Median Santa Cruz home price drops to $599,000
February 16, 2008
Finally, the real state of the Santa Cruz county housing market is starting to show up in median home prices:
[From Santa Cruz Sentinel - Median home price drops to $599,000]
By JONDI GUMZ The median price for a single-family home in Santa Cruz County dropped to $599,000 in January, down 18 percent since December and a level not seen since 2004. … Only 63 sales closed escrow, a new low, the previous was 107 in 2006. A third of the January 2008 sales were for homes less than $500,000, more than double from previous months, and the subset of sales over $1 million, which had been as high as 25 percent, was 14 percent, the lowest in months.
For too long, the median home price has defied the reality out there on the streets, giving many buyers and especially sellers a false sense of what’s happening. Sometimes, we would see the median price inch up month over month, but for a long time it held steady at over $700,000.
But now, there’s been a significant drop in the median price, down to $599,000. Of course, it is worth noting that this is the figure for the county as a whole, and that some areas continue to hold up their values very well. That would be the usual suspects - Santa Cruz, Capitola, and pretty much anything near the beach.
And don’t go blaming Watsonville on being a drag on prices - hardly anything is selling down in Watsonville, although it had a much better month in January than it did in December, which was pretty much a train-wreck for sales. No, these lower-prices are county-wide, and even in Santa Cruz and Capitola, there are more bargains to be had than in recent years past.
The article is a good read, and it mentions that inventory is relatively low in many parts of the county, that many people who might want to sell are keeping their homes off the market, because now is not a good time to sell. That’s true, but what’s left unsaid is, what would happen if these same people found themselves in a situation where they had to sell?
Might we start seeing rising foreclosures in the rest of the county? Up until now, Watsonville (and to a lesser extent, Boulder Creek and the rest of the San Lorenzo Valley) has grabbed the lion’s share of the foreclosure activity. That’s because people tried to sell their houses, and found there were few buyers for them at the prices they were asking…and when you can’t make your house payment, and nobody wants to buy your house…you know the rest of the story.
Is this what lies in store for more of Santa Cruz county? I sure hope not, because what’s going on in Watsonville is pretty heartbreaking.
Posted by SantaCruzBroker at 9:46am
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Introducing Zilpy.com - Rental Info
February 11, 2008
I just heard about a fascinating new web site, called Zilpy.com - it’s like Zillow for rentals. I don’t do rentals, but the rental rates are very important to me, because I need to tell my clients what a property would rent for. That’s the #1 question that needs an answer for an investor, so they can calculate how much the property would be worth to them.
For example, I have a listing at 262 Sunnyhills Drive, in Watsonville. I think it would make a fantastic rental for an investor. After perusing Craigslist.com and the Santa Cruz Sentinel On-Line classifieds (as I talked about in a previous blog entry), I figured it would rent for $1,250 or so per month. Let’s see what Zilpy says:
Zilpy’s Estimate for 262 Sunnyhills Drive in Watsvonville
According to Zilpy, that place could be renting for $1,441 per month - cool. It should be noted that I had to tweak the info that Zilpy had for that property, by adjusting the number of bedrooms, bathrooms, and square footage. Curious, I went on to see what Zilpy figured I could rent another of my listings for, 140 Weeks Drive in Watsonville:
Zilpy’s Estimate for 140 Weeks Drive in Watsonville
Zilp comes in at an even $1,200 a month for that place. That’s pretty suspicious, given that it’s a much nicer property than Sunnyhills - it’s got a 1-car attached garage, an extra bathroom, and about 20% more square footage, but according to Zilpy, it would rent for about 17% less money, even though it’s a superior property.
Given these surprising results, I had to ask myself - where does Zilpy get its data from? I couldn’t actually find out, but here is what their knowledgebase has to say on the subject:
Zilpy employs a comprehensive array of data sources, both online and offline, to gather the most complete rental market activity.
Spare me the details, please! Well, part of the problem may be that Zilpy is apparently using some kind of proximity factor in its algorithm, as well it should - but in the case of Weeks Drive, it comparing it to a couple of rentals in Adult Village, an “adult community” where at least one occupant must be 55 years old to live there, and the other occupant (if any) must be at least 45. That keeps a damper on home values in that area (which is kind of the idea), and it likewise has a depressive effect on rental prices, thus throwing off Zilpy’s estimate for home values.
Jut for grins, I put in another listing I have at 216B Green Meadow Drive, in Watsonville - also a condo. Here is what Zilpy says:
Zilpy Estimate for 216B Green Meadow Drive in Watsonville
According to Zilpy, this unit (a three bedroom, 1.5 bathroom, 1 car attached garage) ought to be bringing in $1,737 per month.
As an investor, I’d take those numbers and do some back-of-the-envelope calculations. First thing I would do is take the HOA fee right off the rental amount. That’d help me with an apples-to-apples comparison. Here’s how it breaks down:
The bit of data I’m after here is in the last column, the GRM, or Gross Rent Multiplier. This is the number of years it would take to pay off the mortgage, assuming 0% interest, if the property were rented 100% of the time. At 16.11 years, 216B Green Meadow Drive takes the prize. Of course, the data is flawed - 140 Weeks Drive would rent for more than 262 Sunnyhills, etc.
Even though it is flawed, Zilpy.com is an interesting web site, and if you are considering doing some real estate investing, I encourage you to take it for a spin.
Posted by SantaCruzBroker at 12:44am
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