Talk about money: Mild upswing on horizon for real estate

Remember when your parents advised you that buying a house was a good investment? For the second half of the 20th century, that was sound advice. But for the past six years, it’s been dead wrong.
U.S. home prices have dropped 32.9 percent since their peak in July 2006, according to the S&P/Case-Shiller home price index released last week, and are back to their mid-2003 levels.
Locally, the numbers aren’t any better. The median price for a single-family detached home in Scotts Valley peaked at $823,000 in March 2006, according to the real estate website Zillow.com. The median price of homes sold in the fourth quarter of 2011 was $565,000, according to Melanie Useldinger, a realtor in Scotts Valley. That’s a drop of 31.3 percent.
In the Felton-Lompico area, the median price peaked in April 2007 at $560,000, according to Zillow. In the fourth quarter of ’11, the median sales price was $250,000 — down 55.3 percent from the peak. Only eight homes sold in that area during the period, and four of those were sold by banks after the owners had lost them to foreclosure.
“The distressed homes are making home sales look bleak,” says Scotts Valley Realtor Millou Rose, “but the truth is there are not enough nice homes on the market.”
She struck a note of optimism amid the bleak numbers, saying that sales are picking up, as low interest rates on mortgages motivate some buyers who have been waiting on the sidelines to jump in.
Santa Cruz Realtor Neal Langholz also sees a little more optimism.
“There’s a feeling that maybe the bottom of the market has been reached,” he said, citing a pickup in sales of homes in the price range of $550,000 and less, helped by ultra-low interest rates on mortgage loans of $417,000 and below.
But even if the market is at or near a bottom, prices are likely to remain flat for the next few years, said Wayne Shaffer, a Santa Cruz realtor for 40 years. He says there is a “shadow inventory” of homes owners have been waiting to sell that will enter the market as soon as prices show signs of rebounding.
Scotts Valley Realtor David Bergman expects prices to stay low through 2014. He cited high unemployment and the end of the era of lax lending.
“Buyers simply do not have the savings that are required by the banks under the new, more restrictive lending programs,” he said.
Jobs are a key factor, said Scotts Valley Realtor Kurt Useldinger, who specializes in distressed properties.
“The closer you are to real jobs, the healthier the housing market,” he said. “Santa Cruz County is a great destination, but the jobs aren’t here. It’s like night and day between Santa Cruz and Santa Clara County,” where companies like Google and Facebook have been hiring.
He cites an example in Hollister, in San Benito County, which is farther from Silicon Valley jobs than Scotts Valley. A four-bedroom, three-bath home that five years ago sold for $600,000 recently went for $275,000.
“If that home was here, it would sell for $550,000,” Useldinger said. “If it was in San Jose, it would sell for $625,000. And if it was in Cupertino, with its super-strong school district, it would sell for $825,000.”
Speaking of schools, next month I plan to discuss what realtors and others think about the proposed parcel tax for Scotts Valley schools.
– Mark Rosenberg is an investment consultant for Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 439-9910 or mr********@fw*.com.