The 7-10 Year Real Estate Cycle

sebfreyCharts and Statistics, Silicon Valley Real Estate

The Real Estate Cycle

This morning I watched a new YouTube video that had recently been posted which touched on the 7-10 Year Real Estate Cycle. The video’s author encouraged all Realtors to differentiate their message to the public by not talking about how hot the market is, but rather, about how we’re about to reach the end of it. Ever alert for a shifting real estate market, I tuned in and watched. The thrust of the argument of the video was that the real estate market is cyclical: it goes up, it comes down, and we are right now nearing a market peak which, according to the video’s author, we’ll hit in 6-18 months. The interesting thing about this video is that there was no actual data given to show how this will happen, other than the axiom that the real estate market is like a clock, and that it cycles every 7-10 years. This is something I’ve heard many times over the years, and it got my brain going. It’s not like I myself haven’t ever predicted that the market is about to turn, just like I’ve recently predicted that 2016 is going to be a banner year for real estate in our area. Based on the invisible hand of the 7-10 year real estate cycle, might 2016 prove to be a peak year for Silicon Valley real estate? Being something of a data geek, I went looking for the data. I was looking specifically for Santa Clara county historical pricing data – and I could only find … Read More

Holistic Valuation of Santa Cruz Real Estate

sebfreySanta Cruz Real Estate

Holistic Valuation of Real Estate

Properly evaluating homes in Santa Cruz can be tough work. Improperly evaluating properties is easy, and can be done in less than a minute on the web. As many sellers may suspect, there is a difference from the quality of a valuation you can get automatically from the web, and the type of evaluation that is provided by an experienced, local real estate agent. Here we’ll explore Holistic Valuation of Santa Cruz Real Estate, and discuss some of the additional things to consider when determining the value of a home. Your run-of-the-mill property valuation website uses a computer algorithm that works to estimate a home’s value. After sending in a valuation request, this algorithm digs through tax records and sales information, cross-references it using factors such as home size, room counts, lot sizes, and age, then weighs the figure against additional factors such as proximity of the sales activity and time elapse of recent sales vs. local value progression rates. All of these elements are thrown into a formula, and out pops a value. The sophistication of the programming is remarkable, even if the results often aren’t. So what’s wrong with programming-based valuation models such as these?  Well, they are based on information that often times is inaccurate, especially for properties here in Santa Cruz. For instance, sometimes the actual square footage of a home is greater than what is reported on the Assessor’s records, which would throw off calculations. Or perhaps a home was built years ago, but underwent extensive remodeling just recently. A computer … Read More

The Dirty Truth about Home Price Valuations

sebfreyCommentary

The Dirty Truth about Home Price Valuations

The Internet is swimming in offers for free, instant home price valuations. They’re all over Google search results, Facebook, Craigslist, and just about every Realtor web site. You can look up a home’s value on Zillow, eppraisal.com, and thousands of other sites which promise instant, online and accurate real estate valuations. But the truth is, there’s much more to know about your home’s value than you can get in any home price valuation. I’m here to tell you the dirty truth about home price valuations. I have performed literally thousands of home price valuations (aka CMA, or Comparative Market Analysis) over the years I’ve been a real estate broker. I’ve done them for all kind of properties, and in all kinds of markets. I’ve done exterior-only, full interior valuations, value estimates for mobile homes, commercial property and raw land valuations – the works! I feel very comfortable valuing property, and I think I do a pretty good job of it. But here’s the dirty truth about home price valuations: your home is not worth any one particular price. Rather, it is worth something within a range of prices, and could sell anywhere within that range. If anyone could reliably and consistently tell you exactly how much any particular property would sell for at a particular point in time, that person would be fabulously wealthy. It’s tantamount to having a crystal ball and being able to accurately prophecy the future. You see, a home price valuation is based on a whole series of assumptions about the state of … Read More

Planning for High Cost Real Estate

sebfreyCommentary

Land Use Planning Map

Real estate values in the Golden State have been soaring for the past couple of years – especially around the San Francisco bay area.  Of course, high-priced real estate is nothing new around here. In fact, it’s almost as though someone’s been planning for high cost real estate for years! But the dramatic price increases we’ve seen recently have again brought the high cost of housing in the bay area into sharp focus. One striking characteristic of the bay area real estate market in the past couple of years has been low inventory. In most of the region, there’s been far less than a six month supply of homes, which is what is considered a “balanced” market.  In some neighborhoods, supply has been as low as six weeks – or less.  Conventional wisdom dictates that when prices rise, supply will open up to meet that demand.  Yet in the face of steadily rising prices, that supply has yet to appear.  Many market watchers are wondering, when and how will that change? The possibility exists that we are now entering a new normal:  a perpetually low supply of available homes.  Faced with a growing population and a booming tech sector, this could well mean that we’ll see home prices continue to climb into the stratosphere – out of reach of the vast majority of the folks who make the area their home. Only the very well-heeled will be able to afford to buy property within a reasonable commute distance of the area’s major employers. Is this dystopian … Read More

Santa Cruz Real Estate Market Update – April 2013

Seb FreyLocal, Santa Cruz Real Estate

Spring has sprung – and with it, a raging seller’s market.  The first two months of 2013 showed a market that appeared to be moderating after steady price increases throughout 2012 – recall that the median price declined for the first two months of 2013…but in the third month of 2013 – wow.  The median home price in March of 2013 soared to $583,500 – up 18.6% year-over-year, and up a gi-normous 28.2% from February 2013, the month prior.  What is going on? A lot of things are going on – there’s a lot of moving pieces to this real estate market.  But please watch the video below to get a quick summary of where we are at. Aside from the median price, there are some other interesting numbers to look at – such as inventory, which remained virtually unchanged at the end of March, at 277 available units county-wide (vs 279 units at the end of February).  The sales volume did pick up strongly in March, with 156 homes having closed escrow  – an increase of 28.93% over the month before, but a decrease of 8.2% from a year ago, March 2012. Last week I attended a conference where the keynote speaker was Leslie Appleton-Young, a VP and the Chief Economist of the California Association of Realtors.  Leslie gave a very well received presentation about the state of the national and California real estate markets.  As you might expect from someone as high up in the Realtor® organization as Leslie, she is very bullish on the California … Read More

New Year, Old Challenges for Santa Cruz Real Estate

Seb FreySanta Cruz Real Estate

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. tealeaves.jpg 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.

Caveat Emptor for Watsonville Investors

Seb FreySanta Cruz Real Estate

They are not looking to speculate on real estate – that’s how so many people ended up getting foreclosed on in Watsonville, and in California, and in many other places throughout our glorious but fading homeland . green_eyeshades.jpg A Speculator is someone who is placing a bet – they put some money down, and there bet is that the value of whatever they buy will go up. … These clients of mine are probably not what you would call professional real estate investors – but they want to buy real estate as if they were – and after they do buy a few properties, and if they keep with it, hey, before you know it – they will be professional investors, after all, every professional has to start somewhere. … What this means for my clients is that the amount of money they can afford to pay for a property, given their higher interest rate and lower rental rates means that they can offer less for a property than they had first thought – in order to make that 10% (or near 10%, anyway) return on their investment. … And, of course, the unemployment rate in Watsonville is reported to be at 25% – that’s huge, and I think it means a lot of people are going to be sharing housing, families living with families, rather than each family having their own individual place as I’m sure they’d prefer in many cases but owing to the weak economy cannot afford to do so at the moment.

Santa Cruz Real Estate Great Debate

Seb FreySanta Cruz Real Estate

You really need to look at the year before to see how the market performed – and from the statistics, we can see the median home price, county-wide, is actually down 33.5% in April of 2009 compared to a year ago. … Honestly, I am mystified how people can take a few anecdotes, completely ignore the state of the economy and the housing market as a whole, and now herald, with strident authority, that we are now at the bottom of the market and THIS, TODAY is the time to buy, or you will miss out on the chance of a lifetime. … Well, that’s not true – short sales can also occur at those prices, and some people who have had their homes a long, long time may have enough equity in them to compete with all the REOs and short sales. … Personally, I think it’s going to put increased pressure on the bottom of the market, as many people who were looking at buying a lower-priced “starter” home may now be thinking of stretching to go for one of these “premium” foreclosures which I expect we’ll be seeing.

Santa Cruz Real Estate Deathmatch

Seb FreyCommentary, Santa Cruz Real Estate

Whether you think the current housing crisis is a cause of a symptom of the economic meltdown in the United States and abroad, there’s no denying that there’s a great deal of uncertainty about how long this recession will last , how deep it will cut , and what this means for people looking to buy a house in Santa Cruz today. deathmatch.jpg I’ve said it several times in various postings to this blog, but I think it bears repeating: I think home prices in Santa Cruz county will continue to drop for the foreseeable future – and by that, I mean the rest of this year, at least. … It’s not a new thing – as I mentioned a blog entry or two ago, this multiple-offer feeding-frenzy has been going on at least 18 months, I don’t see that it is more common today than it was a year or so ago – but perhaps it’s being talked about more in the media, as there is now more effort into talking up the economy rather than talking it down. … I had seen it when it had come up (I send myself e-mails from my automated system for every bank-owned home that hits the market), but at the moment, I had a number of deadlines I was working to meet so I didn’t look at the particulars to see that it was really an incredible deal. … Actually, when it started out, I don’t think it was a short sale – but as the months went by, the price was reduced until finally the owner owed more on it than the market would pay.

Santa Cruz at Market Bottom? Some Say Yes, I Say No

Seb FreySanta Cruz Real Estate

Fact is, we have been seeing multiple offers for well over a year now on these bargain-basement properties in Watsonville – and pretty much anywhere in California where bank-owned foreclosures are sold several percent cheaper than competing properties – these properties attract multiple offers and sell quickly. … Pretty much – I didn’t go into 87 Arista when it was on the market, but from what I can tell on the MLS from the pictures, the choice of paint colors and level of amenities in this home was about on par with my listing. … And then, a scant two months later, my own listing comes on with an asking price of $250,000 – that’s 3.8% less than the sale price of a very very comparable property which closed just two months earlier…and I’m on the market eight days, and I’m standing in a field of chirping crickets . … But not too far below – if in fact you were able to buy a home for 10% below true market value, you could not do a thing to the property, then turn around and sell that property to someone else the next day for 10% more than you paid for it.