Santa Cruz Bank Owned Homes and the Market

Real Estate Agent with Monterey Bay Properties

Santa Cruz Real Estate Market

Mid Year Forecast



Over the last few months, most experts have been predicting that the bottom of the Real Estate market will happen late 2009 or early 2010.  There are several things that have to happen if a recovery is to occur. First mortgage interest rates have to remain low. The lower end of the real estate market is currently being fueled by low interest rates that are allowing first time homebuyers and investors to pick up properties that are 40% to 50% off their market high prices. As I mentioned in my earlier blog, we are seeing multiple bids for these properties. But we will need on-going low mortgage interest rates to continue to fuel our recovery.

 But for a full recovery to happen in our real estate market, we also need to clear out the inventory of bank owned properties that are on the market. These bank owned properties are a result of homeowners losing their homes in a foreclosure action by the banks. We have seen over the last year how property values have continued to fall with the rise of foreclosure sales. The result is a lack of confidence and stability in the market. Thus having a major negative physiological cloud on the market. People are afraid to buy due to the uncertainly of their jobs status. Homeowners are seeing a major decrease in wealth and resulting home equity credits lines. Buyers are uncertain whether to buy now and risk further downturns in the market. 

 So where are we at today with foreclosure market? The chart below tells us several important messages about our future.

 The blue bars represent the number (200) of Bank Owned properties that are not on the market. This is the shadow inventory that the bank is holding on, so as to not flood the market with inventory and drive home prices even lower.

 The red bars represent the number (327) of homes that currently scheduled for a foreclosure auction. Keep in mind that the banks will end up owning the majority of these homes. In fact the Banks buy 99% of the homes that are sold at a foreclosure auction.

 The yellow bars represent the number (543) of homes that have a Notice of Default. Again the majority of these homes will end up being foreclosed on in the months to come.

 Based on this information, we can conclude the following:  The banks are holding at least five months of home sales inventory in Santa Cruz County at this time. This is based on the fact we are currently selling about 100 homes a month on the MLS, and the Banks have a shadow inventory of 200 Bank Owned properties not on the market and will be getting another 300 plus homes through the scheduled foreclosure auctions. On top of that, we have 543 homes with a Notice of Default and a good number of these will end up as Bank Owned properties. Keep in mind the Banks will not release their entire shadow inventory on the market at one time. So we will be seeing an ongoing supply of Bank Owned properties on the market for sometime to come. Given the volume of the Bank Owned inventory, we will not see the bottom of the market until at least sometime next year and maybe beyond that.

 Santa Cruz Area Foreclosures

 Steve Johnson

Monterey Bay Properties

(831) 588 0254

Comments (1)

Paul Gapski
Berkshire Hathaway / Prudential Ca Realty - El Cajon, CA
619-504-8999,#1 Resource SD Relo

yes they look so nice but Foreclosures are such tough on to stomach.

Nov 17, 2011 02:54 AM