Santa Cruz real estate outlook 2019

Around this time of year, people start asking what the next year holds for real estate.    Let’s face it – if I had a crystal ball I probably wouldn’t be working any more.    Still, having worked through some peaks and troughs in this industry, and being a constant observer of not only our local market but also the national economy, here’s an outline of some trends.

This chart illustrates the number of homes for sale and the monthly number of homes sold in Santa Cruz County during 2018.santa_cruz_county_sfd_sales_over_time_2019-01-11

Sales – the number of sales is falling as a new trend emerges in home ownership.    On average, people used to stay in their home for about 7 years.    The average has recently extended dramatically to 10 years or longer.     This puts a constraint on the number of homes available for sale.    Meanwhile, the millennial generation – a large demographic – will soon begin turning 30: traditionally a prime age for household formation and home buying.

Interest rates – Mortgage rates rose nearly 1 percent over the past year, putting a pinch especially on first time buyers as their prospective monthly payments rose by as much as 10 percent given the complication of higher home prices too.      Most recently the Federal Reserve sounded like they may not continue to raise interest rates as aggressively as they’d been thinking of doing earlier this year.   On that news, mortgage rates immediately softened from 5% back down to about 4.6% now.    Still, forecasters say if there are any more signs of economic strength, that could cause the Fed to push rates up another ½% over the next six to twelve months, with the first ¼% increase as soon as this month.

Delinquencies – I watch this indicator carefully because rising delinquencies back in 2007 eventually set off the last financial crisis leading to the great recession where real estate prices dropped precipitously.     Recent mortgage delinquencies remain at a ten year low, attributable to stricter loan underwriting requirements, higher down payments, and home price appreciation.    CoreLogic measured August delinquencies at 4%, down from 4.6% last year.   They expect delinquencies to continue to fall due to national home price appreciation, but note some risk in overvalued metros like San Jose, should job growth falter.

santa_cruz_county_sfd_prices_last_5_years_as_of_2019-01-11

The above chart illustrates Santa Cruz County Home Prices over the past 5 years

Prices – after years of double digit growth, we might be in for a healthy period of leveling off.    Normal long term real estate appreciation rates are around the inflation rate, so prices may rise 3-5% give or take.      There have been plenty of price reductions on the multiple listing service lately, but some of that is because those sellers were overly optimistic and initially listed their properties at too high of a price.      Just recently I’ve heard of a few companies issuing layoffs, so the steamy pressure spilling over into the San Lorenzo Valley from the Silicon Valley just might cool down.   On the other hand, with tens of thousands of homes recently lost due to wildfires, and continued job and population growth throughout the SF Bay Area, new homes simply aren’t being built fast enough to meet demand.

Bear Creek Road November 2012
Santa Cruz Mountains

I originally wrote this article in December for the Santa Cruz Mountain Bulletin.    Here is a link to an article I just read, that corroborates my outlook (always a good feeling!).

Here are major economists’ price forecasts for California as mentioned in that article:

California Association of REALTORS +3.1%

Chapman University                               +3.1%

 

 

Regardless of the macro or micro economy, each individual’s circumstances are unique.    Let’s meet to review your situation and see what works best for you.

 

Whenever you have real estate questions,    just text or call MC at (831) 419-9759, or,

Minolta DSC
Photo Credit John Urwin

e-mail me at mcd@mcdwyer.com

I’d love to help you buy or sell your home. Your home is your castle; I’ll treat you like royalty!

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SLV Home Prices – Second Quarter 2013

The San Lorenzo Valley turned in a smoking hot second quarter of 2013 – 78 homes sold at an average price of $420,858, up 18% over the same period last year  (66 homes sold at an average price of $355,435 in 2012).

The San Lorenzo Valley residential real estate market was still red hot this July, when 32 homes sold at an average price of $439,818.    Similarly, 36 homes sold in August at an average sales price of $426,613.   In order not to skew the average, I removed the most expensive property from the calculation.    Because the 87 acre Johnson ranch in Boulder Creek fetched $2.25 Million, if it had been included in my calculations, the average price would have been $477,263.

This year, for the first time since 2008, a Boulder Creek home sold for over one million dollars.    According to the MLS, only a dozen other homes have sold in this price range, all between 2005 and 2008.

This 4800 square foot 5 bedroom home featured a gourmet kitchen, pool, and about 4 private, usable acres with an adjacent parcel sold separately.

Average prices are the highest they’ve been since August of 2008.  SLV Real Estate prices have recovered well from the low point in February 2009 and September 2011, when the SLV average home prices briefly touched $270- $280k.

The pace in the first quarter of 2013 was 63 sales, with an average price of $348,842 between January and March.

This quarter, 12% of homes went pending sale within 7 days, compared to 22% last quarter, giving buyers just a little more breathing room.   Homes went into escrow on average within 43 days of being listed.   The average days on market was 69 days during the first quarter.

The San Lorenzo Valley simply doesn’t have enough sellers willing to sell their homes, compared to all the buyers who want to buy.

Graph of SLV Homes for sale
Graph of SLV Homes for sale

The chart on the right shows we’ve just 4 months of inventory – a seller’s market.    (6 months is considered a balanced market.)   This competition puts upward pressure on home prices.

Multiple offers are common.   It takes steel nerves to persist as a buyer right now.   Many buyers want to lock in affordability: even though interest rates have gone up, they are still very low by historical standards.    My sense is this market flurry is a result of buyers watching their purchasing power diminish as both interest rates and home prices rates rise.

The Federal Reserve has been talking for a couple of months about curtailing their bond repurchase program, which they’ve used to keep interest rates low until unemployment and other economic indicators stabilizes at an acceptable rate.   This week their remarks show they’re poised to reduce their economic stimulus package as early as September.

Distressed sales are declining as a percentage of overall sales to just 25% of the total, although they account for about 50% of the sales of homes priced under $400,000, and about 75% of homes priced under $300,000.

Only 17 homes in the San Lorenzo Valley sold for $250,000 or less: all but a couple of 1 bedroom homes were contractor specials requiring cash buyers.

Although a couple of lesser quality 3 bedroom 2 bath homes sold for under $300,000, the average price for a 3 bedroom, 2 bath home is now about $530,000.

If you have been thinking about selling your house, there’s still pent up demand.  Even if you have a distressed property to sell, don’t worry  – about 40% of my transactions this year were short sales.     To find out what your San Lorenzo Valley home is worth now, click here or call MC Dwyer, Century 21 Showcase REALTOR at (831) 419-9759.

Source: MLSListings.com statistics as of 8/6/13 for for single family homes in zones 34-37 between 4/1 and 7/31/2013

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San Lorenzo Valley Real Estate Market Report

San Lorenzo Valley -SLV Real Estate – Home Prices and Sales – 1st Quarter 2013

The residential real estate market in the San Lorenzo Valley was sizzling hot during the first quarter of 2013 – 63 homes sold at an average price of $348,842, up 16% over the same period last year.   Last year from January to March, 57 homes sold at an average price of $300,474, taking an average of 106 days to sell.

This year, 22% of homes went into escrow with buyers within 7 days!   Homes listed as “normal transactions” – in other words, not distressed (foreclosed or short sale) –took an average of 47 days to go into escrow.   The average days on market was 69 days.

The most expensive home – which sold for $735,000 in Boulder Creek – was a gorgeous 4 bedroom 2900 square foot home, with all day sun and distant ocean vistas.   Listed by a Century 21 Showcase REALTORS agent, it got multiple offers and went into escrow within 18 days.

In sharp contrast, the home that took the longest to sell – over 9 months – was a foreclosed home that had been ravaged.   I previewed it but never showed it to a client because not only was it overpriced for months (listed by an out of the area agent), but it felt horrible inside-the walls were practically dripping with hate.

Boulder Creek Home sold by MC Dwyer

I listed a short sale 1 bedroom cottage that was mid-remodel when the seller ran out of funds to complete the work.    The incomplete construction meant only someone with cash could buy the home.   Next, and this isn’t the only time I’ve seen this happen, the appraiser for the short sale lender valued the home at $38,000 BELOW the buyers’ offering price.    The buyer was able to apply those savings towards buying two adjacent vacant land parcels.    Both buyer and seller in this transaction were conscientious, earnest, genuine people – making my job a lot more pleasant than it would have been otherwise.

If you have been thinking about selling your house, there’s pent up demand right now!     Prices are well up from the cyclical low point of February 2009, when the average SLV home price was $272,184.

SLV home prices have recovered from the cyclical low in February 2009

To find out what your San Lorenzo Valley home is worth now, call a Century 21 Showcase Agent at 438-8400 or 338-2125, or just click here.

Santa Cruz Mountains: Location, Location, Location!   The Santa Cruz Mountains and San Lorenzo Valley are a laid back, picturesque alternative to living in the frenetic and crowded Silicon Valley.   If you don’t already live here, you owe it to yourself to check out the lifestyle.

 

Mortgage rates for a 30 year fixed loan continue to average well below 4%, allowing people to secure their future housing costs.   First time buyers are a big portion of the market: renting in this area is competitive and often costs just as much owning.   Investor buyers continue to invest cash – often buying homes with no loan at all – because rental properties are generating positive cash flow.

Distressed sales are still a factor in the housing market in the Santa Cruz Mountains, particularly dominating the lower price range.  12 short sales and 17 foreclosures (REOs) resulted in 46% of first quarter sales being distressed property, down from 50% during 2012.     If banks were rational sellers, they would release their foreclosed inventory, both here and nationally, because there are plenty of interested buyers right now.

Last year, Residential home sales turned in a solid performance for 2012, with an average San Lorenzo Valley home price of $338,238, up 5% on average for the year.

Source: MLSListings.com, Single Family Residential Sales Closed Escrow through 12/31/12.

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San Lorenzo Valley Real Estate Prices – 2012 in review

San Lorenzo Valley Home Prices and Sales – 2012

The real estate market in the San Lorenzo Valley turned in a solid performance for 2012, with an average home sales price of $338,238, up 5% on average for the year.

SLV Home Prices

The key factor affecting home sales right now is a lack of inventory – the number of homes for sale is at an eight year low!    Yet, there are many buyers, including cash investors and first time buyers who want to lock in great interest rates.     The imbalance of supply and demand leads to competition, and that supports increasing prices.

A new home listing, priced properly and marketed well by your agent, is likely to get multiple offers, even over asking price.    There just aren’t enough homes on the market to match buyer demand.  Another measure of demand: Days on the market (before the house goes into escrow) is about 2-3 months, putting us solidly within what’s known as a sellers’ market.

SLV housing inventory 2012 by month

If you are contemplating putting your house on the market, there’s pent up demand right now!    Look at the typical upward swing in inventory during the summer months in the chart– is there really a reason to wait to list your property?    To find out what your San Lorenzo Valley home is worth now, click here

The Santa Cruz Mountains and San Lorenzo Valley are influenced by the hectic Silicon Valley and greater Bay Area markets which experienced rapid appreciation in the range of 20% during 2012.

Felton fields and clouds, photographed by John Urwin
Felton fields and clouds, photographed by John Urwin

With gas prices a bit lower lately, more working people are willing to make the 30-45 minute commute from the San Lorenzo Valley.   They feel it’s a great trade-off because they can come home to more affordable homes and a more relaxed lifestyle, with less crowding and more open spaces.  For the average price of $340k, buyers got a 3 bedroom, 1200 square foot home on lots averaging 1/4 acre or more!

Santa Cruz Mountains: Location, Location, Location!

Earlier this week I took the day off to enjoy a walk along Pleasure Point, dropping

Pleasure Point Egret
Pleasure Point Egret

occasionally down to the beach to look at the tide pools, then back up to street level where people were skateboarding and walking their dogs, enjoying the sunshine.   During dinner on the wharf in Santa Cruz, we watched the pelicans diving for fish, against the amazing backdrop of sunset and ocean.   Returning back home to the San Lorenzo Valley in the evening took less than half an hour, and I again felt so blessed to be living in such a diverse and gorgeous place.

Mortgage rates for a 30 year fixed loan continue to average well below 4%, allowing people to secure their future housing costs.   First time buyers are a big portion of the market, because renting costs just about the same as owning.   Investor buyers are a big factor as well, often defeating first time buyers in competition, because they are putting down a lot of cash – often buying homes with no loan at all.   Understanding the challenges involved in getting a loan, many sellers will choose a cash buyer if they have the option.   Buyers making a down payment of 3.5% or less may find themselves loosing in competition to buyers with a larger down payment, if the seller can choose amongst multiple offers.

2012 –year in review

299 homes sold in the San Lorenzo Valley – from Boulder Creek to the town of Felton (according to the Multiple Listing Service, areas 34-37).    The volume of sales is up about 16% this year compared to last, and the average sales price is up about 5% to $338,238.     (vs. $321,555 average price on 256 sales in 2011.)

In 2012, 46 homes sold for over $500,000, almost double the number in 2011, when just 26 homes had sold for over $500,000.

At the high end of the spectrum, two homes this year sold for $875,000 – one in a good Boulder Creek neighborhood and one in Felton – both were on acreage.

At the bottom end of the spectrum, 8 homes sold this year for less than $100,000 – all had serious deficiencies and would not qualify for a loan.

Distressed sales were still a big factor in the 2012 housing market in the Santa Cruz Mountains, particularly dominating the lower price range.  75 short sales and 76 foreclosures (REOs) caused about  50% of sales to be distressed properties.   It’s possible that there will be more short sales and fewer foreclosure sales in 2013.   This is in part because lenders have learned that unoccupied homes fall apart – loosing value quickly-  so they are seeing short sales as more advantageous.   For buyers, short sales are taking less time to get approved, so the risk is less than before.

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Real Estate Prices in the San Lorenzo Valley – October 2012

San Lorenzo Valley Home Sales through Oct 31, 2012

As tendrils of wood smoke curl lazily above homes in San Lorenzo Valley this chilly November morning, the day after the election, it’s time for me to share my reflections on our real estate market.   Rising home prices in the Silicon Valley continue to boost our local housing recovery.  Recently I helped some first time buyers secure a home in Felton, after being beaten out over and over by 20-30 offers on homes “over the hill” as we say.

Santa Cruz Mountains

We are just loving the beautiful weather here this fall: chilly in the morning, warm and sunny in the afternoons, with the promise of rains right around the corner.   We are so close to wonderful beach towns like Santa Cruz and Capitola, and within commute range to Silicon Valley jobs.   These factors combine with still relatively affordable prices to support continuing stability with hints of growth in the San LorenzoValley housing market.

A new home listing, positioned properly in the under $300,000 segment, is likely to get multiple offers, often over asking price.    There still aren’t enough homes on the market to match buyer demand.

Chart showing low inventory of homes in the San Lorenzo Valley

Days on the market (before sale) – another measure of demand –  are shorter: anything below 6 months inventory is considered a sellers’ market.

One of our biggest challenges as the market recovers is appraisals.    I think the lending risk pendulum has swung too conservative, too late.    Government intervention into the appraisal process inserted a middleman into the system, increasing the cost for borrowers and taking money from the appraisers.   Consequently, many experienced appraisers left the business; those that are left are working harder for less money.    Some are not spending the necessary time to research for suitable comparable properties, resulting in appraisals not coming in at the market value negotiated between multiple buyers’ offers and the seller.

Mortgage rates for a 30 year fixed loan continue to average well below 4%, allowing people to secure their future housing costs.   First time buyers are a big portion of the market, as rental costs continue to increase.   Investor buyers are a big factor as well, often defeating first time buyers in competition, because they are putting down a lot of cash – often buying homes without any loan at all.   Understanding the difficulties in lending, many sellers will choose a cash buyer over one needing a loan if they have multiple offers.

2012 –year to date

241 homes have sold in the San Lorenzo Valley – from Boulder Creek to the town of Felton – so far this year (according to the Multiple Listing Service, areas 34-37).    The volume of sales is up about 15% this year compared to last, and the average sales price is up about 4% to $341,868.

Single Family Home Prices in the San Lorenzo Valley – 2012

35 homes sold in October, and the average home price for the month of October rose to $386,269.    (June’s average was $371,714).   The average sales price for the month of October rose nearly $100,000 from October of last year at $288,982.   It’s critical to understand this increase in average prices is due to a much higher proportion of sales occurring in the upper price ranges in this last month….It’s not as if all homes have increased that dramatically in value!

So far this year, 38 homes sold for over $500,000, compared to last year when only 26 homes had sold for over $500,000.

At the high end of the spectrum, two homes this year sold for $875,000 – one in a good Boulder Creek neighborhood and one in Felton – both were on acreage.

Are we out of the woods yet?  No.   Right now I’m working on escrows for 3 short sellers, a buyer of a foreclosure, and one traditional sale on acreage.   In the first ten months of 2012, of the 241 San LorenzoValley closed escrows,  56  were short sales, and 63 foreclosures (REOs).     The percentage of distressed property sales was 49.3% (compared to 50% in June).

At the bottom end of the spectrum, 6 homes sold this year for less than $100,000 – all had serious deficiencies and would not qualify for a loan.

2011 –year to date  (January 1st through October 31st)

By October of last year, 209 homes had sold in the San Lorenzo Valley.     The average home price was $328,790 for the first ten months, and 129 of the homes sold were distressed sales, or 62%.   26 homes sold for over $500,000, while  9 homes sold for less than $100,000 by this time last year; again none were habitable and had to be sold for all cash, since no lender would touch them. 

To find out more about San Lorenzo Valley homes, click here

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California Real Estate Recovery

California  Home Prices and Home Sales are improving (June 30, 2012)

June sales volume was 8.5% higher, compared to June 2011.

June’s median price was $320,540 – up 8.1% compared to $296,410 recorded in June 2011.

If you or someone you care about has been sitting on the sidelines, uneasy about prices, read this next sentence:

The June 2012 median price for a single family detached home was 30.7% higher than the cyclical bottom of $245,230 reached in February 2009.

California’s housing inventory of unsold single-family detached homes stayed level at just 3.5 months’ inventory.   This index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A 6-7 month supply is considered to be normal and balanced equally between buyers and sellers; California is in a sellers’ market.

Source: California Association of REALTOR®S

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San Jose metro area Economy: housing supply and demand

One of the news services I subscribe to, Housing Trends E-Newsletter, had some wonderful graphics to share with you in this morning’s e-mail.   The data comes from the National Association of REALTORs, and shows which sectors are hiring.    California’s economy is growing a bit faster than the U.S. at large. 

On February 21, Fannie Mae stated that in 2012 the housing market will make a positive contribution to GDP growth for the first time in seven years.

Silicon Valley: Economy + Employment => Housing Demand