Santa Cruz Real Estate Experts Team Sedenquist

I decided to run a few numbers this last month to see how many homes were available under $500,000 in Santa Cruz County. I was very surprised to see that there were 270 homes. When I compared this to 3 years ago… are you ready? There was only 1 home in the whole county priced under $500,000! This number of 270 is currently shrinking, last I looked (during the last week of April) it was down to 233. We are starting to see a shift, and find more people out there ready to purchase homes again. This is great news! Why is this happening? Partly due to the new higher loan limits and the addition of more lenders making FHA loans. By the way, FHA loans offer much more than you might think. Here are a few of the highlights:

FHA Highlights

• FHA has no Declining Market Guideline.
  
• 95% LTV Cashout OK during a refinance.
  
• 97% LTV Purchase (that’s only 3% down payment)
  
• Credit Scores as low as 550
  
• Non-Occupant Co-Borrowers OK
  
• 100% of down payment funds can be Gift
  
• No Reserve Requirement
  
• 6% of Non-Recurring Closing Costs can be paid by Seller
  
• Loan Amounts up to $729,500

There’s more good news and we’d love to share it with you. I know, we keep telling you to get ready to make your move and buy something. Buyers haven’t been in such a strong position in Santa Cruz in many years.

We’d love to hear from you or your friends anytime.

Dan & Lyn
May 2008

For the latest in real estate news, trends, and advice, see our monthly client newsletter.

Forbes.com has rated the various real estate markets around the country and come up with a list of the 10 most risky markets.  Stay Away!!  Here’s the full story. . .

America's Riskiest Real Estate Markets
The riskiest housing markets are those where foreclosure rates are high, homes are selling slowly, local economies are struggling, and lenders are reluctant to make money available.

Forbes magazine examined the nation’s 40 largest metros and identified the 10 housing markets that are in the worst shape. These are the markets Forbes cited:

• Detroit – Prices are so low it’s hard to imagine them falling further. Foreclosures are five times the national average.
• Orlando, Fla. – The vacancy rate is 7.4 percent
• Cleveland – There’s been no job growth here since August 2006.
• St. Louis – Year over year, prices dropped 20 percent.
• Miami – The inventory of unsold homes has climbed steadily.
• Las Vegas – Job growth has been flat since the housing construction bubble burst.
• Sacramento, Calif. – The city has the nation’s highest rate of seller price reductions.
• Denver – The state has ninth highest rate of foreclosures in the country.
• Tampa, Fla. – Weak job market and high inventory of premium properties
• Phoenix – Housing inventory is five times higher than it was in 2005

Lenders have fled, foreclosures are on the rise, homes aren't selling and local economies have stalled.

Given the state of the country's housing market, it wasn't hard to find others like them. To do so, Forbes.com looked at the country's 40 largest metros and combined data on foreclosures, from RealtyTrac, a foreclosure listing service; job growth from the Bureau of Labor Statistics; transaction volume data from Radar Logic, a New York real estate research firm; and vacancy and current inventory rates from the U.S. Census Bureau and ZipRealty, an aggregator of multiple listing service data.

The riskiest were those that had the highest foreclosure rates, slow job growth (or job loss) and a rash of listed homes. By these measures, Orlando has everything working against it. Other spots, Denver, for example, exhibit negative characteristics like foreclosures, lending problems and vacancies, but are adding jobs, a sign that the local economy can better handle these difficulties.

Source: Forbes, Matt Woolsey (03/31/08) via REALTOR® Magazine Online

We’re just simple real estate salespeople gently trying to remind people that real estate has always been a great investment.  And you get to live in it.

Every once in awhile, even the media gets on that bandwagon and leaks some good news about the real estate market. . .

Why Now is a Smart Time to Buy
Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.

The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.

Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.

• Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.
• Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.
• Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.
• Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.

We all know that home prices are falling here along the Monterey Bay.  But what about home values across the country?  Are all these local price declines all bad?

Home values have declined across the country, giving homebuyers the best buys they've had since 2004.
By Les Christie (full article)

It may be the best time to buy a house in more than four years.

Home prices have dropped so quickly and so far that valuations - the difference between what a home should cost and its actual price - are the lowest they've been since 2004, according to a report...

Price declines have continued into 2008 and interest rates, although they have inched up lately, have been steady or lower compared to late last year. There have even been wage gains; personal income rose 0.5% in December. Soaring foreclosure rates have added inventory to many housing markets, depressing home prices further.

The biggest gains in affordability occurred in California, Michigan and Florida, which are areas that have also been some of the hardest hit by foreclosures. Those states registered 43 of the 50 biggest price declines.

For you saavy investors investigating how to get in on the foreclosure bonanza, it is important to find out which markets experiencing foreclosures are actually a good value.  Here’s more. . . 

Best Places to Get Foreclosure Deals
In markets where housing appears to be stabilizing, buying a foreclosure could be a very good deal.

Forbes magazine has analyzed the country’s 100 largest metro areas and then differentiated among inexpensive foreclosure markets and those that were undervalued.

For instance, there are plenty of homes going for practically nothing in Detroit, but the chances of recouping your investment are made more difficult because of the city's economic challenges. On the other hand in a city like Raleigh, N.C., where the local economy is booming, searching for and buying a discounted foreclosed property could be a very good deal.

Forbes identified the healthiest economies and then looked at the spread between median prices and foreclosure prices, with data supplied by RealtyTrac, to determine where banks and sellers were offering the largest discounts on foreclosed properties.

Here are the top 10 cities where the magazine believes the best bargains can be found:

1. Charlotte, N.C.
2. Raleigh, N.C.
3. Nashville, Tenn.
4. Oklahoma City, Okla.
5. San Antonio, Texas
6. Albuquerque, N.M.
7. Knoxville, Tenn.
8. Seattle, Wash.
9. Indianapolis, Ind.
10. Washington, DC-Arlington-Alexandria, Va.

Source: Forbes, Matt Woolsey and Jon Bruner (03/19/08) via REALTOR® Magazine Online

Real estate has always been expensive here along the Monterey Bay relative to other areas of California.  Yet ordinary people with normal incomes have steadily been buying homes all through our history.  How do they do it?  Getting help from your parents is a very common path.  Here’s more. . .

Helping the kids buy a first home is a time-honored tradition that has become even more significant as home prices rise and incomes flatten.

Here are three ways parents can help their children:

• Cash. For parents with the means, cash is clean and easy. An individual can give $12,000 a year to a recipient without having to pay a tax on the gift. Therefore, a couple could give an adult child and the child's spouse a total of $48,000 in one year. To keep things simple, the gift is best given well in advance of the mortgage application.
• Cosigning or otherwise jointly investing in the property. This can work for parents of more limited means or those who want to be paid back. The biggest risk is that the offspring will be unable to meet their obligations and it will affect the parent’s credit rating.
• Knowledge and hard work are worth gold. Parents who can’t afford to help financially may be able to provide experience and even some sweat equity to help the kids make a smart housing choice.

Source: Market Watch (03/21/08) via REALTOR® Magazine Online

The volume of existing-home sales is expected to remain stable through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

Lawrence Yun, NAR chief economist, says many buyers have been waiting for higher mortgage loan limits.

“The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he says. “Therefore, a notable rise in home sales can be anticipated in the second half of the year."

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.

"This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity,” Yun says. “Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.

Market Forecast
Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.6 million in 2009. The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.

A pattern of disparate price performance continues around the country with a roughly even split between up and down markets. Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J.

At the same time, many areas that have lost jobs are showing price declines.

“Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace,” Yun says. NAR’s housing affordability index is forecast to rise 14 percentage points to 127 in 2008.

New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009.

“As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half,” Yun said. “That will permit a quicker return to balanced market conditions in many local areas.”

Everyone knows that bad news sells.  The media is banging the Foreclosure Crisis gong relentlessly.  But remember, most home owners are doing fine. . .

Although the national foreclosure rate rose 79 percent between December 2006 and December 2007, the rate was still only 1.033 percent of all homes. This is a regional problem, not reflective of the overall real estate market.

• Foreclosure statistics are rarely presented in context. Because about 30 percent of homes are owned free and clear, only seven-tenths of 1 percent of all homes were in foreclosure last year.
• If you rank the top 100 foreclosure areas identified by RealtyTrac as reported by MSN Money, only 34 areas had foreclosure rates above the group average.
• Fifty-one areas had foreclosure rates of 1 percent or less.
• Foreclosure rates actually fell in 14 of the top 100 foreclosure areas.

As people get used to the idea of a recession, and the economic stimulus plan that Congress enacted starts to take effect, the housing world is beginning to calm down.  We are still experiencing price declines in our market, but perhaps the end of the slide is approaching.  One way for you to privately watch the market before deciding to buy or sell is to sign up for our Property Alert program through our Team Sedenquist website.  Here is a link to get started. . .

http://www.santacruzteam.com/home/property/alert/

You’ll be ready to make a move when the right home comes on the market.  Dan and I are here for you and will help guide you through the process. . .

We’d love to hear from you or your friends anytime.

Dan & Lyn
April 2008

For the latest in real estate news, trends, and advice, see our monthly client newsletter.