I find myself doing it all too much, but I feel compelled to do it again…I must apologize for not keeping my blog updated. There’s a few reasons for that – no excuses, of course, just unvarnished reasons. One biggie is that I am completely and utterly swamped with work, and while my blog is actually very important to me, it falls into the “important but not urgent” quadrant of McCovey’s “first things first.”
Another reason I haven’t written anything is that I don’t know quite what to say! Every day, I read the newspapers and the blogs and e-zines and and I watch TV and listen to podcasts, absorbing all the real estate news that there is, and I try to make sense of it all, I try to wrap my head around it and come to some kind of conclusion that I feel certain enough about to write up a blog entry, sharing my thoughts with you all…
I guess I just keep looking for that ray of sunshine. I think you can read lots of sunny Realtor blogs, about how great a market it is for buyers right now. That may be true, but I’m not buyin’ it. I don’t think it’s that great of a market out there for buyers, because there simply isn’t that much to chose from. Not here in Santa Cruz, anyway. Just check out my Santa Cruz Real Estate Sales Data page and you’ll see.
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If you’ve read my newsletter, you know the facts – that the sales volume has risen in Santa Cruz for the eighth month in a row. No if, ands, or buts about it – that’s good. However, that goes along with, I believe, eight months of declining home prices. The Santa Cruz county median in February 2009 was down to $429,000 for a single-family residence. I believe that at the height of the market a couple-few years back, the median was around $834,000.
The optimists in the crowd will also point to months of falling inventory – this time last year, there were 989 single-family residences for sale in the county, and now we’re down to 803. With a monthly sales rate of 87 units in February, we’re looking at a 9.22 month supply, and a year ago, we were looking at a13.36 month supply of homes for sale. The theory is that as the supply tightens and demand increases, prices will stabilize.
Except, of course, that hasn’t been happening these past eight months. Sales have been rising (the “demand”) and the inventory has been shrinking (the “supply”) – but prices have continued to drop, steadily.
I think an important thing to consider in all of this is that the inventory is not shrinking so much because of the high sales volume, but rather it is shrinking also because many sellers are letting their listings expire, or just outright canceling them, taking their homes off the market. Sellers are giving up in frustration, and this is a big reason why the inventory continues to shrink.
I feel this contributes to a false impression of the real estate of the market. I think there are a lot of sellers who want to sell, but right now they are sitting pat. Many of them will not be able to sit pat forever, and will eventually bring their properties back on to the market – at still lower prices. I think there is a huuuuge shadow inventory out there of would-be sellers who, one day, will be pushed by circumstances back onto the market.
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Perhaps they’ll lose their jobs – after all, California unemployment now tops 10.1%. In Santa Cruz, I believe unemployment is now 12.6% and in Santa Clara county (the Silicon Valley, the fountain from which much of our wealth flows) is now at 9.4%. Perhaps they’ll just fear they’ll lose their jobs, and want to sell their property and get out of their crushing mortgage payments before they are forced into the unemployment lines.
Where am I going with all of this? Nowhere in particular – that’s why I haven’t written a blog entry in a while! I hardly know what to make of it all. I will say this, though: don’t buy into the idea that this is a great time to buy. It’s a great time to buy over-priced real estate. It’s quite a bit more challenging to buy real estate today that you won’t regret having paid so much for a year from now. After all, when Warren Buffet says the US Economy has fallen off a cliff, it may perhaps be taken as a harbinger for our local real estate values as well.