Santa Cruz Real Estate Experts Team Sedenquist

It is always interesting to see how other vacation home markets are holding up.  Check out these prices. . .

Best Vacation-Home Spots for Price Growth
Buying a vacation home in a blue-chip locale is a safe bet if you're looking for solid price growth, according to Forbes.com, which compiled a list of the five fastest-appreciating regional vacation areas in the West, Midwest, East Coast, and South.

The magazine selected the areas with help from NeighborhoodScout.com, a Rhode Island-based real estate research site. NeighborhoodScout pinpointed neighborhoods with desirable locations, near beaches, lakes, or mountains, and with amenities and services that cater to a vacationing crowd. Then it identified which locales had the fastest median home price appreciation over the past five years.

The village of Water Mill, N.Y., in Bridgehampton, appreciated the fastest. The median home price there is $1.38 million; it increased in value at an average of 21 percent a year over the last five years. In the Midwest, Victoria, Minn., which is surrounded by lakes, grew an average of 18 percent a year.

The north end of Key Largo, Fla., has appreciated at 27 percent a year, on average, making it the fastest-growing vacation spot in the South. Moran, Wyo., situated between Grand Teton and Yellowstone National Parks, has seen 35 percent average increases in annual value since 2002, putting it at the top of appreciation in the West.

Here are the top five destinations in the key regions and the median price of property there.

Northeast

1. Water Mill, Bridgehampton, N.Y., $1.38 million
2. Avalon, N.J., $1.25 million
3. Napeague/Amagansett, East Hampton, N.Y., $862,129
4. Borough Center, New Hope, Pa., $647,041
5. Orange Street/Union Street, Nantucket, Mass., $1.57 million

West

1. Moran, Wyo., $1.13 million
2. Emerald Bay, Laguna Beach, Calif., $2.8 million
3. Sunnyside-Tahoe City, Calif., $2.8 million
4. Stateline, Carson City, Nev., $1.3 million
5. Wailea-Makena, Hawaii, $1.75 million

Midwest

1. Victoria, Minn., $435,000
2. Martell/Olivet, River Falls, Wis., $271,063
3. City Center, Orr, Minn., $281,998
4. Blue Mounds, Wis., $280,000
5. Jenkins, Pine River, Minn., $380,000

South

1. North Key Largo, Key Largo, Fla., $2.8 million
2. Pine Ridge/Pelican Bay, Naples, Fla., $1.6 million
   
3. Captiva, Fla., $2.1 million
   
4. Unison/Philomont, Bluemont, Va., $804,298
   
5. Williamsburg, Va., $949,900

Source: Forbes.com, Matt Woolsey (08/09/07)

I knew all these tiny little Santa Cruz beach cottages had advantages over larger, more spacious homes.  Finally found some proof. . .

Zillow: Small Homes Hold Their Value Better
The value of midsize and large homes declined more in the last year than the value of small single-family residences, according to a second-quarter analysis by real estate Web site Zillow.com.

The value of single-family homes smaller than 1,200 square feet fell by just 1 percent, according to Zillow's report. Meanwhile, values of midsize homes between 1,200 and 1,900 square feet fell an average of 3.1 percent, and homes larger than 1,900 square feet declined 2.8 percent.

Zillow.com also offers a comparison of 66 metropolitan statistical areas.  The following findings are culled from that analysis:

The highest-appreciating metropolitan areas (year-over-year):

• Grand Junction, Colo. (18.6 percent)
• Corvallis, Ore. (11.2 percent)
• Charlotte-Gastonia-Rock Hill, N.C.-S.C. (9.0 percent)
• Eugene-Springfield, Ore. (6.9 percent)
• Spokane, Wash. (6.1 percent)
• Seattle-Tacoma-Bremerton, Wash. (5.3 percent)

Most-depreciating metropolitan areas (year-over-year):

• Sarasota-Bradenton, Fla. (-16.4 percent)
• Melbourne-Titusville-Palm Bay, Fla. (-14.3 percent)
• Stockton-Lodi, Calif. (-13.5 percent)
• Charleston-North Charleston, S.C. (-12.8 percent)
• Daytona Beach, Fla. (-12.5 percent)
• Modesto, Calif. (-12.4 percent)

Most expensive metropolitan areas:

• San Francisco-Oakland-San Jose, Calif. ($685,653)
• Honolulu, Hawaii ($632,270)
• San Luis Obispo-Atascadero-Paso Robles, Calif. ($537,722)
• Los Angeles-Riverside-Orange County, Calif. ($525,175)
• San Diego, Calif. ($505,334)
• New York-Northern New Jersey-Long Island ($445,435)

Least expensive metropolitan areas:

• Jackson, Tenn. ($91,563)
• Greenville-Spartanburg-Anderson, S.C. ($101,178)
• Tulsa, Okla. ($102,876)
• Dayton-Springfield, Ohio ($108,121)
• Rockford, Ill. ($116,475)
• Columbia, S.C. ($116,865)

Source: Zillow, REALTOR® Magazine Online

So how many of you faithful blog readers remember the character Wimpy on the old Popeye cartoon?

It is never too early to plan for your retirement.  Here is a quick article with good advice about buying your retirement home now, well in advance of actually retiring. . .

Buy Retirement Home Now, Move in Later
With prices in many areas at a low ebb, it might make good financial sense for Baby Boomers to buy their retirement homes now, even if they're still years away from actually moving. They can find renters who will pay the bills until they're ready to live there.

Here’s some advice for people who are considering this strategy:

• Shop carefully. It's best to buy a home that can be rented for a rate that, after tax considerations, will cover the mortgage, real estate taxes, and insurance.

• Study up on housing trends. Ask the local or state planning department for demographic and economic data. The information can reveal facts that will influence whether or not to buy. For example, big companies going out of business or military base closings can be bad news.

• Don’t forget maintenance. Consider who’ll take care of the house in the owner’s absence. Property managers charge 6 percent to 15 percent of the monthly rent. Family members may be willing to do the job for free, but they could be ill equipped to do the job if the don't have any experience.

• Consider financing. Boomers with sufficient equity in their current homes can tap it to either buy their retirement home outright or secure a much lower mortgage rate compared with a loan at the rate often offered to buyers of investment property.

We’re all being buffeted by the market’s over-reaction to the loan crisis. Wall Street investors that buy and sell large loan packages have decided that loans are no longer a good investment. They foolishly aren’t making a distinction between good loans and non-performing loans and have caused a liquidity crisis for lenders that make home loans. What does this mean to you? The long awaited ‘market correction’ is underway. The jumbo loans we’ve all become accustomed to (less documentation, more liberal underwriting guidelines) are disappearing. So lenders and banks are looking to the government to help out. We’re all hopeful that the conforming loan limits, now stuck at $417,000, will be raised to $600,000 or higher for high cost areas of the country. This will have a huge effect on our local real estate market. We’ll see if our leaders in Washington do a better job managing this crisis than they’ve done in the past.

It is important to remember that loans are still available to borrowers with good credit scores and well-documented income. Those buyers and borrowers that haven’t been good about making their payments will have to sit on the sidelines for a while longer.

The Federal Reserve Chairman, Ben Bernanke, suggested at the end of August that Congress and the private sector should create new, affordable mortgage products that would help some homeowners refinance their mortgages and keep their homes. Sounds good to me! Something has to be done to stop this growing flood of foreclosures. Nobody wins when banks take homes back in foreclosure.

If you’re considering selling your home, please give us a call and we’ll sit down and develop a winning strategy with you. If you’re considering buying a property, your timing is excellent.

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

Dan & Lyn
September 2007

This article puts me in mind of a really bad, old joke.  “What is the name of that famous Jewish wine?”

Vacation and second homes continue to be all the rage.  Team Sedenquist sells quite a few of these vacations homes along the Monterey Bay.  Now there is a growing trend for Buyers to acquire these second homes in more exotic locations.

New Vacation-Home Spots Off the Beaten Track
High-end buyers are increasingly looking for out-of-the-way destinations beyond the borders of the United States to purchase their vacation home. Top destinations include Nicaragua, Morocco and Uruguay.

"There's a desire for somewhere different now," says Nick Barnes, a partner at Knight Frank, a residential research firm. "The luxury market, for reasons of exclusivity, is willing to travel to more exotic locations, irrespective of infrequent flights and a longer flight time."

In Latin America, the most desirable destination is Punta del Este in Uruguay. Prices in luxury towers on the beach are $2,000 per square meter, which is about $180 per square foot.

"That number is way too high for an average Uruguayan or Argentinean investor but competitive for Europeans or Americans," says Julie Shields, a general manager at Dubai-based Jumeirah Group, whose portfolio includes the Burj Al Arab hotel, New York's Essex House and the Carlton Tower in London.

Source: Newsweek International, Michelle Jana Chan (07/02/07)

O.K.  There is always a silver lining.  All these blossoming bank foreclosures actually represent an investment opportunity, if you know what you’re doing.  Call Team Sedenquist for tips on how to make a ghoulish windfall investing in bank-owned properties. . .

7 Tips for Foreclosure Property Investing
With foreclosures rising nationwide, prices falling, and inventories swelling to historic levels, investors with a discerning eye and knowledge of the foreclosure process can build a profitable portfolio of distressed properties, says James Saccacio, CEO of RealtyTrac, which tracks foreclosure data.

Saccacio offers this basic advice to foreclosure investors:

• Know your market. The most important tool in your real estate investing toolbox is knowledge of the area where you plan to invest.
• Develop an appropriate investment strategy. Find an investment strategy that will work in your market, and then do what it takes to implement that strategy.
• Make the foreclosure process work for you. Decide what foreclosure buying technique works best with your investment strategy and your strengths as a person.
• Scrutinize each deal. Many real estate investors wrongly assume that if a home is in foreclosure it's a good deal.
• Rely on a trustworthy team. You'll be in over your head if you try to do all the work involved in foreclosure investing on your own.
• Network with banks and lenders. In a slow real estate market, banks and other lenders are saddled with larger inventories of foreclosed properties and will be more motivated to sell those properties at bargain prices.
• Act quickly, but don't be in a hurry. A slow real estate market gives you the upper hand as a buyer, but you'll still need to act quickly to get the best deals.

Team Sedenquist feels strongly that every home built today should have some elements of solar construction built in.  Whether it is situating the building properly on the lot to take advantage of light and air movement, or active solar panels that are used to generate electricity or heat water, we all need to do a better job of using the abundant sunlight that showers us with free energy all day.  It is ridiculous that we burn fossil fuels first before considering solar technology.

What's the Cost of Going Solar?
The cost of solar panels has fallen by half in the past 15 years, cutting the cost of a system capable of powering a home to about $30,000. Analysts expect the cost to fall even more rapidly in the next few years.

Throw in tax breaks and other incentives offered in some states, and the systems can often pay for themselves within a decade. To find out if there are incentives available in your area, check out the online Database of State Incentives for Renewables & Efficiency.

What other costs can you expect when going solar? Setup costs can include as much as $1,500 for upgrading your fuse box. Another issue is the roof, which might be unable to support the solar panels. Eliminating shade from trees on the property also has a cost beyond sentimental reluctance.

However, the hefty costs pay off when it's time to sell. According to a study by ICF consulting, every $1 reduction in annual fuel bills increases a home’s resale value by $10 to $25.

If you decide to take the solar plunge, look for installers who have been approved by the North American Board of Certified Energy Practitioners, which requires professionals to pass a four-hour exam and have at least one year of experience in the field.

Source: SmartMoney, Daren Fonda (07/01/2007)

Alright, it is a cheap headline.  But you clicked on it. . .

Small Is Beautiful, Home Builders Say
Builders are learning that smaller, affordable homes have big selling power in the sluggish housing market.

Among the nation’s larger builders, KB Home of Los Angeles is leading the way toward downsizing. "Smaller homes generate lower revenues, but they sell faster, therefore the cash returns are better," says KB Home's chief executive, Jeffrey Mezger.

Other major builders, including Fort Worth, Texas-based D.R. Horton Inc., also have started downsizing some home offerings.

KB embarked on its strategy nine months ago to build more small, affordable homes. It declined to disclose national sales figures, but has said it sold 48 units in the past eight weeks at a Las Vegas community where homes range from 1,267 square feet to 1,608 square feet with prices that start at $195,590.

These homes are about 500 square feet smaller than KB believed home buyers preferred a year ago, Mezger says.

The prices also are as much as 20 percent cheaper than they were before the downsizing, although buyers can still opt for a bevy of amenities that drive up the final price.

Source: The Associated Press, Alex Veiga (07/05/2007)

Last week was an amazing week for mortgage lenders across the nation, and this week we’re starting to see some of the fallout.  Here is an excellent summary of the causes of mortgage interest rate volatility written by Mark Junod at First Horizon in Capitola.

That was the week that was
The mortgage industry hasn’t had a week like last week in years. It started last Monday when a few lenders raised rates on their jumbo loan products.

As the week wore on, jumbo rates spiked sharply, several lenders suspended taking locks while adjusting rates upward, and during the day on Friday, we got as many as four notices of rate increases from several lenders.

One major lender (rhymes with embargo) took jumbo rates to such a level that nobody would use them, thus essentially removing themselves from the market.

And while all the rate increases were happening, lenders were also tightening guidelines on jumbo loans, loans-to-value, FICO score requirements and qualifying criteria becoming more conservative.

During the same weird week, rates for conforming loans (single family loans up to $417,000) stayed flat to better.

What does all of this mean and why are conforming rates and jumbo rates taking different paths?

The simple explanation (simple explanations are almost always best) starts with the fact that conforming loans are purchased by two quasi governmental corporations: FNMA and FHLMC.  Conforming loans universally cost less than jumbo loans and the rates are not heavily influenced by Wall Street investors’ appetites for mortgage backed securities.

Jumbo loans are (mostly) purchased by Wall Street investors. And Wall Street is circumspect about their value these days. In fact it is fair to say that Wall Street is re-valuing jumbo loans and this has caught some lenders “holding the bag”.

The lenders holding the bag are those who committed to make loans, banking on their ability to sell them on the secondary market at prices investors will no longer pay.

Although sub-prime loans have received most of the recent negative attention, other jumbo loans have lost their luster as well. In general, stated income loans, loans with potential negative amortization, and “Alt-A” loans are among the loans rapidly falling into disfavor by investors.  Alt-A loans are mid-way between prime and sub-prime. Many lenders have discontinued offering them.  So just imagine a whole bunch of lenders having produced products for which the market suddenly vanished.

The source of funds for making new mortgage loans is replenished by sales of loans into the secondary market, so imagine the impact on liquidity when those sales slow abruptly.

It may be an overstatement to call the present situation a liquidity crisis, but it is fair to call it a liquidity problem. The question of course is how long will it last and how severe will it be?

The truthful answer is: nobody knows for sure. But it is a near certainty that it will be more difficult and more costly to get jumbo loans for awhile.

Interest only loans will still be available, but borrowers will be qualified using the fully amortizing payments. And stated income loans will be severely limited.

The FOMC meets on Tuesday, but don't look for them to do anything to help. The problem is not short term rates, it's lack of liquidity.

Fasten your seat belt and drive slow for awhile: it could be a bumpy ride. We'll keep you posted.