Santa Cruz County Real Estate Report for September 2007

HEADING TOWARDS THE END OF THE PRIME SELLING SEASON.........

Fortunately or unfortunately (depending on how you look at it), I see the local real estate market holding it's own. Sure the media is all doom and gloom, but the numbers don't lie. I believe most of what has been happening in the last few months is directly related to the mortgage industry blues. Some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment. Most problems are primarily with jumbo loans, but there are no serious problems for the majority of buyers who qualify for conventional financing. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.

Let's do a comparison of August from 2005 to 2006 to present. The total sales volume was down 21.9% from 2005 to 2006 and the same percentage for 2006 compared to today. But, the median price and the average sales price dropped only 2.1% from 2005 to 2006 and has increased 4.4% since 2006. Correct me if I am wrong in my thinking but I think prices are basically holding.

The percentage of households that could afford to buy an entry-level home in California stood at 24% in the second quarter of 2007, compared with 23% for the same period a year ago. This First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. At 45%, the High Desert region was the most affordable in the state, followed by the Sacramento region at 44%. Santa Barbara was the least affordable region in the state at 12%, followed by the Monterey region at 17%. No records were available for Santa Cruz.

The rate of mortgage loans entering the foreclosure process during the second quarter broke a new record nationally, the Mortgage Bankers Association said on 9/6/07. The rate of loans entering the foreclosure process hit a record 65%, compared with 58% during the previous quarter and 43% during the second quarter of 2006.

In releasing the results of its latest delinquency survey, the MBA said the record rate of loans entering the foreclosure process was driven by data from four states where investors and speculators were particularly active during the boom: California, Florida, Nevada and Arizona. These states have more than a third of the nation's subprime adjustable-rate mortgages (ARMs) and foreclosure starts on subprime ARMs, and are also responsible for most of the nationwide increase in foreclosures, the MBA said.

C.A.R. urges swift passage of GSE and conforming loan limit reform bill, calling for increases in loan limits to match median home prices in California and other high-cost areas and the creation of a new regulator to oversee Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac.

Vigorous support helped push the measure, HR 1427, through the House in May, but it has since stalled in the Senate. The bill would raise the current maximum size of a conforming mortgage loan from $417,000 to a capped amount at 150 percent of the national limit or $625,500, allowing low- and moderate-income home buyers in high-cost areas better access to low-cost, low-rate fixed mortgages.

C.A.R. President Colleen Badagliacco was recently quoted in a 'San Jose Mercury News' story on the issue, saying that a loan of $417,000 'may buy a mansion in Des Moines but it doesn't buy anything in San Jose.'

Here is what is happening in our local Santa Cruz County market, for other areas please give me a call.

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August Monthly Statistical Highlights for Single Family Homes:

* Inventory down 4.4% compared to August 2006, and slightly down 0.5% from July 2007
* Sales down 25.1% compared to August 2006, but only down 2.8% from July 2007
* Days on the market decreased to 73, month prior 88, last August at 81
* Median home price decreased just slightly from the prior month to $798,400, but increased 4.4% from August 2006
* Sales price vs.listing price ratio increased to 97.79% from July
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(These statistics are believed to be accurate but not guaranteed)

We are still looking at over 9 months of inventory on single family homes, which continues to make it a buyers market. There are some great opportunities for those looking for a primary residence, second home, or an investment property. If you know of anyone thinking of selling or looking to buy in the next 30-60 days, I would love to help them.

I hope you enjoy my monthly newsletter. Let me know if there are other facets of the market you would like information about.