GILROY
– With mortgage rates this week hitting a 37-year low, South
Valley real estate agents expect to see in 2003 an increase in
sales of lower-priced homes in Gilroy.
GILROY – With mortgage rates this week hitting a 37-year low, South Valley real estate agents expect to see in 2003 an increase in sales of lower-priced homes in Gilroy.
Buyers are being lured by the lower interest rates which economists have attributed to a rise in unemployment levels, a poor stock market and meager sales during the holiday retail season.
The average rate for a 30-year fixed loan fell to 5.93 percent this week. This is the lowest rate since 1965. Other types of mortgages can be even more attractive such as a 15-year fixed-rate mortgage falling to 5.32 percent and one-year-adjustables at 4.01 percent.
Interest rates have been on a relative decline since October 1981 when they hit a record high of 18.63 percent.
Unless the economy turns and interest rates start to climb drastically, Gilroy should remain an attractive location for first-time buyers and condo owners seeking to move to single-family homes, said Chuck Dillmann, a broker associate at Seven Oaks Properties’ Morgan Hill office.
“That’s where the market is strong right now, in the lower-priced homes,” he said. “If interest rates stay low next year, it’s going to be that kind of market.”
The median price of homes in Gilroy is about $100,000 less than nearby Morgan Hill, he said, and this is because there is a much larger supply of lower-priced homes in Gilroy.
Besides the supply of lower-priced homes and low mortgages, South Valley has become more attractive for home buyers for other reasons, including the widening of Highway 101 from Morgan Hill’s Cochrane Road to south San Jose’s Bernal Road. The $52.2-million project will expand Highway 101 from two lanes to four lanes in each direction for 7.5 miles. The project is expected to be completed by February, six months ahead of schedule, and will take an estimated 10 minutes off commute times in each direction.
“Right now, it’s a strong buyer’s market,” Dillmann said. “The sellers don’t seem to be responding to that by bringing the prices down.”
But still, especially in Morgan Hill, many homes on the market didn’t sell as fast as sellers would have liked because buyers are taking their time looking for homes that suit them, he said. It’s not the buyer feeding frenzy that hit the county’s housing market during the late 1990s.
“Those that sold this year, sold at 96 to 97 percent of list price,” he said. “Houses are selling that are priced right and are reasonable buys.”
Aytch (pronounced “H”) Roberts, with Realty World South Valley in Morgan Hill, also sees the early part of 2003 as a good time to buy a home.
“Personally, I believe we’re going to see a strengthening of both Gilroy and Morgan Hill,” he said. “As long as interest rates stay low and people get comfortable with the fact the economy won’t get worse, they’ll feel good about getting into the market.”
Roberts, who is president of the South County Realty Association and on the board of directors of the California Association of Realtors, sees the first three or four months of 2003 as the optimal time for buyers to get “good deals” in real estate.
“Competition will heat up in the spring and you’ll see the prices rise,” he said.
Comparing Silicon Valley with other markets, he said this area’s real estate market has been hurt more than other metropolitan areas in recent years because the technology sector was hit so hard. But the worst days seem to be behind, he said, as indicated by the lower days homes were listed.
According to information from the Santa Clara County Association of Realtors, in 2001, the average price of a home in Morgan Hill was $502,000 and was on the market for 107 days. In 2002, the average price was $612,000 for a home in Morgan Hill and it was on the market for 56 days.
In Gilroy, last year, for the month of November, 28 homes were sold for an average price of $474,000. This November, 42 homes were sold for an average price of $452,000.
“If you look at the average days on the market (in Gilroy), it dropped quite a bit,” Roberts said. “Last year, it was 99 days on the market and now it’s down to about 50.”
Comparing Gilroy and Morgan Hill with the county overall, Santa Clara County saw an average price of homes of $613,000 in November 2001 which rose to $642,000 in November 2002.
Last year was also a difficult time for the real estate market overall because of the Sept. 11 terrorism attacks on the East Coast that year, he said. People who had their homes on the market pulled them off because they were fearful of what the attacks would do to the economy.
But 2003 also is starting with its fears due to current events, he said. People still worry about the state of the economy, a possible war with Iraq and problems with North Korea, he said.
“There’s a lot of uncertainty,” he said. “But I think people who are out there making deals are making real good deals.”
But the weathervane to watch is the stock market and how that affects the interest rates, he said.
“Interest rates tend to stay low if the stock market is low,” he said.
When the stock market drops, people are afraid to invest in it and put their money into banks, he said. Banks have more money to lend, so they drop their interest rates to attract more buyers.
