Quick Take
The Santa Cruz County housing market looked typical for the beginning of summer. Home sales and inventory have risen, bringing more balance to a market often dominated by sellers. However, a new Federal Reserve chair and increasing inflation due to geopolitical instability could lead to an interest rate hike at some point this year.
The Santa Cruz County housing market is beginning its typical jump as summer begins, with both home sales and new listings taking a leap. While that has given buyers a bit more power, inflation could lead to a hike in interest rates just as people have become accustomed to rates elevated from the historically low mortgage rates seen in the immediate post-pandemic era.
“President [Donald] Trump is looking for a Fed chair that will reduce rates no matter what,” said Monterey Bay Mortgage Advisor Scott Goodrich, discussing new Federal Reserve chair Kevin Warsh’s first policy meeting on Wednesday. The Fed voted to keep rates the same, but, Goodrich added, “The indications are that they’re going to really be focused on inflation, and the consensus now is that you’re not going to see any rate cuts from the Fed anytime soon. I think 9 out of 18 participating policy-makers now forecast at least one interest-rate hike.”
Goodrich said the war in Iran has been the main driver of the shift.
“We had higher oil prices and it left the financial markets and investors confused. The result of this all is increased inflation,” he said.
The number of available homes jumped from 407 to 450 in May, about a 10.5% increase, according to the latest data from the Santa Cruz County Association of Realtors. Local inventory has risen steadily in the early months of 2026.
Properties sold slightly faster in May than in April, averaging 35 days on the market compared to 40 in April. This often happens when warmer seasons begin and the local real estate industry enters its busiest period of the year.
In May, 133 sales closed, higher than the 105 sales that closed in April. Prices, on the other hand, were lower, with a median sales price of $1,130,000 in May compared to $1,400,000 in April, an over 19% decrease. Sereno Group agent Jennifer Watson said that that’s likely due in part to what was available, but that higher inventory might play a role.
“People have more to choose from, so they think if it’s been on the market for some time, maybe there’s a little negotiability,” she said. Some sellers will lower prices if their properties have been on the market for longer than they expected, she said.
Watson sees the market as more balanced than it has been in recent years, adding that contingencies are more common once again. That’s a welcome sight, she said, especially after the post-pandemic era years when they were not as common.
“People have the time to do an inspection and really find out the true condition of the property,” she said. “It keeps everyone up to date and able to really know what they’re getting at and proceed with caution and knowledge.”
Watson added that buyers’ property preferences have changed since the pandemic, too. Previously, people looked for spacious lots to be able to be outside with others while maintaining distance.
Goodrich also said that the market is more balanced, but believes that it still favors sellers. He said he is working with first-time buyers in Santa Cruz who put in an offer on a townhouse last week, which received four offers: “Buyers are still calling the shots – if it’s a nice place in a desirable area, these properties are still getting a lot of attention.”
Although Goodrich says mortgage rates could rise this year, assuming the Fed is aggressive with addressing inflation, he said long-term rates could end up falling. That’s because investors who deal with bonds and investors in 10-year notes will feel more comfortable, and mortgage rates are often tied to 10-year Treasury yields.
Moving forward, Watson is keeping an eye on whether locals begin underpricing their homes significantly, which is starting to happen in Silicon Valley. When trends develop in Silicon Valley, they often pop up in Santa Cruz County several months later.
“It gets attention to a listing that’s maybe been sitting for a while or if someone truly needs to move fast,” she said, adding that an underpriced home can end up selling for well over the asking price. “We have to ensure that they’re really willing to take the price listed. It can be upsetting if they had no intention of doing that and buyers get banged up.”
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