Gilroy
– If you’re thinking about buying a home in South County, do it
before it’s impossible. The median price of a new home in Gilroy
has reached $587,950, nearly twice as much at it was in 1999. The
average new home costs almost $700,000. And most local experts say
it’s only going to get worse.
Gilroy – If you’re thinking about buying a home in South County, do it before it’s impossible. The median price of a new home in Gilroy has reached $587,950, nearly twice as much at it was in 1999. The average new home costs almost $700,000. And most local experts say it’s only going to get worse.
“It depends on a lot of things, but prices can only go up,” said Susan Jacobsen of Staritt Realtors in Gilroy. “We’re looking at maybe another hundred thousand by the end of next year. It’s crazy.”
Jacobsen and other area realtors say they’ve never worked through such a busy holiday season, historically a lull in the real estate calendar. Houses in Gilroy are being snatched up immediately after hitting the market, receiving multiple bids and selling within days. One 1,400-square-foot, three-bedroom home on Senegal Court went for $809,000 and sold in a week.
“Can you imagine that? In Gilroy?” asked Aytch “H” Roberts, vice president of the Santa Clara County Association of Realtors. “Five years ago that was unheard of. In general, the housing market is a reflection of the jobs market. We’re in a fairly challenging economy yet demand for homes continues to rise.”
The engine isn’t being powered by economic vitality so much as by basic economics, say realtors. Interest rates are low, buyers can get in the market with very little capital, and there’s that simple law of supply and demand. People who want houses have very few to choose from.
As of Thursday, there were only 137 single family homes on the market in South County. In Gilroy, there are only about 20 for sale that list for less than $600,000, the high-end of the “entry-level” housing market.
“Inventory is extremely low,” said Patty Filice, a broker associate with Intero Real Estate Service. “It’s a tight market and there’s a shortage of affordable housing all over South County.”
Prices are growing so sharply that even sellers sometimes find themselves priced out of the market.
Gilroy native Stacy Enos and her husband, Joe Del Razo, are about to close a $559,000 sale on the Fourth Street home they bought four years ago for $349,000. The family is moving to Oakdale for Del Razo’s job. Enos, who works at Chicago Title Co., said getting back into Gilroy would be a challenge.
“If we had to come back, it would be very difficult to buy a house here,” she said. “It’s surprising that the market has moved this quickly. It hasn’t stopped in four years. It just keeps growing and growing in value.”
Even so, Gilroy is the best buy in South County. In Morgan Hill, the median price for a new home exceeds $690,000.
This past summer, Richard Klauer, who works in technology in San Jose, looked for housing there and in Morgan Hill, but in August settled for a $500,000 house on Church Street in Gilroy. His newly built house was part of a program that allows teachers to buy houses at discounted prices and rates. Not enough teachers qualified for the program and his house landed on the open market.
“I wasn’t surprised at the price because I’m from the area, and it’s all relative,” he said. “I got lucky with my house. It was just really good timing.”
Klauer just refinanced. He has a $2,400 mortgage and has two renters to help pay it. He bought the house with a $15,000 down payment, traditionally a small buy-in, but in today’s world of 100 percent financing, a fortune.
“People don’t even have to have a savings account to buy a house, just decent credit and the ability to pay it back,” Jacobsen said. “It’s scary. What if someone gets sick or loses a job? It’s so easy to get in, it’s almost sinful.”
But realtors agree that there’s no reason to think anything will change in the near future. Interest rates are expected to rise next year, but not significantly, and there’s no anticipated surge of inventory.
“I don’t know what will happen in 2005,” Roberts said. “One countermanding factor is that rates could continue to go up, and that will squeeze out some buyers, but in the meantime, people will be looking to get in ahead of that increase. They don’t build enough houses in Gilroy and Morgan Hill so people will be forced to spend more money.”
And, Jacobsen said, banks will continue to make risky housing loans. One trend she finds particularly disturbing are loans made against rental properties.
“In the past, lenders’ logic has been that you’ll pay your mortgage because you’re living in the house, but now they’re willing to lend even more money against property people don’t even live in,” she said. “I think we’re going to start seeing a lot of foreclosures. A day of reckoning is coming, but it won’t be next year.”
Home prices in Gilroy
Year Average Median Days/mrkt
2004 679,446 587,950 38
2003 577,208 510,000 78
2002 452,219 456,950 50
2001 446,232 405,000 95
2000 441,240 419,500 44
1999 331,835 306,250 60
