Move-up, move-down sellers scarce in Santa Cruz County

Posted on March 25, 2014 Updated on April 14, 2014

He’s one of a surprisingly small number of homeowners in Santa Cruz County who put their home up for sale this month, taking advantage of last year’s 30 percent appreciation. The house, in a 29-home development not far from Scotts Valley High School, listed for $695,000 and went into escrow after 10 days.

Three weeks ago, Zufall sold a different home in Hidden Glen near the neighborhood stables, after making improvements, an investment property to fund his retirement.

“I wanted a million and I got $985,000,” said Zufall, reporting that Silicon Valley workers are house-hunting on this side of the hill. “If you’re a Google or Apple guy, you’ve got a bus in Scotts Valley. The company is helping them get over the hill.”

Buyers are looking but there’s not much to look at. As of the first week in March, there were 455 listings in Santa Cruz County, the fewest in nine years, according to Gary Gangnes of Real Options Realty, who tracks the market.

Five and six years ago, after the housing market collapsed and foreclosures were rampant, buyers could pick from more than 1,000 homes for sale, according to MLSListings.

Home prices tend to drop in the winter, but the median, the mid-point of what sold, stayed in the $600,000s this year after reaching $674,444 in November. In February, the median price was $622,500, Gangnes said.

Only 14 of 104 sales, a scant 13 percent, involved distressed property, owned by a lender or a “short sale,” in which a lender agrees to accept less than what is owed. Those made up to 40 percent of sales during the foreclosure crisis.

“The stealer deals around a year ago have dried up,” said Glenn Fuller, a full-time appraiser since 1983, citing one in Watsonville purchased for $230,000 by an agent who sold it for $330,000.
So homes are appreciating and foreclosures are down to a trickle. Yet, most homeowners are staying put.

Fuller considers interest rates of 4.5 to 4.75 percent “a heck of a generous loan.” Yet, move-up buyers are rare. “The availability of money turns out to be a bigger thing than I ever thought,” Fuller said. “Most people are saying, ‘What’s my monthly payment?’ If they raise interest rates, no one will be able to qualify (for a loan).”

If he bought a home for $1.3 million, he said, his property taxes would jump from $3,000 a year to over $13,000 a year. “Once you get your property taxes set, it makes a lot more sense to remodel your house rather than buy,” Fuller said.

Checking all the listings on the coast, he found 48 for over $1.8 million, with only two in escrow.
Another factor in the lack of move-up buyers, he said, could be the water situation — the rising cost to maintain landscaping on a larger property during a drought.

“It’s really a logjam,” said Tom Brezsny, an agent with Sereno Group who blogs on real estate.
He recalled how in 2005, the inventory of homes for sale was low, but there was a robust move-up market because it was easy to borrow money.

Homeowners would get an equity line of credit to fund a down payment, then shop around. Loans were easy to get, borrowers did not have document employment, assets, and income sources, and once they found the home they wanted, they could easily sell their old house, which was worth more because of rising prices.

Those easy money days are gone, homeowners haven’t forgotten how the market blew up and “they’re not willing to take the risk,” Brezsny said. He sees a changing culture, a view that bigger isn’t necessarily better, less interest in estate property and more interest in living in a walkable neighborhood, being able to travel, ride a bike and surf.

A three-bedroom, two-bath home, single-level, 1800-1900 square feet that is walkable to parks, the Santa Cruz Small Craft Harbor, the Seabright area or West Cliff Drive, “that’s what’s hot right now in the marketplace, and they’re hard to find,” Brezsny said.

“If there’s anything tighter than the housing market, it’s the rental market,” he added, reporting “it’s daunting” for a family with kids and a dog to try to rent somewhere while shopping for another home.
His idea is a matchmaker system, “like Match.com,” for contingent sellers and buyers, whose transaction depends on closing another transaction. But there’s not an app for that, yet.

Zufall, who has lived in Santa Cruz since 1978, found his new nest, a 700-square-foot cottage on the Westside on half an acre, through word of mouth. He’s paying rent of $1,300 a month. “The rent situation here is unbelievable,” he said.

Contact Jondi Gumz at 831-706-3253.