Santa Cruz county showed price declines. And let’s not blame it on Watsonville – Watsonville experienced the smallest price drop of all, just 0.7%. Capitola – down 12.3%, Scotts Valley, down 28.4% – and the West county (Bonny Doon, Davenport, Empire Grade, etc.) – down a whopping 28.6%.

Now, hold on a second. Let’s talk about lies, damned lies, and statistics. There is a chorus of voices saying that it looks like we’re hitting bottom – after all, the median price, county-wide, did just increase, right?

Nope, not really. The median price just decreased a whopping 33.5%. The truth is, it is pointless to look at one month compared to the month before, because there is a lot of seasonality in the real estate market. You really need to look at the year before to see how the market performed – and from the statistics, we can see the median home price, county-wide, is actually down 33.5% in April of 2009 compared to a year ago.

And some people are now saying the market is bottoming out?!

One thing that many folks from the “the market is bottoming!” camp like to point out is the number of multiple-offers some listings are receiving. It is true, the market for single-family residences priced under $400,000 is very competitive. Most of those properties in our neck of the woods are to be found in the Watsonville area, and there’s no lack of multiple-offer situations going on down there. There are also a lot of multiple-offer situations going on in San Jose and Salinas – I have a listing in San Jose where I got 34 offers (asking price: $349,900) and another in Salinas where we got a similar number (asking price: $149,900). Surely that means we’re at the bottom, right? Right??

Honestly, I am mystified how people can take a few anecdotes, completely ignore the state of the economy and the housing market as a whole, and now herald, with strident authority, that we are now at the bottom of the market and THIS, TODAY is the time to buy, or you will miss out on the chance of a lifetime.

It’s clear that the bottom is coming – there will be a bottom, someday, and prices will start to rise, eventually. And it’s true, we will only know it by looking in the rear-view mirror – which makes it impossible to say for sure that this is, or is not, the bottom of the market. What’s more, not all market segments will bottom at the same time, so there really is not truly a “bottom” so much as a series of different bottoms for different kinds of properties in different places.

Allow me to tackle the anecdotal evidence head-on. Again, many people point to these multiple-offer situations as evidence we have hit bottom. The thing is, there were many multiple-offer situations going on this time last year. Many. Why do you suppose that is?

I will grant you – there are more this year than last year – more properties getting multiple offers, and more offers getting submitted. Competition is, certainly, stronger this year. So let’s take a look at those charts again, at another key bit of information: the amount of inventory available.

Despite what you may have heard from certain interest groups (California Association of Realtors, National Association of Realtors, ahem), there is not a great selection of homes to choose from on the market. This time last year, there were 1,042 single-family residences available county-wide. Now, there’s just 787 available – that’s a drop of 24.5%. Simply put, there is a lot less to choose from this year than last year – creating more competition for those homes which are available. Good news for sellers, that’s for sure!

The overwhelming majority of these multiple-offer situations happen in the low end of the market – in Salinas, that would be under $250K, in Watsonville, under $350K, in San Jose, under $450K. What kind of homes are selling in these areas at these prices?

Bank-owned homes, that’s what kind. Only foreclosure real estate can sell at those prices. Well, that’s not true – short sales can also occur at those prices, and some people who have had their homes a long, long time may have enough equity in them to compete with all the REOs and short sales. However, I’d bet my bottom dollar that upwards of 75% of all of these sales are bank-owned “REO” foreclosure properties, probably another 10-15% are short sales, and the rest would likely be probate sales and whatnot.

As it happens, there is a distinct lack of REO inventory on the market right now – and again, at these price points, the vast majority of the market consists of REO properties. This inventory shortage comes just at the time when sales hit their peak – the hot time of our real estate market tends to be March through August, that is when more buyers are out shopping compared to the rest of the year.

So why is there a lack of REO inventory? Has there been some dearth of foreclosures, has the foreclosure crisis abated? Not hardly. Change has come, and during the transition, while all this TARP business and Making Home Affordable initiatives were getting going, the lenders had some self-imposed moratoria on foreclosures. That, and many states (including California) enacted laws to lengthen the time it takes to carry out a foreclosure – and that has served to really tighten up the inventory of these low-end properties.

These multiple-offer situations we are seeing now is simply the combination of a very constricted inventory coupled with the seasonal increase in real estate sales.

The good news for home buyers is that this, too, shall pass. The various moratoria have been lifted and the clock is already winding down on the laws lengthening the time it takes to foreclose on a property. What that means is that Notices of Default (the first step in the foreclosure process) are still near, at, or over record highs.

Here is what I predict – and I’m probably wrong, but I’m going to go out on a limb here. I predict that in 2-3 months, we will begin to see more REO inventory on the market. That puts us in the July-August time-frame. In 3-5 months, we will be seeing a lot more REO inventory coming onto the market – just at the time that the peak buying season is ending. We will see a significant increase in REO listings – and a continuing drop in real estate values, as supply once again exceeds demand.

Another interesting wrinkle is that many of these coming foreclosures are not bottom-rung properties. Many of these upcoming foreclosures are in solid, middle-, upper-middle, and wealthy neighborhoods. I wonder, what’s that going to mean for the market as a whole? Personally, I think it’s going to put increased pressure on the bottom of the market, as many people who were looking at buying a lower-priced “starter” home may now be thinking of stretching to go for one of these “premium” foreclosures which I expect we’ll be seeing.

And that doesn’t even begin to address the elephant in the room – the sad state of the local and national economy. There is a whole lot more to the picture than just the simple supply of foreclosures and demand for affordable housing.

So let the debate rage! We’ll see which way the chips fall, and I look forward to the market data from September, October, and November of this year. As the late Paul Harvey used to say – stand by for news!

Posted by SantaCruzBroker at 1:01pm
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Santa Cruz Real Estate Deathmatch

March 29, 2009

One thing’s for sure – it’s interesting times we live in. Whether you think the current housing crisis is the cause or a symptom of the economic meltdown in the United States and abroad, there’s no denying that there’s a great deal of uncertainty about how long this recession will last, how deep it will cut, and what this means for people looking to buy a house in Santa Cruz today.

I’ve said it several times in various postings to this blog, but I think it bears repeating: I think home prices in Santa Cruz county will continue to drop for the foreseeable future – and by that, I mean the rest of this year, at least. This is an opinion that is apparently not shared by some people, as we see buyers falling all over themselves (and other buyers) in a mad scramble for these “bargain” properties.

A few days ago, the Santa Cruz Sentinel ran a story about what homebuyers found at close to the median price of $380,000 in Santa Cruz County. I thought it was a pretty good read. I “watched” a lot of these properties come on the market and get sold, and it’s interesting to get a report from “inside” the transaction. One thing that was interesting is how many agents said their buyers received closing cost credit (typically in the 3-4% range) – I know from my own listings that this is common place, but you rarely see this in the “private remarks” section of the MLS. It’s an important bit of information – if a house is sold for $380,000 but the seller credited the buyer $12,000 for closing costs, the house really only sold for $368,000.

Another eyebrow-raiser were the anecdotes from the buyer’s Realtors, talking about the multiple offers. One agent told of showing her client “100 houses” (nice agent!) and writing up 15 offers, before finally being the winning bidder on a house on Grant Street in Santa Cruz for $412,500.

I myself have been there and seen this a lot of late. It’s not a new thing – as I mentioned a blog entry or two ago, this multiple-offer feeding-frenzy has been going on at least 18 months, I don’t see that it is more common today than it was a year or so ago – but perhaps it’s being talked about more in the media, as there is now more effort into talking up the economy rather than talking it down.

I work with a few buyers, although mostly my work these days is with the banks, listing and selling their REO assets here in Santa Cruz, but also in San Jose, Gilroy, Salinas, etc. I have some buyers who I’ve been working with for some time – we haven’t seen a hundred houses and we haven’t written 15 offers (yet!), but we’ve written up a good number of offers and haven’t yet been the winning bidder.

The day before yesterday, though, my client sent me a link to a listing which had “0 days” on market – meaning, it had popped up on the MLS only a few hours ago. I had seen it when it had come up (I send myself e-mails from my automated system for every bank-owned home that hits the market), but at the moment, I had a number of deadlines I was working to meet so I didn’t look at the particulars to see that it was really an incredible deal. When my client wrote me about it, I took a closer look. I wrote back – “Sounds like a winner, let’s go see it tomorrow, at the crack of dawn.”

The next morning at 8:30 AM, we went out to the property and took a peak. Stunningly cheap – priced well, well below market value. After only a couple of minutes at the property, we were already talking about writing it up. As fate would have it, though, it was about 4 hours more before we would actually send the offer in. And send it we did – at which point I called the listing agent, who informed me there had been four offers, all offers had submitted their “highest and best” offers, and that the bank had just chosen one of those buyers. All of that, in less than 24 hours.

It’s a bit of a mystery why a bank would price a home so low and then not give the home proper market exposure before accepting offers. Many of the banks that I work with have a 5 or 7 day minimum market time before they review offers, and that gives enough time to attract a good number of high-quality offers. Those that do not wait a few days before reviewing offers often leave quite a bit of money on the table, it seems to me.

But that’s nether here nor there. Whether a bank takes the first offer that comes along, or waits 7 days before reviewing offers, the point is this: it’s brutal out there for buyers of these “bargain” properties. The big question in my mind is, why is there such a clamor to buy something which in many cases is going to be considerably cheaper six months from now? What is driving everyone to fight tooth and nail for these properties which are still steadily dropping in value?

There’s any number of reasons, of course. Many buyers probably think that we are at the bottom of the market. You can’t time the market, after all – it’s impossible to say just when the bottom has been reached, and usually you can only tell when you are coming off it. Many buyers have just been itching to buy for years now, and finally, prices are “affordable” – and now, declining market be damned, they’re going to buy into the American Dream.

I have a theory, though, I’d like to run it by you. My theory is that there is actually very little for sale at the moment compared to the demand that’s out there. At any one time, there are only a few dozen properties listed for sale – not already in escrow – which are well priced for today’s market. Spying through the MLS, I see every house, condo, and multi-res property that hits the market – and more often than not, I say to myself: “What are these people thinking?!”

You see, most houses just aren’t priced to sell. In order to get $700,000 or $800,000 – hey, let’s face it, even $600,000! – for a house these days…the house has got to be pretty special. It’s gotta be tight, turn-key, in a good location, or have enormous and obvious upside potential. And yet, the market is flooded with houses in these price ranges…and there are no buyers for them. There would be buyers if the houses really were turn-key in fabulous locations – however, those properties are also usually priced $200,000 more than the market is now willing to pay for them.

These days, there is absolutely no shortage of buyers in the mid-county area in the $400,000-$550,000 price range. The problem is, there are almost no properties in this price range – and this is the reason why, I think, we have this Real Estate Deathmatch thing going on. There’s just very little tho choose from at the price the market is willing to pay.

Take, for example, the listing at 3365 Branciforte Drive. I am the co-listing agent of this property. This property had actually been listed by my office for a loong time – since May of last year. But then, it was a short sale, and started out at $799,000. Actually, when it started out, I don’t think it was a short sale – but as the months went by, the price was reduced until finally the owner owed more on it than the market would pay. It was in contract as a short sale at the time the property got foreclosed on – but there was no stampede of buyers vying for it at the time.

Why? Because nobody likes a short sale. Once that property became a bank-owned foreclosure listed at $459,900 – woah. Many buyers avoid short sales because so few of them are successful. For example, this very same property – it was in contract as a short sale and then…it got foreclosed on anyway; the buyer had full loan approval and was all set to close. The buyer had spent hundreds of dollars on an appraisal and a septic inspection, all for naught. Who needs that kind of aggravation, right?

This property ended up getting 10 offers on it – this is being sold by one of the banks that lets properties sit on the market seven days before reviewing offers. It should go ‘pending’ probably on Monday, after the bank chooses the winning offer. And all this madness over a house with serious foundation issues. True, it’s got a nice lot and it’s in the Happy Valley school district, but this house really needs a lot of work.

But buyers are willing to take it on- because there’s just not a lot out there in this price range. Soon, though, the now-healthy pool of buyers even in this price range will start to shrink. Unemployment continues to rise, and lenders continue to tighten lending standards – and that’s a fatal one-two punch that even historically low interest rates will not be able to combat fully.

So if you’re one of these buyers who writes 15 offers and misses out on every one – if you are battered and bloodied by this Real Estate Deathmatch that’s going on – take heart. This is just the Universe’s way of telling you that the time for you to buy hasn’t quite arrived. Time is on your side – if the deathmatch is too brutal, there’s no harm on sitting the sidelines a while longer, so you can heal up for future bouts to come.

Posted by SantaCruzBroker at 10:00am
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Santa Cruz at Market Bottom? Some Say Yes, I Say No

March 18, 2009

I popped in my office this evening to pick up a commission check, and as I passed by a colleague’s desk, I happened to notice a photocopy of the front page of today’s Santa Cruz sentinel sitting there. I had actually seen the headline news flitter across my screen this morning, thanks to Twitter and Growl (very cool). However, I didn’t have a chance to read the article, and I didn’t see the sub-headline: “We are at Bottom says one Watsonville Realtor.” Or some such eye-bait.

One thing that’s interesting is that the median price the Santa Cruz Sentinel used, $380,000, is quite a bit lower than my own figure of $429,000. $380K is pretty low for these parts, but an almost $50K discrepancy between my numbers and those of Gary Gangnes (an oft-quoted source of local market data) is notable. But I won’t quibble with Gary, I think he’s been tallying the numbers since I was learning to ride a tricycle.

The exact median price for sales in February ‘09 doesn’t interest me so much – the fact that it’s a lot lower than February ‘08 or even January of ‘09 is very interesting – the fact that we’re heading, still, in a downward direction seems inescapable.

However, one Realtor at least (and one who should know – the president of the Watsonville Association of Realtors) is ready to escape this, by proclaiming that in the south county, at least, “We’ve hit our bottom … in single family.”

She brings up a few vague anecdotes, like she has more buyers than properties right now. And that’s the criteria for knowing when we are at the bottom, when one Realtor has more buyers than properties? That’s not real hard thinking. She also cites how we’re seeing multiple offers. Fact is, we have been seeing multiple offers for well over a year now on these bargain-basement properties in Watsonville – and pretty much anywhere in California where bank-owned foreclosures are sold several percent cheaper than competing properties – these properties attract multiple offers and sell quickly. It’s not a new phenomenon, it’s been going on at least 18 months I’d say.

The fact is, I’ve got a number of listings in Watsonville myself. Do I have multiple offers on all of them? Hardly. Certainly, sometimes there’s a crazy feeding frenzy of 10+ offers on these properties. I listed a new home last night in San Jose, and I’ve had 20 phone calls on it today at least, I’m sure there will be multiple offers on that one. Does that mean the market has stabilized, that we have hit bottom?

No, it means that this is the cheapest home to sell in that neighborhood in that condition in many years, and there are buyers for it, lots of them. But when this home sells, the next one to come on the market will come on at a lower price, or at least, it’ll almost surely sell at a lower price. That’s because we’re in a declining market.

Here’s an anecdote that tells me we we are not at bottom. I have a listing at 90 Arista Lane in Watsonville, it’s 14 years old, 3 bedrooms, 1.5 bathrooms, on a quiet dead-end street in the center of town, close to everything. All the homes on Arista Lane and Arista Court are pretty much identical. My own listing is not in bad shape at all, except it does have some unusual choices for interior paint color.

The house across the street from this, 87 Arista Lane, is what you’d call a “model match.” Pretty much – I didn’t go into 87 Arista when it was on the market, but from what I can tell on the MLS from the pictures, the choice of paint colors and level of amenities in this home was about on par with my listing. 87 Arista was listed in October of 2008 for $299,900, and in November of ‘08 it went down to $279,900 before closing escrow on January 2 of ‘09 for $260,000. There was no mention made of the seller having paid the buyer any closing cost credits – but not all Realtors mention the closing cost credits in the private comments when marking the property sold (though they should).

And then, a scant two months later, my own listing comes on with an asking price of $250,000 – that’s 3.8% less than the sale price of a very very comparable property which closed just two months earlier…and I’m on the market eight days, and I’m standing in a field of chirping crickets. Not an offer, and only a handful of phone calls. Where are all these buyers, loan approval letters in hand, waiting to buy my listing that could possibly be had for maybe 6-7% less than this comp which closed just a tad over two months ago?

Let’s say though that 90 Arista Lane does get a full price offer (very unlikely if there’s only one buyer making an offer), and it sells for $250,000. By the time it closes escrow, it’d be about 3 months past the sale of the last comp, meaning the market will have dropped about 1.26% per month (for this particular type of home). That’s an annual rate of 30% drop. And, strangely enough – the year-over-year price decline (February 2008 to February 2009) in Watsonville was…30%. But mind you, we are now looking ahead to March, so what we’re seeing is…the market is still headed down, at about the same rate as it’s been going down for the last year.

And another thing! Before I close out this little missive, I’d like to take exception to another thing in the Sentinel article, that homes are being sold “at discounts of 30 to 50 percent.” Nothing could be farther from the truth. The truth is, these homes are being sold at a loss of 30 to 60 (yes – sixty) percent from their all-time peak values. In fact, these homes which receive multiple offers typically end up selling for more than asking price – so does that mean that anyone who pays more than list price is paying more than the property is worth?

No, it doesn’t mean that at all. It means that the list price was below market value, and the market recognized that and enough offers were generated to bump the price back up to market value – or perhaps a bit above market value, or perhaps a good bit below. But not too far below – if in fact you were able to buy a home for 10% below true market value, you could not do a thing to the property, then turn around and sell that property to someone else the next day for 10% more than you paid for it. I can name few examples where that has happened here after purchasing the home “retail” on the MLS in recent memory.

Since Paul Harvey is no longer with us to say it, I’ll have to: “So now you know…the REST of the story!”

Posted by SantaCruzBroker at 8:29pm
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Santa Cruz home sales rising, prices falling

February 15, 2009

The February 2009 edition of my newsletter is available, and once again I give you the skinny on the Santa Cruz Real Estate market for the previous month. As has been the case for several months, there is a bit of good news – the sales volume (number of houses, condos, etc., which have sold) has increased for the seventh month in a row, year-over-year.

Unfortunately, sales were not up month-over-month; in December of 2008, there had been 112 sales of single-family residences in Santa Cruz county; in January ‘09, that number had sunk back down to 79. It’s normal, though for January sales numbers to be quite a bit lower than sales in December. The important thing to look at, I feel, is the year-over-year gain or loss, and this year, sales were up a whopping 21.5% from January 2008.

The median price of a Santa Cruz home, however, continues its march downward, but at a slower pace than for most of 2008. The median price for January sales of single-family residences was $445,000, compared to $452,500 in December 2008. However, the median price in January 2008 was $610,000, representing a year-over-year price drop of 27%. Ouch.

It’s an interesting market, that’s for sure. If you watch TV or listen to the radio, you may have heard a commercial or two from the National or California Association of Realtors telling you this is a great time to buy, that there are a lot of homes for sale. In Santa Cruz, this is patently not true. There are not many homes for sale at all – the amount of inventory is down 21.6% from January a year ago, and inventory has been declining for nine straight months.

This low inventory, however, is not a result of blistering sales figures. Rather, inventory is low for one simple fact: this is a terrible time to sell your house in Santa Cruz, and sellers know it. There are many people who would like to sell their homes, but fear they will face a market of buyers with their knives out.

And, they are right. Buyers are definitely looking for a bargain. Any seller which wants to sell their home needs to ask themselves a simple question: can I wait to sell my home for, oh, 3 years? How about 4? It could easily be that long before prices are higher than they are today. If you have a house you need to sell in the next year, or even two, I have a hot tip for you: sell now. Price it under market to generate multiple offers, get over asking price, and get that property sold. Even though the market is dropping, your house is, right now, worth more than it’s going to be for some time to come.

Posted by SantaCruzBroker at 9:02am
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