All Forum Posts by: Dax Nollenberger

Interest rates have had a substantial impact on the overall affordability of a home. With mortgage rates on the continual rise, it’s time to think creatively about how we can minimize our long-term costs and make our homes more affordable in the short term. Did you know that a 1% interest increase adds a little over $600 a month in cost on a $1M loan?

I know leverage is ideal when it comes to Real Estate investing but in times like these, creativity wins the day. 

From a lender’s perspective, there are a variety of ways to lower the impact of mortgage rates like rate buydown and Adjustable-Rate Mortgages (ARMs). I’d advise speaking to a lender about the best options for you.

Ever heard the phrase “marry the home, date the rate”? This is a common Realtor phrase to help buyers understand that rates have the option of being temporary. The benefit of a fixed-rate mortgage is you lock in a rate so if it goes up, you maintain the lower rate, and if it goes down, you can simply refinance.

Long-term, refinance is a great solution for the temporary issue of higher rates. However, it doesn’t really help you now. So, what can you do to lower the impact of higher rates right now?

The quick and easy solution is to increase your down payment.

To understand the impact of increasing your down payment, let’s look at dueling scenarios:

20% Down Scenario

Using a 30-year fixed mortgage at 6.5%

Purchase Price: $1.2M

Down Payment: $240k

Mortgage Amount: $960k

Monthly Payment: $6,067.85

25% Down Scenario

Using a 30-year fixed mortgage at 6.5%

Purchase Price: $1.2M

Down Payment: $300k

Mortgage Amount: $900k

Monthly Payment: $5,688.61

The difference is straightforward, pay the extra $60k and reduce your monthly payment by $379. While impactful, that by itself might not seem worth the additional investment. Let’s zoom out for perspective.

Your additional $60k investment is yielding a return every year. After 13 years you’ll have earned your $60k back. I’m sure some of our investment-savvy readers will ask the question, “what about the opportunity cost of not having that money? You could invest it elsewhere.” You’d be right, there is an opportunity cost as there is with not increasing your down payment. The opportunity cost of that is not saving the additional cash each month to invest how you chose. The Average Annual Return for that down payment investment is 7.58%!

But wait, it gets better! You still have the refinance option in your back pocket.

The moral of the story is that paying a higher down payment is a great way to lower your loan exposure and save money. You’ll receive a significant return on your investment while also maintaining the opportunity to refinance down the line.

The higher the interest rate, the larger the return on your increased down payment investment.

This means that you can purchase a home at a more affordable price than when the market was peaking (but interest rates were low) and use that additional cash to increase your down payment therefore lowering your monthly payment (and interest cost) on the loan. When you factor in those strategies, it may just be a better time to buy than when prices were high and rates were low. 

If you can navigate these uncertain times with creative tricks and realize that these interest rates are a temporary hurdle that you can overcome, opportunities for deals are out there.

Reach out so I can talk through how an increased down payment can help you achieve your real estate goals. Thanks for reading!

Thank you for coming and contributing your insights! Great (surprising) turnout. Looking forward to the next one. 

@Rob Gaukel Yes!! Come join us in person or on zoom. Reach out to us for details.

 Thanks Jenifer. That is a worthy topic of conversation! We'd love to have you speak at some point. 

 Finally, Yes! 

Our first meeting will be the evening of Wednesday October 19th at Sereno office located at 720 Front St Santa Cruz. We'll post the specific time and topics as we finalize them to this thread. If you have any topics you'd like discussed please let us know. Looking forward to meeting everyone! Thanks.

Hi Santa Cruz Investors. We are officially starting the process of creating a new hybrid meetup here in Santa Cruz. @Rob Gaukel and I have developed a preliminary plan and set a date for our first meeting. 

Our first meeting will be on the evening of Wednesday October 19th at the Sereno office located at 720 Front St Santa Cruz. We'll post the specific time and topics as we finalize them to this thread. If you have any topics you'd like discussed please let us know. Looking forward to meeting everyone! Thanks.

Please tell your friends and reach out directly if you are interested!

 Very excited about this Santa Cruz meetup!

Quote from @Tony Kim:

Quote from @Dax Nollenberger:

Searching the internet for whether homeownership is actually valuable will leave your head in a daze. Major players in the real estate investing space will argue that you shouldn’t own a primary home, others will argue that you shouldn’t take on any debt, and many more will encourage you to accumulate as much real estate as possible. So many varied opinions pulling in every conceivable direction only adds to an already overwhelming decision and leads to the inevitable buyer thinking “am I making the right decision?

To understand why you should be a homeowner, we need to identify the many benefits of homeownership. Pride of ownership and the ability to make a house a home are obvious benefits but I want to focus on the financial benefits of homeownership: debt paydown, appreciation, and tax benefits. If it were an investment property, there would be even more: rental income and rental property depreciation.

I know, I know, there is great value in using the money to leverage investment properties. In California, appreciation is king. 

The numbers will certainly look different wherever you are but the premise is the same, there are great monetary benefits to homeownership. 

To best understand the financial benefit of homeownership, we need to walk through a scenario:

Hypothetical Homeowner’s

• Buying in Santa Cruz, CA
• Using a 30-year fixed mortgage at 5% interest rate
• Married- Filed Jointly
• Cumulative Income: $350,000
• Purchase Price: $1.5M
• Down Payment: $300k
• Mortgage Amount: $1.2M
• Monthly Payment: $6,441.86

If they Rent: 

The math is pretty straightforward here. If they rent for 5 years at $5,000 per month, they will have paid $300,000 to someone else.

NOTE: This doesn’t even account for the potential of continually rising rents.

If they Buy:

One of the benefits of owning is that instead of paying off someone else’s mortgage, you are paying off your own. The Principle Paydown is the portion of the payments that go toward actually paying off the house. With an amortization schedule, the majority of the early payments are going toward interest on the loan but as you pay it off over the years, more goes toward the principle. This allows you to build equity in your home. After five years, the equity built from debt paydown is $98,055.21.

Another huge benefit for homeowners is the tax benefits. The interest that you pay on your mortgage is tax-deductible as is the property tax (although the property tax deduction is capped at $10,000 per year in CA). After five years, the cumulative tax benefit is $142,667.04.

Historically, Real Estate prices go up over time so it’s safe to predict the value of your home will continue to rise after purchasing. We assumed a highly conservative 3% annual growth rate. For reference, the Cumulative Annual Growth Rate (CAGR) in Santa Cruz County since 2010 is 7.6%. After five years, the value added from appreciation is $238,911.11.

After 5 years, the cumulative homeowner benefit is $479,633.36.

After 5 years, the cumulative benefit of not paying rent is $300,000.

After 5 years, the cumulative expenses (interest and property taxes) are $-380,706.35.

After 5 years, the NET benefit of homeownership vs renting is $398,927.01.

In the example above, homeownership would pay these potential homeowners about $80,000 a year!

Homeownership > Renting

So, buyers, if you are asking yourself “am I making the right decision?” the answer is a resounding YES!

If you'd like to plug in your own numbers, reach out for free access to my homeownership benefit calculator. 

- Dax Nollenberger

Realtor, Santa Cruz County 

Are you taking into account what the renter would do with the extra $300,000 he can keep as downpayment? What if that money was invested in the stock market that returned 8%? Or what if that money was used to buy a rental property? 

With that said, I'm obviously a homo and also rent out a portfolio of homes so I believe in homo-ship. But I honestly believe that there are multiple ways to achieve financial prosperity. I don't think there is anything wrong with renting your primary and putting all your assets to work outside of your primary.

 Hi Tony, 

In the scenario you presented, with $300,000 compounding annually at 8% for 5 years, you'd have $440,798. A gain of $140,798. That is certainly a strong alternative. If I had assumed a 5% yearly appreciation rate instead of 3%, the net value of homeownership would have increased by $175,511. Like my scenario, it makes some assumptions (about the stock market return in your case) that may not be true (especially if we head into a recession). Obviously, there are many different strategies for wealth building and each person's situation warrants a different strategy. My goal for this post was to identify the value of homeownership, especially in CA where appreciation is king. Thank you for your response. 

Searching the internet for whether homeownership is actually valuable will leave your head in a daze. Major players in the real estate investing space will argue that you shouldn’t own a primary home, others will argue that you shouldn’t take on any debt, and many more will encourage you to accumulate as much real estate as possible. So many varied opinions pulling in every conceivable direction only adds to an already overwhelming decision and leads to the inevitable buyer thinking “am I making the right decision?

To understand why you should be a homeowner, we need to identify the many benefits of homeownership. Pride of ownership and the ability to make a house a home are obvious benefits but I want to focus on the financial benefits of homeownership: debt paydown, appreciation, and tax benefits. If it were an investment property, there would be even more: rental income and rental property depreciation.

I know, I know, there is great value in using the money to leverage investment properties. In California, appreciation is king. 

The numbers will certainly look different wherever you are but the premise is the same, there are great monetary benefits to homeownership. 

To best understand the financial benefit of homeownership, we need to walk through a scenario:

Hypothetical Homeowner’s

• Buying in Santa Cruz, CA
• Using a 30-year fixed mortgage at 5% interest rate
• Married- Filed Jointly
• Cumulative Income: $350,000
• Purchase Price: $1.5M
• Down Payment: $300k
• Mortgage Amount: $1.2M
• Monthly Payment: $6,441.86

If they Rent: 

The math is pretty straightforward here. If they rent for 5 years at $5,000 per month, they will have paid $300,000 to someone else.

NOTE: This doesn’t even account for the potential of continually rising rents.

If they Buy:

One of the benefits of owning is that instead of paying off someone else’s mortgage, you are paying off your own. The Principle Paydown is the portion of the payments that go toward actually paying off the house. With an amortization schedule, the majority of the early payments are going toward interest on the loan but as you pay it off over the years, more goes toward the principle. This allows you to build equity in your home. After five years, the equity built from debt paydown is $98,055.21.

Another huge benefit for homeowners is the tax benefits. The interest that you pay on your mortgage is tax-deductible as is the property tax (although the property tax deduction is capped at $10,000 per year in CA). After five years, the cumulative tax benefit is $142,667.04.

Historically, Real Estate prices go up over time so it’s safe to predict the value of your home will continue to rise after purchasing. We assumed a highly conservative 3% annual growth rate. For reference, the Cumulative Annual Growth Rate (CAGR) in Santa Cruz County since 2010 is 7.6%. After five years, the value added from appreciation is $238,911.11.

After 5 years, the cumulative homeowner benefit is $479,633.36.

After 5 years, the cumulative benefit of not paying rent is $300,000.

After 5 years, the cumulative expenses (interest and property taxes) are $-380,706.35.

After 5 years, the NET benefit of homeownership vs renting is $398,927.01.

In the example above, homeownership would pay these potential homeowners about $80,000 a year!

Homeownership > Renting

So, buyers, if you are asking yourself “am I making the right decision?” the answer is a resounding YES!

If you'd like to plug in your own numbers, reach out for free access to my homeownership benefit calculator. 

- Dax Nollenberger

Realtor, Santa Cruz County 

In my latest Dax's Data, I dove into the impact that recessions have had on the national, regional, state (CA), and local (Santa Cruz) markets. 

There have been fifteen recessions in the last 100 years. The data I am going to present spans back to 1968. Eight recessions have occurred in that timeframe and, on average, last 10.6 months. The metric that I’ll be focusing on is Single-Family Median Home Price. While I realize that there are plenty of other metrics that help determine Real Estate market strength, prioritizing prices gets to the crux of the question, “will prices crash”?

Only in one of the last eight recessions did the median home price actually decrease.

1970 recession: Relatively mild overall and lasted 11 months from Dec 1969 to Nov 1970. We have the US and California yearly data. The US median home price in 1970 increased 5.5% from the year previous. This was a lower increase than 1968 to 1969 (8.5%) and 1970 to 1971 (7.8%). California experienced only a 1.7% median price increase over the previous year.

Conclusion: The recession had minimal impact on real estate as both the National and State Median home prices increased from the previous year.

Median Price change: Positive

Side note: the median home price in California in 1970 was $24,640… mind blown!

1973-1975 recession: The result of the 1973 oil crisis, this recession lasted 16 months from Nov 1973 to Mar 1975. We have the US and California yearly data. During the 16 months that spanned over three calendar years, the real estate market had explosive growth both nationally and at the state level in California. The 1973 US median home price was $28,900, up 8.2% from the year previous. It then grew another 10.7% in 1974 and 10.3% in 1975. California had similar Median price growth, gaining 9.2% from 1972 to 1973 and another 10% and 20.2% in subsequent years.

Conclusion: The recession had virtually no negative impact on real estate pricing nationally or in California. Some of the growth can be attributed to the high inflation rate of the 1970s.

Median Price change: Positive

1980 recession: The result of raised interest rates (as high as 20% in 1981) by Fed Chair, Paul Volcker, to fight the inflation of the 1970s. This recession lasted 6 months from Jan 1980 to Jul 1980. We have the US and California yearly data. The median home prices seem to be minimally affected by this brief recession. From 1979 to 1980, US Median home price rose 11.7% while California rose 20.2%.

Conclusion: Home prices jumped significantly in 1980, partly the result of inflation. California far outpaced inflation numbers (CA real estate is a great hedge against inflation, historically).

Median Price change: Positive

1981-1982 recession: Related to the 1980 recession, the recession of 1981-1982 was considered the main course after a 1980 appetizer. Caused by the 1979 energy crisis and a tightening of monetary policy, this recession lasted 16 months from Jul 1981 to Nov 1982. We have the US and California yearly data. While housing price growth certainly slowed, we still saw year-over-year growth in Median home price for both California and the USA from 1980 to 1981 (CA 8.2%, US 6.8%) and 1981 to 1982 (CA 3.8%, US 2.1%).

Conclusion: Home prices still grew during the 1981-1982 recession but inflation was historically high in ’79, ’80, and ’81. Home price growth could not keep up with the inflation rate.

Median Price change: Positive

Early 1990s recession: The result of the Fed’s rate hikes to combat inflation from 1986-1989. This recession lasted 8 months from Jul 1990 to Mar 1991. We have the US and California yearly data. US Median prices grew 2.9% from 1989 to 1990 and 5.5% from 1990 to 1991. California’s Median price decreased 1.2% from 1989 to 1990 and increased 3.6% from 1990 to 1991.

Conclusion: Small price growth for the national home prices and net-positive growth over two years for California.

Median Price change: Positive

Early 2000’s recession: The result of the Dot-com bubble (among other factors). This recession lasted 8 months from Mar 2001 to Nov 2001. We have US, regional, California, and local monthly and yearly data. Year-over-year, every area performed well in terms of median price growth. US median price grew 6.3%, California grew 8.7%, and Santa Cruz County grew 11%. Although looking at the monthly data, prices stayed relatively flat during the period from Mar to Nov 2001.

Conclusion: The year-over-year growth was really strong. When zooming in, the majority of the growth occurred just prior to and just after the defined recession period.

Median Price change: Positive Y-O-Y, Flat during recession months

Great Recession: Also known as the housing crash, this recession certainly did have an impact on pricing. First, though, let’s discuss briefly why the recession occurred. A lack of lending regulation and reckless lending practices led to MANY unqualified buyers getting qualified for way more than they could afford. When the market shifted, all those borrowers defaulted on their loans. This recession lasted 18 months from Dec 2007 to June 2009. We have US, regional, California, and local monthly and yearly data. Every region in the US had two consecutive years of declining median home price. The US was -9.8% from 2007 to 2008, and -12.5% from 2008 to 2009. California saw massive loss in median home price in both 2007 and 2008. California’s median home price dropped 37.8% from 2007 to 2008 and 21.1% from 2008 to 2009. Santa Cruz County was -23% from 2007 to 2008 and -15% from 2008 to 2009.

Conclusion: The real estate market isn’t recession-proof if it is the cause of the recession. Fortunately, proper legislation and regulation will ensure that a subprime mortgage recession won’t occur again as lending practices have been strengthened and buyers are highly qualified. Another important note is that this recession particularly affected the higher-price areas like California.

Median Price change: Negative

Covid-19 recession: This may be the nation’s quickest recession. Brought on by a global pandemic, the drop was sharp but the recovery was fierce. This recession lasted two months from Feb 2020 to April 2020. We have US, regional, California, and local monthly and yearly data. The worst month of this recession for real estate actually occurred in May of 2020 when the median price dropped over 10% locally. After that, when the interest rates plummeted, the market took off at a record pace.

Conclusion: Uncertainty creates fear which creates inaction. Once clarity was provided and quantitative easing improved loan affordability, demand soared. The lesson is action during inactive times is when you can get great deals.

Median Price change: Positive


Recessions do not mean that housing prices decrease. This isn’t to say that recessions don’t have some impact on housing but through eight analyzed recessions, only during one of them did prices actually drop. The more likely scenario is a brief slowing of growth or a temporary flattening of the trend. For those buyers willing to take the plunge, there are opportunities out there. For those waiting for the market plunge, the opportunity is going to pass you by.

Note from the author: Each area is different. My expertise is in the Santa Cruz County market. I highly advise you to find a local Realtor who has expertise/experience in their area and can properly predict how your hyper-localized market will react to a changing market. 

- DAX NOLLENBERGER