Is it safe to buy a house in Santa Cruz yet?
March 26, 2008
I get questions like that all the time. Are we near the bottom? Have we hit bottom? How low will prices go? When will the market turn around? Good questions. Where to go for answers?
There’s just so much contradictory information, isn’t there? For example, our good, reliable, always-faithful friends at the California Association of Realtors (C.A.R.) report:
C.A.R. reports sales decrease 28.5 percent, median home price falls 26.2 percent in February
LOS ANGELES (March 24) – Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
But then we have this little tidbit which I saw splashed on the front pages of various newspapers the other day:
U.S. Economy: Existing-Home Sales Rise, Prices Fall
March 24 (Bloomberg) — Sales of existing homes in the U.S. unexpectedly rose in February as prices fell by the most in four decades.
There are other data points we can look at - for example, check out this entry from the Countrywide Foreclosures Blog:
14,413 REO’s Offered For Sale on Countrywide Financial’s Website
Total REO Asking Price: $2,976,805,967
(As of March 24, 2008)
Sounds like a lot of REOs - but look at the chart - the inventory is going down.
If you’re ever in need of a good a laugh, I recommend stopping by the Calculated Risk blog. It’s always a riot. They’ve got a bit of input on the New Home Sales numbers as reported by the Census:
[From More on New Home Sales - Calculated Risk]
There are actually two pieces of good news in the report. First, inventory levels (even accounting for cancellations) are clearly falling….The second piece of good news is revisions. During periods of rapidly declining sales, the Census Bureau routinely overestimates sales in the initial report - and then revises down sales over the next few months. In this report, sales were revised up slightly for November (from 630K to 631K), December (605K to 611K) and January (588K to 601K). This is actually a positive sign that New Home sales might be nearing a bottom.
So, what, exactly, does it all mean? The honest answer is, nobody knows. I’ll tell you what I think, though. I think that, barring any major, protracted recession, we are at or near the bottom of the market. I think Watsonville and the south county area is at the bottom and may already be heading up a bit - North Monterey county, too. I think that in the rest of Santa Cruz county, prices may have a bit to fall yet, but not much.
In short, I do think it is now “safe” to buy real estate in Santa Cruz county. We may not be at the bottom of the market in every nook and cranny of our diverse area, but I believe we’re close. My feeling is that anyone who buys today will not lose their shirt (and hat, and coat, and…), as many people did who bought in 2005 and 2006. I think worse case, if you buy today, you might lose a sock. Maybe a shoe, too. However, barring any calamity in the economy, I think now is a great time to buy in Santa Cruz. Mark my words. Unless I’m proven wrong, of course, in which case, forget everything I just said. 
Posted by SantaCruzBroker at 6:07pm
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It’s a Swing Thing
February 18, 2008
Ahh. It’s Monday, and it’s a holiday. It’s already 8:49 AM, and my phone hasn’t rung once so far today. I’m sipping a cup o’ Joe, reading my blogs, while I ease into my day. I stumbled upon a cool animated graphic, courtesy of CNN Money/Fortune, which I think many of you will find of interest:
It’s a Flash animation, and there is no accompanying article, so it makes for an easy read. It’s interesting to see how most of the steep market declines we’ve seen over the past 50 years have been relatively short. It’s also interesting to see how prices just keep rising over the long term.
Of course, the debate is still open as to if Real Estate is a better or worse investment than the stock market - how much of the price rise shown in the chart is due to inflation, etc.? I’ll leave that to you and your financial planner to discuss, but if the answer comes out that buying a house is an OK thing to do in a down market, with an upside looming around the corner, I’ll be here.
Posted by SantaCruzBroker at 10:00am
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Waiting for the bottom
February 12, 2008
I read an interesting article on MSN.com this morning:
Buyers: Should you wait for the market bottom?
It’s a surprisingly well balanced article. So often when you read these kinds of articles, the author has some kind of axe to grind and comes out strongly in favor of buying or not buying. This article is different, and really explores how it might be a good idea for you to buy now, or how you should put off a purchase for a later time.
Here’s an excerpt from that article, which sums up by giving you five reasons to buy, and five reasons to wait:
5 REASONS TO BUY
1. Prices in the neighborhood you are interested in are relatively stable. Either they are holding their own or increasing, or the pace of decline is slowing significantly. If you have to move and don’t like apartments, the small penalty you pay for missing the bottom may not mean much.
2. You plan to stay in the home for more than five years. If you can stick it out that long before selling, economists say you’ll probably ride out any downturn and come out ahead on price.
3. Your rent rivals a mortgage payment. If you can afford to buy, it can give you one bonus that renting can’t: the mortgage-interest deduction on your taxes.
4. You’ve found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home.
5. You’ve built equity in your house and are moving to a place where homes are cheaper. In your new market, your money will go a lot further.
5 REASONS TO HOLD OFF
1. You’ve lived in your house less than two years. Chances are you haven’t had enough time to accumulate equity in your home. Indeed, you may have negative equity, if you live in many areas such as California, Florida, Arizona or Nevada.
2. Your job security is uncertain. If your company or business is in distress, it’s probably better to stay put until the smoke clears.
3. You don’t plan to stay in your next house at least five years. While it’s not important to buy at the exact bottom of the market, it is important to stay long enough to ride it out completely.
4. You don’t have good credit or a decent down payment. Do you have a job and income you can document? As a result of the subprime lending crisis, lenders are much more careful about whom they’re giving their money to.
5. You have an existing home to sell in a neighborhood where prices are dropping precipitously or where the number of foreclosures is spiking. In this climate, you’re probably better off waiting out the storm.
I encourage you to read the whole article, as it’s very well written and avoids a lot of the hysteria and hyperbole of many such articles. It’s definitely OK to buy real estate right now, depending on your situation. The sky is not falling, at least, it’s not falling everywhere for all people.
Posted by SantaCruzBroker at 8:39am
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