Santa Cruz Real Estate  Digest,  Ed. 21
May, 2017 - 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. 

You already know that real estate can be a great investment, but do you know how to build your equity so that, when it comes time to sell, you get the maximum payout? In our first article, we discuss equity and small steps you can take to increase it

In California, we had strong sales growth in the first quarter of 2017. Is this sustainable? What about locally? Read below for a California and Santa Cruz market update and forecast.

If you've procrastinated on your spring cleaning, Christine's Corner is for your. She discusses
 the importance of decluttering, not just for your real estate, but for your quality of life. 
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.

How to Build Equity in a Home

Whether you are a first time homebuyer or have owned a property for years, it is important to understand how your home equity increases and decreases with market fluctuations, and what you can do to increase your equity.  

Your Equity = Your Home's Value - Your Mortgage Balance

To increase your home equity, you need to either increase the home's value, or decrease your mortgage balance.

Increasing A Home's Value:

Market Fluctuations and Appreciation:

Santa Cruz County has consistently seen appreciating home values over the past 4 years.  

If you purchased your property around 2012, your home has most likely increased in value, meaning your equity has increased. If housing prices drop in 2018, then this same equity may deteriorate. This is why it is important to stay abreast of the housing market when considering the best time to sell.

Home Improvements:

Just as people will pay more money for higher quality cars, clothes, and technology, people will pay more for higher quality kitchens, bathrooms, and house features. When you commit to improving your house, we suggest that you analyze the highest return for your dollar.

First ask yourself, have I put off any home maintenance? Address these issues first. No matter how nice your kitchen looks, if your roof needs replacing, you will find yourself in a weaker negotiating position when you sell your house. Your first priority should giving your house a "clean bill of health".

If your house is well maintained, and you have funds for upgrades and 
improvements, it's important to analyze which home improvement project will have the highest ROI (return on investment). To help you, we present a table of ROI's for a variety of home improvement projects from  Remodeling's annual "Cost vs Value Report":

Note: Here "upscale" refers to higher-dollar projects that are more complicated than your average home-improvement project.

This data was collected from San Jose, and we assume that Santa Cruz cost-recoups will be similar.

Read the full report here , which includes National and Pacific Region cost vs value comparisons.

Decreasing your mortgage loan balance:

Making Extra Payments On Your Mortgage:

Making your monthly payments is the obvious way to decrease your mortgage loan balance. But, be sure to extra payments or increase your monthly payments when possible. Take a look at this article 's example: " On a $200,000 mortgage at 5%, in five years you will have accumulated $16,343 in home equity. But add just $100 a month to your payment, and in five years you will have $23,143 in home equity."

Refinance to a Shorter Mortgage Term

Refinancing may help you build equity but it can also decrease equity, so consider this option carefully. When you refinance, you will often have to pay points and fees to acquire the new, lower rate mortgage. These points and fees may skim off any equity you have already accumulated. While you will enjoy lower monthly payments, your long term financial position may be the same or worse.

Refinancing to a shorter-term loan (for example, from a 30 year to 15 year loan) with a lower rate and fees is more likely to save money paid to interest over the life of the loan. Regarding equity, you'll have 100% ownership of your home in less time.

So, when considering refinancing don't just look at the monthly payment. Consider the total amount paid over the life of the loan and how much time it will take before you own your home.


A home can be a wonderful investment. It provides financial stability and strength, it is a place to raise children, to throw parties, to rest, and to grow deep roots. Care for your home like it cares for you: maintain it, improve it, and pay off that mortgage. You'll find that when it's time to sell, through increased equity and a life well lived, you'll have gained in more ways than one.

California And Santa Cruz Market Updates

In the first quarter (Q 1 ) of 2017, California has experienced a fast growth of home sales with 6.8% more transactions than in Q 1 of 2016. This growth was very broad based. Southern California saw the highest rate of growth with places like the Bay Area, where housing is less affordable, seeing a 6.4% increase in sales. On the other hand, sales in the Central Valley were up by 3%, and the Central Coast experienced only a 1%-2% increase.

Will this growth continue? 
Economists at the California Association of Realtors suspect that we will see a slow down in sales throughout mid- and late-2017.  Why?  Largely because of constrained inventory and decreasing affordability.

Neither of these issues are new, but it's no longer just housing prices that are making homeownership less affordable. Due to higher interest rates, the cost of owning and making the monthly payment on a median priced home has risen approximately 13.6%, not just the 6.8% reflected in price increases. Here is a chart to illustrate how the average Californian's monthly payments will change as interest rates increase, assuming the 2016 Q 4 median home price.

If you are planning to buy within the next few years, sooner may be better. We do not expect rates to drop again soon, and locking in a lower rate now can save you thousands of dollars if rates continue to rise. With lackluster growth in the first quarter of 2017, we are not sure if the Fed will continue to raise rates, though economists at C.A.R. suggest that we may be in for a rate increase of a few more basis points.

What about the future of housing affordability in Santa Cruz? 
Santa Cruz is currently the 2nd least affordable county in the state. According to C.A.R.'s data, housing is taking up 89.9% of consumer income, and we are 130.7% above the market clearing home price. Both numbers point to an inevitable decrease in prices in the coming years. With that said, there is anecdotal evidence of an influx of buyers from "over the hill" pushing up housing prices. If this trend continues, we may experience a slow decline, or none at all.

So what is the conclusion?  If you are planning to buy within the next two years, a bump up in rates implies it will be advantageous to buy now and lock in a lower rate. However, continued rate increases are uncertain, and if you are able to wait for three to five years to buy, you may benefit from a decline in prices. There are pros and cons to waiting, not to mention seemingly infinite personal variables that make it a better or worse time for you individually to buy or sell. We suggest that you give us a call so that we can discuss some of these factors, the current market, and your best options.

Christine's Corner


Decluttering is very relevant to your real estate. When it comes time to put your home on the market, the less clutter your home has, the better it will show. Clean and tidy spaces are pleasing to the eye. For example, take a look at this children's room:

Just a little bit of decluttering goes a long way. Furthermore, once your house sells, you'll have an easier time moving out.

With respect to the here and now, you'll also enjoy living in a decluttered home. This blog, written by Courtney Carver, is dedicated to helping people achieve a lifestyle with less stuff, and more space for relationships, experiences, and peace of mind. I've borrowed some of the gems from this blog and others that I've found to be helpful.

Let's start with the closet. This article gives five simple and very useful questions to consider when deciding whether to toss or keep items in your closet.

  1. Do I love it? If yes, keep it.
  2. Do I wear it? If you haven't worn it in a year, give it away.
  3. Does it project the image I want to project? Even if you love it, if the answer to this question is no, give it away.
  4. Does it itch or scratch? Yes? Then why do you still have it?
  5. Does it pinch my toes? For your feet's sake, give it away.

And now, for the kitchen Ms. Carver suggests removing any glasses, dishes, silverware, serving dishes or cooking utensils from the kitchen that you haven't used in the last 6 months. Box it up and write "kitchen stuff: donate after 30 days" and then put it out of sight. If you miss something, go get it. If not, donate it.

Moving on to the bathroom. Bring a box into your bathroom and fill it with anything that has expired, that you don't use, or that will be expired by the time you use it. You can learn more about disposing of unused medications here.

Courtney Carver and others I have read suggest decluttering a little at a time so as not to get overwhelmed and give up. Celebrate your small victories and remember that a little each day will result in a decluttered and spacious home in no time.