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A Rosy Spring for Real Estate?

growingupsc — Wed, 05 Apr 2023 00:11:25 +0000

The spring real estate market is about to come into full bloom, and from where I’m sitting, our local market is looking downright rosy. I’m guessing it may surprise you to see me write that, because it runs contrary to the narrative that’s we’re being fed in the media – that rising interest rates have snuffed out the real estate market, the Federal Reserve is working to bring about a recession, and the real estate market is circling the drain. There’s no question that the market has cooled – and cooled dramatically. Prices are down across the board throughout the Bay Area, to varying degrees. But Santa Cruz specifically is holding up better than most of the Bay Area. Alameda county has been hit the hardest – down 15%, but followed closely by San Francisco (-14.5%) and Santa Clara county (-14%). Prices in Santa Cruz haven’t dropped nearly so dramatically, with the 3-month moving average down just 5.5% year over year. Unfortunately, this drop in home prices in Santa Cruz has not shown up in terms of affordability. Rising mortgage interest rates have had a devastating effect on our already abysmal affordability in Santa Cruz County. Check out this next chart: The data shows that the monthly housing cost in Santa Cruz County has increased 44% for new home buyers, comparing Q4 2021 to Q4 2022. This figure assumes that the buyer has a 20% down payment (as if!) and accounts for principal, interest, property tax, and insurance costs. This is an incredibly steep jump in housing cost in a single year. This begs the question: who can afford home prices like this? You already know the answer: people who work in Silicon Valley, and those who can work-from-home in Santa Cruz, for well-paying employers the world over. And there’s a small segment of locals who earn enough in town to consider buying – lawyers, doctors, entrepreneurs and the like. For many would-be homeowners, they’ll need to be looking out of the mid-county area – or consider a (very) small condo or perhaps a townhouse. But single-family homes in the popular mid-county neighborhoods are now by and large far too expensive for most first-time buyers. Despite the exorbitant prices people are forced to pay to become homeowners, I think today’s market is in solid shape. True, it’s nothing like March of last year – and thank goodness! While last March was Nirvana for home sellers, it was a complete and total nightmare for buyers. A year ago, the market was utterly out of balance. Regardless of what steps the Federal Reserve might have taken, the market was bound to burn itself out. The Fed’s historic increases in interest rates just doused a flame that was burning way, way too hot. What’s left is a nicely smoldering, glowing red bed of hot coal. Yes, prices are down, and interest rates are up. But this has led to a real estate market that is much more balanced and sustainable, with much greater opportunity for buyers. And let’s face it: buyers are a key ingredient in any seller’s market.Many of last year’s buyers were never able to get into a property. In fact, sales last year were down 35-40% from the year before – which means there are a lot of buyers from last year who are looking to get into homes this year. Right now, the market is loaded with a good chunk of last year’s buyers – plus new buyers from this year. That’s a lot of pent-up demand, making this market feel like a hot one. I’ve written a number of offers so far this year – and in every instance, there have been multiple offers to compete against. True, there aren’t as many offers per property to beat this year compared to last, and oftentimes, homes aren’t selling much over asking price, even with multiple offers. But homes are selling – and if they’re priced right, they’re selling quickly, and with favorable prices and terms for sellers. Mortgage rates could keep climbing, putting the hurt on buyers and a real damper on the market. Layoffs in Silicon Valley and beyond could accelerate. There’s literally no end of things which could happen that might put the market into a tailspin. But for now, and for the foreseeable future, the market is in surprisingly – and refreshingly – good shape. Let’s enjoy it while it lasts, and take advantage of this period of relatively smooth sailing. Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003. His contact info can be found at SebFrey.com/contact – and check out his YouTube channel at SebFrey.TV

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Real Estate

growingupsc — Fri, 01 Jul 2022 19:34:08 +0000

Is the Santa Cruz Real Estate Market Toast? By Seb Frey What a difference a few months makes! It was just this past March when I wrote an article for Growing Up in Santa Cruz asking if the Santa Cruz real estate market was boiling over. As I write this in June, nobody’s asking that question anymore. Instead, everyone seems to be asking if the market is headed for some kind of crash. And that’s a fair question, because anecdotally and numerically, it’s apparent that the Santa Cruz County real estate market – and every market across the country that I’m aware of – has hit the brakes. Whether it has hit a wall too remains to be seen. I’ve heard countless stories from realtors near and far who report sharp decreases in open house attendance, offers received on listings, and buyer inquiries on homes for sale. Factually, the number of homes for sale in Santa Cruz County has spiked above 2021 levels – about 25% above this time last year. The number of homes going under contract to be sold, and closing the sale, are likewise down about 25% versus this time last year. The median single-family home price as derived from MLS listings data show that the median sale price for single-family homes in Santa Cruz County was $1,290,000 in May of this year…down from $1,405,000 in April of this year, and down from $1,600,000 just one month prior, in March. However, the median price a year ago in May 2021 was an even $1,300,000 – just $10K higher than this May, so home prices have decreased less than 1% versus where they were a year ago. A less-than-1% drop in year over year prices is weak evidence that prices have collapsed. Although in the year since May 2021, inflation has surged to 8.6%, the highest rate in 40 years. The Federal Reserve is moving aggressively to combat inflation, by rapidly and sharply raising the interest rate it charges. While mortgage rates are not directly tied to the Federal Reserve’s lending rate, they often move up and down together in an awkward harmony. The Fed’s rate rose by 0.25% in March, then another 0.5% in May, and now in June, the rate was increased by a further 0.75%. In only about two months, the Fed’s rate has jumped 2%. In that time, mortgage interest rates have surged almost in lockstep by equal or greater measure. The real estate market seemed to downshift when mortgage rates started rising in early March. Then the market appeared to take a clear step back in the days following Fed’s announcement of the 0.5% rate increase in early May. Most transactions closed in May had already been in motion for contracts signed and loans locked in April. And then, uncharacteristically for the year’s prime selling season, May saw far fewer closings than the month prior. That could be an anomaly, but May closings were also down 28% from May 2021. There’s no better number to look at to see that the market has indeed changed, because a 28% year-over-year drop in homes sold is significant. However, the market is always changing. It never stays the same. It goes up, and it goes down. It’s gone up by a lot, and it’s mostly stayed there so far, although it is off the highs from just a few months ago. It’s quite possible that home prices will drop in the short term. It almost seems as they have to now, because the tremendous surge in mortgage interest rates, combined with almost stratospheric increases in home prices, have cut down affordability to the point where logic would dictate something has to give. Many homebuyers are looking at loans in the $1 million range. But even if you’re looking at a loan of half that amount – “just” $500,000 – you’re still seeing a massive increase in monthly cost. That $500K loan was $2,108 per month on a 30-year fixed mortgage when interest rates were at 3%. With interest rates at 6%, the mortgage will run you $2,998 – or almost $1,000 more a month. While inventory remains low, it’s possible that prices will remain stable, even with 6% interest rates. But you’ll want to keep a close eye on rising inventory. If inventory does climb above the 6-8 weeks presently in Santa Cruz county – perhaps above a 3-month supply, or 12 weeks – I would expect to see prices that are clearly dropping. Will our real estate market be able to shrug off these higher rates, or at least bear the burden without collapse? This is an open question, and we will know more in another month. Keep a sharp eye on this space to see how the market is faring we head into the long hot days of Summer. Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel at YouTube.com/SebFreyTV Read More Your Home Articles

The post Real Estate first appeared on Growing Up in Santa Cruz.

About to Pop?

growingupsc — Wed, 01 Jun 2022 17:55:11 +0000

The Santa Cruz Real Estate Bubble By Seb Frey The talk of a real estate bubble has been getting louder and louder for the past several years. Lately, it seems to have reached, if not a fevered pitch, something of a dull roar. Memories of the 2008 mortgage crisis and subsequent collapse of real estate prices linger. Prices are now considerably higher than they were at the prior peak, and housing affordability is as bad as it has ever been, and quite possibly worse. It seems everyone is asking, “Are these prices sustainable?” and “should I wait for the market to correct before I buy a home here?” Those are two very good questions! If you’re looking for answers to them, unfortunately you’re going to have to keep looking, because I can’t pretend to answer them in any way that you should rely on. Whether you should buy, sell, or hold any real estate in Santa Cruz county is a very consequential decision, and getting to that determination is a path for your steps alone. I’m just here to provide some information for you which I hope will be of some value if you are struggling to figure out what to do in today’s Santa Cruz real estate market. I’ll begin by addressing the question of pricing sustainability. Historically, real estate prices in Santa Cruz have marched inexorably upward…with periods where prices have retreated for brief periods of time. Even in the real estate collapse of 2008-2009, prices really only went down for about 18 months before hitting bottom in 2010, and they’ve been climbing (sometimes lurching) upwards ever since. It’s important to also understand that much of the increase in home prices is just garden variety price inflation. A dollar bill you had lying around in 1984 is equivalent to $2.78 in 2022 money. In 1984, California’s median home price was $114,260 – which means that adjusted for inflation, the California median price “should be” around $317,600 today. Yet Zillow reports that the California median home price is about $790,000, more than double the increase that can be attributed to inflation. This does beg the question, how can prices keep up? The answer is simple. Home price increases have exceeded the rise of inflation because income increases have exceeded the rate of inflation. According to the St. Louis Federal Reserve, the median California income in 1984 – in 2021 dollars – was $25,287, and the median income in 2020 was $77,358 – a 300% increase, which is adjusted for inflation. California home prices have grown about 250% greater than inflation over the past 35-40 years…but inflation-adjusted incomes have grown 300% in that time. This helps to show how and why home prices have risen to where they are today.Regardless, I am absolutely certain that prices will come down again – but what I can’t tell you is when, by how much, or how long they will stay down. And crucially, I can’t tell you how much more they will rise between today and whenever they do finally retreat. I will say though that I am not expecting that we will see a drop in home prices in Santa Cruz county this year. A lot of people are very incredulous that home prices will continue to rise, given how far they’ve gone up recently, especially in the face of the sharp – historically sharp, actually – increases in mortgage rates that we have seen over the past couple of months. However, I have yet to see any forecast which predicts that national or California home prices will decrease this year. Just today I read an article that said CoreLogic, a major real estate analytics and data services company, put out a new report predicting that the median U.S. home price will increase 5.9% between March 2022 and March 2023. That same CoreLogic report analyzed 392 U.S. housing markets in April of this year, looking to determine the likelihood that there will be price decrease in them over the next 12 months. In the Bay Area, every county – including Santa Cruz – registered a “low” probability (20-40%) chance of a price decrease in that time. However, it should be noted, Monterey county was rated as having a “Medium” chance of home price decreases, in the 40-50% range. And that leads me to that second question: should you wait to buy, in anticipation of the inevitable correction in Santa Cruz housing prices? I’m not a big believer in market timing – in most cases, if you’re able to successfully time the market, you owe it to luck. But knowing that real estate prices have tended to rise over the long term, and will likely continue to rise until we reach the Zombie Apocalypse, should help inform your decision. You may want to wait … but you may not want to wait too long. Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel at YouTube.com/SebFreyTV Read More Parenting Articles

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Do REALTORS Even Matter

growingupsc — Fri, 29 Apr 2022 19:13:20 +0000

Do REALTORS Even Matter? By Seb Frey In a real estate market as hot as this, where homes appear to “sell themselves,” it’s a fair question: do REALTORS even matter? I’m going to give you an answer that may surprise you…considering that I myself am a REALTOR, and have been for 19 years. In fact, I was even President of the Santa Cruz County Association of REALTORS in 2019 so I consider myself something of an authority on the subject. I won’t bury the lede here. I’m going to come right out and say it: no, REALTORS do not matter…if you don’t believe they matter. When it comes to answering this question, what you believe matters, because a lot of people believe that when it comes to selling a home, it’s the real estate market that determines how much you’ll be able to sell it for. This is a very commonly held belief. There’s a real estate market, and so there’s a market price for your home. The market is going to pay what the market is going to pay, in which case, why would a hiring a REALTOR even matter? Yet something like 91% of homes in California are sold with the assistance of a REALTOR. The other 9%? This is mostly eaten up by new construction sold directly by home builders, and family members selling their property to other family, friends, or neighbors. Locally, very few homes are sold without a REALTOR to a buyer who had no pre-existing connection to a seller. So why do so may choose to hire a REALTOR? I’m going to posit that the reason for the dominant use of REALTORS is because owners see some value in using one. But given the high dollar cost of the average commission, people have to ask: are REALTORS really worth that much? Another good question! I’d guess it wouldn’t surprise you to read that some house painters are better than other house painters. Or that some doctors or lawyers are better than others in their respective fields. It’s not too much of a stretch then to suppose that in fact, some REALTORS provide better service, or provide better value, than other REALTORS. So it’s interesting that most REALTORS charge almost exactly the same fee. And it’s important to note that there is no standard commission, and that commissions are always negotiable. But I’ve researched MLS data, and I’ve verified that there appears to be one particular commission rate that the overwhelming majority of Santa Cruz REALTORS charge. Now why, if there’s surely a wide difference in REALTORS in their level of skill and service, are the fees so similar? I believe the answer to this is that few people actually try to negotiate the commission. They just accept it as a the “standard” and pay it, because most everyone else pays it too. So why not talk to a REALTOR about lowering the fee? I’m suggesting here that it’s a good idea you do so. Try to see if your REALTOR will accept a lower fee than whatever you think most REALTORS charge, or what they tell you their fee is. And then, if the REALTOR does in fact accept a lower fee … you probably shouldn’t use that agent. Say WHAT? That’s right. Here’s the thing: if a REALTOR can’t successfully negotiate their own commission, if they do not believe in the value they bring to the transaction, why would you want that person to represent you in the largest financial transaction of your life? How could you trust that person to negotiate for your money, when they can’t do a good job negotiating their own? It could be you think that isn’t important, because after all, the market pretty much sets the price. What’s missing here is the understanding is that the market price is really a negotiated market price. And your REALTOR’s ability to negotiate the price (and terms) of the sale of your property to net you the most money possible is one way (of many!) where REALTORS can really prove their worth – or demonstrate their lack thereof. Even in a super-hot market like this one – where houses “sell themselves” and home owners often receive several offers in a short time, a REALTOR’s ability to negotiate the best price for you can literally mean tens of thousands of dollars – or more! – extra on the sale of your home. If a REALTOR has a demonstrated inability to be a strong negotiator, as evidenced by their weakness in standing firmly on their commission and exhibiting confidence in the value of the service they provide, it’s a good bet that they will be be unable to extract the very highest price possible from the plethora of buyers you will no doubt find for your home.Turns out, REALTORS do matter, if you understand how and why.  Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel at YouTube.com/SebFreyTV Read More Parenting Articles

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Housing Market is Boiling Over

growingupsc — Wed, 30 Mar 2022 18:51:10 +0000

The Santa Cruz Housing Market is Boiling Over by Seb Frey This is my first column of 2022 for Growing Up in Santa Cruz, and it’s good to be back! I wrote several articles last year where I discussed buying a home in Santa Cruz. As everyone knows, the Santa Cruz real estate market in 2021 was a hot one, with the median sale price up about 25% compared to the year prior. Going into 2022, there was a sense that the market may have reached something approaching a plateau, with perhaps a modest 5-10% increase in sale prices. That may sound like something more than “modest,” but historically that’s fairly typical, and that is not adjusted for inflation which is running about 7%.The reality of the first few months of 2022 is something different altogether. Prices have taken another vigorous leap upwards – up yet another ~ 20%-ish over prices from a year ago. To say the market is brisk is an understatement. There’s less than a month’s supply of homes across the county, with over 60% of homes receiving multiple offers and an average sales-to-list-price ratio of ~ 107% for the month of February. What’s behind this depressingly robust real estate market? The root cause is lack of supply. Very few people are selling their homes, compared to historical levels of new listings and especially compared to very strong demand. The strong demand is of course coming primarily from Santa Clara County, where “work from home” has settled in for the long haul, as well-compensated Silicon Valley types continue to decide that working from a home close to the beach is very appealing. I used the word “depressingly” robust because this real estate market has become out of reach of far too many would-be Santa Cruz homebuyers. Affordability has been poor in Santa Cruz County for quite some time, but even when the market tanked in 2008 and prices sank dramatically, by the end of 2010 affordability was still only about 20%. Today, that number is likely below 8%. In case you’re wondering, a home is considered “affordable” when someone would pay no more than 30% of their income on a payment for a home, with 20% down – and today, 20% down for a median-priced home is about $250K and would mean a $1,000,000 mortgage. A $1,000,000 mortgage at today’s ~ 4% interest rate would cost $4,774 per month. When you add in property tax and insurance, the monthly payment would likely exceed $6,000 per month. For such a home to be considered affordable, the homebuyer would need to earn in excess of $200,000 per year. So many local Santa Cruz homebuyers have now been priced out of the mid-county “flat lands” close to the beach. Many of these buyers are heading for the hills of the San Lorenzo Valley, Aptos, and Soquel – only to find very strong competition there too, along with fire insurance rates that are in many cases 3-5x more expensive than in neighborhoods further from these fire-prone areas. Other buyers looking for more affordable housing are again moving south to Watsonville and Freedom. Prices there are surging as well, with a well-maintained bread-and-butter 3-bedroom, 2-bathroom, 1,500-2,000sf homes easily fetching $850,000 and more. It’s no secret that the commute from south county to the jobs-rich areas further north is indeed miserable. However, with many locals also now being able to work at least a few days per week from home, this is becoming a more palatable option for many first-time buyers. For too many buyers, the dream of buying into the Santa Cruz real estate market has become truly a nightmare. But in any economy, there are winners and losers, and the winners today are those who already own a home in Santa Cruz. But bear in mind, 15 years ago, many of these same homeowners were facing financial ruin – or were in fact completely wiped out. While many would-be buyers are just giving up, moving further from the beach, or just moving out of town, sellers are having an absolute field day. Homes are selling far above prices most homeowners ever expected to get for their properties, receiving multiple offers even before they hit the market. Of course, selling off market isn’t something that I typically advise. I can’t begin to count the times when a client I’ve worked with has been tempted to accept a strong offer while in the pre-marketing phase…but who held firm and waited, only to be rewarded by several far-superior offers a few weeks later after exposing the home to all comers. It turns out that a bird in hand is often worth quite a bit less than 10-20 in the bush.  Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel at YouTube.com/SebFreyTV Read More Parenting Articles

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Home for the Holidays

growingupsc — Wed, 01 Dec 2021 18:09:06 +0000

Home for the Holidays Why December is the Best Time to Buy a Home By Seb Frey That pain in my neck must be whiplash, because here we are, staring once again at the end of the year, with a new year beckoning right around the corner. It has been one bonkers year for the real estate market, characterized more than anything else by exceedingly strong home price appreciation. I’m not sure if we’re in record territory for a single year’s home price increases, but if not, we must be very close. The market was strong going into December 2020, unusually so for so late in the year, but the pace picked up in January (as it usually does) and sling-shotted the market into spring months that were simply mind-blowing in terms of the fierce competition for homes. The summer months (July and August mostly) offered a bit of a reprieve – as they usually do. Like many of you, I spend a fair amount of time on Facebook, but much of that time is spent in real estate related groups. Predictably, many agents from coast to coast were saying over the summer that the market had softened and voiced the opinion that we were shifting into a buyer’s market. But by the middle of September, all that talk faded away and once again the online chatter from agents from coast to coast was about what a hot, hot market it is. Indeed, the fall market has been stellar. True, it hasn’t been as insane as it was during April and May, but by any rational measure, September, October, and November have been amazing months to be selling a home. And not bad for buying, either. Earlier in the year, it was common for homes in Santa Cruz to receive a couple dozen offers. By this fall, most homes for sale were still receiving multiple offers, but fewer – perhaps as few as only two or three, making it much easier for buyers to actually get an offer accepted. But “easier” does a not mean easy. A few weeks ago, I sat through an office meeting where our broker of record went through the sales statistics for our region. Santa Cruz county was a standout, for two reasons: it was the shortest number of “days on market” (13) for homes sold in October that our broker could remember in his 40 years in the business, and more homes sold than were newly listed for sale, which is a very rare phenomenon. But now here we are in December. December has long been my favorite time of year to buy a home. It’s the time of year when people are mostly distracted with the holidays, so buyers face the least competition. At the same time, anyone who is selling their home over the holidays is someone who really wants to sell. They’re motivated, and are more likely to be willing to make a deal on favorable terms for the buyer in December than at any other time of the year. If you’ve been trying and trying to buy a home, December may be the break you’ve been waiting for! Assuming you can find anything you’d want to buy, in a price range you can afford. But if you can stretch, and an opportunity presents itself, December is not the month to pull your punches – go for it! While you probably won’t be able to move in to it for the holidays this year, buying a home in December will be a gift for you and your family that will keep on giving, for years or decades to come. It’s also at this time of year that I begin to think and plan for the coming year. When I look at what’s happening with the real estate market and the economy in general, I can only come to one conclusion: the market is going to take off like a rocket come January. Job growth has been remarkably strong, incomes are up, mortgage interest rates remain absurdly low, the work-form-home trend shows no sign of dissipating, COVID-19 appears to be coming to heel, and Biden’s infrastructure bill has been signed, sealed, and will be delivered over the coming years. Millennials – the largest generation in America – are finally hitting income levels that allow them to become homeowners, while the second largest generation, Baby Boomers, are downsizing and moving on, spurred on in California by the passage of Proposition 19. It feels to me like we are in the midst of a mega cycle for real estate, and, unbelievable as it may seem, there appears our real estate market has quite a bit of room left to run. While 2021 has been an unreal year for real estate, I think that 2022 will likewise prove to be an incredibly strong real estate market.So, if indeed an opportunity to become a homeowner presents itself this month, my advice is don’t hesitate to pull the trigger and get an offer in! This time next year, you’ll be happily inviting your friends and family to share the magic of the season in a home you’ll be proud to call your own.  Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel on SebFrey.TV Read More Parenting Articles

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Santa Cruz Passenger Rail

growingupsc — Wed, 01 Sep 2021 15:15:56 +0000

Santa Cruz Passenger Rail Show Me the Money By Sebastion “Seb” Frey Normally in this space I write about our local real estate market – but this month’s column focuses on what has become one of the most contentious pieces of real estate in Santa Cruz County: the Santa Cruz Branch Line Rail Corridor.Nine years ago, in October of 2012, the Santa Cruz County Regional Transportation Commission (the RTC) completed the purchase of the rail corridor from Union Pacific Railroad. The corridor had fallen into disuse after the rail line’s sole significant customer, the Cemex cement factory in Davenport, shut down in May of 2010. The tussle over the future of the corridor began even before the ink was dry on the final paperwork. The Santa Cruz RTC’s vision for the corridor is to provide passenger rail service alongside the Monterey Bay Scenic Sanctuary Trail (MBSST) – the “rail and trail” which is fervently pushed by both RTC staff and local supporters such as FORT, the Friends of Rail and Trail. There’s an alternative vision for the corridor as a “trail only,” where it would be used only as a multi-modal walking/bicycling trail. The groups most actively supporting “trail only” include Santa Cruz County Greenway and Trail Now. This past April, rail-and-trail advocates were dealt a major setback when the RTC failed to approve the business plan for the design, construction, and operation of a passenger rail system. At the same time, the commission rejected a motion to move forward with even a $17.1 million environmental review. So why, after nine years of study, did the RTC suddenly slam the brakes on the project? While I am sure each of the commissioners has their own reasoning, in the end, it came down to funding. Trail advocates, led by FORT, have repeatedly made public statements that the project will be paid for primarily through state and federal grants. In fact, numerous claims on social media have been made which state that the project is already fully funded! However, in fact, the project is far from fully funded and the RTC has not been able to clearly identify sufficient potential funding sources. And therein lies the rub: there simply is not enough money to build and operate a passenger rail system in Santa Cruz County. I have no doubt that the passenger rail project would indeed be funded in large part by federal and state grants – because there is no other way it could be built. However, “in large part” does not mean wholly funded. To obtain any such grant money, there would need to be local matching funds. These local matching funds would need to come from a new tax or bond measure. Passing a tax or bond measure is a high bar, requiring a 2/3rds majority of voters. In the case of a passenger rail project in Santa Cruz County, there simply is not that level of community support. For perspective, it’s helpful to look at the most recent effort to raise local funds for transportation projects: Santa Cruz Measure D. This sales tax measure was approved by voters in 2016, with 67.78% of voters saying yes. Measure D added a half-cent sales tax for thirty years, raising about $17 million annually for county-wide transportation infrastructure projects and maintenance improvements. Measure D barely squeaked by, even though it provided and paved the way for urgently needed funding across the entirety of Santa Cruz County. Passenger rail, on the other hand, would be used by, at most, a few thousand riders per day and would only be practical for about 50% of the county’s population to ever consider using for transportation. Given recent history, and the limited reach of the proposed rail system, it seems unlikely at best that 2/3rds of all county voters would approve funding for a project which will not serve county-wide needs. Everyone agrees that Santa Cruz County has a transportation crisis, but there is no consensus on what to do about it. However, the RTC’s own studies show that establishing passenger rail service would do little to improve transportation in the county. Their research shows that passenger rail service would have a negligible impact on freeway commute times, vehicle miles traveled, and greenhouse gas emissions. One question we’re always trying to solve for in real estate is to determine the “highest and best use” of property. The Appraisal of Real Estate, 13th Edition, defines highest and best use as: The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value. Whatever someone may feel about the merits of passenger rail in Santa Cruz, we simply cannot escape the fact that passenger rail is not a financially viable proposition. There is, at present and for the foreseeable future, no credible way to pay for it. Given this stubborn fact, nobody should expect to see passenger rail in Santa Cruz County any time soon. ◊ Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel on SebFrey.TV Read More Parenting Articles

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Modern Realtor

growingupsc — Wed, 28 Jul 2021 14:40:35 +0000

The Modern Realtor’s Value Proposition by seb frey Don’t tell anyone, but I watch a fair amount of Reality TV. Not sure how it began – but I think it was Survivor. Then before you know it, I was watching forgettable season after forgettable season of the Bachelor(ette), and I’ve seen all the housewives from coast to coast, humiliating themselves and each other with wild abandon, for more years than I care to count. Of course, my true love is Million Dollar Listing New York. I just love looking at that gleaming Manhattan real estate. Million Dollar Listing L.A. is another show I watch every episode of, but the agents on the show are just a little too L.A. for my taste. Not that there’s anything wrong with L.A., of course! The reason I mention this is because I also watch Selling Sunset on Netflix, which is kind of like Charlie’s Angels, Real Estate Edition. In a recent episode I saw, head honcho Jason of the Oppenheim Group (the Charlie of the show) mentioned that they had recently introduced their Concierge Program. Any time I hear the words “Concierge” in the real estate context, my ears perk up. I’ve offered “Concierge Services” for many years, where I help homeowners do whatever it takes to get their property ready for market, given the time and resources available. In fact, when I shuttered my independent brokerage and moved my license to Compass in 2019, a large part of the impetus for that was because of the Compass Concierge program. Compass Concierge is a wonderful program where Compass will front the cost of repairs, up to $75,000 per home in the Bay Area (including Santa Cruz and Monterey), with no cost, fee, or interest whatsoever. This solves a big problem for many of my clients, a great number of whom struggle to scrape up the cash to repair and refresh their homes to get them market ready. Many people around here are cash poor but house rich, and if you’re retired and on a fixed income, even qualifying for a HELOC (Home Equity Line of Credit) to get the funds to get your home looking its best is impossible – but even when it is possible, it’s still expensive and time consuming, making it a less-than-desirable choice for many homeowners. Today, many brokerages have copied the Compass Concierge program. It’s become almost de rigueur, although most competing firms charge a fee or interest and/or won’t front as much as Compass does. One of the hallmarks of the “pandemic economy” is the booming real estate market – prices in Santa Cruz are up probably about 20% in just a year, and I’d swear they’ve jumped up by 25% in Watsonville. Given the stratospheric home prices, and the perceived ease of selling a home in this market, many homeowners are wondering what today’s Realtors are doing to earn those “juicy” commissions.I point to these Concierge programs as just one example. Realtors – the best of them, anyway – have long pointed to the value that they help create, unlock, or preserve through their services. It’s becoming increasingly common in Santa Clara county, for example, for Realtors to also pay for staging – which can easily run $3,500-$5,000 per house, and often quite a bit more. Helping their clients clean up, repair, and modernize their homes is one way that Realtors do for sure earn their fees. One back-of-the-napkin figure I use to calculate the return on investment for this kind of work is 2.5x the cost – so, for example, $50,000 spent readying a home for sale might increase the sale price by $125,000, or an increased profit to the seller of $75,000. $75,000 by the way is the equivalent of a 5% commission on a $1.5 million sale – so it’s easy to see how just this one service alone easily pays the cost of the commission, and then some. All the marketing, negotiation, counseling, and transaction processing is just gravy for the seller at that point. Now, here’s the rub: there’s still plenty of old-school Realtors out there who eschew professional photography and video, social media, paid advertising, repairs, and staging. Yet, many of these Realtors charge just the same as a modern full-service agent does. Working with these “no-frills,” full-cost Realtors still has value vs. selling “by owner” – but clearly, the value is commensurately lower. If a pared-down service (and lower sale price) work for you, I want to point out that there are numerous discounted, local Realtors you can tap – just turn on the Google machine and see what comes up. But if you’re looking to make the most on the sale of your home, please know that there are Realtors out there who provide a level of service, expertise, and value that make the cost of the commission very much worth every penny, and then some. You just have to know what’s possible, and where to look for it. Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003, and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel on SebFrey.TV Read More Your Home Articles

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Sales Slowing

growingupsc — Tue, 29 Jun 2021 16:04:27 +0000

Are Real Estate Sales Slowing Down? By Sebastian Frey If you’re in the market to buy or sell a home, you may be paying particularly close attention to the headline news about real estate. If so, you may have seen some news stories about a cooling real estate market. Many of these stories were based off a report from Redfin, showing somewhat declining sales activity, coast to coast. But all real estate is local, so national trends aren’t necessarily reflected in our local real estate market. But even locally, today we are seeing a modest decline in homes going under contract, and homes sold in June, compared to March, April, and May.This has a lot of potential homebuyers and sellers asking questions. Does this mean the sky is falling? Have sellers missed the market? Is the great real estate “correction” coming, and the bubble about to burst? Will we be seeing a downturn in pricing here in Santa Cruz, and surrounding areas? I don’t think so. I think this is largely seasonal. I always tell people that we really have two “big” markets here: spring, and fall. We normally see a lot of sales in March, April, and May, with fewer in June, July, and August. Then the market roars back to life for September, October, and the first part of November, before things get a bit quieter over the holidays. I think this seasonality may be especially pronounced this year, because vacation season last year was essentially wiped out. Very few people went on any kind of vacations last year. This year, it seems that everyone who can is trying to get out of town. My Facebook feed is full of people in Hawaii, Costa Rica and Mexico. When they’re there, they’re not here, buying houses. Of course, this is purely anecdotal. I know that many readers of this column will feel that the robust strength of the real estate market is a mirage, fueled by low interest rates, forgiven PPP loans and stimulus checks. You may be thinking this “softening” is just the tip of a melting iceberg, and soon we’ll be awash in lower-cost real estate.I hear that too, and of course, economic factors such as these are part of the equation. However, I’m firmly in the camp that believes we’re seeing a generational shift in the real estate market, as millennials – America’s largest generation – ramp up their buying power and appetite for real estate. Speaking of economic factors, back in June, there was an article on Bloomberg with the headline, California Defies Doom with No. 1 U.S. Economy and the subheading which said, “The Golden State has no peers when it comes to expanding GDP, raising household income, investing in innovation and a host of other key metrics.”Go ahead and search Google for that article. The article claims that California has the best “post-COVID” economic performance of any industrialized nation in the world, excluding China. California is creating new jobs, and increasing pay for existing workers, faster than just about anywhere. I believe it’s important to look at the overall trends and dynamics before reading too much into any reporting on the real estate market. It can be very misleading to look at a single month or quarter of data and make any assumptions about longer term trends. Even so, what’s being reported shouldn’t just simply be ignored…so what does this “dip” in the real estate market mean for you? Well, if you’re planning on selling, it means that you really, REALLY can’t just put whatever price you want to on your home and expect it will sell. In this market, and any market, the best strategy for most homes is to price them slightly under what you expect it to sell for, and let the market dial in the price precisely, as it always does. If you’re planning to buy, the market “softening” is unequivocally good news. There may be just a teeny tiny bit less competition out there while people are off enjoying summer, and so your odds of actually being able to find a home in your price range and a bidding war you might actually win have improved, if only slightly. Nobody has a crystal ball; there’s no way to know for sure what the future will bring. But we can observe what’s happening now and make educated forecasts for what the future holds. One current trend which is dramatically affecting Santa Cruz is remote work. Notably, both Google and now Apple have said that going forward, employees will only need to be in the office three days per week, making a longer-distance commute much more bearable. Locally, the Santa Cruz County Board of Supervisors has announced that half of its employees will likewise be able to work from home two days per week. The trend is clear, and it’s happening now, and Santa Cruz County, due to its proximity to the greater Bay Area, is in the crosshairs. Crazy as it may seem, this summertime “lull” in the real estate market may be your best shot at becoming a homeowner in Santa Cruz for the foreseeable future. Read More Parenting Articles

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Santa Cruz is a Top Housing Market

growingupsc — Fri, 28 May 2021 18:51:14 +0000

Santa Cruz is a Top Housing Market But That’s Not Necessarily Good News by Seb Frey …areas with strong housing demand and rising prices combined with robust economies, lots of good-paying jobs, and the amenities that make a place desirable. These markets have lots of restaurants, bars, and shops as well as reasonable commutes to work. Unless you’ve been living under a rock, you’re probably aware that the Santa Cruz real estate market has gone completely bonkers. Prices are skyrocketing, supply remains very constrained, and buyers are in a world of hurt. And it’s not just first-time buyers who are feeling the burn (although they do feel it most acutely). Buyers in virtually all price ranges are experiencing the pain – it’s not much less common to be outbid on a chic $2 million home than it is on a $750K condo. In fact, the market in Santa Cruz is so competitive that it’s receiving national attention. Real estate portal realtor.com and the Wall Street Journal have teamed up to produce an “emerging housing markets” report for the United States. In their first report, released in late April of this year, the only area in California listed as a top emerging market in the USA was…Santa Cruz. That’s right. Santa Cruz is the #10 hottest “emerging housing market” in the United States. And, unsurprisingly, Santa Cruz was the most expensive of the top 10 markets, by a comfortable margin. And what makes these emerging markets so hot? To quote from realtor.com, these markets are: “…areas with strong housing demand and rising prices combined with robust economies, lots of good-paying jobs, and the amenities that make a place desirable. These markets have lots of restaurants, bars, and shops as well as reasonable commutes to work.” Sound like Santa Cruz?While Santa Cruz is making the national news, another headline that’s getting a lot of attention is the sharp uptick in inflation. In April, the U.S. recorded the highest inflation in nearly 13 years, punching in at an annualized rate of 4.2%. But month over month, inflation jumped 0.8%, far above the 0.2% the “experts” had been expecting. Read all about it on MarketWatch. We’re seeing inflation everywhere in the economy now: food, gas prices, building materials, electronics – you name it, things are getting more expensive. And we’re seeing inflation in the real estate market too. Prices are up dramatically in a short period of time – and much of this is, in fact, inflated value. However, simply because prices have inflated does not mean prices will deflate. The United States experienced a decade of significant inflation between 1973 and 1982 – averaging 9% per year in that time. Strikingly, home prices likewise averaged 9% annua l increases in that same time period. In 1970, the median U.S. home price was $17,000. In 1980, it was $47,200. In 1990, it reached $79,100. But by Q1 of 2021, the US median home price reached $347,500.Real estate provides a wonderful hedge against inflation. Prospective homebuyers who today may look at what’s going on in the market and think how expensive homes are really aren’t considering the full picture. They’re only expensive compared to what they cost 1, 5, or 10 years ago. Long term, I expect prices to continue to rise – even if only in inflated dollars (although I do expect prices locally to rise above the rate of inflation). Rent will rise in price too – as will almost everything, including, probably, incomes.Buying a home means that one thing that won’t be going up much over time is your housing cost. Locking in your housing cost for a long period of time, as inflation eats away at the real value of your mortgage debt while increasing the price of your home is the way that most families are able to build wealth, over time. Having said all that, allow me to share with you the latest real estate statistics for Santa Cruz county. These numbers all compare the first 4 months of 2021 to the first 4 months of 2020, and they’re quite eye-popping, for the most part. Median house sales price: + 26%, $1,152,500 in 2021 YTDMedian house $/sq.ft. value: + 18% Total sales volume: + 54% Luxury home sales, $2,000,000+: + 450% Active listings at end of month: – 26% (4 month average) Months supply of inventory: – 48% (much less supply vs. demand) Median days on market: down to 10 from 14 days Percentage of sales over list price: up to 60% from 30% of sales Median SP to LP %:up to 102% from 100% of list price Yes, buying a home in this market is especially challenging. But it’s never been easy in Santa Cruz, and it’s probably not going to get any easier – the NIMBYs who fight against dense housing projects, a growing University, and a tsunami of Silicon Valley money will see to that. If you want to get into this housing market (which, if you plan to live here long term, needs to be a high priority goal for you), you’ll need patience, perseverance, and a plan. While the market may seem daunting, buying a home in Santa Cruz may well prove to be one of the smartest financial decisions (and commitments!) you’ll ever make. Realtor Seb Frey is the author of the book Get It Sold! Check out his videos on Facebook and YouTube – search for “Seb Frey TV.” Learn more on his website and reach him at Read More Parenting Articles

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