Should my parents buy a house in Los Gatos, Saratoga, Los Altos Hills or the Santa Cruz mountains? (San Jose: broker, living in)

[jaynetarzana]

The fact that those areas haven't shown a significant price drop yet only means that they are next to feel the pinch. Everything I read says that the nicer areas are just now starting to be affected. The Bay area is some of the most desirable real estate in the country and it is taking major hits now. The loans that put people into those price points no longer exist. There are only so many millionaires out there to buy up the overpriced real estate. Sooner or later people have to move for one reason or another and their motivation will force them to lower the prices thus affected the entire areas median prices and so on.

[krudmonk]

Take off your tin hats. Real estate has already bottomed out for the most part here. Bargain-hunters are already swooping in and buying above the offering prices when they get into bidding wars. It's not all doom and gloom.

[jaynetarzana]

Those aren't the statistics I am seeing at all. When I speak to my friends who are agents (one of them a top agent in the area) they say that not much is moving at all. All you have to do is look at the decreases from each month to the next in each town to know that this is far from over. People losing jobs, loan programs going away and like I said, only so many millionaires to buy up all of the inventory = decreasing home values.

[Ludachris]

Originally Posted by jaynetarzana

Those aren't the statistics I am seeing at all. When I speak to my friends who are agents (one of them a top agent in the area) they say that not much is moving at all. All you have to do is look at the decreases from each month to the next in each town to know that this is far from over. People losing jobs, loan programs going away and like I said, only so many millionaires to buy up all of the inventory = decreasing home values.

We've got a few real estate agent friends in the area too. Some who have been in the game for decades. They've told us that the desirable areas (Los Gatos, Palo Alto, Saratoga, Cupertino, etc) will not drop anywhere near as much as the places that are not so desirable (San Jose, much of the East Bay, etc). The strong school districts will be a big reason. Sure, things will slow down, but that doesn't necessarily equal a big drop in prices.

I'm not saying the desirable areas won't be affected, but they've shown that they can hold their value, or maybe drop as little as 5-10% while all the other areas drop 30-40%. It's all relative. The desirable areas will always have buyers. Not everyone is being affected. There just aren't the massive number of buyers there once were.

And you don't have to be a millionaire to buy a million dollar home.

[jaynetarzana]

Scotts Valley which has some of the best schools in the area dropped 23% in the past year. It is considered to be one of the most desirable areas because of the schools. There is a house on the market that just dropped their price $130K and it was priced low to begin with.

[Ludachris]

Originally Posted by jaynetarzana

Scotts Valley which has some of the best schools in the area dropped 23% in the past year. It is considered to be one of the most desirable areas because of the schools. There is a house on the market that just dropped their price $130K and it was priced low to begin with.

Well, I don't know that I'd put Scotts Valley in the mix with Los Gatos, Saratoga, Cupertino, Palo Alto, or Los Altos Hills. It's one of the areas people look when they can't get into those areas. But it is a nice area. It's going to be a trickle down effect - the least desirable areas will get hit first and the hardest. The most desirable areas will get hit last and not nearly as hard. I think Scotts Valley would be up in the mid to upper-mid range of desirable areas. People are still buying in the desirable areas right now - just not in the same numbers as 3 years ago.

Again, I didn't say the desirable areas weren't going to be affected. Just not nearly as much as what we've seen with the not so desirable areas. The key is whether or not waiting another year will save someone money. Will the price drops be significant enough to offset the possible rising interest rates? What's the point of waiting for prices to drop another $30-40k (if they actually do) if the rates go up 1% to 1.5%? Maybe, maybe not. I seriously doubt you're going to see a lot of properties in Los Gatos showing up for under $800k all the sudden.

[MtnSurfer]

Ok Guys,

While I can see valid points being made by all it helps to look at some real numbers as well. Take a look at these statistics for the areas in question here: California Home Sale Price Medians by County and City.

This site shows the real change for towns like Lost Gatos (down -28.57%) and Scotts Valley (up 2.96%) over the past 12 months. This is a sliding 12 month window. So you can watch cities actually slide month to month which I have been doing.

I think this demonstrates Ludachris' point that some areas are hit less. That Scotts Valley is actually 'Up' during one of the worst crashes in recent history speaks to an area in high demand. I have been watching Monterey County which also 'holds' value even during rough times, especially in places like Monterey, Pacific Grove, Pebble Beach and Carmel.

However after watching the numbers over the past 6 months I am slowing starting to see the effect jaynetarzana is describing. That is that strongest areas tend to be the laggers in a RE downturn. Monterey and PG are now 'finally' starting to dip (~ 14%). But this has taken some time. And it is a far cry from the Monterey County average of -48.89% over the same period. These drops are almost like waves with these strongest areas being hit by the last waves of a set.

Whether PG or Monterey are just at the beginning of a drop, at the end or the middle is hard to say. But with most econmists forecasting another 30% drop state wide in 2009 I suspect these nicer areas have a ways to go before stabalizing in value (or bottoming out). Of course no one has a cystal ball. So all we can do is look at past trends, recent changes, current conditions and forecasts to arrive at our own conclusions.

I will say that I worked in RE as an appraiser. So determining value was my job. As such watching the market was important especially for the banks whom I worked for. I also discovered that 'most' realtors/brokers knew very little about the valuation of property or the market with respects to trends. They tend to follow the mantra the 'It is Always a good time to buy' and look at the RE industry thru that lens. Unfortunately for buyers and lenders this does not always ring true.

With regards to Scotts Valley in particular its seems to be a bit overvalued especially in a down market. True it has good schools and ppl can drive the 17 for higher paying jobs than in SC. But not everyone wants to make that drive every day. So I think it still has room to drop when reviewing the other data and forecasts out there.

It will be interesting in the end when all is said and done to see which areas basically remained 'flat' during this huge state and nation wide RE down turn. My hometown area where I went to HS, Manhattan Beach, CA is actually up 14.16% over the past 12 months - disgusting if you ask me.;P

Derek

[jaynetarzana]

I wonder how statistics from site to site can be so different. Zillow has Scotts Valley listed at a 23% decrease from Jan 2008 - Jan 2009. Check it out:

Scotts Valley Home Values and House Prices
Population: 11,150
Zindex® $621,500 What's this? 1-yr change -23.6%
For Sale (69) Make Me Move (22) Recently Sold (119)
Zillow Home Value Index

Scotts ValleyNational
Zestimate Per Sq. Ft.

Zestimate Distribution

Scotts Valley Home Value Information
Scotts Valley National
Zillow Home Value Index: $621,500 $205,174
1-Yr. Change: -$192,500 -$23,705
Zestimate Per Sq. Ft.: - - $258
Flips (Sold Twice Within the Last Yr.): 1.1% 2.3%
Turnover (Sold Within Last Yr.): 2.1% 2.2%
Property Tax: $4,844 $2,861
Median Condo Value: $463,500 $216,500
Median Single Family Home Value: $768,500 $234,000
Median 1-Bedroom Home Value: - - $196,500
Median 2-Bedroom Home Value: - - $205,000
Median 3-Bedroom Home Value: - - $231,500
Median 4-Bedroom Home Value: - - $337,500

[MtnSurfer]

Hmm...

Many RE professionals view Zillow as not the greatest (some would say it is down right bad) for their data accuracy and the Zestimates. These can be 'way' off. I have noticed they tend to use data which is old/stale. I just wouldn't base any calculations on their numbers. MLS and other data sources are preferred.

Derek

[Scott5280]

As a broker and investor myself-- I would second that comment above about zillow--they inacuratly reflect current market conditons--they have a long wag time between current IDX.MLS stats..often times this leads to distorted mean averages on PSF. and sold comps..sometimes they're not far off, but are usually off the true data..