The Santa Cruz County Real Estate Market Trends Report

Market Overview

	Investors Back in the Market
Investors are back in the market, and they’re paying all-cash, mostly for property under $500,000. The effect of this is to freeze out first-time home-buyers who have to get a loan. Banks are still chary about providing loans. About the only loans left for first-time buyers are FHA loans. So, while the first-time buyer is working through the loan process, the investors are swooping in and buying the best property, which, after slapping a coat of paint on and, maybe, replacing the carpeting, they are putting back on the market. Sometimes, they rent out the property hoping for more appreciation down the road. Appraisals are also affecting buyers who need a loan. Appraisals lag the market because they use past data, typically six months worth, to calculate current market value. When a market has bottomed out and begins rising, appraisals often come in under the value agreed upon by the buyer and seller. Banks are requiring buyers to come up with extra cash to make up the difference. First time buyers are having a hard time doing this, so we’re seeing many more sales fall out of escrow than normal. Another thing hanging over the market is the so-called “shadow inventory” of bank-owned property that has not been put on sale. If the banks release these homes in a measured manner, the market should be able to absorb them. Home sales were down significantly in January, falling 39% from December. Nevertheless sales were up 9.8% year-over-year. This is the nineteenth month in a row home sales have been higher than the year before. The decline in sales is not a result of reduced demand, rather it was produced by a lack of inventory, or should I say, a lack of desirable inventory. We expect sales to regain their momentum through the Spring because of the extended tax credit and because this is historically the prime time for home sales. From talking with other Santa Cruz County real estate agents, properly priced homes in the most desired neighborhoods and school districts are being sold with multiple offers: many multiple offers. Pending sales, which is a solid indicator of future sales, was up 19% year-over-year in January for the twenty-first month in a row. Remember, the real estate market is a matter of neighborhoods and houses. No two are the same. For complete information on a particular neighborhood or property, call me.