Santa Cruz Real Estate Experts Team Sedenquist

Or maybe not.  It is interesting to see the country waking up to find ourselves in a financial mess.  Even more shocking?  Putting the wrong crew in power in Washington does actually make a difference.  Will the new president wield a magic bullet to fix the economy?  Time will tell. . .

Obama, McCain Seek to Fix Housing Problems
Which candidate would do a better job of handling housing prices?

According to a recent AP-Yahoo News poll, 25 percent of those surveyed said Barack Obama and 17 percent thought John McCain. But nearly 30 percent said neither.

Both Obama and McCain envision the Federal Housing Administration providing new, cheaper mortgages to distressed home owners.

Obama wants to create a $10 billion fund to counsel distressed home owners before they slide into foreclosure; help people sell homes they bought but could not afford; and team with state governments, community groups, and lenders to ensure loans can be modified in a timely manner to avoid foreclosure or bankruptcy.

McCain sees a more limited government role. "In some cases, lenders and borrowers alike were caught up in the speculative frenzy that has harmed the housing market," the Arizona senator said. "It is not the responsibility of the American public to spare them from the consequences of their own bad judgment."

Although most voters think the next president will have a "great deal" or "some" influence over housing prices, there is unlikely to be a quick fix.

"The odds of that are slim to none," says Cal Jillson, political science professor at Southern Methodist University. If the next president can make people more optimistic about the future, "the slow rebuilding of confidence will help to increase home values," he contends.

Source: The Associated Press, Jeannine Aversa (07/06/08) via REALTOR® Magazine Online

Everyone agrees that the long term prospects for our real estate market show continued growth and increasing demand.  But where is this demand going to come from?  Most everyone I know already owns a house and is waiting for prices to head back up.  Harvard University offers this bit of bright news. . .

HOUSING DOWNTURN SLOW TO REVERSE, BUT DEMAND EXPECTED TO CLIMB OVER NEXT DECADE
Record numbers of foreclosures, coupled with tighter lending practices, will make it more difficult for the country to recover from the current housing slowdown, but immigration growth is expected to create a demand for more homes over the next decade, according to a new study released Monday by the Joint Center for Housing Studies at Harvard University.

"The State of the Nation's Housing 2008" says that a return to home affordability levels seen in 2000 will take a combination of continued home-price declines, interest rate reductions, rent deflation, and a boost in consumer spending. "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability," said Nicolas P. Retsinas, director of the center.

The report adds that the credit crunch stemming from the subprime mortgage crises will likely continue to drag on the nation's economy across several sectors for an unforeseeable amount of time. The study does suggest that immigration is expected to keep up with its current 1.2 million annual pace over the next decade, which, coupled with other social and cultural factors, should feed a consistent rise in demand for more housing.

More real estate statistics.  This time showing median prices from much, much more expensive markets in our golden state.  Check out this list of areas where home prices are actively climbing!  What economic recession?  What real estate downturn?

Statewide, the 10 cities with the highest median home prices in California during May 2008 were

• Los Altos, $1,710,000
• Burlingame, $1,700,500
• Saratoga, $1,506,500
• Mill Valley, $1,475,000
• Los Gatos, $1,350,000
• Newport Beach, $1,250,000
• Cupertino, $1,172,500
• Santa Barbara, $1,066,000
• Rancho Palos Verdes, $950,000
• San Carlos, $900,000

Statewide, the 10 cities with the greatest median home price increases in May 2008 compared with the same period a year ago were

• Sonoma, 61 percent
• Cupertino, 16.7 percent
• Mill Valley, 14.6 percent
• Los Gatos, 10.2 percent
• Sunnyvale, 4.7 percent
• Fullerton, 3 percent
• Burlingame, 2.1 percent
• Santa Barbara, 2 percent
• Los Altos, 1.8 percent
• Folsom, 0.5 percent

If you’re wondering how many single family homes in Santa Cruz County priced under $500,000 are available on the market, I have some very interesting news for you.  Over the last two months I’ve posted these numbers as compared to three years ago when there was only 1 home.  Two months ago there were 270, last month it went up to 292, and today…… down significantly at only 138 homes.  Remember, these totals are for single family homes, not including condos or townhomes.  I believe we’re seeing a shift in Buyers attitudes.  I think Buyers are realizing that it’s time to jump in and buy before the market changes.  With lending guidelines getting ever more difficult, and interest rates climbing, it may be time for you or someone you know to make your move!

If you have been considering a purchase, but waiting for the market to reach bottom, we are getting close.  Don’t wait too long and miss the boat!  Give us a call and we’ll see if the time is right for you.

Dan & Lyn
July 2008

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

Every once in a while, Supergeek here wants to look at real estate market statistics to see what the regional trends are.  Have we reached the bottom?  Are home prices going up yet?  How does this market compare with markets of recent years?  Read on, faithful statistics geeks, for a mixed but encouraging message. . .

C.A.R. reports sales increased 18.1 percent; median home price fell 35.3 percent in May
LOS ANGELES (June 25) – Home sales increased 18.1 percent in May in California compared with the same period a year ago, while the median price of an existing home fell 35.3 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

“Home sales exceeded 400,000 last month for the first time since early 2007. While this is a welcome sign for the market, it was due in part to the large share of distressed homes for sale in many parts of the state,” said C.A.R. President William E. Brown. “Sales also rose above their year ago levels for the second month in a row after 30 consecutive months of year-to-year decreases. The lower prices associated with distressed sales along with favorable interest rates both contributed to higher sales levels.”

Closed escrow sales of existing, single-family detached homes in California totaled 423,700 in May at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 18.1 percent from the revised 358,640 sales pace recorded in May 2007.

The statewide sales figure represents what the total number of homes sold during 2008 would be if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The median price of an existing, single-family detached home in California during May 2008 was $384,840, a 35.3 percent decrease from the revised $594,530 median for May 2007, C.A.R. reported. The May 2008 median price fell 4.7 percent compared with April’s $403,870 median price.

“The statewide median price declined 35.3 percent to $384,840 in May, a record for year-to-year percentage decreases in the median, reflecting the effect of large numbers of short sales and foreclosures in the market,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “With the statewide median in the $585,000- to $595,000-range through August of last year, we expect the market to continue to experience large year-to-year adjustments through the summer, even if the median price holds steady over the next few months.”

Highlights of C.A.R.’s resale housing figures for May 2008:

• C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2008 was 8.4 months, compared with 10.7 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
• Thirty-year fixed-mortgage interest rates averaged 6.04 percent during May 2008, compared with 6.26 percent in May 2007, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.24 percent in May 2008, compared with 5.52 percent in May 2007.
• The median number of days it took to sell a single-family home was 49.7 days in May 2008, compared with 50.8 for the same period a year ago.

In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 4.1 percent, or 15 out of 369 cities and communities, showed an increase in their respective median home prices from a year ago.

How many times every day do you notice other drivers that are completely distracted by their cell phone conversations and aren’t driving their cars well?  Worse yet, how many of us know teens that actually text message each other while driving?  Good news comes today from Sacramento for all of us that think driving and cell phone use aren’t really compatible. . .

NEW CELL PHONE LAWS FOR DRIVERS TAKE EFFECT JULY 1
Under a new California law, all drivers will be prohibited from using handheld wireless devices, including cell phones, while driving beginning July 1. Driver's 18 and older may use a headset or other hands-free device, but drivers under the age of 18 are prohibited from using any form of wireless telephone communication device while driving, even with a hands-free device.

Drivers who violate the new laws face fines of up to $190.

CHP Wireless Telephone Laws FAQs
Two new laws dealing with the use of wireless telephones while driving go into effect July 1, 2008.  Below is a list of Frequently Asked Questions concerning these new laws.

Q: When do the new wireless telephone laws take effect?
A: The new laws take effect July 1, 2008

Q: What is the difference between the two laws?
A: The first law prohibits all drivers from using a handheld wireless telephone while operating a motor vehicle. (Vehicle Code (VC) §23123). Motorists 18 and over may use a hands-free device. The second law prohibits drivers under the age of 18 from using a wireless telephone or a hands-free device while operating a motor vehicle (VC §23124).

Q: What if I need to use my telephone during an emergency, and I do not have a hands- free device?
A: The law allows a driver to use a wireless telephone to make emergency calls to a law enforcement agency, a medical provider, the fire department, or other emergency services agency.

Q: What are the fines if I’m convicted?
A: The base fine for the FIRST offense is $20 and $50 for subsequent convictions. According to the Uniform Bail and Penalty Schedule, with the addition of penalty assessments, a first offense is $76 and a second offense is $190.

Q: Will I receive a point on my drivers license if I’m convicted for a violation of the wireless telephone law?
A: NO. The violation is a reportable offense: however, DMV will not assign a violation point.

Q: Will the conviction appear on my driving record?
A: Yes, but the violation point will not be added.

Read more at CAR.org

Buying and holding Santa Cruz real estate has historically been a great thing. To be safe from normal economic downturns, and to guarantee attractive returns, the savvy investor must always keep a diversified investment portfolio in addition to real estate that includes stocks and bonds from companies based in the United States and increasingly in other countries. I ran across this article on The Motley Fool that makes perfect sense to me. You may be aware that Lynette and I traveled to China in late 2007. I came away from that trip stunned at the size and momentum of China and resolved to find a way to invest some of my own money into that exploding economy.

The Greatest Opportunity in Our Lifetime
By Bill Mann May 27, 2008

The better environment for finding long-term winners is in an economy that is growing so fast and generating so much wealth that companies aren't necessarily destroying each other -- yet.

That market isn't the United States. It isn't Europe. It's China.

China is a once-in-a-lifetime investment opportunity. But you have to know what you're doing.
You also have to be patient. China's like that eighth-grader you know who is going to be unbelievable at basketball someday: He's already got the crossover dribble, the court vision, he's 6'5" -- but he's 14, and still makes mistakes typical of a 14-year-old. China's still unpredictable, like the adolescent market that it is. It has an unbelievable entrepreneurial culture, but does not yet have a fully formed culture of protecting minority shareholders.
This is why the strategy most big foreign investors are following in China is such an unbelievable mistake. They're investing in the big state-owned enterprises, which, by and large, have neither an entrepreneurial spirit nor a great affinity for protecting shareholder interests. Buying these companies is sort of like buying a house in Bakersfield because you always wanted to live in California. Good idea -- bad execution.

Read more at The Motley Fool

Even here in the Trustafarian la-la-land of Santa Cruz, foreclosures and mortgage defaults are starting to control the price of our real estate, especially in the ‘starter home’ range of $500,000-$800,000. The more bank-owned properties, the lower the prices for homes will be across the market. Banks don’t want to own properties and they will sell homes at bargain basement prices to get out of owning them.

Here is an article from Bloomberg reporting April mortgage insurance statistics that says things aren’t going to get better anytime soon. . .

New Overdue Home Loans Swamp Effort to Fix Defaults
By Josh P. Hamilton and Bob Ivry

May 30 (Bloomberg) -- Newly delinquent mortgage borrowers outnumbered people who caught up on their overdue payments by two to one last month, a sign that nationwide efforts to help homeowners avoid default may be failing.

In April, 73,880 homeowners with privately insured mortgages fell more than 60 days late on payments, compared with 39,584 who got back on track, a report today from the Washington-based Mortgage Insurance Companies of America said. Mortgage insurers pay lenders when homeowners default and foreclosures fail to cover costs.

Foreclosure filings surged 65 percent and bank seizures more than doubled in April compared with a year earlier as rates on adjustable mortgages increased, according to RealtyTrac Inc. Lawmakers and Federal Reserve officials are trying to ease the worst U.S. housing slump since the Great Depression through tax rebates, expanded federal mortgage insurance and other programs.

"It's going to take a while before you see the impact of the government's plans, if you can even see a discernable one,'' said Steve Stelmach, an insurance analyst at Friedman, Billings, Ramsey Group Inc. in Arlington, Virginia.

Read more at Bloomberg.

Hey, although Santa Cruz didn’t make this top 5 list, I still am bullish on Monterey Bay properties being among the best vacation home values in the country. Having said all that, here is an interesting rating of the top 5 second home bargain locations around the country according to SmartMoney.com. I find this interesting. The only California location on this list is Lake Tahoe, which historically has been dramatically expensive relative to other vacation destinations. My how times do change. . .

TOP 5 Bargain Places to Buy a Vacation Home
By Kelli B. Grant,
Reporter, SmartMoney.com

Credit-crunch-squeezed homeowners and investors are unloading second homes en masse, offering up desirable vacation properties at some pretty steep discounts.

"When the market is down and there's blood in the streets, someone else's misfortune could work in your favor," says Ken Kamen, president of New Jersey-based Mercadien Asset Management. Buying now entails some risk, however. After all, prices could drop even further. But for those looking to hold a property long term for a family vacation spot or eventual retirement retreat should feel confident that they'll recoup the investment, he says.

Here are five places where vacation-home bargains abound:

1. Panama City Beach, Florida
2. Pocono Mountains, Pennsylvania
3. The Crystal Coast, North Carolina
4. Lake Tahoe, California
   With close to 71 square miles of mountainous shoreline, almost every property in Lake Tahoe boasts a view of the water. In the winter visitors can ski at one of a dozen ski areas. In the summer, music, wine and Shakespeare festivals abound for those who tire of swimming and boating all day. Lakeview homes start at $250,000, with more ostentatious lakefront properties topping $25 million. Why Buy Now: California home prices have plunged an alarming 26% since last March, according to DataQuick, a real estate market researcher. "You'd almost have your pick of property," says Pereira. Beyond single-family homes, there are condos and cottages, as well as purchase shares on larger homes. Given Lake Tahoe's popularity, there's little doubt that home values will spring back as the economy stabilizes, he says.
5. Great Smoky Mountains, Tennessee