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). … 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. … 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. … 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.
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. … 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. … 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. … 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.
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. … 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. … 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. … 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.
The Housing Crash guy says: A landlords’ rule of thumb is that a house price should be a maximum of 15 times the annual rent for that place, yet in coastal areas, houses are still selling for 30 times annual rent I think he’s got a good point there – which goes to underscore my belief that prices in Watsonville are actually very reasonable at the moment. … Looking over the ads on Craig’s List, it’s safe to say that a 3 bedroom, 2 bathroom house would rent for about $2,400 a month in Santa Cruz, assuming it was in a not-so-great location. … Let’s look at the payment for a $500,000 house – but let’s assume you’re putting down a reasonable 10% instead of the FHA minimum of 3.5% – so you’d have a $450,000 loan, again at about 5.75% because with only 10% down, you’d still need to pay mortgage insurance. … Let’s say you’re in a tax bracket of 25%, and you can figure you’d save about $640/month in federal and state taxes, bringing your effective monthly after-tax payment to about $2,519 per month, or just about $120 more than renting.
OK, this data is about a week old, but I bet you haven’t seen too much of it, so here it goes. For starters, we have some good news. … The bad news, though, is that the median price in October 2007 was $732,500 – so, year-over-year, prices have dropped 31.7% in Santa Cruz county. … Also, some good news for sellers out there is that the amount of inventory (i.e., the competition) is getting low – we are down to just 195 days worth of homes for sale – versus 215 days of inventory in September, and a whopping 361 days of inventory in October 2007. … If you are a home seller, and you can wait 2-3 years to sell, you might want to wait, because it’s possible we’ll be in a better market by then – however, if you plan to sell in the coming year, I’d urge you to accelerate your plans, because I’m pretty sure prices in most of the county will be lower towards the end of 2009 than towards the beginning.
Of course, the reverse was true on the way up – ridiculously easy credit , liar loans , lax underwriting standards , and mortgage fraud – all of this played a part in the enormous run-up in prices that we in Santa Cruz enjoyed for most of the early years of this decade. Wether you are a prospective home buyer or a home owner, the role of credit is very important to you – it strongly shapes your ability to buy a home, or the price for which you will be able to sell your home. … The good news is, the conforming loan limits for 2009 will stay the same as in 2008: For Santa Cruz County, the new “high-balance” limits are: 1 unit $625,500 2 units $800,775 3 units $967,950 4 units 1,202,925 For Monterey County, we weren’t as fortunate. Here are the new limits: 1 unit $483,000 2 units $618,300 3 units $747,400 4 units $928,850 I asked the lender if a house with a legal accessory dwelling unit (aka “granny unit”) that could be rented would count as a “2 unit” property.
Still, though – if you have a house in Santa Cruz, you’re looking at it being worth about $58,725 less than it was this time last year, if your house is something like the median house. … I looked at Sold Single Family Residences: Median Price of Sold Houses in June & July of 1999 Watsonville: $247,000 (1.0) East side Santa Cruz: $390,500 (1.58097) West side Cruz: $395,000 3/2 1486 (1.59919) Capitola: $360,000 (1.457489) Soquel: $379,000 (1.5344) Felton: $310,000 (1.2551) What this says is that back in the summer of ’99, the median-priced house in Capitola cost about 1.457 more than the median-priced home in Watsonville. Now, let’s look at sales data from September 2008: Watsonville: $352,000 (1) East Side Santa Cruz: 615,500 (1.74857) West side Santa Cruz: 702,500 (2.0468) Capitola: $711,000 (2.01988) Soquel: $610,000 (1.73295) Felton: $486,500 (1.3821) (* August 2008) You’ll notice that compared to the 1999 ratio, the sampled areas in the county appear considerably higher relative to Watsonville than they have been historically. If we use the same ratio from the summer of ’99, here’s what prices in the rest of the county should look like today: Watsonville: $352,000 East Side Santa Cruz: $556,501 West side Santa Cruz: $562,914 Capitola: $513,004 Soquel: $540,108 Felton: $441,795 What does all this mean?
In the latest edition of my newsletter (if you don’t already get it, I invite you to subscribe to my Santa Cruz Market Trends newsletter ), I provide lots of juicy data about how real estate values are continuing to drop in Santa Cruz. As of August 2008, the median home price in Santa Cruz county is now down to $585,000 – and in July of this year (just a month ago!)… In other words, it’s easier to sell your house this year than it was last year, so long as you are willing to sell it for 25.9% less than it would have sold for a year ago. … The median price for a condo in Santa Cruz county in August 2008 was $420,000 – that’s down 17.2% from a year ago, but up 3.4% from last month. … When you look at the MLS, it is very interesting to see where the “pending” listings (that is, houses that are in contract, pending sale) are in the spectrum – about 90% of them are below the median price of “active” listings.