The following is a detailed and comprehensive report on the real estate market in Scotts Valley, year-to-date. Some of the information applies to the entire state, but most is centered on our town.
If you have read my previous articles, interviews or have seen some of my videos, I have been saying three things for quite some time:
- There will be more inventory and breathing room after the summer of 2013
- Lenders will be more flexible as the market stabilizes
- Rates will go up close to 5%
Guess what? All of the above have or are taking place right now. Let’s break it down.
INVENTORY
Although the Scotts Valley Real Estate Market remains strong and active, there has definitely been a shift that favors homebuyers more than at any other time this year and maybe even going back to 2012.
What’s Happening?
Inventory has risen to a more buyer friendly level and we are currently looking at more inventory today than what we have seen all year. Buyers today have more selection and sellers need to pay attention and price their homes accordingly to compete with other homes in the market. I like to say that you are either ON the market or IN the market.
“On” the market means your home is listed with a for sale sign, but there is no real motivation to sell based on your price. It does not stand out and you are more than anything just testing the waters.
“IN” the market means you want to sell your home and have priced your home competitively and it is attractive in price, availability and the way it shows.
Why the rise in inventory?
There are several reasons for this.
As kids are going back to school, the peak selling time in real estate has passed as more home buyers put their home buying plans on hold to tend to family matters of getting kids ready for the new school year in addition to taking a couple of steps back as interest rates have risen about 1.25% to about 4.75% for a 30 year fixed that not too long ago was sitting at about 3.5%.
And then there are those buyers who saw the red hot real estate market in the first half of the year and have decided to also step back, take a breather and see what the market will do before they act. This stems from some fears by some buyers who think that we are heading back into a dangerous housing bubble like we had just a few years ago. However, tighter lending guidelines and the shift to more traditional 30 year fixed rate mortgages should be the cure for today’s buyers who witnessed the housing bubble burst in 2007 as home buyers are now smarter and obtaining fixed rate loans instead of the toxic loans that millions of homeowners were getting the last time around. Today’s homebuyers are not only smarter and wiser, they also a little more conservative, which is exactly what we need to keep a stable and safe housing market in check.
There is also more sellers finally realizing and seeing more equity and the need to make that move has brought more homes on the market.
We are now seeing more homes staying on the market a little longer than they were just a month or two ago.
How so? Let’s crunch some numbers because the numbers don’t lie.
Consider this, as of September 12, 2013, these are the following real estate inventory stats in Scotts Valley:
SINGLE FAMILY HOMES
Active For Sale Single Family Homes 57
Pending Sale Single Family Homes 18
Lowest Price Single Family Home $265,000
Highest Price Single Family Home $3,950,000
This means that currently 24%, about one in four single-family homes are pending sales. A pending sale means that the sellers have accepted an offer and are going through the escrow process.
TOWNHOUSE & CONDOS
Active For Sale TH & Condos 3
Pending Sale TH & Condos 5
Lowest Price TH & Condo $237,131
Highest Price TH & Condo $380,000
This means that 62.5% of townhouses and condos are pending sales; almost two out of three have an accepted offer. In addition, 3 townhouses and condos for sale is a very low number and does not give buyers a lot of selection. It also means that the hottest market right now is the townhouse/condo market as well as the lower priced market as it is more affordable and affordability is now taking the place of desirability in terms of people buying more what they can afford versus buying for luxury or want. Need is more important than want right now.
The activity is as follows:
Lower End Priced Homes – Lots of activity, homes are selling relatively quickly at top dollar.
Median Priced Homes – Holding their own, but definitely seeing some negotiation on some of the median priced homes by homebuyers and sellers. You can expect to negotiate prices and terms on some homes more than you have seen in some time.
Higher Priced Homes – The luxury or higher priced home sector is what is being affected more than any other sector right now as the demand for these homes comes down somewhat. In addition, there has always been a lower demand for homes in the higher price range because less people can afford them. It’s just a fact and the law of averages.
Something else to consider is the fact that in just over a month, we will be heading into the holiday season where the market tends to slow down for a few months, as has been the case every year since I can remember as a licensed real estate practitioner for over 27 years.
What does this mean to today’s home buyer and move-up buyers?
Today’s homebuyers now have some breathing room and more selection, more than they have seen in a long time.
Move-up buyers should be licking their chops right now. Let me explain…
Many townhouse and condo owners have wanted to move up into a bigger home and the timing could not be better. They can now get top dollar for their homes because of the lack of inventory, and they are able to get a broader and bigger selection of bigger single-family homes they will be moving up to. Not only that, but they can actually do some negotiating on many of these bigger homes that are on the market today. So what it means is, sell high and buy low. Now, it is tough to think that they can buy a single family home for lower than what they sell their townhouse or condo for, that is still tough to do, but the timing right now is about as good as it gets as rates still are extremely attractive at the 4.75% rate that people are obtaining for a 30 year fixed rate loan.
In addition, there are a lot of single-family home owners who have been wanting to make that move into a bigger home but were afraid to do so because they feared selling their home and not being able to find a bigger home when the market was red hot in all price ranges. Again, with the current market being what it is as described above, that fear is no longer there for a lot of move-up buyers that are able to sell their lower priced homes in a hot sector and are able to buy bigger homes with more negotiating power as the higher priced homes are sitting on the market longer.
LENDER FLEXIBILITY
For quite some time, several years to be exact, lender guidelines were so strict due to the uncertainty of the housing market that it was difficult to get financing on the purchase or refinance of a home if you did not have perfect credit and a sizeable down-payment or equity. Lenders were nervous because for many years, there was no end in sight to dropping home values, which raised their risk each time they would lend money. As the market started to stabilize, the risk factor became smaller and smaller and lenders became more flexible with today’s guidelines, as flexible as we have seen them in quite some time. Make no mistake about it, you now need a job, decent credit and some downpayment to buy a home today, imagine that. But it is not as hard as it was not too long ago and not as hard as you may think it is.
In fact, recently FHA guidelines changed that allow you to buy a home after selling your home in a short sale. There are now some guidelines that allow you to buy immediately after a short sale if you did not miss payments on your mortgage, and for those who may have missed payments they may be able to buy one year after they completed a short sale.
The amount of short sales that were done is a massive amount, in the millions. With this new guideline that just took effect, expect many of those short sale sellers to get back in the market soon. It is a new guideline that will soon have a trickle-down effect on the market when they start buying again.
RATES HAVE GONE UP
While the rise in interest rates has made an impact in some homebuyers being able to afford a home, it really is not much of an impact as people may think. In this case, perception is more powerful than reality, as is the case with many things like the stock market among others.
In other words, the rise in interest rates has made a difference in affordability to some people, but as a whole, an interest rate of 4.75% is still a great rate especially when you compare it to the historical rates of 9% or more over the past 30 years. We really are are sitting on some pretty cheap money right now. To put it in perspective, for every $100,000 that you borrow at 4.75%, your payment is $522 fixed for 30 years. That is still pretty affordable and chances are you can still buy a home today and have a payment close to or even lower than what you are paying in rent. Or better yet, make that move from a townhouse or condo into a single family home without having to break the bank every month with payment shock. The same goes for move-up sellers of single-family homes.
Many real estate agents say that it is a great time to buy and sell a house even when it was not a great time to do so. But in this scenario, it really is a good time to make a move whether it be buying a home or moving up to that dream home or home that fits your family’s needs. Its all about the numbers, and the numbers don’t lie.
If you are thinking of buying or selling a home, please think of me. I have been licensed since 1986 and I have helped hundreds, if not thousands of families buy and sell their home. I am local and am always a phone call or email away, and I am always at your service.
Robert Aldana
REALTOR® since 1986
BRE # 00921165
Bailey Properties
4788 Scotts Valley Road
Scotts Valley, CA. 95066
800-882-7896 ext. 800
[email protected]
www.RobertAldana.com
Robert Aldana is a long-term resident and homeowner in Scotts Valley, is the founder of myScottsValley.com and a licensed REALTOR@ with Bailey Properties in Scotts Valley.
Robert is also a nationally syndicated real estate journalist and his articles and interviews can be read at RobertAldana.com, DeadlineNews.com, RealtyTimes.com, Forbes.com, and many other real estate and finance news sites and publications. For more information and links to his articles including his appearances on HGTV and NBC, visit RobertAldana.com