As the Weather Cools - the Market Slows Down

A good time to start hitting the real estate ads and searches on line is just as November nears. With the holidays on the minds of most people, those who have to still sell their house leave it on the market and carry on. The dedicated ones looking for a house to buy may just be able to find an opportunity in the cooler months ahead.

It's obvious from the graph that fewer sales occur in the winter months. There are fewer homes on the market and less to choose from, but it is precisely the time to keep looking and make a move if you are a  bargain hunter.

You may find yourself looking at houses over the Thanksgiving week-end, but you could still have that new house by Christmas!

The New Lending Process

A new set of lending rules have been put into place by the Consumer Financial Protection Bureau as of October 2015. The feds are trying to make it as clear as possible for the general public to read and understand what they are getting, and getting into, when taking out a loan to buy a house or other real estate.

There are now two main things for consumers to read and understand; 1) what the loan conditions are and 2) what it's going to cost you to borrow the money. These are called the Loan Estimate and the Closing Disclosure. These two documents replace the four documents consumers used to have to read and decipher - often having repetitive information that made you wonder if you had read it correctly or if you might be misunderstanding the whole thing. The "loan estimate" gives the consumer a better tool for comparison shopping - and that is an important thing to do before signing on the dotted line. This has to be given to the borrow within three days of receiving their application.

Other tools available are online here. Like the "Know Before You Owe" toolkit as well as the loan estimator and closing disclosure tools.

I always advise buyers to be prequalified for their loan before they step one foot in a potential house to buy. There is nothing worse than thinking you can afford "X" and finding out you really can only afford "X-$50,000."

The new mortgage rules should make things easier - though maybe not at first for lenders getting used to the new rules. Just as consumers are well informed on real estate, so too they should be well informed on lending.

The LIst Price vs. The Sale Price

This is a graph of the sales to list price ratio for houses over the last three years and to date for 2015. I thought it was interesting that the last time the majority of "over list price" sales was in 2013 and this year, 2015, is starting out with the almost identical trend.

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.