A few days ago, after about a month’s silence, I wrote something of a “doom and gloom” blog entry about Santa Cruz real estate – in fact, I’m proud to say, the entry was even picked up on the HousingDoom.com blog, which I read now and again to stay in touch with my darker side. […]
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.
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.
For those of you who are really interested in knowing what’s going on with real estate sales in Santa Cruz county, I want to remind you that I have a great page on my web site that gives you all kinds of ways to look at Santa Cruz Real Estate Sales Data . Also, I offer a monthly Santa Cruz Real Estate newsletter which offers an analysis of what the numbers mean, and this month’s edition just hit the inboxes of subscribers. OK, maybe the numbers aren’t grrrrrrrreat! … There, we see that the median price (again, county-wide) of single-family residences is down 11.8%, and in April last year, 132 homes were sold – so about 25% fewer homes were sold this April. The numbers are considerably worse for condos, but so few condos were sold (just 19 county wide) that it’s difficult to really gauge what’s going on in that market price-wise.
I cobbled together a PowerPoint presentation, about 20 slides or so, about some market statistics and the opportunities that are there for investors in Watsonville who want to buy short sale or REO real estate. I had 30 minutes to talk, it actually ended up being closer to an hour because there were a lot of questions from the people who were there.
It’s kind of amazing how much opportunity there is for investors down in Watsonville, but there’s so few people right here in Santa Cruz who know what’s going on down there.
… Anyway, I had fun doing the presentation, and I’m going to try to do some more such presentations at other investment clubs in the area.
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.
… 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.
… 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 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.