Santa Cruz Real Estate
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The good news is that this has been a warm and sunny summer. Even the foggy days have seemed warm. And there are lots of people in town.

The not so good news is the real estate market has been very sluggish this summer. Rates for 30-year mortgages just hit their lowest point since April (at 6.55%, down from 6.85%), and yet the market is totally lagging from last year. There are currently 1358 homes for sale in July with only 147 sales. Compare those to 2005 with 192 sales and 845 homes for sale. The good news is historically the number of sales for August and September are much better than in July and already August it is proving to have quite a few more sales than July. The result in the lagging market is that many sellers are adjusting their selling prices to reflect the abundance of competition. If only 10% of the homes are selling, and you want to sell, then having a home that is in good condition, shows well and is priced aggressively will set you apart from the competition.

Buyers today seem to be afraid of paying to much for a home, so they are really negotiating. An article in the Contra Costa times said “Many sellers did not acknowledge the shifting housing market and held out for higher prices despite pleas from agents. People are now waking up and making price reductions. We ask sellers ‘If next week you had to buy your house back at the same price, would you? And if they can’t say yes, then no one will.” I think any home can sell, even in a changing market. Being the best value in your price range will set your home apart.

The summer is almost half way over, pretty soon all the beach goer traffic will be replaced with Cabrillo and UCSC students flooding back into town and the market is still looking pretty blah. With fewer buyers and lots of homes to choose from those houses that are selling are priced very aggresively. Buyers are negotiating and want to get a good deal. Sellers are experiencing pressure to lower prices and negotiate to buyers terms that they haven’t felt in over five years.

The unstability of the market seems to be in large part a result of the role Ben Bernanke has taken as Chairmen of the Federal Reserve. He is definately playing his hand in the FED and changing the tone of the Real Estate economy. While Alan Greenspan kept interest rates low, fueling the market exuberence, Ben Bernanke is taking a more proactive stance with regard to fighting inflation. Bernanke is trying to calm the exuberence without bursting the bubble. The climbing interest rates may be helping curb inflation, but they are also primarily responsible for slowing the real estate market.

The U.S. economy is in a period of transition and many people are unsure where exactly we are headed. Real Estate professionals are scratching their heads and meanwhile, according to an article in Time Magazine from July 31, "No one, including the Fed seems to know quite where we are in the interest-rate cycle. The prices of oil and other commodities have gone through the roof, and consumer prices continue to creep upward a bit more than economists would expect, yet the housing market is downshifting and paychecks are relatively constant."

Interest rates continue to fuel the fear of buyers, but they are still relatively low, and with sellers starting to accept the new market, this really is a great time to buy before interest rates go higher.