Santa Cruz Real Estate Experts Team Sedenquist

I always enjoy hearing about home prices in other markets around the country.  The National Assoc. of Realtors just released these 2006 statistics on the markets that show the highest price appreciation and the greatest decreases in home value in the country.  Check these markets out.

5 Metro Areas with Highest Price Growth
Home prices are declining year over year for the first time in the last 10 years.  Zillow.com estimates that in the fourth quarter of 2006, prices declined nationwide by 0.48 percent compared with the fourth quarter of last year. Zillow.com measured home value changes in 75 metropolitan areas. Here are some of the site’s findings.

Five metropolitan areas where prices have increased the most in the last year:

1. Lakeland-Winter Haven, Fla.: 25.88 percent
2. Yuma, Ariz.: 25.66 percent
3. Myrtle Beach, S.C.: 21.24 percent
4. Flagstaff, Ariz.: 19.02 percent
5. Ocala, Fla.: 17.56 percent

Five metropolitan areas where prices have fallen the most in the last year:

1. Panama City, Fla.: -11.84 percent
2. San Luis Obispo-Atascadero-Paso Robles, Calif.: -11.35 percent
3. Punta Gorda, Fla.: -9.23 percent
4. Sarasota-Bradenton, Fla.: -8.99 percent
5. Greenville-Spartanburg-Anderson, S.C.: -8.73 percent

Lynette and I are starting to see an increase in client call activity and agent showings at our listings.  We hear that the title companies are getting busy again.  We think our Santa Cruz County market is quietly picking up steam.

Here is some more good news – new housing statistics from the National Assoc. of Realtors, released last week.

• Steady Climb Seen for Existing-Home Sales
  Consumers are beginning to respond to more favorable housing market conditions, with existing home sales expected to steadily increase into 2008, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
  
  “After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008,” says David Lereah, NAR’s chief economist.
  
  Existing-home sales, which reached the third-highest total on record of 6.48 million in 2006, are forecast at 6.44 million in 2007 and 6.64 million in 2008.New construction, on the other hand, will take longer to recover. Following a fourth-best 1.06 million in 2006, new-home sales projected to decline to 961,000 this year and then rise to 971,000 in 2008. “We look for that sector to turn around later in the year,” Lereah adds.

• The 30-year fixed-rate mortgage is forecast to rise to 6.7 percent by the second half of the year. Freddie Mac reported the 30-year fixed rate at 6.14 percent in December, but it has been trending up since. “Mortgage interest rates remain favorable, and a gradual rise means potential buyers have some time to weigh purchase decisions,” Lereah says. “When existing-home supplies become more balanced between buyers and sellers this spring, we’ll see some modest price gains.”

• The national median existing-home price should grow 1.9 percent to $226,200 in 2007, after rising only 1.1 percent in 2006. The median new-home price is expected to increase 1.8 percent to $249,800 in 2007, following a similar gain last year. Stronger gains are forecast for 2008, with existing-home prices rising 3.2 percent and new-home prices increasing 3.4 percent.

• The unemployment rate is seen to average 4.7 percent in 2007, compared with 4.6 percent last year. Inflation, as measured by the Consumer Price Index, is projected at 2.0 percent this year, down from 3.2 percent in 2006, while growth in the U.S. gross domestic product is likely to be 2.8 percent in 2007, down from 3.4 percent last year. Inflation-adjusted disposable personal income will probably rise 3.7 percent in 2007, up from a gain of 2.7 percent in 2006.

OK, Ok, ok.  I know I should be writing and posting new blog comments frequently, and one of my 2007 resolutions is to do just that.  But like everything else in this business, when it gets busy, I get . . . BUSY.  Why is that significant?  I don’t think the huge collapsing housing bubble that the media keeps talking about will happen, and certainly not here on the Monterey Bay.  Team Sedenquist enjoyed our busiest month ever in December.  Doesn’t look like much of a bubble to us.

Here are some comments from the National Association of Realtors (NAR) about predictions for housing in 2007.

The chorus is growing in the chant that housing has struck bottom and will slowly rise again. A new report by the National Association of Realtors suggests rising existing home sales through 2007 and 2008 and a turn-around for new home starts by summer 2007, but homes won't appreciate over inflation rates for the first time in decades. And that's a little scary.

Since 1968, when the NAR first began keeping records, homes have beaten inflation by one or two percentage points annually, making them a good investment, coupled with tax incentives and other benefits, for homeowners. However, between 2001 and 2006, homes appreciated 50 percent, causing affordability issues to put a stop to rising prices. Then the financial press began drumming on the housing market as a bubble bursting, causing buyers to sit on the sidelines. The effect was slower sales, falling prices and buyers and sellers at a standoff.

NAR economists expect existing-home sales for 2006 to come in at 6.50 million, making the year the third highest on record. For 2007, the trade organization predicts a total of 6.42 million homes sold for 2007.

Helping to make home purchases more attractive will be mortgage rates held under seven percent. The 30-year fixed-rate mortgage will probably rise to 6.7 percent by the fourth quarter of 2007, says the NAR.

“The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers,” Lereah says.

So, Buyers - get off the fence and take advantage of this market.  Sellers - be confident and get your homes on the market.  2007 will be another great year in Real Estate!

Another reason to use an honest, licensed REALTOR® to manage your real estate transactions for you- the P.T. Barnum syndrome*. . .

Wednesday, September 27, 2006 (USA Today)

Nice Oceanfront Property for Sale ... in Arizona?

Land scams are alive and well on the Internet.

Just as scam artists sold thousands of lots in phantom subdivisions decades ago, online wheeler-dealers are snookering a new generation of people who are looking for an inexpensive deal on a retirement home in a warm place.

Many of the lots being sold have never been developed because they're on swampland in Florida or isolated desert ranchland in Texas and Arizona. There is no road access, water, or power. The land might be developed someday, but county officials who are busy processing a surge in deed transfers are skeptical.

"If someone does buy one of these parcels thinking they're going to build their dream home on it now, that's really a problem," says Bart Medley, attorney for Texas' Jeff Davis County.

Texas officials say many of the lots have been sold two or three times to unsuspecting buyers who stop paying property taxes once they realize they own a worthless patch of dirt. The county takes possession, resells the lots in one chunk, then the new owner starts the process all over.

Web sites say they can’t take responsibility for buyer stupidity. They just provide the vehicle to list properties. "The actual transaction happens directly between the buyer and seller," says Catherine England, spokeswoman for eBay, which lists and auctions properties in its real estate section.

* There’s a sucker born every minute.
   - P.T. Barnum, Founder, Barnum & Bailey Circus

Heather Boerner, who used to write for the Santa Cruz Sentinel, is now living and writing in San Francisco.  Sometimes her real estate related articles were off the mark down here, but she describes the current real estate market pretty well in this San Francisco Chronicle article from last weekend.  It is a little long, but a good read.  Let us know what you think.

Sunday, September 24, 2006 (San Francisco Chronicle)

A HEALTHY GIVE AND TAKE
Sellers aren't getting what they want but neither are buyers as real estate market drifts toward normalcy

Heather Boerner, Special to The Chronicle

When Van Torma put his Alameda home on the market in April, he was expecting packed open houses, multiple offers and a quick sale. Five months later, his house is still on the market and Torma is perplexed.  "In retrospect, I should have grabbed the first offer, but I didn't know," he said. "Having sold a house previously in Oakland in three weeks, with multiple offers, that was my frame of reference. It turns out I put this house on the market when it was turning, going from a sellers' market to kind of entering a buyers' market."

Torma, 44, is one of a growing legion of "motivated sellers" populating classifieds, open houses and real estate offices around the Bay Area. He has slashed the price of his home, paid for staging, made upgrades and done a marketing blitz. The original listing price was $930,000. Now it's $845,000, a fair amount less than the $875,000 Torma turned down in April.

And this market shift is not just local: Tom Stevens, president of the National Association of Realtors, said at a U.S. Senate hearing on the housing market earlier this month that there has been a sharp decline in sales across the country, resulting in a glut of houses on the market. This is especially true in California and other overvalued markets, where, Stevens warned, "These areas are vulnerable to outright price declines."

Those declines are happening, albeit slowly. According to DataQuick Information Services, Bay Area home sales have reached their lowest levels in 10 years while inventory continues to rise. As a result, home sellers and builders are resorting to offers they never would have considered even a year ago -- everything from sellers offering to pay closing costs and months of homeowner association dues to vacation offers to agents who sell the most condos in new upscale buildings.

What that means for people looking to buy or sell a home is slightly lower prices, more incentives to purchase, more negotiating power for buyers and potential savings of thousands of dollars.  "Sellers are facing hard realities," said Cece Blase, an agent with Paragon Real Estate Group in San Francisco. "It used to be that a buyer would take a house as-is, all cash, no contingencies. Now sellers are so anxious that they'll negotiate the cost of repairs and throw some goodies into the deal. It's a totally different market than it was a few years ago."

Buyers' market or bust?

But are we in a buyers' market? The numbers indicate that we may be. Home prices are still hovering around $700,000 for the Bay Area, but there are signs of a slowing market: Houses are staying on the market longer, leading to price reductions and homes withdrawn from the market, said Andrew La Mont, a real estate agent who keeps statistics on the housing markets in San Francisco and San Mateo counties. "We are having a record number of price reductions," he said. "There are still a lot of people hoping to recoup last year's prices."

But not everyone is convinced, and many agents are trying to convince buyers that now's the time to act.  "People laugh when I say, 'Don't wait to buy,' " said Pacita Damicali of Gallagher and Lindsey in Alameda. "But seriously, it still makes sense to buy instead of renting because you're gaining equity."

Max Lo of Stanley Lo Green Banker in Daly City has 15 years in the real estate markets from San Jose to San Francisco. He says Bay Area expectations of the market are so skewed by years of bidding wars and double-digit home appreciation that we don't know what a buyers' market looks like anymore. He and others, such as La Mont, argue that we're simply in a balanced market and that sellers are just realizing that they have to price their homes more realistically.

"Overall, the market has slowed a little and there are some price reductions, but I don't think you can call it a buyers' market," Lo said.  "I think we've just been spoiled by the previous markets."

The change in the market has inspired sellers, however, to entice buyers with offers they never would have considered in 2005.  One homeowner in Foster City is offering his home for no money down and a $10,000 credit. The seller of a condo in San Francisco is offering a plasma screen TV and surround sound system with his unit. Other sellers are offering free marble countertop upgrades in new homes.

Blase said she's seen offers in new buildings offering free upgrades. La Mont said many agents now offer to split the cost of staging their homes with the sellers to make the homes competitive.

Bird-in-the-hand approach

These incentives are modest, however, compared with what is happening elsewhere in the country. According to the Associated Press, National Association of Realtors President Stevens discovered that the home across the street from his in Great Falls, Va., comes with a new, $60,000 Mercedes in the garage.

Whether it feels like a buyers' market depends on whom you ask. For Elisa Rassen, 28, who just bought her first home in San Francisco, it doesn't seem to be. Despite flagging sales, she still saw several homes with multiple offers. Over her six-month search, Rassen was "flabbergasted" by the Noe Valley house that was "so destroyed it was scary" but was still on the market for about $1 million. She saw tons of condos for about the same price.

Eventually, she bid on a condo between the Castro and the Mission for $900,000 before backing out at the enormity of the cost. "I had a panic where I thought, 'I can't believe I was going to pay close to a million dollars for basically an apartment!' " she said. "It's not like homes are suddenly $400,000."

With her parents' help, Rassen bought a multiunit fixer-upper in the same area. "I like to call it a shipwreck. It's beautiful but falling apart," she said. The rental income will help her pay the mortgage, and she gets more for her money. She was able to negotiate some contingencies from the seller. Still, the purchase "didn't feel super easy.  I don't have anything to compare it to," she said. "But it did feel competitive and it felt expensive."

But it's a sign of the slowing market that Rassen was able to get in at all. Marissa Harnett remembers what it was like to buy her home in the Montclair district of Oakland 11 years ago: She and her husband put in bids on four different houses, each time encountering one bidding war and lots of false starts. They lost out on all but the last home.

So despite the fact that she and husband Andrew welcomed two boys -- Matthew, 11, and Alex, 8 -- into their family since purchasing their home, they avoided wading into the insane housing market of the past several years. The slightly cooling market brought out Harnett, who, like other buyers, didn't want to compete in the previous market.

"We were intimidated by the market before, with the frenzied bidding," she said. "We had friends who got into that, and it was just unappealing to us. We'd rather get less for our current home and also get our future home at a less stressful time and a lower price without as much competition."

Her strategy worked. The couple sold their Montclair home and bought a larger one in Orinda in just a few months, and in just enough time for the boys to start school earlier this month.

A shift in power

The experience this time was quite different. As buyers, they felt they could offer less than the asking price because the house had been on the market awhile. The seller countered and the Harnetts were able to find a price that pleased everyone.

As sellers, though, the experience was an eye-opener. After only a few days on the market, the Harnetts got an offer. They had to decide: Should they wait it out for multiple offers or sell now? It turned out the people who bid on their Montclair house felt just as empowered to ask for contingencies as the Harnetts had at their new home. "We felt like we didn't have any power," she said. "You just don't have control. We could say no to them, but they could say, 'Forget it.' "

The couple decided to sell. "In the end, we took our Realtor's advice, that the bird in the hand approach was better for us," she said. "Even six months ago it was different. Six months ago, we could have gotten more for our house. In the end, we did it the way we needed to. We're not greedy.  For what we bought if for, and for what we bought our new home, it was fine."

Source: SF Chronicle and Heather Boerner

The real estate market slowdown is gaining strength across the country.  Interest rates are still low, and unsold listing inventories continue to climb.  The slowdown is discussed endlessly in all the media because we know that “bad news sells.”

But let’s take all this housing news with a grain of salt.  Unless you have to quickly sell your home into a slow market, all this negative talk is just theoretical.  If your timing is fortunate and you get to buy in a slow market, your negotiating dollars go further.

The U.S. Senate convened a panel yesterday to talk about the slowdown in the housing market.  Here is their encouraging report. . .

Housing Experts Reassure U.S. Senate Panel

The U.S. housing market is drifting down, but it is unlikely to crash, economists and business leaders told the Senate Banking Committee on Wednesday.

David Seiders, chief economist for the National Association of Home Builders, predicts the housing market would bottom out “around the middle of next year.”

In prepared testimony, he told the committee home sales and housing production should transition to a gradual recovery that will raise housing market activity back to a sustainable level by the latter part of 2008.

“True housing busts are a relatively rare event,” Richard Brown, chief economist at the Federal Deposit Insurance Corp., told the committee.

Prior to 2000, Brown says the FDIC observed 54 housing booms and only 21 housing busts. Of the busts, only nine followed a boom in the preceding five years.

Brown says that after a boom, housing prices are more likely to stagnate rather than drop sharply. Those housing doldrums can be “fairly painful” for home owners, builders, and real estate professionals, Brown says, but they fall short of causing distress for the overall economy.

Moments of Zen
I have learned from experience that the greater part of our happiness or misery depends on our dispositions and not on our circumstances.
    - Martha Washington

Will this matter a year from now?
    - Richard Carlson Ph.D., Author "Don't Sweat the Small Stuff"

THE SKY ISN’T FALLING HERE. . . Much is being made in the Chicken Little Media lately telling the public that because of all the Adjustable Rate Mortgages (ARM) loans that were used to buy or refinance homes over the past 2 years, as the interest rates for these loans increase, there will be many more defaults and foreclosures, and home prices will collapse.  Santa Cruz County isn’t seeing any of this ARM-triggered price decrease.  Here is an interesting study showing which areas of the country are most at risk for ARM “Rate Shock”. . .

Consumer watchdog group ACORN has released the results of its study of communities with the most adjustable rate mortgages. The report listed the top 10 cities most at risk for “rate adjustment shock.”

These communities are Detroit and Flint, Mich.; Memphis, Tenn.; Jackson, Miss.; McAllen, El Paso, Laredo and Brownsville, Texas; Springfield, Ill.; and Birmingham, Ala.

High-cost loans represented more than two of every five home-purchase and refinance loans in the 10 communities most at risk, ACORN reported in a news release. ACORN is an acronym for Association of Community Organizations for Reform Now and it advocates for low- and moderate-income families.

For its study, ACORN analyzed data available under the Home Mortgage Disclosure Act. It looked at 130 metropolitan areas and the disparities between borrowers of different race and income levels. The study concluded that minority neighborhoods are at a greater risk of rate shock than neighborhoods that are predominantly white, due to the higher percentage of subprime loans held by homeowners in these communities.

Moment of Zen
Kathyrn Carpenter offers good advice about worrying:
Don’t get your knickers in a knot. Nothing is solved and it just makes you walk funny.

Whoa, now, real estate fans.  I just read the housing related article in today’s Santa Cruz Sentinel.  Several items jumped out at me.  First, our real estate market is slower than we’ve recently experienced.  There are fewer homes selling, and many more nice homes on the market.  It probably is becoming a Buyer’s market where Sellers will have to negotiate and compete for qualified Buyers.  And home prices are becoming more negotiable. 

However, the median single family home price edged upward slightly to $767,000 from last month’s $760,000.  And 147 homes in our local market did sell and close escrow during July.  I decided to look back over the past few years to see how this July compared to past July sales numbers.

2006          147 homes sold
2005          192 homes sold
2004          274 homes sold
2003          210 homes sold
2002          225 homes sold

So looking at these numbers, we can assume that the “normal” rate of homes sold in this county during July is 210 homes.  That means that we are off the pace this year by around 30%.  Last year was off by around 9%.  2004 was ahead of normal by around 31%.  2003 was average and 2002 was ahead by 7%.

What does all this mean?  The Sky isn’t falling, Chicken Little.  Well-qualified Buyers are becoming King, once again.  Home prices are negotiable.  Sellers will have to make more concessions to get in contract with good Buyers.  And Real Estate agents are having to work plenty hard to keep transactions together. 

More real estate observations to come, my friends. . .

David Lereah, chief economist for the National Association of Realtors, offers this prediction for the coming months in national real estate.  “Make no mistake, a soft landing with cooling sales and easing appreciation this year will help settle the market in two ways.  First, it’ll give household income a change to gain ground lost to home prices.  Second, it’ll drive safety-conscious buyers back into more stable fixed-rate financing products.  Despite what you hear in some media reports, there’ll be no hard landing.  Even in the areas seeing the most pronounced leveling of home sales, such as Los Angeles and Phoenix, new jobs and economic growth remain strong.  That vibrancy combined with continuing favorable trends in demographics and interest rates, among other things, will sustain solid housing demand.  So, I would resist getting misty-eyed over the passing of the boom.  Although some dark clouds like rising oil prices and an unexpected interest rate hike could bring a chill, a cool breeze is just what we need to ensure a temperate tomorrow.”

Moment of Zen
Problems are only opportunities in work clothes.
    - Henry J. Kaiser