Sales ticked up last week in the south Santa Clara County towns of Morgan Hill, San Martin and Gilroy.  Last week there were 24 residences that went from active to pending status.  Of these, 22 were single family homes and 2 were townhouses/condominiums. 

Of these sales, the list price ranges were:

Below $200,000 = 3 sales (12.5% of total)

$200,000 - $500,000 = 16 sales (67% of total)

$500,000 - $800,000 = 3 sales (12.5% of total)

$800,000 - $1,200,000 = 1 sale (4% of total)

$1,200,000 - $2,000,000 = 1 sale (4% of total)

As of January 4, 2009, there are 580 residential (single family homes and condos) listings active on the market in Morgan Hill, San Martin and Gilroy, which is 41 less than last week and 88 less than 3 weeks ago.  There are currently 222 pending residential listings.  Therefore, 28% of the total listings are pending under contract as of this date.  Many of the pendings are short sales and therefore take a long time to close.  This could keep our pending percentage up artificially high. 

Tune in next week for an update on the number of sales in South Santa Clara County!

It has been quite a few years since a Bay Area residence could be purchased for investment purposes and have a positive cash flow from the income received from rent.  But with the large drop in real estate sale prices, it appears that not only will there be great potential for gains in equity appreciation, but that the property will have a positive cash flow.

Let’s look at an example case study on a real property currently for sale in Gilroy.  I chose this property because the Multiple Listing Service states that it is currently rented for $1900/month.  This property is located at 9110 Church Street, has 3 bedrooms and 2 bathrooms, is 1132 sq.ft. and is on a 5227 sq.ft. lot.  The list price is $279,000 (originally $369,000), and this property is a short sale.

Although we are given the current rent amount, there are other assumptions that must be made in order to analyze this potential investment.  Here are the assumptions that I made:

• Purchase price = $250,000, 25% down payment = $62,500
• Loan:  6% interest rate with 1 1/2 discount points, 30 year loan, monthly payment = $1124.16, total acquisition cost = $5000 (including closing costs)
• Utilities paid by tenant
• Self-managed (no property management costs)
• 5% vacancy allowance
• Annual property taxes = $3125
• Annual insurance = $800
• Annual maintenance costs = $2500
• Investor’s federal tax bracket = 25%, California state tax = 9.3%
• Holding period = 7 years
• Annual appreciation, average over 7 years = 3% (hopefully this is a very conservative number)
• Projected sales costs = 7%

Using the above assumptions, the property can be analyzed as an investment, taking into account tax depreciation, cash flow before and after taxes.  We will also look at the eventual sale of the property, looking at taxes due upon the sale and the after-tax rate of return.

• Income - Vacancy Allowance = Gross Operating Income = $21,660
• GOI - Operating Expenses = Net Operating Income = $15,235
• Subtract Mortgage Payments = $13,490
• ANNUAL CASH FLOW BEFORE TAXES = $1745

Looking at my assumption of selling the property in seven years with a conservative guess of 3% appreciation in value per year:

• Projected sale price in 2016 = $307,468
• Subtract cost of sale = $21,523
• Add 7 years of cash flow = $12,215
• Subtract remaining loan balance = $168,073
• CASH OUT ON SALE = $130,087
• Subtract initial investment of $67,500
• TOTAL GAIN ON SALE = $62,587

This example shows a viable real estate investment in south Santa Clara County with a before-tax rate of return of 8.55% on the investor’s initial $67,500 investment.  Please consult your tax advisor for more information regarding the tax implications of buying, leasing and selling investment real estate.

As I mentioned in my last post, I showed a lot of bank-owned residences in Los Banos on Friday.  One thing that struck me was that for the most part (with a few exceptions), the properties were in good condition.  Out of the ten that we saw, at least half of them had been freshly painted and new carpet was installed.

This goes against what most people think of when they consider the condition of REOs and short sales.  But the condition of these homes is sometimes ”turn-key”, meaning that you could move into the home and not have to do anything.

In the south Santa Clara County cities of Morgan Hill, San Martin and Gilroy, there are currently 346 distressed residential properties that are either REOs (bank-owned) or short sales.  See my previous post that defines the meaning of these types of sales.  These homes range in price from $1,999,999 for a short sale at 12895 Ales Place in San Martin,

to $104,900 for a bank-owned townhouse at 7759 Murray Avenue in Gilroy:

Both of these properties appear ready to move into.

If you like the prices of the distressed properties that are on the market now but are reluctant to even look at them because you are concerned that all distressed properties are going to be terribly damaged, please reconsider.  As your agent, I can weed out the properties that are in poor condition and only show you the properties that require very little work to make them habitable.

Quite a jump in sales last week in the south Santa Clara County area of Morgan Hill, San Martin and Gilroy - especially considering that it is mid November!  There were 38 residences that went from active to pending status.  Of these, 36 were single family homes and 2 were condo/townhouses. 

Of these sales, the list price ranges were:

Below $200,000 = 1 sale (3% of total)

$200,000 - $500,000 = 26 sales (68% of total)

$500,000 - $800,000 = 8 sales (21% of total)

$800,000 - $1,200,000 = 2 sales (5% of total)

$1,200,000 - $2,000,000 = 1 sale (3% of total)

As of November 18, 2008, there are 719 residential listings active on the market in the Morgan Hill, San Martin, Gilroy area, and 228 pending residential listings.  Therefore, 24% of the listings are pending under contract as of this date. 

Tune in next week for an update on the number of sales in South Santa Clara County!

   I’ve had several clients and friends recently ask me just what, exactly, have home prices been doing in south Santa Clara County since they peaked.  And, by the way, just when did they peak?  To answer that question, I turned to MLSListings Pro where Realtors go to look at the Multiple Listing Service.

Here’s what I found for Morgan Hill:  Morgan Hill’s average home sale price peaked in September, 2006 at $1,091,144.  The average sale price for the year of 2006 was $945,240.  The average sold home price in 2007 didn’t dip too drastically, but did fall 5% to $901,582.  Our most recent data for 2008 through the third quarter shows an average sale price of $767,900.

For Morgan Hill, that is a total drop in average home sale prices from the year of 2006 to the end of the third quarter in 2008 of 19%.

And for Gilroy, the statistics look a little gloomier:  Gilroy’s average home sale price peaked in the year 2006 with an overall average sale price for single family homes of $800,620 for that year.  The average sale price for a Gilroy home in 2007 barely moved from the previous year and was $796,676.  But through the third quarter of this year, the average sale price for 2008 is $565,278.

For Gilroy, that is a total drop in average home sale prices from the year of 2006 to the end of the third quarter in 2008 of 30%.

Gilroy has been particularly hard hit with foreclosures and short sales and those “distressed” listings seem to be what is selling there, so of course, that will drag down the average sale price for the city.  If you live in Gilroy and you want to know how much your home may be worth now, don’t just automatically take 30% off what you think your house was worth in 2006.  Each house is still valued individually and there are many factors that make up its worth.  Call me for a thorough, in-depth market analysis if you are considering selling your home.

Sales were basically on par with the week before in the south Santa Clara County area of Morgan Hill, San Martin and Gilroy.  There were 29 residences that went from active to pending status.  Of these, 28 were single family homes and 1 was a townhouse. 

Of these sales, the list price ranges were:

$200,000 - $500,000 = 20 sales (69% of total)

$500,000 - $800,000 = 6 sales (21% of total)

$800,000 - $1,200,000 = 2 sales (7% of total)

$1,200,000 - $2,000,000 = 1 sale (3% of total)

As of November 11, 2008, there are 730 residential listings active on the market in the Morgan Hill, San Martin, Gilroy area, and 216 pending residential listings.  Therefore, 23% of the listings are pending under contract as of this date.  This percentage is down slightly from the past few months.

Tune in next week for an update on the number of sales in South Santa Clara County!

Sales weren’t quite as robust this past week in the south Santa Clara County area of Morgan Hill, San Martin and Gilroy.  There were 30 residences that went from active to pending status.  Of these, 28 were single family homes and 2 were condo/townhouses. 

Of these sales, the list price ranges were:

Below $200,000 = 1 sale (3% of total)

$200,000 - $500,000 = 21 sales (70% of total)

$500,000 - $800,000 = 5 sales (17% of total)

$800,000 - $1,200,000 = 2 sales (7% of total)

$1,200,000 - $2,000,000 = 1 sale (3% of total)

As of November 4, 2008, there are 732 residential listings active on the market in the Morgan Hill, San Martin, Gilroy area, and 231 pending residential listings.  Therefore, 24% of the listings are pending under contract as of this date.

Tune in next week for an update on the number of sales in South Santa Clara County!

Another busy week last week in the south Santa Clara County area of Morgan Hill, San Martin and Gilroy.  There were 43 residences that went from active to pending status.  Of these, 41 were single family homes and 2 were condo/townhouses.  This past week there were more sales in the higher price ranges than compared to some of the previous weeks.  For comparison, look at my previous weekly posts on Wednesdays.

Of these sales, the list price ranges were:

Below $200,000 = 1 sale (2% of total)

$200,000 - $500,000 = 22 sales (51% of total)

$500,000 - $800,000 = 12 sales (28% of total)

$800,000 - $1,200,000 = 5 sales (12% of total)

$1,200,000 - $2,000,000 = 3 sales (7% of total)

As of October 28, 2008, there are 730 residential listings active on the market in the Morgan Hill, San Martin, Gilroy area, and 252 pending residential listings.  Therefore, 26% of the listings are pending under contract as of this date.

Tune in next week for an update on the number of sales in South Santa Clara County!

South Santa Clara County has some extreme price differentials going on these days.  A few years ago, I never thought we’d see a single family home priced below $200,000 again.  And we still have some high quality estates priced in the several millions range.  Here are South County’s least expensive single family home and most expensive home on the market today.

The least expensive home shown above, 7450 Rogers Lane in Gilroy, is a bank-owned property that has been on the market for over a year.  It is a two bedroom, two bathroom fixer-upper priced at $175,000 and is 1204 sq. ft. on a 3483 sq. ft. lot.  This home sold in March of 2003 for $321,000.

On the opposite end of the price range is 2400 McDonald Lane in Morgan Hill.  This lovely home is priced at $4,350,000 and was built 8 years ago.  It is a 7550 sq. ft. home with 6 bedrooms and 5 1/2 bathrooms sitting on 21 acres in the hills east of town.  There are many amenities that add to the value of this home.

In addition to these two homes, there are another 664 single family residences actively listed in the south County that are priced between these two extremes!

I work at the very first Intero Real Estate Services office to open back in 2002.  Before this office opened, many of us had worked together previously in Morgan Hill, and so we all moved in together into what was a thriving office from day one.  We opened  the Morgan Hill branch of Intero on October 22, 2002.

There are now over 60 offices in several states and countries.  And, in just 6 years of being in business, on October 22, 2008, there is a good possibility that we will arguably have #1 market share in Santa Clara County - The largest county in Northern California.

Our Intero office has always had the largest share of the real estate market in Morgan Hill.  And soon we’ll be able to make the same claim about Santa Clara County.  Click on the thumbnail graph below:

Gretchen Merrick Phone:408-892-9015 gmerrick@interorealestate.com Featured Listings 16830 Edwin Jones Court Morgan Hill, CA 4 BR | 3 BA $749,000 More Details 16868 De Witt Ave Morgan Hill, CA 6 BR | 4.50 BA $849,999 More Details

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