House it Going? What is the Bottom Line in the Santa Cruz Housing Market?
Megan Kilmer: Santa Cruz Realtor and Lender
Hi! I'm Megan Kilmer a local millennial Santa Cruz Mama, and Homeowner!
Living in Santa Cruz has always been a worthy battle. I am someone who's rented a kitchen nook with a beaded curtain for privacy in order to stay in this beautiful town. I've been a single mama with my first kiddo, renting rooms from other single mamas. My partner and I make just under the six-figure mark and are considered "low-income" by Santa Cruz County standards. I'm not a magician. I can't make housing fall from the sky, but I can tell you how to hack your way into the Santa Cruz housing market!
Right off the bat - I want to acknowledge that the battle for housing is systemic. When our parents grew up, there was no such thing as a credit score. Many people rely on generational wealth to access their first home purchase and there are many who have been excluded from home buying in the past. Therefore, they do not have generational wealth to draw from. In addition, homelessness is a relatively new concept. One used to be able to walk into the woods and clear part of the forest to build their home, and in other countries homelessness doesn't exist because housing is treated as a human right.
Well, we are here now, so let's play with the cards that we have been dealt. What can we do with the current system in place? If home buying isn't where you are in your housing journey right now - feel free to skip ahead. I will be adding information to help those who need resources for rental support as well.
So let dive in - what is needed to be a homebuyer in this market?
There are two ways to buy a house - all cash or financing. If you need a loan you need to be loanable. That means consistent income for two years, a decent credit score, and most people need at least 3-5% down. So let's talk turkey - what's the bottom line in Santa Cruz County?
If you're like me you have been up late at night scrolling looking at real estate websites and drooling at something ridiculously cheap. Maybe it's a piece of land for 15K, mobile home for 170K, or a cute cabin in Felton for 300K! Or wondering why in the world is a condo on by the beach here under 1M?! Or what's up with a "pre-forecloser" property? You probably already know this, but if it looks too good to be true, it is!
Pieces of land under 100K most likely are not buildable. Keep in mind that any property in the San Lorenzo Valley ( Felton, Mt Hermon, Ben Lomond, Lompico, Zayante, Brookdale, Boulder Creek etc.) that does not have a sewer connection is going to need a septic test. Most septic and well systems have not been maintained or were damaged in the CZU Complex Fires. This means that building will take time effort and MONEY! It's 2023 and of the 911 homes lost, we only have 24 rebuilds! Despite the County stating that they are expediting the permitting process.
Does that mean you shouldn't try? No! There are some problem solves to building. One is an FHA 203(k) loan. If you are willing to put in the effort and energy to go through the permitting and rebuild process you will be able to finance the development of your property with a loan.
One of the most inquired about properties I get are mobile homes under 200K. These are tricky. with a mobile home they ask for a larger downpayment because these homes are seen as "depreciating assets" to financial institutions - that being said these home don't seem to have lost much, if any value, in our Santa Cruz housing bubble. The fact is we are still short on housing and affordable homes to buying a mobile home is still a better bet than renting. Because you will gain equity in your mobile home verse not equity gains in a rental.
So why would a mobile home in Santa Cruz County be under 200K? Some parks have age restrictions like age requirements of 55+. Some parks have very high space rent especially if they are near the ocean or another desired location. If space rent is above $1000 this makes the property value go down because it decreases affordability. Also a challenge may be that the mobile home was build pre 1974. These are hard to lend on since they are considered a vehicle, but an added bonus for these homes is there is no home property tax, only annual registration.
Mobile home loans are possible, but a little different. You will need a higher downpayment, 10-20% and the terms of the loans tend to be shorter between 14-20years. If the loan term is shorter that increases your monthly payment. So, if you are looking at a 200K mobile you may end up paying the same amount as you would a 400K home a month, but as you know, those don't exist in Santa Cruz County! So get the mobile home, build equity so that when the time is right you can leverage into your next home.
On to the cute tiny cabin in Felton - or Paradise Park! If you are a member of a Masonic Organization in good standing with dues paid you are eligible to buy property in the Paradise Park community. If you aren't, you are out of luck. If this is a creative direction you want to explore let me know I can introduce to a Brother.
Other cute cabins in the Santa Cruz redwoods! These homes were build after the 1906 earthquake that devastated San Francisco. The homes were build as vacation homes and have now turned into permanent residences. Because many of these homes were not built to endure year-round use there are a lot of "fixers" we can go back to our FHA 203K loan for support with financing a home that is a fixer. We will also diligently ensure that the well and septic systems pass inspections before committing to a home because these issues are costly and may make your monthly payment unaffordable after financing repairs.
Those properties by the beach that snag everyone's attention are usually shared equity - like a timeshare. Many I have seen are between 1/4th and 1/7th shared equity. You would need to work out times that the other homeowners approve to be at the property. It cannot be a permanent residence and it could be loaned on as an investment property but you will not be able to put less than 20% down on it.
The last thing I want to mention about the dream homes that you may find online - there is no such thing as a "pre-foreclosure" home. Those folks have defaulted on a mortgage payment, missed their tax payment, or have a mechanics lien. They are not posting their home for sale. I think it's really sad that big real estate websites do this because the homeowners are already struggling and it gives false hope to a scroller!
If you have any questions about any of the ways to home hack your way into the Santa Cruz home market please reach out. I will be posting more ways to navigate your Santa Cruz homeownership journey, so stay tuned!
