Is it safe to buy a house in Santa Cruz yet?

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I get questions like that all the time. Are we near the bottom? Have we hit bottom? How low will prices go? When will the market turn around? Good questions. Where to go for answers?

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There’s just so much contradictory information, isn’t there? For example, our good, reliable, always-faithful friends at the California Association of Realtors (C.A.R.) report:

C.A.R. reports sales decrease 28.5 percent, median home price falls 26.2 percent in February

LOS ANGELES (March 24) – Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

But then we have this little tidbit which I saw splashed on the front pages of various newspapers the other day:

U.S. Economy: Existing-Home Sales Rise, Prices Fall

March 24 (Bloomberg) — Sales of existing homes in the U.S. unexpectedly rose in February as prices fell by the most in four decades.

There are other data points we can look at – for example, check out this entry from the Countrywide Foreclosures Blog:

14,413 REO’s Offered For Sale on Countrywide Financial’s Website

Total REO Asking Price: $2,976,805,967
(As of March 24, 2008)

Sounds like a lot of REOs – but look at the chart – the inventory is going down.

If you’re ever in need of a good a laugh, I recommend stopping by the Calculated Risk blog. It’s always a riot. They’ve got a bit of input on the New Home Sales numbers as reported by the Census:

[From More on New Home Sales – Calculated Risk]

There are actually two pieces of good news in the report. First, inventory levels (even accounting for cancellations) are clearly falling….The second piece of good news is revisions. During periods of rapidly declining sales, the Census Bureau routinely overestimates sales in the initial report – and then revises down sales over the next few months. In this report, sales were revised up slightly for November (from 630K to 631K), December (605K to 611K) and January (588K to 601K). This is actually a positive sign that New Home sales might be nearing a bottom.

So, what, exactly, does it all mean? The honest answer is, nobody knows. I’ll tell you what I think, though. I think that, barring any major, protracted recession, we are at or near the bottom of the market. I think Watsonville and the south county area is at the bottom and may already be heading up a bit – North Monterey county, too. I think that in the rest of Santa Cruz county, prices may have a bit to fall yet, but not much.

In short, I do think it is now “safe” to buy real estate in Santa Cruz county. We may not be at the bottom of the market in every nook and cranny of our diverse area, but I believe we’re close. My feeling is that anyone who buys today will not lose their shirt (and hat, and coat, and…), as many people did who bought in 2005 and 2006. I think worse case, if you buy today, you might lose a sock. Maybe a shoe, too. However, barring any calamity in the economy, I think now is a great time to buy in Santa Cruz. Mark my words. Unless I’m proven wrong, of course, in which case, forget everything I just said. 🙂

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