They are not looking to speculate on real estate – that’s how so many people ended up getting foreclosed on in Watsonville, and in California, and in many other places throughout our glorious but fading homeland . A Speculator is someone who is placing a bet – they put some money down, and there bet is that the value of whatever they buy will go up. … These clients of mine are probably not what you would call professional real estate investors – but they want to buy real estate as if they were – and after they do buy a few properties, and if they keep with it, hey, before you know it – they will be professional investors, after all, every professional has to start somewhere. … What this means for my clients is that the amount of money they can afford to pay for a property, given their higher interest rate and lower rental rates means that they can offer less for a property than they had first thought – in order to make that 10% (or near 10%, anyway) return on their investment. … And, of course, the unemployment rate in Watsonville is reported to be at 25% – that’s huge, and I think it means a lot of people are going to be sharing housing, families living with families, rather than each family having their own individual place as I’m sure they’d prefer in many cases but owing to the weak economy cannot afford to do so at the moment.
I said that prices have now reached the point where, in some situations, for some people who want to make Santa Cruz home and plan to be here, either as property owners or not, for some years to come, that it may be about the same expense to buy as to rent – or less, depending on where they want to live and what kind of home works for them. My colleague then said something I had not heard before: “rental prices are dropping in Santa Cruz.” … My colleague figured that the reason rental prices would be dropping in Santa Cruz is that many sellers, rather than selling in a declining market like this one, have opted to just put their houses up for rent rather than try to sell in a market like this, and wait to sell when times are better. Well, I thought, that’s a possibility – I believe there are a lot of would-be home sellers , especially in the mid-county area, who are bursting at the seams to sell their real estate but are putting it until the market exits this cycle. … However, they speculated that the market is soft at the moment because it’s the middle of winter, and this is a time when students are not looking to move into housing, they should have settled in by now.
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.
…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 than the superior townhome.
…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.