It’s Nigh Time to Buy in Santa Cruz

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A few days ago, after about a month’s silence, I wrote something of a “doom and gloom” blog entry about Santa Cruz real estate – in fact, I’m proud to say, the entry was even picked up on the HousingDoom.com blog, which I read now and again to stay in touch with my darker side. You see, I felt the need to vent about what I see as a lot of hype by various individuals and organizations saying what a great time it is to buy some real estate.

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As I’ve said before, it may in fact be a good time for you to buy some real estate here in Santa Cruz. In any market, it really depends on your situation. All I’m saying is, don’t buy into the hype – positive or negative – about the current real estate market. Do your own research, make up your own mind. Make an informed decision, and be prepared to live with the consequences.

It may be that you decide that it makes sense for you to buy some real estate right now in Santa Cruz. Over a hundred people bought property in the county in February – and did all of these 100 people make a horrible mistake? Indubitably, some of them did. Just as indubitably, some of them made very shrewd investment decisions which will yield rich rewards down the road. After all, let’s not forget the golden rule of real estate: you make money when you buy, you reap the cash when you sell.

If you were to ask any my buyer clients about what I’ve been telling them in person as we’re out looking a property, I bet they’ll all tell you I said this: “Be patient, time is on your side.” I have some clients with whom we’ve been looking, on and off, for many months. With each passing month, the properties that are in their price ranges just keep getting better, and better still. The problem right now isn’t so much the price of the homes – it’s the idea that a better home for the same price is waiting just around the corner.

The truth is, while the median price in Santa Cruz county is now down to a “wow I can afford that” $429,000 – there are not many of these homes for sale in the central parts of the county (e.g. Santa Cruz, Soquel, Capitola, Aptos); the sales are for the most part happening in areas where the sellers are more motivated – and that means, the areas with a high percentage of foreclosures, or distressed homeowners who need to (try to) sell quickly to avoid foreclosure.

However, the sharp rise in unemployment, rising foreclosure rates among Alt-A and Prime borrowers, coupled with pent-up seller demand (sellers who really want to sell, but have been waiting for the market to go back up) means that every day, prices of real estate even in prime locations continues to drop down to where it is within reach of the average Jane who has a good credit score, low debt, and a good enough, fully-documentable income. Jane, your time is coming.

I ended my previous blog entry saying:

It’s quite a bit more challenging to buy real estate today that you won’t regret having paid so much for a year from now.

Buyer’s remorse is, of course, a terrible thing. I think you can have buyer’s remorse in a market even that is appreciating strongly, because remorse can come from a variety of factors. Feeling that you have overpaid, or regretting that you didn’t wait to buy as you watch prices in the neighborhood into which you have bought keep tumbling lower can be, to be sure, nauseating.

For that reason, I caution my buyers: be patient. Wait, until you find the house that you love, at a price you can comfortably afford. This is not the market, or the economic cycle, in which you want to be stretching. If the house you want to buy is a stretch – don’t buy it now, this isn’t the time. If you wait just a bit, a very similar house will come on the market in another six months which won’t be such a stretch.

Even then, “six months from now,” I wouldn’t be surprised if prices keep right on dropping. Might you still be a happy homeowner, even so, having not bought at the rock bottom of the cycle? If you are patient, and you buy the right house, in the right location, that fits your lifestyle, your plans, and your budget comfortably, then I expect that you’ll continue being happy in your new home, even should it drop in value over the next year or two. And, down the road, you may be pleasantly surprised to find that the house you bought because you loved it and it was affordable at the time turned out to have been a great investment. Imagine that.

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