Santa Cruz Real Estate  Digest,  Ed. 14
October, 2016 - In This Issue:
In This Month's Issue
In this month's Digest you will find national and local news as well as informational pieces on topics that we have found to be increasingly important in the real estate industry. 

Nationally, new FHA rules  may have implications for those with student debt, as well as those who are underwater and need to refinance. 

Locally, city council and community members analyze the cost and benefits of changing the zoning laws along the four main corridors in Santa Cruz City. The corridor debate is closely tied to affordable housing issues in Santa Cruz. 

We've written about the ADU requirements and incentive programs within Santa Cruz, as this is not only a way to increase our housing stock, but is also a viable cash-flow opportunity. 

Finally, walkability has become a buzz word within the real estate industry. Walkable neighborhoods have been shown to have higher housing prices, as well as healthier and more civilly engaged communities.

If you are looking for monthly real estate statistics for Santa Cruz, Santa Clara, and/or Monterey County, see below. 

Real Estate Market Statistics 
For Santa Cruz, Santa Clara, and  Monterey

The reports contain median home prices, real estate price statistics, valuable information about mortgage rates and much more.

National Real Estate Articles:
New FHA Rules
The FHA is designed to make homeownership more 
affordable. By insuring loans, the FHA allows lenders to offer you a better deal. This includes:
  • Lower down payments
  • Lower closing costs
  • Easy credit qualifying
New rules have recently been released which may affect your ability to obtain an FHA loan or, if you have a pre-existing loan, to refinance.

What are the new rules?

Calculating the DTI and Reporting on Self-Employment Income:
  • The treatment of student loans when calculating a borrower's debt-to-income ratio (DTI) has changed. Previously, loans in deferment for at least 12 months were not included. Now, all loans are brought into the calculation. Read more about changes to FHA's treatment of student loan debt here .
  • Authorized users of credit cards must include the card's monthly minimum payment in their DTI unless proof of payment for the last 12 months by the primary card holder can be provided.
  • A smaller percent of installment and car loans (with 10 or fewer statements) are included in the DTI.
  • To use self-employment income on a mortgage application, borrowers must show two years of actual work experience, including tax returns.
  • See additional changes and read more about the ones listed above here .

  • The FHA Streamline Refinance product has been modified.
  • If you have a pre-existing FHA loan, you do not need to show proof of employment, income, or credit to refinance.
  • Appraisals are not required.
  • However, you do need to show proof of 3 months of on-time loan payments, have had the loan for at least 210 days, and demonstrate that there is a Net Tangible Benefit in the refinance.
    • Net Tangible Benefit is loosely described as a reduction in principal plus interest plus mortgage insurance by 5% or more.
  • Get more details here .

Who does this effect?
  • The following statistics reveals how much student debt exists within the US. As of 2016, 48 million Americans owe nearly $1.3 trillion in student loan debt. In 2012, 66% of graduates from public colleges had debt, with an average of $25,550; 75% of students graduating from private nonprofit colleges had debt with an average of $32,300; and 88 percent of graduates from for-profit colleges had debt with an average of $39,950 ( source ). This implies that when some of these individuals apply for a mortgage, they will face a higher DTI and may have more difficulty obtaining a one.
  • Those with a substantial amount of credit card debt, for which payments are missing in the last year, will see an increase in their DTI, also reducing their access to affordable credit.
  • Underwater borrowers benefit from not having to obtain a home appraisal when refinancing. You can use the original purchase price of your home as its "current value", meaning you avoid penalties and the additional costs associated with a higher value home.

Questions ? Contact your local lender, or call us if you need a referral.

Local Real Estate Articles:

ADU's in City of Santa Cruz

Affordable housing for the middle and lower income brackets is vital for city health. The Housing Element, found in the Santa Cruz General Plan 2015-2023 , states "currently moderate income families and the city's workforce, including teachers, public safety workers, nurses, and others, leave the community entirely, or find affordable housing elsewhere and commute to work in Santa Cruz. This trend impacts the quality of schools, affects traffic and commuting patterns, and makes it difficult for employers to retain employees". Additionally "employment trends indicate a strong need for moderate- and low-income housing to support the housing needs of persons employed by the retail and accommodations and food service industries within the city".  In other words, without affordable housing, we do nothave a place for the workers of Santa Cruz to live and the city does not run as efficiently.

One of the steps that the city is taking to increase the amount of affordable housing is to support the construction of ADUs. It has even published an ADU manual, found here . To learn more about ADU's and how they may be a profitable investment, read one.

What is an ADU?
Multiple structures can serves as an Accessory Dwelling Unit. The only requirement for a structure to serve as an ADU is that the unit has a kitchen, bathroom, and a place to sleep. Sometimes they are attached to a house as a second story or garage, while at other times they may be a stand alone cottage on the premise.

Who can build and ADU?
  • Any homeowner within the City of Santa Cruz who lives in their home, has a lot that is 5,000 square feet or more in area, and is zoned for SFR (single-family residence) dwellings can consider building an ADU.
    • There are additional considerations and the homeowner needs to ensure they are eligible for building an ADU.
    • Additionally, you should check with the City Planning Department to ensure that you do not have any restrictions that would prevent you from building an ADU.

Santa Cruz City ADU Incentive Program:
  • The City's ADU development program:
    • Technical Assistance Grant: Homeowners may request a grant for technical assistance for a one-hour consultation with a licensed architect, plumber, or electrician. This grant may be used to help adjust the ADU design to the homeowner's needs.  
    • ADU Loans: A joint City/Santa Cruz Community Credit Union loan program provides up to $70,000 at 4.5% interest. Apply at the Credit Union, call (831) 425-7708.
    • Wage Subsidy Program: The Community Action Board of Santa Cruz County's Women Venture Project will provide 50% salary assistance for builders using graduates from their training program for the building trades. Call (831) 724-0206 for information.
    • Check with Habitat for Humanity to learn more about their ADU program. See here.

The Numbers Behind an ADU:
  • You can rent the ADU for over $1000 a month, and according to Santa Cruz Green Builders, build a garage-conversion ADU for $75,000. With a 4.5% loan, this bears a minimum cash flow of approximately $550/month. Other ADU options (such as stand alone ADU's) and approximate costs are illustrated here .

What if I don't live in the City of Santa Cruz?
  • The information on this page is for residents within the City of Santa Cruz only. If you live outside the city limits and are interested in building an ADU, you need to talk to the planning department in your home city or to the county if unincorporated. The County of Santa Cruz has a "secondary unit" plan for building ADUs that could work for you.

Potential Change in Zoning in Santa Cruz
The Corridor Debate

The city is in the process of researching and asking for public feedback on the idea of changing the zoning code along four corridors within the city of Santa Cruz. As shown in the map below, these corridors include Mission Street (Highway 1), Soquel Avenue, Water Street, and Ocean Street, each identified as a road that carries the heaviest cross-town traffic and provides access to a variety of amenities.

In the map above, the dark brown areas, along the major corridors, are the targeted areas for zoning changes. See the map in higher resolution here. Changes in the zoning code would modify allowable density in these areas. Density is defined as the number of people or housing units in a given area, and residential density is usually measured in dwelling units per acre. If the zoning changes are successful, builders will have the opportunity to build higher density, mixed use housing in specific "nodes" along the corridors.
  • The following nodes have been identified in the Santa Cruz Corridor Planning and Zoning Update found here .
  • After surveying the corridors, the city has found 2.67 acres of vacant land, and 46.12 acres of underutilized sites with varying current land use which may serve as areas for future development.
  • Table 5.5 summarizes the stock of land that the city has identified.
  • Here the AV ratio is defined as the ratio of the value of existing permanent improvements (i.e. buildings) to the value of the land. If the AV ratio is less than 1, the land is considered underutilized. Sites with an AV ratio less than 0.5 have an ever greater potential for development.

What are the pros and cons of this proposal (identified by the city, community members, and journalists)?

  • Pros:
  • Affordable housing is needed in Santa Cruz (see more in the ADU article above). Further development in these areas will allow for more affordable, mixed use housing, benefiting lower and middle income residents.
  • Development of underutilized lots may help to raise property values in surrounding areas.
  • The city has a vision to increase walkability within the corridors, and many may benefit from less transit time and a higher quality of life (see Walkability article below). Read more about the Transportation Commission's plan here .
  • Cons:
  • If appropriate transit is not planned for a higher density neighborhood, development could lead to more traffic and congestion within the city. City officials are working with the Regional Transportation Commission to ensure development occurs around new or pre-existing bike and public transport areas. City cfficials expect that new residents will bike, walk or take public transport to work at least part of the time.
  • Those living in these areas may face undesirable consequences of higher density development (such as condominiums) including less privacy, more noise, more traffic and less parking.

So what does this mean for you and how can you participate in the discussion?
  • If you are a developer, this change may be a welcome opportunity to start a new project.
  • If you are living near one of these nodes or along the corridor, your neighborhood will undergo changes. Whether that change is positive or negative is for you to decide.
  • New development will likely influence commute times, housing supply, rents (higher supply), and many other aspects of our community. Therefore, every member of Santa Cruz County will be affected.  
  • Visit the this site to find public meeting times and news on the progress of the corridor planning process.


One proposed definition of walkability is "the extent to which the built environment is friendly to the presence of people living, shopping, visiting, enjoying, or spending time in the area" ( source ). For example, a home near Pacific Avenue such as Center or Lincoln Streets in Santa Cruz would be considered highly walkable.

The concept of walkability has become increasingly important in the minds of homeowners, policy makers and city planners. This may be a result of an increasing body of research on the benefits of walkability as well as the negative environmental impacts of increased automobile use.

What are the advantages of living in walkable place?
  • This article identifies a variety of studies on the effects of living in a walkable community. According to the article, research suggests that walkability can have positive effects on housing prices, a person's health, and his or her civil engagement.
  • Additional studies, which take advantage of Walk Score data, are listed here .

How do I (the client) know if my home is walkable?
  • Walk Score is one of the more respected walk-score generators, and with a large number of indexed cities across the country, is the most complete walkability estimator that we have found. While others exist, including apps, they depend on user input and many did not have a substantial amount of data on Santa Cruz County or surrounding areas.
    • Walk Score provides walk, transit, and bike scores.
    • To read more about Walk Score's methodology, click here .
  • Like many algorithm-driven values, Walk Score has it's limitations. As this article explains, the Walk Score is largely a measure of the density of economic activity in a given area. As a result, certain locations, such as sprawling commercial areas, will get higher scores than they deserve.

UCSC Arboretum Plant Sale

With a couple of cold days behind us and leaves beginning to turn, it is clear that Autumn has arrived. You may not associate Fall with a time for planting, but according to the UCSC Arboretum, there are many benefits to gardening at this time. These include:

  • Energy Efficiency - during fall, plants are not longer in bloom and so they do not have to expend as much energy flowering and reproducing. Therefore, the plant will have more energy to establish itself in your garden by growing roots and preparing to bloom the following spring. These plants tend to bloom faster than those planted in spring because they have already "settled in".
  • Many weeds that are highly active during the spring will go semi-dormant during the fall, making like easier for the plant and the planter.
  • Many nurseries have sales during the fall to find homes for their inventory before winter.
( source )

If you're interested in the UCSC Arboretum's fall sale, happening October 15th, click here .

By taking care of the exterior, as well as the interior of your home, you provide a beautiful and safe space for you and your family to live while maintaining or possibly increasing your home's worth. Here are some examples of fall plants that can brighten up your front or back yard:

Christine's Corner

A basic law of nature is that things are always changing. There are different ways that we as individuals and a business can respond to this fundamental rule. At Schneider Estates, we are fully committed to embracing change. One obvious change is the look of our newsletter, and other changes are happening behind the scenes. We live in a more connected world where social media is used by a majority of consumers. As the result, we are changing the way we market your properties to ensure that we fully utilize these platforms and get your property in front of more interested buyers. By targeting Facebook ads and tapping into our databases, we may attract the ideal buyer before your property even hits the market. For example, using these kinds of tactics, we are currently working three off-market deals. We are also changing how we relate to you, the buyer. We are using new software to keep track of your needs, and working to match you up with sellers quickly and efficiently. Change is always happening, and we are working to take advantage of the changes in today's technological world to give you the best real estate experience possible.