Real Estate Report
2002 Santa Cruz County Annual Real Estate Report

Looking back on our predictions in last year’s annual report is interesting. What did we say then:

• Sales to increase, modestly.

• Prices to stabilize with perhaps a small increase in line with inflation.

• Interest rates will increase.

O.K., so we got one of three. In this business, not bad.

Sales roared back, interest rates declined and prices increased slightly.

Single-family home sales rose 27% to 2,319 units.

The median county home price rose 4.7% with the average home price inching up 0.8%. More than a low-end vs. high-end market, it was a market of location. The average home price fell in Aptos, Capitola, Live Oaks, Seacliff and the east County, but rose everywhere else.

The condo market showed pretty much the same thing: sales were up 24% with the average condo price rising 3.3% and the median price rising 5.5%.

Interest rates? Well, they fell to levels that hadn’t been seen in over forty years. We won’t see these levels again for another forty years. Time to take advantage of them because they will be rising. The current Federal deficits guarantee it.

O.K., so what's going to happen in 2003 in Santa Cruz County? Fearlessly, we march into the breach!

First, we expect sales to rise this year. Last year was a good year but far from a record. The surrounding counties were all close to having a record year.

Second, prices should increase slightly. Let's say around 8-10%.

Finally, as we mentioned, mortgage rates will flop around for the first quarter of the year, then start increasing. Mortgage rates have no where to go but up. See our article on mortgage rates below for several economists’ take on rates.

Mortgage rates will be the story of the market this year. If mortgage rates spike upward, buyers will be coming out of the woodwork to lock in low rates. There is a good chance of rates rising rapidly because of war with Iraq.

The National Association of Realtors® predicts home sales in 2003 will be the second best ever. Last year was the best ever with 5.56 million homes sold. David Lereah, the NAR’s chief economist, predicts mortgage rates will reach 7% by year’s end.

The Spring selling season is beginning and we'll see increasing inventory and sales. To be kept informed of what's happening on a month-to-month basis, subscribe to this report by pressing the BIG RED subscribe button at the bottom right.

P.S. To see the annual trend charts and tables for the individual cities in Santa Cruz County, click on the desired city name in the menu to the left.

Mortgage Rates

A panel of economists in the housing industry got together to predict what will happen to mortgage rates and house prices this year, and to forecast trends in the housing market. They said their predictions assume that if the United States attacks Iraq, the war will not last long.

The pace of refinancing will fall off in the second half of the year, Frank Nothaft, chief economist for Freddie Mac, predicts, as rates increase. People who could benefit from refinancing will do so by the first half of the year, he says.

That's not exactly how Paul Merski, chief economist for the Independent Community Bankers, sees it. He believes that rising rates in the second half of the year will stimulate yet another wave of refinancing. "People who procrastinated or wanted to refinance or do home purchases are energized by rates going up, and jump into the market to take advantage of lower rates," he says.

A couple of economists not only predicted that rates will rise this year, but also predicted what they think rates will be. David Seiders, chief economist for the National Association of Home Builders, says rates will average 6.1 percent in the first three months of 2003 and will average 6.5 percent in the last three months of the year, rising gradually in the meantime.

David Lereah, chief economist for the National Association of Realtors, wasn't as optimistic about rates. He believes 30-year fixed rates will average 6.3 percent in the first quarter and will rise to an average of 7 percent in the fourth quarter. If that happens, rates will return to where they were two years before, in the midst of a refinancing boom.

Lereah predicts that home price appreciation will slow down from 2002's torrid 7%. Prices for existing homes will rise 4.7% this year, he forecasts, and prices for new homes will rise 6.3%.

None of the economists believes that we're in a nationwide housing bubble, with prices ready to plummet downward. For the foreseeable future, they say, demand for houses will exceed supply as young families and immigrants clamor to buy houses in communities that adopt anti-growth policies.

To be kept informed of what's happening on a month-to-month basis, subscribe to this report and we'll notify you when the report is updated.

The chart below has the prices and the unit sales in the thousands. If you see a chart with ($000's), then only the price is in the thousands and the unit sales are as they appear.

DEFINITIONS

Med. Price

Median Price is that at which 50% of properties sold were above that price and 50% were below.

Ave. Price

Average Price is the sum of all prices divided by the number of sales.

Ave. DOM

Average Days on Market is the average time it took to sell all properties.

Newly Listed

How many properties came on the market in the given time period.

This page is copyrighted by http://rereport.com. All rights are reserved.