What a Difference a Location Makes

I receive email notifications on all new listings in and around my areas of expertise. I thought this notification was the perfect example of what your money can buy depending on the area you choose.

This Scotts Valley (northern Santa Cruz County) house is smaller, fewer bedrooms, and more than $300,000 more than the home advertised in Royal Oaks (northern Monterey County.)  Moreover, the Royal Oaks property is over 2 acres and in a gated community. The Scotts Valley house is a standard lot in a subdivision.

The "Walk Score" on the Scotts Valley house is much better than the Royal Oaks house. Goes to show the new trend of being walking distance to amenities is a growing attribute in property choices.

The Santa Cruz County Housing Market Update

Not too much has changed in the last few months regarding our housing market. We have been experiencing a low inventory of single family homes for sale for over three years now. A small change is that fewer homes are selling from year to year. Over 2,000 in 2012 and fewer than 1,900 in 2014.

The median price has climbed, but that is relative to which price range homes are selling in. If you take a look at the graph below you can see that homes in the $200k- $600k price range dominated in 2012, while by 2014 the $600k- $800k homes are the major players. The over $1Mil homes sales has almost doubled in the last 2 years. Either there are no more homes to sell in the lower price ranges, OR those lower priced homes have experienced a push in their prices due to the lack of inventory.  I strongly believe it is the later of these two scenarios.

Santa Cruz County SFR sales

We have been experiencing multiple offer situations for a long time now. It’s almost common place, especially if a home is priced right and prepared well for the market. The buyer pool has been strengthened by the lowering of interest rates and the building economic confidence. Being so close to Silicon Valley does affect our market. The prices and demand “over the hill” has increased to cause an overflow into the Santa Cruz area; this is for buyers looking for their primary residences as well as a second or vacation home.

The “seller’s market” has remained healthy. The most popular homes are those that are prepared well for sale. The single level homes are well loved especially by the aging group of baby boomers. Properties with a second unit are also attracting a lot of attention due to the versatility it offers; extra rental income or living space for family or friends.

All in all, I expect 2015 to be a busy year. It’s a good time to buy a home (lower interest rates and stronger salaries) – but it is also a good time to sell a home (see above.)  That being said we will see what I have to report come mid-summer.

Are You Better Off Renting… Or Not?

There is a time to rent and a time to buy. Figuring out which is best for you and your situation means getting out the calculator and doing some math.

When you first make the move out of your parent’s home and into your own place, the logical decision is to rent a place. A few years later and probably things have changed. Life gets busy and you might forget to re-evaluate that monthly rental payment. It just might not be the best use of your money. 

Realty Trac reports that one-third of Americans currently reside in a housing market where leasing a three bedroom home costs more than 30 percent of the monthly median income, which is normally considered the benchmark for affordability of owning a home.

Half of American renters give up more than 30% of their income on leasing. That’s up from 19 percent a decade ago.  The number of Americans renting has increased in the last 10 years and the median national rent has also increased. 

Here’s where you have to do your homework. Compare your place to other places that are similar and first determine if you are paying market rent. If so, is your rent more than 30% of your income? If you are under the 30% benchmark, but are still feeling squeezed every month (and let’s be honest here), then could it be worth compromising on location or quality in order to own your own home? If you are on the fence it might be worth it for you to run some numbers. 

1. Find two similar homes, one for rent and one for sale. 
2.  Divide the sale price of the one by the annual rent of the other;
3.  Sale Price/ Annual Rent = Price per Rent Ratio
4.   A PRR of 1-15 is a sign that it might be better to buy than rent.
5.    A PRR of 16-20 suggest it might be better to rent than buy
6.    21 or more means renting might be best.

Reasons to buy include:

•     Stable Income
•    Available cash for a down payment and extra for emergencies.
•    Plan to stay in the house for a minimum of three years.
•     Enjoy tax deductions available to homeowners.
•   Expected home value increase.

In addition to the financial reasons outlined above, owning a home gives you security in knowing that you can move when you want to move, and not when your landlord determines it. The ability to remodel or re-decorate on your own terms. Pride of ownership that renting just can’t satisfy.

What's worth more to you, Trulia or Family Dollar Store?

I find it very interesting and a little bit ironic that Zillow is buying Trulia for $3.5 Billion and The Dollar Store is buying Family Dollar for $8.5 Billion. How can it be that a dollar store is worth more than twice that of an online housing search engine?

Putting it in this perspective, there seems to be more value in cheap, everyday goods rather than free, useless information. The business world is getting it right!

In my opinion, Zillow and Trulia have always been parasites sucking the blood from the real estate industry. They only exist to make money from the advertisers on the site, many of which are real estate agents. These are the same agents that give their listing information to these sites, for free, so that these sites can then turn around and charge the real estate agents for advertising on their own listings! Talk about a scam! 

These same sites then use unsubstantiated information to tell unsuspecting (and yes, somewhat gullible) individuals what their house is worth. Are these the same people that believe everything they read on the internet? I think there is a good possibility.

Ok – if you live in a brand new, cookie cutter development, then maybe Zillow will get your home value right, or close. But if you are like most people, and live in a unique home that maybe has had some remodeling, or has been around for more than 5 years, the “zestimate” will be bogus. It’s simply an algorithm based on what homes nearby have sold for. It doesn’t look at, what we call in the real estate business, the amenities. Is there a busy street nearby, a park, a school, are the floors or countertops upgraded, have the bathrooms been remodeled, etc., etc.? I think you might get the idea. Every home is unique and these amenities will either add or subtract from the value. 

A “zestimate” is easy, however. You don’t have to talk to anyone and suddenly you are an expert and know all about home values. Bull. It’s just information. Knowing what to do with the information is the wisdom an experienced and professional REALTOR® brings to the table. Don’t be fooled (or be a fool) and believe everything you read on the internet. Some of it is just not true.

Penny pinchers unite! That cheap merchandise is getting you more for your money than the free useless information. But being penny wise and pound foolish still puts you on the short end of the stick.