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Santa Cruz County real estate review October 2019

Santa Cruz, Scotts Valley, Los Gatos Mountains & San Lorenzo Valley home prices

3rd_Qtr_2019_Avg_Prices_100719

AFFORDABLE HOMES NEAR THE SILICON VALLEY:

Average single family home prices continue to range between $1 to $1.5 million across Santa Cruz County and the greater San Francisco Bay Area.    Many people who work in the Silicon Valley are delighted to discover affordable housing in the San Lorenzo Valley –  within 45 minutes to an hour’s commute to major employers like Apple, Alphabet (Google), Facebook, etc…        The San Lorenzo Valley offers a more relaxed, rural lifestyle at about half the price of neighboring Scotts Valley, which combines the conveniences of a small city with a sense of community.   Santa Cruz home prices have been stable at about $1.1 million, where residents can enjoy legendary parks and beaches, plus a variety of shopping and restaurants, night life and amenities available in a city of about 60,000 residents.

  

SUMMARY:

San Lorenzo Valley sales prices softened a bit in the 3rd quarter, as the number of homes listed for sale increased.    The number of home sales rose as well, while buyers who’d faced stiff competition in the past found it easier to win the bidding process without necessarily having to offer much over asking price.      On average, homes sold for 100% of list price.

Scotts Valley home prices fell slightly from the 2nd quarter, but remained up over 9% compared to the same period last year, while the number of sales held steady.

Laurel road near Hwy 17 in Los Gatos edited.jpgLos Gatos mountains region had a measurably lower average price in the 3rd quarter, but it was due to an anomaly: just 11 homes sold for over $1 million and the highest price was $1.7 million.  3 homes sold for less than $500,000 (one with a code violation, one a contractor special, and one quite remote and off the grid).   During the 2nd quarter, this region experienced a more typical 26 homes selling in excess of $1 million; 2 were over $2 million.

Santa Cruz – the city – saw home price appreciation of 2.4% during the 3rd quarter compared to the 2nd quarter, as the number of homes sold declined by over 10%.    Prices were just 1.7% lower than this time last year.

Santa Cruz County as a whole saw single family home prices easing about 5% compared to the 2nd quarter, but prices were flat compared to a year ago.    The number of home sold rose about 6% over the 2nd quarter but was level with the number sold last year.

Santa Clara County experienced a combination of price easing and slower sales overall, after many years of rapid appreciation.    Average prices rolled back to the average reached in the 2nd quarter of 2018.

Days on market – on average across Santa Cruz County, it takes 4 to 5½ weeks for a home to go into escrow with a buyer now, continuing a trend that’s been increasing several days each quarter.

California’s August statewide results according to the California Association of REALTORS:  median home price rose 1.5% to $617,410 when compared to July’s median of $607,990.    This was up 3.6% compared to the August 2018 median of $595,920.

CoreLogic reported July’s overall mortgage delinquencies remain at their lowest rate in 20 years nationally.    Many experts believe stricter mortgage guidelines and higher down payments over the past decade will prevent a real estate crisis when the next economic downturn occurs.    Just four states experienced increased delinquencies:               Vermont, New Hampshire, Iowa and Minnesota.

Mortgage interest rates – after a brief increase in interest rates earlier this year, recently the 30 year mortgage rate dipped to 3.63%, even lower than last quarter’s 3.99%.    These rates are historically incredibly low and appealing to home buyers.     Many homeowners can benefit from refinancing now – consult your loan professional, or reach out to me if you need references to excellent local lenders.

As you look at the price chart, remember some of these micro markets (like Brookdale) have so few home sales, that percentage changes aren’t statistically significant and average prices can be dramatically skewed when one of the few sales exceed a million dollars.    It’s more useful to look at the San Lorenzo Valley as a whole.

INVENTORY:

Months_of_Inventory_100819

These charts illustrate housing inventory over the past three years.   Around six months of housing inventory is considered a market that is balanced between buyers and sellers.   These graphs show that both regions continue to experience an inventory shortage of just two to three months of inventory.   That means, at the current rate of sales, we’d run out of homes for sale in just two to three months.

At the time of this writing, San Lorenzo Valley has 86 single family homes for sale (vs 84 last quarter), compared to 80 at this time last year.     Scotts Valley has 39 (vs 51 last quarter), compared to 32 homes for sale at this time last year.      Santa Cruz, despite having four times the population of Scotts Valley, has 63 homes for sale (vs 72 last quarter), compared to 68 at this time last year.

ECONOMY

Economic growth as measured by GDP (Gross Domestic Product) was 2.1% during the 2nd quarter, (3.1% during the 1st quarter of 2019, and 2.2% in the 4th quarter of 2018).     Consumer price increases (a measure of inflation – something the Federal Reserve monitors closely) was 1.7% in August (1.8% in May 1.5% in January and considerably lower than 2.9% in July 2018).    The unemployment rate remains steady at 3.6%     (3.7% nationwide in January).    Wages grew at a 4% rate during June (versus 3% in May and 4.5% during this period last year).

 

SANTA CRUZ COUNTY’S APPEAL:

 

Scotts Valley Clouds

Photo Credit: John Urwin

People from the Silicon Valley are enchanted to discover Santa Cruz County’s appeal.   We have dozens of parks for hiking, mountain biking, climbing, horse-back riding, swimming, skateboarding and surfing.    There are dozens of beaches, from popular to serene, walk-in to hike-in, as well as dog-friendly Lighthouse Field State Beach.   The Santa Cruz lifestyle is informal: we cherish our slower pace.   With 1/3 the population density of Santa Clara County, there’s more room to spread out in Santa Cruz County, and consequently lower stress and crime rates.    (Just 440 people/square mile live here, compared to 1400 people/square mile living in Santa Clara County.)  Most homes have high speed internet, and increasingly, companies are allowing employees to work from home at least part of the time. Many people say they enjoy driving through the mountains to work, versus sitting in traffic and spending a lot more money to live in Santa Clara County.

CURIOUS WHAT YOUR HOME IS WORTH?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you’re thinking of selling, I’ll help you by suggesting cost effective ways to make your home appeal to more buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients like these.

LOOKING FOR YOUR DREAM HOME?     Click here!   I’ll help you secure financing, negotiate with the seller, attend inspections with you, review disclosures and potential red flags, and…hand you the keys!

REAL ESTATE MARKETS ARE LOCAL:

The advice of a knowledgeable local REALTOR®, who can intelligently discuss neighborhoods and price trends, is invaluable.  Hire a REALTOR® you can trust, who has enough time to dedicate to you!    I will help you untangle the maze of decisions, preparations, negotiations, inspections, title and disclosures as you buy or sell your home.    Relocating? – I can also connect you to a trust-worthy REALTOR® wherever you’re going.   My goal is to make the entire process easier to understand, less stressful, and as cost effective as possible for you.

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

Click here to look at homes for sale or sign up for your own custom home alert.

Sources:  MLSListings.com, Reuters, California Association of REALTORs, REALTOR.org, ActiveRain.com, Mercury News, CoreLogic, FreddieMac, MortgageNewsDaily.com, Google.     Month to month home sales prices fluctuate widely in small communities and cities, especially when property sales range between million dollar estates and fixer upper properties.   Because of this, percentage and average price changes often aren’t statistically meaningful for short time intervals.      *All stats as of October 8, 2019:  MLSListings.com single family residences.

Santa Cruz area Real Estate Market Report July 2019

2nd_Qtr_2019_Avg_Prices_070919

AFFORDABLE HOMES NEAR THE SILICON VALLEY:

With average single family home prices of $1 to $1.5 million across the Bay Area, affordability concerns continue to push people who work in the Silicon Valley to seek affordable housing anywhere within about an hour’s commute.    The San Lorenzo Valley sparkles with some of the most attractive prices anywhere in the greater bay area, within just about a 45 minute to 1 hour commute to most major employers (Apple, Alphabet (Google), Facebook, Netflix…).    For those who prefer a small city, Scotts Valley offers a quick commute, followed by Santa Cruz with its great beaches, shopping, night life and many amenities.

SUMMARY:

The 2nd quarter trend picked up momentum in the number of sales as well as price appreciation across all areas.      On average in our region, it takes three to four weeks for a home to go into escrow with a buyer now; slightly longer than last year.    Looking at statewide numbers, California Association of REALTORS just reported May’s statewide median home price was $611,190, up 1.4 percent from April and up 1.7 percent from May 2018.     The National Association of REALTORS reported that the national median existing-home sales price (all housing types) was $277,700 in April, up 4.8% from a year ago, the 87th consecutive month of year-over-year gains.    CoreLogic reports serious mortgage delinquencies are at their lowest rate in 20 years nationally.

After a slow start to 2019, many more homes were listed and sold during the second quarter.   After a brief increase in interest rates earlier this year, recently the 30 year mortgage rate has fallen back down to 3.99%, historically very low and appealing to buyers who’d paused, waiting for better conditions.    Consumer confidence is rising, and the number of IPOs (Initial public stock offerings) in the SF Bay Area has brought new wealth to the region….some of which is funneling into real estate.

As you look at the price chart, remember some of these micro markets (like Brookdale & Lompico) have so few home sales, that percentage changes aren’t statistically significant and average prices can be dramatically skewed when one of the few sales exceed a million dollars.    It’s more useful to look at the San Lorenzo Valley as a whole, where prices rose about 5% over the 1st quarter of 2019, and were a tad lower than the same time last year.

Scotts Valley had the largest shift with 35 million dollar plus sales during the 2nd quarter of 2019, up from just 12 home sales in that price segment during the 1st quarter of 2019.     The most expensive home, a 5500 square foot Pasatiempo estate with Monterey Bay views, sold for $4.5 million, while the least expensive home sold for $650,000.

Santa Cruz County as a whole rose a solid 9% over the first quarter, and 13% over the same time last year, closely following the trends in Santa Clara County.

INVENTORY:

Months_of_Inventory_070919

These charts illustrate housing inventory over the past three years.   Around six months of housing inventory is considered a market that is balanced between buyers and sellers.   These graphs show that both regions continue to experience an inventory shortage of just two to three months of inventory.   That means, at the current rate of sales, we’d run out of homes for sale in just two to three months.

At the time of this writing, San Lorenzo Valley has 84 single family homes for sale (up from 40 in January and similar to this time last year.     Scotts Valley has 51 (up from January’s 24 homes and more than last year).   Santa Cruz, despite having four times the population of Scotts Valley, has 76 single family homes for sale, (up from just 38 in January and more than last year).

ECONOMY

The bond market has already priced in the expectation that the Federal Reserve will lower interest rates soon.   As a result, interest rates on the 30 year fixed mortgage have fallen to around 4.00%,  (down from 4.6% in January.) Click here to see today’s 30 year fixed rate mortgages rates   People who purchased at recent levels of 5% or higher may want to discuss the prospect of refinancing with their lenders.

Economic growth as measured by GDP (Gross Domestic Product) rose to 3.1% during the 1st quarter of 2019, (2.2% in the 4th quarter).     Consumer price increases (a measure of inflation – something the Federal Reserve monitors closely) was 1.8% in May (up from 1.5% in January but down from 2.9% in July 2018).    The unemployment rate is holding steady at 3.6%     (3.7% nationwide in January).    Wages grew 3% (over May 2018),  about 1.3% growth after inflation.

DAYS ON THE MARKET:

In contrast to Santa Clara County homes, which went into escrow within about three weeks of being listed, San Lorenzo Valley homes take on average three weeks to a month to go into escrow.    Some properties still sell within the first week or two, while others take a couple of months to find a buyer.     Scotts Valley and Santa Cruz city homes typically take 4-5 weeks to go into escrow, while Santa Clara County is back down to about 3 weeks.

SANTA CRUZ COUNTY’S APPEAL:

People from the Silicon Valley are enchanted to discover Santa Cruz County with all of our parks for hiking, mountain biking, climbing, horse-back riding, and skateboarding.    There are dozens of beaches, from popular to serene, walk-in to hike-in, some dog-friendly.   The Santa Cruz lifestyle is informal: we cherish our slower pace.   With 1/3 the population density of Santa Clara County, there’s more room to spread out in Santa Cruz County, and consequently lower stress and crime rates.    (Just 440 people/square mile live here, compared to 1400 people/square mile living in Santa Clara County.)   Many people say they enjoy driving through the mountains to work, versus sitting in traffic and spending a lot more money to live in Santa Clara County.

CURIOUS WHAT YOUR HOME IS WORTH?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you’re thinking of selling, I’ll help you evaluate cost effective ways to make your home appeal to buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients like these.

LOOKING FOR YOUR DREAM HOME?     Click here!   I’ll help you secure financing, negotiate with the seller, attend inspections with you, review disclosures and potential red flags, and…hand you the keys!

REAL ESTATE MARKETS ARE LOCAL:

The advice of a knowledgeable local REALTOR®, who can intelligently discuss neighborhoods and price trends, is invaluable.  Hire a REALTOR® you can trust, who has enough time to dedicate to you!    I will help you untangle the maze of decisions, preparations, negotiations, inspections, title and disclosures as you buy or sell your home.    Relocating? – I can also connect you to a trust-worthy REALTOR® wherever you’re going.   My goal is to make the entire process easier to understand, less stressful, and as cost effective as possible for you.

Minolta DSC
Photo Credit John Urwin

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

Click here to look at homes for sale or sign up for your own custom home alert.

Sources:  MLSListings.com, Reuters, REALTOR.org, ActiveRain.com, Mercury News, CoreLogic, FreddieMac, BankRate.com, Google.     Month to month home sales prices fluctuate widely in small communities and cities, especially when property sales range between million dollar estates and fixer upper properties.   Because of this, percentage and average price changes often aren’t statistically meaningful for short time intervals.      *All stats as of July 9, 2019:  MLSListings.com single family residences.

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!

Click here to look at homes for sale or sign up for your own custom home alert.

 

 

 

Santa Cruz County Safe Structures Program: LIAP

In an effort to provide safer, affordable housing, Santa Cruz County Building and Planning Department just released a new program called the Safe Structures Program.    (The program used to be called LIAP: Limited Immunity Amnesty Program.)

Boulder Creek Fixer Upper
Vintage 1949 redwood cabin sold by MC Dwyer

This program lets property owners who have unpermitted housing structures work with County officials to add health, habitability, and safety features.    In exchange, the County will consider certified structures as a low priority for future code enforcement actions: “limited immunity amnesty,” even if the structures are unable to meet current building code requirements.

Here are some of the advantages of the program:

  • Lower costs
    • Reduced county fees for: permits for modifications, reduced impact fees, and waived penalty fees
    • Some potential tenant relocation costs are eliminated
  • Any future complaints about the unpermitted structure would be answered by the County with the certification that the structure is safe and habitable, and that the County considers it a low priority for enforcement
  • County Staff Assistance
    • Specialists can help property owners work with the Safe Structures Program
    • Specialists can also help property owners who’d like to fully legalize their structures through the permit process
  • If the property owner decides not to finalize the process, the County won’t pursue enforcement action “unless an imminent hazard affects health and safety.”

 

The program does have certain qualifications:

  • Construction was completed before January 2014
  • The structure can’t qualify for complete legalization under normal rules and processes
  • Current cases already involved in code compliance may qualify on a case by case basis
  • Accessory dwelling units (ADUs), remodels, additions, and recent construction may qualify
  • The structure is maintained so it continues to meet those health and habitability standards

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The process:   There’s a 60+ point county inspection of the property, including safety criteria for stairs and railings, lighting, locks, septic system, carbon monoxide detectors and smoke alarms, water heater earthquake bracing, GFCI or AFCI electrical outlets where needed, sufficiently sized compliant electrical panel, potable water supply, emergency routes from bedrooms, safety features for gas appliances and heaters, widths of doors and halls, etc..    Habitability features include hot and cold water, a heater  (not just a woodstove), cooking and refrigeration, lockable windows without cracks, and lack of infestations (molds, bugs, vermin, etc.).     Other portions of the structure won’t have to be brought up to current building codes under this program, as long as the overall structure is determined to be safe and habitable.

 

Expect to pay about $800 in initial fees.   Unlike other compliance issues where fees can be doubled for illegal unpermitted structures, owners may simply pay normal permit costs to bring structures up to current code on the items identified on the 60+ point inspection checklist.   There are many nuances and each situation is unique, so for more information, visit http://sccoplanning.com/LIAP  or e-mail LIAP@santacruzcounty.us.  Property owners can also go directly to the Building Counter at the Planning Department at 701 Ocean Street, 4th Floor.    Tip: Consider parking in a two hour visitor space, not a one hour space, as parking time is enforced.

 

San Lorenzo Valley July median home price $680,000; up 6.25% over July 2017

California June median home price $602,760; up 8.5% over June 2017

MC Dwyer (CA DRE#01468388) is affiliated with Century 21 Showcase REALTORs

Whenever you have real estate questions,   

just text or call MC at (831) 419-9759, or, 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!Minolta DSC

photo credit: John Urwin

Click here to look at homes for sale or sign up for your own custom home alert.

Santa Cruz County home prices and trends: Market Update 1st Quarter 2018

Santa Cruz, Scotts Valley and San Lorenzo Valley real estate market update

1st Quarter 2018

Q1_2018_Average_Prices

Silicon Valley Homes continue to appreciate – just look at that bottom line up over 20% since last year at this time.    Consequently, many buyers have to cast a wider net to find affordable homes near the Silicon Valley.   Scotts Valley, Santa Cruz and San Lorenzo Valley areas offer relatively more affordable homes still within about an hour’s commute of the Silicon Valley.   One of my specialties is helping people relocate here!

Minolta DSC
Ben Lomond; photo credit John Urwin

With an average home prices around $650,000, the small towns that make up San Lorenzo Valley are a little known secret, offering a variety of relatively affordable homes for Silicon Valley’s employees.  We are less than an hour’s commute from Apple or Alphabet/Google.    Los Gatos mountains offer an even faster commute, Scotts Valley has dedicated express and company buses,   The city of Santa Cruz is just 15 minutes further, with beaches, nightlife and shopping.

PRICES      If you’re shopping in the $800,000 to $1 million range, you can buy a lovely home on property anywhere in the San Lorenzo Valley: from Boulder Creek to Ben Lomond and Felton.   In our lovely small city of Scotts Valley home prices are holding steady at an average of $1.1 million.   In the more populous city of Santa Cruz home prices rose again…while Los Gatos Mountains home prices dipped slightly: a short term anomaly as the mix between higher end and average properties changed briefly.    As you look at the chart, remember some of these micro markets (Lompico and Brookdale) have so few home sales, that percentage changes aren’t statistically significant.    And Felton home prices simply reflect a rare quarter where there was only one Felton home sale priced over $1 million.

DAYS ON THE MARKET   The Silicon Valley housing market is fast paced with an average of less than two weeks on the market before going into escrow with a buyer.   Santa Cruz County homes are on the market between a month and 45 days on average.   Some of the million dollar plus properties may to take a bit longer to sell.      Most Santa Cruz County home sellers who intelligently price their properties will see faster results.    Many Santa Cruz County homes receive multiple offers within the first 2-3 weeks, especially the more affordable homes priced below or near the average.

castle rock state park 010118
Castle Rock State Park – photo M.C. Dwyer

SANTA CRUZ COUNTY’S APPEAL   Many people from the Silicon Valley are enchanted when they discover Santa Cruz, with all our parks for hiking, horseback riding and mountain biking!    There are dozens of beaches, from crowded to serene.   The Santa Cruz lifestyle is informal and we cherish the slower pace.   There’s more room to spread out, and consequently lower stress, crime rates and smog.   So many people tell me they enjoy driving through the mountains to work, rather than sitting in traffic and spending a lot more money to live in Santa Clara County.

Q1 18 Housing Inventory Graph 041818

Inventory Blues dissipated a bit as spring rains give way to sunny skies.     Across the board, more homes have been listed in each area.    Still, these charts show between a few weeks to a couple of months of inventory.     A real estate market that’s balanced between buyers and sellers usually has around six months of inventory.    A month of housing inventory means that, if no new homes were listed, all the homes on the market would theoretically get sold within a month.    This keeps upward pressure on prices.

CURIOUS WHAT YOUR HOME IS WORTH?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you’re thinking of selling, I’ll help you evaluate cost effective ways to make your home appeal to the most buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients like these.

 

montage
Recent Boulder Creek home – sold for a wonderful repeat client

LOOKING FOR YOUR DREAM HOME?     Click here!   I’ll help you secure financing, negotiate with the seller, review disclosures and potential red flags, attend inspections with you, and…hand you the keys!

REAL ESTATE MARKETS ARE LOCAL   The advice of a knowledgeable local REALTOR®,  who can intelligently discuss neighborhoods and price trends, is invaluable.  Select someone you can trust, who has enough time to dedicate to you!  

INTEREST RATES & ECONOMY    The San Francisco Bay Area and Silicon Valley job market continues its brisk expansion, with  two to three dozen new residents per day according to the Mercury News, while new housing construction falls farther behind   The unemployment rate of about 2% locally (4% nationwide) has finally translated to higher wages for some.   Housing affordability isn’t getting any better though, since earnings growth is slower than the increase in home prices across most of the region.

The economy grew at a rate of about 3% during both the 3rd and 4th quarters of 2017.   Inflation is still low (2 to 2.5%), but the Federal Reserve’s concerns led them to increase the base interest rate for the sixth time in March.   30 year fixed rate mortgages rates rose to from 4% to 4.5% over the past few months, still historically low.   While that ½% increase, plus rising home prices, pressures entry level buyers, the mid and luxury markets are still strong here.

Tax reform changes are working their way through the system…the new limits on mortgage interest, sales tax and property tax deductions will affect whether some California homeowners decide to sell their homes to upgrade or downsize.    Look for a proposition on the November ballot where California homeowners can move their property tax basis across counties within the state.   This could make it easier for people to sell and move!    While many of us were concerned the SALT cap on tax deductions might inhibit luxury home sales, there’s been little sign of any slowdown.

Whenever you have real estate questions,   

Minolta DSC
photo credit John Urwin

just text or call MC at (831) 419-9759, or, e-mail me at mcdwyer@century21.com

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

Click here to look at homes for sale or sign up for your own custom home alert.

 

 

Sources:  MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News.     Month to month home sales prices fluctuate widely in small communities and cities, especially when property sales range between million dollar estates and fixer upper properties.   Because of this, percentage and average price changes often aren’t statistically meaningful for short time intervals.      *All stats as of April 18th 2018:  MLSListings.com single family residences only.

Santa Cruz and San Lorenzo Valley real estate report

Santa Cruz and San Lorenzo Valley real estate prices & trends 2017-2018

This might offend a few people, but, honestly, most of the 27 affordable Santa Cruz County homes for sale (priced under $600,000) right now aren’t suitable for you, your sister, your aunt or your uncle…although a couple might work for grandparents (retirement community). You’re going to need an experienced, boots-on-the-ground REALTOR® like me helping you save time sifting through this chaff.    That said, there are a hand full of good affordable homes…

hyena-2323344_1280 from PixabayAnything decent, priced appropriately, is quickly circled by a teeth gnashing pack of hungry buyers, only one of which will win the bone – I mean home. Okay, teeth gnashing is an exaggeration, and I really do like working with buyers. Still, it’s really competitive right now, so if you’re thinking of buying, call or text me: I can help you prepare a successful purchase strategy.

2 BUYER TIPS:  Get pre-approved for a loan before you shop for homes – this way you can clean up any issues on your credit report that may cost you a higher interest rate.   Plus then you can focus on the house purchase, having finished all the lender paperwork.     Don’t wait until the weekend to shop…many homes sell on weekdays!

And if you’re reading this because you’re thinking of selling – call me now! Don’t wait until spring (or worse).

2 SELLER TIPs: I’ll help you prioritize how to get the property ready at the least cost.   It nearly always takes sellers longer to get their property ready than they think it will.

THE INVENTORY BLUES This housing shortage is the worst I’ve seen in years.   It’s not just seasonal – here are graphs going back for years.

Housing Inventory Graph SLV SCC SCC 011218For a frame of reference, a market evenly balanced between buyers and sellers has about 4-6 months’ worth of inventory for sale. Buyers are frustrated because there simply are not enough homes for sale, especially in the under $1 million price range.   Why buy now? Besides the inherent benefits to owning your own home (stability, control, wealth building, etc.), consider that prices and interest rates are both forecast to continue to rise, and rents are just plain exorbitant.

San Lorenzo Valley has only 31 homes for sale right now – that’s about half of the inventory level when I last reported in October. 9 of the 31 are priced at over $1 million. Buyers in that price range may be able to negotiate, since some of those homes have been on the market a month or longer…

Scotts Valley has only 11 homes for sale (normally 30+), while Santa Cruz – a far larger city – has only 22. It’s crazy. Right now, Santa Cruz County has only 175 single family homes for sale (down about 50% compared to late summer). If you’re considering selling your house – market conditions are incredible. Call me soon so I can help you strategize your next move.

Here are three affordable Santa Cruz Mountains homes I just helped sell:Just_Sold_3_homes_011218_facebook_blog

Oh, the stories I could tell about just these three transactions: The Buyers! The Sellers! The agents! The inspectors! The lenders! But, I never share confidential information. Two of these houses need new decks, one needs a new septic leach field, and one needs a new roof. Still, three would-be buyers left the negotiating tables empty handed. The point is, sellers need help disclosing and buyers need assistance understanding the condition of these kinds of affordable, Santa Cruz mountains properties.

BAY AREA’S HOUSING PROBLEM It’s not news that there are very few homes for sale in the region, and that’s driving prices up. Rental rates are high because vacancies are low. For 2018, buying an affordable home in the Santa Cruz Mountains is likely to get even harder. The reasons are complex:
• New jobs & people moving in to the region exceed people moving into larger homes, downsizing or leaving –home owners feel like there’s nowhere to go.
• Not enough new homes are being built (especially in Santa Cruz County).
• People are staying in their homes longer
o Retirees were already worried about keeping their tax basis
o Potential move-up buyers now worry about tax deductions
o This keeps the supply of homes for first time buyers low.
• A lot of entry level homes were foreclosed and then purchased for “all cash” over the past 6 years
o Those investors are getting a great return on their investment by renting the houses out … they’ve no reason to sell.

SANTA CRUZ COUNTY REAL ESTATE

SUMMARY The number of homes sold across most of Santa Cruz County was steady in the 4th quarter, but prices diverged: Scotts Valley and Los Gatos mountains home prices rose under continued pressure from Silicon Valley home prices. Santa Cruz County homes were on the market for about 40 days –twice as long as Santa Clara County at just 19 days on average. Home prices were flat in the San Lorenzo Valley at the end of 2017, although the micro markets of each town moved up and down.

SC_RE_Stats_Q4_2017

PRICES Home prices in Scotts Valley along with Santa Cruz took a bit of a breather in the 4th quarter of 2017 compared to the 3rd quarter, but were still higher than last year. In Boulder Creek, two “homes” sold in the 4th quarter with separate MLS numbers for a total of $23,000 (neighboring shacks on slides), skewing prices temporarily. But Los Gatos Mountains continued it’s ascent as the closest community to the Silicon Valley, where average prices are now over $1.5 million. After years of double digit appreciation, average single family home price increases across the San Lorenzo Valley quieted during the last quarter of 2017. Lompico/ Zayante isn’t really in decline, there were just fewer higher end sales there. In fact, with the water supply situation stabilized, one of my main concerns is gone. Some of these micro markets (Lompico and Brookdale) have so few home sales that percentage changes aren’t statistically significant.

Affordable homes near Santa Cruz (priced $600,000 or less) are nearly non-existent right now. There are only 10 homes in this price range all across the San Lorenzo Valley, and many of them have “issues” and have been on the market for a couple of months. Let’s just say I wouldn’t recommend them for anyone you care about, unless you care about someone who is a contractor. Usually, the San Lorenzo Valley has some of the most affordable homes in Santa Cruz County: SLV real estate prices run about two thirds of the Santa Cruz County average.   Last quarter, many of my sales were in this price range.   Whether you’re buying or selling, you’ll need someone with my kind of experience to navigate the possible pitfalls in rural properties at this price.

CURIOUS WHAT YOUR HOME IS WORTH? Visit www.HomeValues24-7.com for a quick and easy estimate! If you’re thinking of selling, I’ll help you evaluate cost effective ways to make your home appeal to the most buyers. My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients like these.

LOOKING FOR YOUR DREAM HOME? Click here! I’ll help you secure financing, negotiate with the seller, review disclosures and potential red flags, attend inspections with you, and…hand you the keys!   Plus, I’m readily available after you move in to offer local referrals and general assistance.

SILICON VALLEY The housing shortage in the Silicon Valley continues to drive the region’s prices higher. In Santa Clara County, the average price of a single family home in October reached $1.5 million. With an average home price of $630,000, the San Lorenzo Valley and Boulder Creek are a little known secret offering relaxing small town hide-a-ways for high tech workers. Boulder Creek’s affordable housing is less than an hour’s commute from Apple or Alphabet (Google). One of my specialties is helping people relocate here!

SANTA CRUZ COUNTY’S APPEAL People from the Silicon Valley are understandably enchanted by Santa Cruz: we have so many state parks for hiking, horseback riding and mountain biking! There are dozens of beaches – from crowded to serene. We have small cities and towns. The Santa Cruz lifestyle is less formal and we adore the slower overall pace. There’s more room to spread out, and consequently lower stress, crime rates and smog. So many people tell me they enjoy driving through the mountains to work, rather than sitting in traffic and spending a lot more money to live in Santa Clara County.

REAL ESTATE MARKETS ARE LOCAL The advice of a knowledgeable local REALTOR®, who can show you the trends in your neighborhood and your specific kind of property and price range, is invaluable. Select someone you can trust, who knows your area well. Understanding pricing, analyzing location, property appeal and condition, requires local market intelligence. When choosing your REALTOR®, also consider if the agent has enough time to dedicate to you!

DAYS ON THE MARKET Santa Cruz County homes are on the market about 40 days on average before going into escrow with a buyer. Intelligently priced and especially affordable homes are selling quickly, usually receiving multiple offers within the first 2-3 weeks, others even faster.

INTEREST RATES & ECONOMY The big news is tax reform…new limitations on mortgage interest, sales tax and property tax deductions will affect many California homeowners. 30 year fixed rate mortgages rates averaged just over 4% for the past few months, still historically quite low.  But, the Federal Reserve intends to increase their benchmark interest rate for lending to banks several times this year.   The economy was estimated to grow about 3% over the 3rd quarter, and there’s minimal inflation (under 2%).  Jobs and employment are quite strong, with unemployment rate at just 4% nationwide. Housing affordability isn’t getting any better though, since earnings growth is slower than the increase in home prices across most of the nation. Silicon Valley incomes are growing at the 4th fastest rate in the nation., with radical innovations in the way we live continuing to pour out of the brilliant minds working in the Silicon Valley.

Sources: MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News. Month to month home sales prices fluctuate widely in small communities and cities, especially when property sales range between multi million dollar estates and fixer upper / tear down properties. Because of this, percentage and average price changes often aren’t statistically meaningful for short time intervals. *All stats as of 1/09-12/2018: MLSListings.com single family residences only.

San Lorenzo Valley real estate prices August 2017

San Lorenzo Valley home prices, Scotts Valley home prices and Santa Cruz home price changes through August 2017:

Aug_and_Q2_2017_Santa_Cruz_County_SLV_SV_SC_stats

PRICES   Feeling like the cooler weather and yellow leaves dancing in the light breezes of fall, average single family home prices across Santa Cruz County seem like they might level off a bit this fall.      The county’s affordable price range, $600,000 and under, is still sizzling like a summer bar-b-que, with multiple buyers pursuing just a handful of homes.     The San Lorenzo Valley has some of the most affordable homes in Santa Cruz County: home prices run about 67% of the county average.

Here’s an example of an affordable San Lorenzo Valley home I sold.   This two bedroom home received three offers, selling for $429,000.     Within the next week I expect to have a larger two bedroom home listed – please call for details.114_Roble_ext

CURIOUS WHAT YOUR HOME IS WORTH?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you’re thinking of selling, I’ll help you evaluate cost effective ways to make your home appeal to the most buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients.

LOOKING FOR YOUR DREAM HOME?     Click here!   I’ll help you secure financing, negotiate with the seller, review disclosures and potential red flags, attend inspections with you, and…hand you the keys!

SILICON VALLEY The housing shortage in the Silicon Valley is a systemic problem.    In Santa Clara County, the average price of a single family home in August was $1.4 million, holding steadily over the past year.    Santa Cruz County is a great option when high tech workers look for reasonable housing prices within commute range.    One of my specialties is helping people relocate here!

SANTA CRUZ COUNTY’S APPEAL People from the Silicon Valley are understandably enchanted by Santa Cruz, with our beaches, many parks, smaller cities and towns.     The Santa Cruz lifestyle is less formal with a slower overall pace.   There’s more room to spread out, and consequently lower stress, crime rates and smog.   People tell me they enjoy driving through the mountains to work, rather than sitting in traffic and spending more money to live “over the hill.”

INVENTORY    If you’re considering selling your home – early fall conditions are still ripe!     The market still doesn’t have enough homes for sale in the under $1 million price range.   San Lorenzo Valley has about 70 homes for sale – about 20 more single family homes than at this time last year – but this year, 10 are priced over $1 million, twice as many as last year.

Scotts Valley has about 40 homes for sale, stable, nearly ¾ of which are priced over $1 Million.     Santa Cruz – a far larger city –  has just 40 homes for sale, again, ¾ of which are over $1Million.

DAYS ON THE MARKET Overall, Santa Cruz County homes are on the market about 45-50 days on average before going into escrow with a buyer.   This is about 2 weeks longer than last year.  I think this is because recently, some sellers have been tempted to price their homes too high, but then have to adjust downward after waiting but getting no offers.    Competitively priced and affordable homes are still selling quickly with multiple offers.   Right now, Santa Cruz County has 378 homes for sale (versus 396 around this time last year).

REAL ESTATE MARKETS ARE LOCAL!   The advice of a knowledgeable local REALTOR® who can show you the trends in your neighborhood and your specific kind of property and price range is invaluable.   Different communities and different price ranges don’t move in synch.  The price a buyer should offer, or the price a seller should list their property for, takes not only in-depth research but also field knowledge.   Buyers or sellers should choose their REALTOR® carefully: consider if an agent will have enough time to dedicate to you, in addition to someone who knows the area well and perhaps even lives nearby.

INTEREST RATES    The Federal Reserve met this week;  their meeting minutes say the economy is on track for modest growth with minimal inflation (under 2%).   ¾ of voting officials appeared to be in favor of raising interest rates in December.    30 year home mortgage rates rose ever so slightly to about 4%, depending on personal factors.

Sources:  MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News.     Month to month home sales prices fluctuate widely in small communities and cities, especially where property values can range between multi million dollar properties and fixer upper sales.  Because of this,  percentage and average price changes aren’t statistically meaningful for a static 30 day period.      *All stats as of 9/15/17, MLSListings.com single family residences only.

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Santa Cruz Home Prices, Scotts Valley and SLV Home Prices, 2nd Quarter 2016

Here is a summary of San Lorenzo Valley, Los Gatos Mountains, Scotts Valley and Santa Cruz home prices.

Q2_2016_Santa_Cruz_County_SLV_SV_SC_statsPRICES   Average single family home prices in Santa Cruz County rose about 1% during the second quarter of 2016, following an increase of about 10% during the first quarter.     Some communities and price brackets remain “hot” with multiple buyers pursuing a limited number of homes.     The San Lorenzo Valley continues to be one of the most affordable regions in Santa Cruz County, with home prices at about 66% of the county average.

INVENTORY    The main issue facing the market is still too few homes for sale.    San Lorenzo Valley only has 49 single family homes for sale (versus 48 at the end of the 1st quarter).    Scotts Valley: 46 (41).   Los Gatos Mountains, 26 (29).    In contrast, the City of Santa Cruz has nearly twice the number of listings right now at 43 (26).

DAYS ON THE MARKET Santa Cruz County homes are on the market for about 25 to 32 days on average now before going into escrow with a buyer.  Well priced and particularly the most affordable homes are still selling quickly with multiple offers, but some upper middle to higher end listings are lingering on the market.   I believe part of this is because home prices are less affordable now for many entry level buyers.   It’s the entry level buyer that in many cases triggers current home owners’ ability  to buy a larger or better home, so it’s an inevitable chain reaction in my opinion.       Santa Cruz County now has 396 homes for sale in (compared to only 288 homes in the first quarter).

SILICON VALLEY Santa Cruz County is influenced by real estate conditions in the Silicon Valley.    In Santa Clara County, single family homes started 2015 at a median sales price of about $850,000…rising to about $945,000 by December 2015.   By March 2016, the average sales price was $1.38 million, holding relatively steadily through the end of July.

SANTA CRUZ COUNTY’S APPEAL Besides the obvious appeal of our relatively lower home prices, many people from the Silicon Valley are enchanted by our beaches, numerous state parks, smaller cities and towns … The Santa Cruz lifestyle also conveys benefits like lower stress, crime rates and smog. I often hear people say they would rather commute through the mountains than sit in traffic and spend more money to live “over the hill.”       Right now I’m working with a first time home buyer who works “over there”, an investor who’d rather not pay rent for their UCSC-bound post-grad student, and some retirees who simply love it here.       The sellers I’m currently working with are retiring to mountains and lakes elsewhere.

TECHNICAL ANALYSIS – IS SANTA CRUZ COUNTY APPROACHING A REAL ESTATE BUBBLE?

Real estate typically moves in about 7-10 year cycles.    Here, we started to see appreciation around 2011, after the low in 2009.     Analysts are looking carefully at metro areas across the country to see if there are any bubble conditions yet.    Some of the factors that lead to bubbles include price appreciation that’s faster than wages and rents: San Jose and San Francisco arguably fall in this category.    On the other hand, mortgages have been difficult to obtain during this cycle, and renting is very expensive, so my feeling is the likelihood of default is pretty low.   Finally, population and jobs are growing faster than the rate of new construction throughout the Bay Area.     My hope is that this cycle functions more normally, moving toward price stability.   That’s how I interpret Santa Clara and Santa Cruz County home price comparisons between the first and second quarters this year.

The two sets of charts below illustrate this bit of a pause in the market right now:   A normal market, balanced between buyers and sellers, has about 6 months’ worth of housing inventory.   Santa Cruz County had about 2 ½ months of inventory at the beginning of the year.     Right now, there is about 3 ¾ months of inventory county wide, still in favor of sellers.    You can also see this is one of the factors that drove prices upward.  Now that there are more homes to choose from, prices are a bit subdued.     If this trend continues, it may increasingly favor home buyers.

SCC_Months_of_Inventory5_years__2016-07-25

SCC_Months_of_Inventory_2016_as_of_07-25

Next, you can see a correlation between months of inventory (a measure of supply and demand), and prices:

SCC_Sales_Prices_5_years_as_of_2016-07-25

Next: Santa Cruz County real estate price trends so far this year:

SCC_Sales_Prices_2016_as_of_07-25

REAL ESTATE MARKETS ARE HYPER LOCAL!   Nothing can replace the advice of a local and knowledgeable REALTOR® who can show you the specific trends in your neighborhood market and your specific price range.   Different communities and different price brackets definitely do not move in tandem. The question of how much a buyer should offer, or what price a seller should list at, takes in-depth research and knowledge!   Buyers or sellers should choose a REALTOR®who knows the inventory well and can knowledgeably compare a home’s asking price to other recent home sales.    I believe the best way to serve both my buyers and sellers is by consistently touring properties, talking to other agents, and tracking the final sales prices.

INTEREST RATES Given the weakness in the global economy, compounded by the uncertainty of “Brexit,” many think the Federal Reserve will pause and let the market absorb their first increase in interest rates in a decade last December.    Right now the market is expecting at most one more increase this year.   Most buyers are still able to get mortgage rates in the high 3% to low 4% range, depending on personal factors.

Curious what your home is worth?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you are considering selling, I’ll help you evaluate cost effective ways to make your home appeal to the most buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients.

Looking for your dream home?     I’ll help you secure financing, negotiate with the seller, review disclosures and potential red flags, attend inspections with you, and…hand you the keys!

*Statistically, these communities had too few home sales for the percentage changes to be meaningful.

Sources:  MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News

 

Santa Cruz Real Estate Prices 2016

Here are the latest real estate prices around Santa Cruz County for the first quarter of 2016

Santa_Cruz_Real_Estate_Q1_2016

On average, single family residence prices in Santa Cruz County rose about 10% during the first quarter over the last quarter of 2015.  As you can see in the above chart, each micro-zone is moving in a different direction.   Scotts Valley had an unusually high number of million dollar plus sales in the first quarter, so I believe the 20% figure is an anomaly.   Brookdale only had one sale – a foreclosed home.     Ben Lomond got off to a very slow start in 2016.    San Lorenzo Valley had far fewer upper end home sales during the first quarter, on about half the sales volume of the 4th quarter 2015.     Why?

The most widespread problem is that there are very few homes for sale!     Right now, San Lorenzo Valley only has 48 single family homes for sale.    Scotts Valley, 41.   Los Gatos Mountains, 29.   City of Santa Cruz 26.    Only 288 homes are for sale in Santa Cruz County!   The following chart shows the problem clearly.    A normal market, balanced between buyers and sellers, has about 6 months’ worth of housing inventory.   We have about 2 months of inventory.     You can also see in the charts below that this is one of the factors that is driving prices upward.

SCC_Sales_Prices_5_years_as_of_2016-04-14SCC_Months_of_Inventory_2016-04-14

CA_has_12_of_the_top_20_hottest_markets_in_the_US

Santa Cruz County is influenced by real estate conditions in the Silicon Valley, where prices continue to rise.    In Santa Clara County, single family homes started the year 2015 at a median sales price of about $850,000…rising to about $945,000 by December 2015.   By March 2016, the average sales price was $1.38 million.      One of my buyers was interested in a San Jose home that got multiple offers, over $100,000 above asking price – about 12%.

Fortunately for buyers in Santa Cruz County, while multiple offers are still common, the amount the average buyer has to pay above asking price is far less, on average:

Santa Cruz County                                                     Santa Clara County

SCC_Sales_Price_to_List_Price_2016-04-14.pngSanta_Clara_Sales_to_List_Price2016-04-14.png

The question of how much a buyer should offer is tricky: here’s where an experienced local REALTOR can really help you!   Choose an agent who knows the inventory well and can knowledgeably compare the desired home’s asking price to other recent home sales.

Our more affordable housing continues to attract Silicon Valley commuters, as well as second home buyers, investors, and retirees.    The lifestyle here holds appeal for people who would rather live closer to beaches and mountains, parks and recreation, amidst a lower population density which conveys benefits like lower stress, crime and smog.

Given the weakness in the global economy, many think the Federal Reserve will pause and let the market absorb their first increase in interest rates in a decade.    Right now the market is expecting one more increase this year, although some Fed Board Members are still talking about multiple rate increases.      December’s 0.25% increase in the Fed Funds rate has not affected the 30 year mortgage rate significantly, most likely because the increase was already factored in by the market.     Most buyers are still able to get mortgage rates in the low 4% range.

I’ll close with comments about the new consumer disclosure laws that went into effect in October of 2015.     “TRID” (TILA RESPA Integrated Disclosure, also known among agents as “The Reason I Drink”) has delayed closing schedules for months now, as lenders and title companies get used to the new requirements and adapt their internal software systems.     Many of the escrows I’ve closed were affected by delays ranging from a few days to as much as two weeks.

Curious what your home is worth?   Visit www.HomeValues24-7.com  for a quick and easy estimate!    If you are considering selling, I’ll help you evaluate cost effective ways to make your home sparkle.    My customized marketing plan is exceptional: contact me to see why I have so many repeat clients.

Looking for your dream home?     I’ll help you find financing, negotiate with the seller, inspect what concerns you, and hand you the keys!

*Statistically, some communities had too few home sales for the percentage changes to be meaningful.

Sources:  my independent research using MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News

 

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CNN Money reports – Buying a Home may Never get any Cheaper

Buying a home won’t get much cheaper

By Les Christie @CNNMoney May 3, 2012: 11:48 AM EST

Several housing experts are predicting that this year will be the last chance for homebuyers to cash in on the weak housing market.

NEW YORK (CNNMoney) — Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.

With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable — but it won’t stay this way for much longer.

Stuart Hoffman, chief economist for PNC Financial Services (PNC,Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.

A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.

Some economists, like Trulia’s Jed Kolko, expect home prices to pick up even more quickly. Trulia’s data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.

“This is a strong indicator that we will start seeing home price indexes, like the S&P/Case-Shiller, start to report home price increases this summer,” he said.

Prospective homebuyers who’ve been sitting on the fence shouldn’t worry if they aren’t quite ready to make the leap. Analysts are predicting that the initial price gains will be modest, at least, in most markets.

Hoffman, for example, is forecasting a 2% increase in 2013 compared with 2012. Meanwhile David Stiff, chief economist for Fiserv, predicts that prices will turn in the last quarter of 2012 and will rise 4.2% for the 12 months through September 2013.

Foreclosures start to fade. One major factor that will drive the trend is the cooling of the foreclosure crisis. Stan Humphries, chief economist for Zillow, said that the percentage of mortgage loans 90 days or more late, a good predictor of future foreclosures, is “falling fast.”

That percentage dropped 15% year-over-year to 3.1% through the end of 2011, according to the Mortgage Bankers Association. And the decline is accelerating: More than 70% of the decline came in the last three months of the year.

Before things slow down, however, buyers should brace themselves for a temporary spike in the number of foreclosures as banks start expediting the processing of hundreds of thousands foreclosures that were stuck in the system following the robo-signing scandal. That backlog should move more quickly now that new guidelines for processing foreclosures have been outlined in the $26 billion foreclosure settlement.

Many of the bank-owned properties currently coming out of the foreclosure pipeline are being snapped up by investors who are fixing them up and renting them out — often to those who were displaced by the foreclosure of their own home. That has helped to lift prices on foreclosed properties, according to Alex Villacorte, the director of analytics for Clear Capital, which specializes in housing market valuations.

“That could have a significant impact on the market overall in terms of providing a rising floor to home values,” he said.

In some markets hit hard by foreclosures, the turnaround in prices is already underway. Phoenix recorded an 8.4% jump in home prices during the three months ended April 30, compared with the three months ended January 31, according to Clear Capital.

“It’s crazy,” said Tanya Marchiol, founder of Team Investments, a Phoenix real estate investing firm. “Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000.”

Miami saw a 4.6% increase quarter-over-quarter through April, andTampa, Fla., was up 4.4%, according to Clear Capital.

Goodbye 3.8% mortgage. In addition to home prices, mortgages could also move higher.

Mortgage rates have been at or near historic lows for much of the past six months. The average interest rate for a 30-year, fixed-rate mortgage has not topped 4.5% since July 2011 and this week, it hit 3.84%, a new low.

But rates aren’t expected to remain at these record-low levels much longer. As the economy continues to recover, rates will move higher, said Doug Lebda, CEO of LendingTree, the online lending site. Although, he said, they will “stay very reasonable.”

The Mortgage Bankers Association is forecasting that the 30-year fixed will hit 4.5% by the end of the year.

Greater demand for loans will help fuel the increase, according to Lebda.

Even though mortgage rates have been cheap, borrowing for home purchases has been sluggish. The Mortgage Bankers Association estimates that homebuyers will take out mortgage loans totaling about $415 billion this year, an increase of less than 3% compared with 2011. Next year, however, it forecasts that amount will almost double to $706 billion.

As housing markets stabilize and prices stop falling, homebuyers will be even more confident about buying, said Humphries.

“People can now see the light at the end of the tunnel,” he said. “And that can be enough to get them off the fence.” To top of page