March 2003 Real Estate Report
War Fears Stalling Market

The looming war against Iraq is having a major effect on the Santa Cruz County real estate market, although few people are citing that as the primary reason. It is the secondary effects that are having the biggest impact.

The uncertainty surrounding when and with whom we will invade Iraq are stopping companies from hiring or making capital purchases which, in turn, effects more companies. Layoffs are mounting and employees are uncertain whether or not they will be next. Many homeowners, especially those in the computer industry, have been laid off and are living off their home equity. That can't last much longer.

On the other hand, investors are fleeing stocks and buying bonds which is driving down mortgage rates and giving a boost to the low-end of the market: under $1,000,000.

Until this uncertainty is removed, one way or the other, the market will be in turmoil.

To paraphrase Clinton, "it's still the economy, stupid!"

Santa Cruz County Real Estate Statistics

The statistics we use to follow, and anticipate, the market indicate that we're treading water.

The selling price to listing price ratio edged up a bit: 96.7%

Inventory rising entering the Spring selling season, up over last year: 26%

Days of Inventory rose: 206.3

Days on market dropped three days: 84 /p>

All indicators are flat, except for Days of Inventory, and that reflects a large inventory more than weak sales.

The following chart shows the Days of Inventory: how many days it would take to sell all the homes for sale at the current rate of sales.

Another important indicator of the Santa Cruz County real estate market is the sales price to listing price ratio. When the ratio is over 100%, homes are, on average, selling for more than the listing price. When that happens, you can be sure we're in a raging sellers' market. In February, the ratio rose to 96.7% for single-family homes and 98.2% for condos.

The following chart shows the SP/LP ratio for single-family homes since January 2000.

The sales chart below shows the historic inventory versus sales ratio since January 1997. Click on the chart to expand it, then click your browser's back button to return.

The chart below tracks the change in median and average prices since January 1998. Click on the chart to expand it.

My advice? Good time to buy. Mortgage rates are the lowest they've been in almost two generations. The incipient Iraqi War will continue to depress mortgage rates. After either the war is over or has been averted, we expect mortgage rates to rise as investors start leaving bonds and going back to the stock market.

For sellers, pricing is the key. If you price your property in-line with the market, you'll sell your home faster.

If I can help you devise a strategy, call me at 831.588.1472 or email me at graham@santacruz-realestate.com.

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