Santa Cruz County median home price drops 8.8 percent to $702,500

Has the bubble burst? That's the question some people are asking, now that the Santa Cruz County median single-family home price dropped 8.8 percent in September, falling from $770,000 to $702,500.

September's median matches the median from January of this year. Prices have been rising since 1996 and the median hasn't been in the $600,000 price range since December 2004.

As property values drop, residents seek tax break

SANTA CRUZ — For new homeowners who may have watched in shock as the value of their homes recently dropped to less than what they paid, some relief could be on the way.

The county assessor's office is accepting applications for reappraisals, and county leaders say hundreds of homeowners could receive breaks in their property tax bills as assessed values drop. Already, Assessor Gary Hazelton said his office has identified condos in Santa Cruz and new homes in Watsonville — especially in the neighborhoods behind Target — that have lost value. He expects to find more as the applications roll in.

"The conditions have changed, the market has changed," said Santa Cruz resident Charles Muller, 41, who is applying for a reappraisal on the condo he bought about 18 months ago. "It's gone down drastically"

Southern Calif. home sales plunge 30 pct in Sept

By Jim Christie

SAN FRANCISCO (Reuters) - Sales of houses and condominiums in the most populous Southern California counties fell 29.9 percent from the previous month and 48.5 percent from a year earlier, DataQuick Information Systems said on Tuesday.

Southern Calif. home sales plunge 30 pct in Sept

By Jim Christie

SAN FRANCISCO (Reuters) - Sales of houses and condominiums in the most populous Southern California counties fell 29.9 percent from the previous month and 48.5 percent from a year earlier, DataQuick Information Systems said on Tuesday.

As Defaults Rise, Washington Worries

Foreclosure signs, like this one east of San Diego, are becoming more common as data showed a higher default rate on subprime mortgages taken out in 2007 than those in 2005 and 2006.

During the summer’s credit crisis, investors concluded that the default rates on subprime mortgages made last year would probably prove to be the highest in the industry’s history.

Graphic

Mortgage Default Rates

But there now appears to be another contender for that dubious honor: loans made in the first half of this year.

Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year, according to a report by Friedman, Billings, Ramsey, an investment bank based in Arlington, Va. The data suggested that more Americans could lose their homes and that the housing market’s troubles might persist longer than many analysts have been predicting.

FIRE SALES!

Little reported in this week's news was the Fire Sale Hovnanian Homebuilders conducted over the weekend. Offering 30% discounts on their new homes as they headed for the sidelines before their peers do. It is an act of yelling "FIRE IN A THEATRE". Please understand that prices are set at the margin, in other words, the value of your holdings are determined by the last price at which they were transacted. In this example with Hovnanian it works out this way: Homes were sold at 30% discount to reduce inventories and to satisfy creditors that were getting nervous and demanding payment.

But the result after the sales is that every homeowner in similar homes in the area just saw the value of their homes drop an equivalent amount. Imagine a homeowner who had 20% equity in his home before the Hovnanian clearance sale; he may be a prime-quality borrower and live in a personally-affordable home (had the income to support his purchase). Presto, he wakes up on Monday and his is now 10% underwater on his purchase, and since his and many other mortgages in his area have been SECURITIZED, those previously healthy AAA credits have been turned into trash with these sales. This person's wealth just suffered a CRASH, no different than if the value of his or her stock investments declined in the same manner. Homeowners and homebuilders in general had been holding their prices up through value-added incentives, such as special countertops or flooring sales tactics, are now between the proverbial rock and a hard place. This will no longer work. That sound you hear is the sound of crashing home values around the country as homebuilder after homebuilder will follow Hovnanian out the exits.

this is a Email that came to me and is NOT copyrighted.

Hi: Happy Halloween. Summer is over, Halloween is right around the corner and the overall housing market remains soft.

Compared to last year, home sales are down but interesting enough, the median price actually went up in the Santa Clara county (5.4%) and San Francisco county (6.3%), using September 06 and 07 data.  It is clear that we are in a correction period, largely thanks to the hugh market spike from 2003-2005, where almost anyone could get financing and the market were investor-friendly (40% of buyers in 2004 were investors); I do view this as a normal market behavior.

The recent sub-prime fiasco, however, is a different story.  It's impact to the housing market can be viewed in 2 fronts: homeowners who no longer can't afford the mortgage, primarily due to the over-extension of their borrowing capacity, maturing of ARM loans, and buying a home at above market value, will continue to play out and contribute to the increasing number of foreclosures and short-sales; and that may take a while before it peaks out.  The second is the tightening lender guidelines will make it more difficult for first time buyers with little or no money down to get into the market.

The news on the housing market today is pretty gloomy but I have a different viewpoint.  The Bay Area market is NOT the national market, it never has been.  With a robust job market, favorable climate, diversity, culture, this area can't be compared to the rest of the country.  With the Fed changing their tactic by lowering the rate in September, they are addressing the problem at-hand rather than the feared inflation.

I think this is an excellent time for qualified buyers to act now:

1) Inventory are plenty and sellers are motivated & willing to talk.  Just like a stock market, who wants to buy high anyway?

2) Home prices are already adjusted to the soft market condition and there is more room for buyer to negotiate, thus opportunity to buy at below market price.

3) If the Fed does cut rate further, the market may swing the other way quickly.

4) Rents are going up.  If you actually do the math, factoring in the tax savings and potential equity gain (without the tax consequence), you are likely to be ahead in a few years' time in overall gain.

Have we reached the bottom?  Clearly no one has the answer.  But if you are considering a purchase, your home is more than an investment.  If I can be of help in your home search, or help answer any questions you may have, give me a call. Take Care, Irene

Irene Eagling
REALTOR (R)
Licensed in CA
My Profile: http://www.ziprealty.com/agent/ieagling

*******The Bay Area market is NOT the national market, it never has been.***********

happy talk! 

Geech Guy, did you post enough about this?  ( 5 posts? ) LOL

This story is not much different than in anyother state with Moderate to Upper class Housing...Fla is even worse...

And Not so sorry for someone who owns a $700,000 home either...

If they can't afford a 10-15% Temp. Hit? ( and really No Hit if they aren't Selling or Borrowing on it) They had no business in them in the first place....and/or they were Flippers and even less symptahy goes out to them....

In the longer term? say 5 yrs? It will still probably go +50% by then, or more..

Especially in this Area....

as for Reappraising? In our Area, our appraised values are only about 80% of Retail, thus allowing for fluxuations like these...

;)