Last week, I appeared on KSCO radio to talk with producer Brad Polisuk about the Santa Cruz Housing Crisis. I was joined by Evan Siroky from Santa Cruz YIMBYs (“Yes In My Back Yard”) and Robert Singleton of the Santa Cruz County Business Council. There was a lot of food for thought and not anywhere near enough time to digest it all. You can listen to the 2 o’clock hour of the show where I appeared below. Listen to the Show Here One thing I was struck with were the callers, none of whom it seemed were younger people, that is, renters who are most affected by the housing crisis. The callers seemed as though they were older homeowners who already had their slice of paradise, and weren’t keen to share by permitting much in the way of further growth. This in a nutshell is the problem with creating more housing in the county. It’s folks like the radio show callers who are the people who vote and show up for meetings, and to a large extent they control the dialog. Before our discussion, I was asked to be prepared to come to speak on several points. I wrote up some notes, and rather than just toss them now that the show’s over, I thought I’d share them with you here. Why is Santa Cruz real estate expensive? In essence, I believe it comes down to land use planning: we have very low density zoning. The general plan for Santa Cruz county states that we … Read More
What she doesn’t say is that there is a lean supply of homes because so many people are waiting for the market to turn around before they sell – and many many other people who would like to sell cannot, because they are effectively trapped in their homes which are “underwater” (that is, they owe more on the homes than they are worth). … It means that in the face of weak employment and stagnant incomes, when interest rates rise (as they are apparently rising now), the prices people will be able to pay for housing are going to drop – and that’s going to bring house prices right on down too. … Suffice it to say that while it may be true as the President says that there is a clear trend of lower unemployment – that trend could be easily reversed and, as the article I linked to notes, the drop in unemployment is largely due to the fact that 206,000 more people have given up looking for work and are no longer counted as unemployed. I’ve sipped the last of my Earl Grey and I’m looking down at what’s left in my cup, and I’m trying to make sense of what I see there. … Our pre-tax payment will be considerably higher than that, of course – so I for one really hope they don’t pull the plug on the mortgage interest tax deduction – which could , of course, have a really deleterious effect on home prices depending on how it is implemented.
OK so the video we’re cranking out isn’t up to national network broadcast quality, but that’s some of the appeal. … Peter stopped by at an Open House I was holding, and wanted to talk up the CalSTRS Loan Program . It’s a great program for teachers, whereby teachers need only a 3% down payment and can get a 17% “silent second” mortgage with no payments on this loan for 5 years. It sounds like a great option for teachers in Santa Cruz county who are looking to get a little help on their path to home ownership.
The Housing Crash guy says: A landlords’ rule of thumb is that a house price should be a maximum of 15 times the annual rent for that place, yet in coastal areas, houses are still selling for 30 times annual rent I think he’s got a good point there – which goes to underscore my belief that prices in Watsonville are actually very reasonable at the moment. … Looking over the ads on Craig’s List, it’s safe to say that a 3 bedroom, 2 bathroom house would rent for about $2,400 a month in Santa Cruz, assuming it was in a not-so-great location. … Let’s look at the payment for a $500,000 house – but let’s assume you’re putting down a reasonable 10% instead of the FHA minimum of 3.5% – so you’d have a $450,000 loan, again at about 5.75% because with only 10% down, you’d still need to pay mortgage insurance. … Let’s say you’re in a tax bracket of 25%, and you can figure you’d save about $640/month in federal and state taxes, bringing your effective monthly after-tax payment to about $2,519 per month, or just about $120 more than renting.
The C.A.R. report breaks it down county-by-county, and reports this as the Santa Cruz county: Q2 2007: 18 Q1 2008: 28 Q2 2008: 30 So since Q2 2007, Santa Cruz county has soared 12 points – that’s 67%! … C.A.R. also goes on to report that the median entry-level priced home is going for $531,250 – and that’s a steep drop from what homes used to be going for ($750K+). … In case you’re curious, C.A.R. also figures that a home costing $531,250 is going to cost a buyer $3,380 per month including principal, interest, tax, and insurance (PITI) – assuming a 10% down payment (check under your mattress for that $53,000 you have lying around). … And the good news is, these prices are still dropping in many areas – it’ll be interesting to see where Santa Cruz county sits in next quarter’s affordability index.
But check out this news from C.A.R., the California Association of Realtors: [From the California Association of Realtors – median home price fell 29 percent in March ] Home sales decreased 24.5 percent in March in California compared with the same period a year ago, while the median price of an existing home fell 29 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. It’s a pretty interesting article, with lots of numbers to pick apart. … The C.A.R. data says otherwise – the only city it breaks out in Santa Cruz county is the City of Santa Cruz, where it reports that median home prices have dropped 17.9% since March 2007. … The bad news is that if you need or want to sell your house, C.A.R. has just provided ample proof (again) of what you might have maybe thought: now is not the time to sell your home. Also, you might want to make sure your home equity line is still available, because your lender may get wise to the fact that you probably have a lot less home equity than you thought you did.