May 2008: most asked question...

The most often asked question I've gotten lately is, "Have we reached 'the bottom?'" Since no one really knows if we've reached the bottom until we've passed it, here are some indicators from the trenches:

Many agents are reporting increased numbers of buyers looking at homes, my clients included.

An investment advisor reports parents are liquidating investments to help their grown children buy homes.

Homes that are priced really well compared to the competition are getting multiple offers.

The average asking price of homes on the market is approaching the average price of the homes that have received offers, indicating sellers have gotten realistic about what it takes to get a property sold in this market.


Quick San Lorenzo Valley Statistics:
o 100 homes are for sale in the four towns;
 Average days on the market:108
o 33 homes are pending sale:
 average days on market 117
 average asking price $534,000
o 19 of those went into escrow in the last 30 days
o 13 homes sold in the last 30 days
 Average asking price $428,000; sales price $403,000
 That's a discount of about 5%

Although the Fed lowered interest rates again, this is not really benefiting the residential market, because the lenders themselves have tightened their lending criteria so fewer people can get loans. We have seen a few situations where the lender required the buyer to put up a larger down payment or make other adjustments in order to get the loan funded. Yet, there are positive developments including FHA and Cal HFA programs that have broader criteria. As of this writing, the 30 year fixed rate is just over 5.8%, the new conforming jumbo category is hovering around 6%, and the jumbo is over 7.5%. Despite the Fed's cumulative rate reductions, interest rates on mortgages are only slightly less this year than last.

Recent statistics show that even in markets that have declined the worst, homes have appreciated modestly over the last 5 years. Yet, many homeowners who purchased in 2005 and 2006 owe more than their home is worth. People who can afford their mortgage and intend to stay in the same home are relatively unaffected. Some are even benefiting from declining interest rates, which have reduced some adjustable rate mortgage payments. The nugget to glean from all this is that buying a home should be considered a long term investment, backed by adequate financial reserves to weather short term setbacks.

In the News:
Here's the Mercury News' latest take on local home value changes and the popular service Zillow
http://www.mercurynews.com/ci_9167620?source=most_emailed

The latest housing article in the Santa Cruz Sentinel indicates home sales rose 50% in April (normally, May's seasonal increases are 5% over March). The median home price rose to $661,000 from $650,000.
http://www.santacruzsentinel.com/ci_9253667?source=rss

Useful advice for all ages in last week's Santa Cruz Sentinel: http://www.santacruzsentinel.com/ci_9223937?source=rss

And finally, submitted by a client, is this great reminder about common contractor scams. Another valuable benefit of being a Century 21 Showcase client is that all you have to do is pick up the phone or e-mail me for the latest list of our approved vendors: people our clients have used with confidence. We update this list frequently, so if you ever have a negative experience, or discover a new someone wonderful, tell me all about it! http://www.scambusters.org/contractors.html