Home prices are up

Median home sales prices in the San Francisco and San Jose metropolitan areas rose 25% over last year according to the National Association of REALTORs. Measured from the bottom of the cycle February 2009, the California Association of REALTORs reported that June 2010 median home prices rose 50% in the SF Bay area. Santa Clara rose 42% and Monterey 40% over the same time period. As a whole, median prices in California are up 27% from February 2009.

February 2009's low median home price in the SF Bay Area was $399,040. Today, that median price is now $598,640. This does not mean that all area homes have appreciated 27% - rather, it means that the price point of homes that have sold is rising. Median price is the figure at which 50% of homes sold for lower, and 50% sold for higher prices.

Distressed sales are still a big factor

There is help available for unemployed California homeowners: check with CalHFA to see if you can qualify for 6 month's mortgage payment assistance. http://keepyourhomecalifornia.com.

Short sales are rising as a percentage of sales. Lenders are often reluctant to approve short sales, but they have greatly improved their ability to process them more quickly. The transactions can be difficult, time consuming, and disappointing for everyone when rejected by the lender. However, some lenders would prefer to do a short sale rather than a foreclosure (on certain properties in certain areas). It is a unique, case by case situation. Interestingly, the director of the USC Lusk Center for Real Estate, Richard K. Green, sees a ray of hope in that sellers, after a short sale, are free to look for work and relocate anywhere, possibly leading to an improvement in the employment situation.

We are definitely not out of the woods yet, with about 1 in 5 homes nationally being underwater. However, foreclosure activity (notices of default, auctions, and bank repossessions) in California has fallen 38% year over year (July 2010 compared to July 2009) as reported by RealtyTrac. Nationally, foreclosure activity has fallen 10%.

Rates, Short Sales, Stats, and Appraisal News

Despite previous economic predictions, long term interest rates have fallen to their all time lows - 30 year fixed rate loans are available starting at 4.375%. Combine that with the fact that lenders are becoming more proficient in handling their short sales, I'm wondering if we might look back on this as one of the best buyers markets. My first short sale took so long, the buyer conceived and delivered a baby before it closed after 50 weeks. My most recent short sale got approval within +/-50 days.

First quarter statistics:

First quarter statistics in the San Lorenzo Valley:

Felton - 19 homes sold, average/median selling prices between $408,657 & 410,000. Properties sold for 97.67% of asking price.

Boulder Creek - 22 homes sold with average and median $318,250 & $324,477; 96.7%.

Ben Lomond - 5 sold, average/median $365,000 & $390,000. Properties sold for 105.8% of asking price.

Call or e-mail me to get updates for your specific region.


Call or e-mail me to get updates for your specific region.

Lately, appraisals have sometimes come in lower than expected, creating another hurdle to closing escrow. I spoke with an appraiser yesterday: the good news is that Santa Cruz County is largely considered a stable market. Sometimes, there are challenges getting recent sales comparables for higher end homes, because portions of the market are still dominated by lower priced, distressed properties. This tends to be more pronounced in rural areas of the County.

Boulder Creek Elementary School

Here's some great news for our local students and parents, continuing a consistent chain of scholastic achievements. Our local grade school, Boulder Creek Elementary, has once again been voted one of California's Distinguished Schools. This is awarded to just under 500 schools each year...so thank you, teachers, students, parents, and staff who made this happen!

Source:
http://www.santacruzsentinel.com/ci_14918533?source=most_viewed

Up to $18,000 tax credits for CA home buyers

To qualify, the home purchase must go into escrow before May 1st and close before June 30, 2010.

First Time Home Buyers
up to $8,000 in Federal Tax Credits
up to $10,000 in CA State Tax Credits

Repeat Buyers / Existing Homeowners
up to $6,500 in Federal Tax Credits
up to $10,000 in CA State Tax Credits for the purchase of a never occupied home.

While I can't give tax advice, I can say this is a historic opportunity that you should explore with your tax preparer!

To learn more:
http://www.federalhousingtaxcredit.com/faq2.php
http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit
http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml

The "second wave"

Some of my first time home buyers have voiced concern over a potential future drop in prices, due to a looming "second wave" of foreclosure properties that could be dumped on the market by banks.

My impression has been that the banks in our market have been selling in a measured manner, and while they do have a growing inventory of property on their balance sheets, they aren't inclined to dump them all at once, causing prices to fall. Meanwhile, investors have been gobbling up foreclosed and distressed properties, often buying with all cash. In our area, there is a balance between the supply and demand for the foreclosures.

But what about nationwide? Barclays Research has studied and quantified this inventory. They note that bank owned foreclosures peaked in late 2008 at 845,000. By December of 2009, that number shrank to 617,286. Nationwide, banks are adding foreclosures to their inventory now as loan modifications and other programs have failed. Barclays projects the "second wave" will hit 733,000 next month, but will decline through the end of the year.


Source:
http://online.wsj.com/article/SB10001424052748703523204575129861685086570.html?mod=WSJ_Real+Estate_LeftTopNews

CA legislature votes YES on $10,000 Tax Credit

The Governor signed the bill late 3/25 - which he drafted as part of his job support program - allowing first time home buyers to claim up to $10,000 tax credit on their state taxes. The formula is up to 5% of the purchase price, or $10,000, whichever is less. The tax credit is spread out over 3 years, and is funded up to $200,000,000. It is first come, first served! Although this is scheduled to apply to homes purchased May 1st through December 31, 2010, demand caused the last tax credit to run out early.

Source: http://www.mercurynews.com/search/ci_14734412?IADID=Search-www.mercurynews.com-www.mercurynews.com

Has Housing Stabilized?

Single-family homes sales data for Santa Cruz County as of February 2010
Median price: $500,000 ($380,000 a year ago, $682,500 in 2008)
Listings on the market: 844 (1,049 last year)
Number of Sales: 93 (compared to 92)
Unsold Inventory: 4.7 months (down from 11.4 months of inventory a year ago)
Average price: $542,739 ($490,238 a year ago)

The California Association of Realtors (C.A.R.) notes that the median price of an existing home rose 8.4% compared with a year ago, to $306,820. This is the second year-over-year increase. Zooming out, still excluding new home sales, the western region including California showed sales increased about 7% over a year ago. And on a national level, the National Association of Realtors notes that the S&P/Case-Shiller U.S. National Home Price Index Sales were 11.5 percent higher than a year ago.

Nationally, median existing home prices are stable year to year at $164,700. According to the Federal Housing Finance Agency, prices fell by only 0.1% nationally from the previous quarter. IHS Global insight released a press release today indicating that "For the country as a whole, the housing market is now slightly undervalued. When weighted by market value, the nation is 8.9 percent undervalued."

Experts point out that California's inventory may be low due to several factors. Some homeowners and corporate owners alike appear to be waiting for prices to increase before they sell. Owners of foreclosed properties are taking a measured approach, listing their properties over time. Some people are concerned there are more foreclosures to come, as unemployment continues to rise. However, C.A.R. predicts that foreclosures will remain flat in 2010.

It appears that sales of existing, single-family homes bottomed out in August 2007, while the median home price bottomed in February 2009.

Reuters recently reported that new "housing starts rebounded more strongly than expected to their highest level in six months in January, while permits fell slightly less than forecast, pointing a mild housing market recovery. Housing, which is at the core of the most painful economic downturn since the Great Depression, is crawling out of a three-year slump, supported by government programs. New home construction contributed to economic growth in the third quarter of 2009 for the first time since 2005."

Read more:
http://www.santacruzsentinel.com/ci_14699561?source=most_viewed
(www.ihsglobalinsight.com),
(www.reuters.com)

Santa Cruz County Sales Statistics January 2010

This data is for Detached, Single Family Homes county-wide

Median price: $480,000 (versus $425,000 a year ago)
Listings on the market: 720 (963 last year)
Number of Sales: 94 (compared to 81)
Unsold Inventory: 4.7 months (down from 11.9 months a year ago)
Average price: $576,534 ($530,560 a year ago)

Sources:
http://www.santacruzsentinel.com/newsletter/ci_14517561 and http://www.ror.com

Interest rates are moving upward

Last week, Federal Reserve ("Fed") officials voted to raise one of their two benchmark rates for the first time in a couple of years. They raised the "fed discount rate" - or the rate at which banks borrow overnight from the Fed - to 0.75%. They left the "fed funds rate" - at which banks can borrow from each other overnight - near its all time low of nearly zero.

The Feds use these rates to influence the direction of the economy, and tend to tighten monetary policy (including raising rates) when concerned the economy is growing too quickly. So when the securities and currency markets reacted negatively, Fed officials rushed to explain that this did not represent a major change in monetary policy, but rather a technical change designed to bring the two benchmark rates back to a more normal difference of 1%. Various officials commented that the economic recovery was still too fragile, and unemployment still too painfully high, for the Feds to be concerned that the economy was growing too rapidly.

For home mortgage borrowers, the average national rates on the 30 year mortgage have risen from December's record low 4.71% rates; rates are now hovering in the 5 to 5.125% range.

Experts remain concerned that mortgage rates will creep higher soon - pointing to another Fed program slated to end in March. This program involved spending $1.7 trillion since January 2009 in the purchase of mortgage backed securities. The Fed's strategy was to provide liquidity in this market, which had all but stopped trading after the financial crisis first hit. (I'd be happy to explain the underpinnings of the whole financial crisis to anyone nerdy enough to ask!) Most economists agree this program has kept the interest rates on mortgages low in order to support a recovery in housing.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/15/MNSP1BVILP.DTL#ixzz0g0OXNViM

http://www.reuters.com/article/idUSTRE61H62I20100219?feedType=nl&feedName=ustopnewsearly

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402996.html?hpid=topnews

Housing Affordability Rises

Housing affordability has risen dramatically, to the point where about 2/3 of Californians can afford to buy a home (vs. just over 1/2 in 2008). An entry level home in California costs just under $1500 a month to own - including mortgage, taxes and insurance.

This plus low interest rates and tax incentives caused California's year end 2009 median home prices to rise 8.4% over 2008; this was the 10th month in a row where prices rose. Here in Santa Cruz County, November and December 2009's median home prices ranged between $550,000 and 549,500, up from $450,000 12 months ago.

Another measure to watch is unsold inventory - which was 4.7 months for Santa Cruz County, versus 8.3 months a year ago. Statewide, inventory fell to 3.8 months, the lowest level in five years It is this squeeze in inventory plus sheer affordability that is creating the multiple offer environment for the foreclosed homes. While the economy struggles with unemployment, there will be continued foreclosures coming on to the market. Economists for CAR expect foreclosure rates to be about level in 2010 with 2009.

To read more,
http://online.wsj.com/article/SB10001424052748703822404575019302869755306.html?mod=WSJ_Real+Estate_LeftTopNews

http://www.topix.net/forum/source/santa-cruz-sentinel/T9F39R1FJTNHQRV8I

http://online.wsj.com/article/SB10001424052748703657604575005491246452922.html?mod=djemRealEstate