Santa Cruz is a county on the Pacific Coast comprised of the incorporated cities of Capitola, Santa Cruz, Scotts Valley, and Watsonville. Some of the most popular communities in Santa Cruz include Aptos, Bonny Doon, Brookdale, Corralitos, Felton, Larkin Valley, La Selva Beach, Los Gatos Mountains, Rio del Mar, Scotts Valley, Seacliff, and Soquel.
The real estate market in Santa Cruz is diverse. Homebuyers have a wide range of choices among various residential properties available for sale, including waterfront houses, single-family homes, condos, townhomes, and apartment buildings. Located on the northern edge of Monterey Bay with 29 miles of coastline, Santa Cruz homes offer buyers the ultimate comfort and lifestyle at relatively low prices. Considering the pristine beaches, lush redwood forests, and prime farmland in this amazing location, Santa Cruz is the ideal place for anyone who loves to stay close to nature.
Let’s take a closer look at the real estate scene in this location with our Santa Cruz Market Report for 2018:
What is the Current Market Climate in Santa Cruz?
At first glance, it seems that that the real estate market is softening in Santa Cruz in 2018 in favor of the buyers, as the housing demand began to shrink earlier in the year. While market trends often see buyers being less active during the holiday season, the local market started to slow down earlier in 2018 and homes were being sold below their asking price. The average home was sold at 97.2% of its asking price in December and at 98.35% in November. Among the homes that were sold, only 19% were purchased more than their asking price.
However, it is important to note that the slow turnover is not caused by buyers alone. The housing supply shortage can also be attributed to homeowners, who have not been moving as often as in previous years. Currently, a typical family lives in their home for about 11.5 years before selling – the longest in the last 38 years. This demographic shift is mostly due to Baby Boomers, the largest home owning age group in Santa Cruz, aged 55 and above. Compared to people between 20 and 40 years of age, Baby Boomers would rather stay in their current homes. As a result, there are fewer homes being turned over and a decrease in supply in the real estate market.
Another factor why a lot of homeowners in Santa Cruz are hesitant to sell their homes is because most of them have locked in their fixed-rate mortgages at a low level when rates hit bottom in 2013. Selling their property now would mean that they would have to pay a higher rate when they buy their new home. Taxes could be another reason why most homeowners prefer not to sell their properties, as they anticipate paying a higher property tax if they were to move to a higher-priced home. Also, the capital gains tax for selling their home could be quite substantial.
How Long are Santa Cruz Homes on the Market?
The average days on market swelled from 33 days in August to 54 days in September 2018. This is a relatively big jump compared to its neighboring Santa Clara County, which was 22 to 27 days. In October, the median days on the market to sell a Santa Cruz home was 35 days, up from 20 days compared to the previous year. By the last month of the year, the days on market was 51 days.
Average Closing Price of a Santa Cruz Home
In March 2018, the median price of single-family homes in Santa Cruz County reached $935,100 and the median price has stayed above the $900,000 mark for the most part of the year. In August and September, the median price for a single-family home was $920,000, and $926,000 in December, 15% higher than the median sale price from the same month in the previous year. The average selling price for December 2018 was $1,099,200 with a total sales volume of 108. For the whole year of 2018, the median listing price for Santa Cruz homes was $846,250. Per square foot, the median list price was $541.
Santa Cruz: A Buyer’s or Seller’s Market?
The year 2018 saw the housing market softening, not just in Santa Cruz County but all across the country. There were fewer new listings, with only 58 single-family homes listed for sale in December. Closings also declined, with only 114 single-family homes sold. The average sale-to-list price ratio dropped to 97%, while average days on market rose to 52. However, the market in Santa Cruz remains to be a seller’s market. The year ended with the median sale price rising to $926,000 in December. This is 15% higher than the median sale price from December 2017.
To gain a better understanding of the slowdown in Santa Cruz’ real estate market in 2018, Goldman Sachs economists have identified three fundamental drivers:
- Increase in mortgage rates, putting pressure on affordability.
- Home prices have grown faster than rents and incomes since 2012, aggravating the impact of rising rates.
- The changes in the 2017 tax law reduced the tax benefits of owner-occupied housing relative to renting.
For homebuyers, buying a home in 2019 might be an even more expensive undertaking as mortgage rates and home prices continue to rise. On the bright side, this could also mean that there will be less competition, as more real estate buyers are priced out. However, buyers should also be able to anticipate further price increases within the year and close before the property that they are interested in buying gets even more expensive. Despite these challenges, this is still a great time for homebuyers to purchase a home in Santa Cruz, with interest rates still historically low and the possibility of waning competition.
If you are considering moving to Santa Cruz, CA, let me help you. As a Monterey Bay Area resident for more than 18 years, and a San Francisco Bay Area native, I can understand and meet the needs of a diverse group of clientele. Please feel free to call me at (831) 661-5591 or send me an email at [email protected] for inquiries.