Quick Take
The Santa Cruz County housing market saw slightly less activity than usual in the early fall months, but real estate agents expect that to pick up as October continues. The Federal Reserve’s decision to cut short-term rates in September has brought in some prospective buyers.
Santa Cruz County’s housing market slowed slightly through the fall, but real estate agents expect it to pick up through the holiday season as the Federal Reserve’s recent rate cut gives some hesitant prospective buyers the push they needed to enter the market.
Countywide, the housing market was largely flat through the summer, with 131 home sales in July and 132 in August, before dropping 25% in September to 99 home sales, according to data from the Santa Cruz County Association of Realtors.
That’s fairly close to the number of home sales seen in August and September 2023, clocking in at 126 and 107, respectively. As usual, Santa Cruz, Aptos and Watsonville were the most active areas in the county, but in September, Watsonville saw its sales fall and Boulder Creek saw its number of sales rise above that of Watsonville.
Homes spent more time on the market in September than August — 40 days in September versus 28 days in August. Both September and August 2023 saw homes on the market for 31 days on average.
Although home sales stayed mostly flat, prices continued to rise. The countywide median sale price reached $1,486,095 in September — 30% higher than the same month in 2023, when the median price was just $1,142,500.
The variations in price are often due to a difference in average home size, lot size or a small number of very expensive sales. For example, this September saw a much higher median sale price than September 2023 due to a La Selva Beach home that sold for just shy of $5 million, skewing the median sale price up.
Santa Cruz County Association of Realtors agent Jennifer Watson said that the somewhat slow business in the early fall can likely be attributed to prospective buyers getting caught up in busy schedules with summer vacations ending and children returning to school.
She added that the fall’s picturesque weather also usually draws crowds to open houses across the county, but the heat wave that scorched the area in late September probably deterred some. Now that the weather is more mild and consistent, Watson expects open houses to see more traffic.
“If it’s a super hot or beautiful day and we haven’t had one in a while, you’re not going to get people. If it’s really rainy, then you’re not going to get people,” she said, adding that spring and fall are typically the busiest times in the local market.
Watson said that properties that hold the possibility of building an accessory dwelling unit (ADU) or some other version of a secondary unit remains very popular, in many instances because the homeowners can have family move in with them, or they can rent out the unit to help with their own mortgage. Watson also said that she’s seen a lot of recent prospective buyers who appear to be interested in three-bedroom homes rather than a more spacious four or five. She said that could be due to either location or affordability.
“Maybe you come down to an area that you really want to live in, and you’ve got a little bit better prices in three-bedroom houses than four-bedroom houses,” she said. “It’s sacrificing a little bit to be where they want.”
Watson said, similarly, that she is seeing a lot of people looking to downsize from their current residences. Most notably, those are frequently older people who might be looking to move in with family or close friends.
Despite a somewhat slow fall for the Santa Cruz housing market, Watson said that the Fed’s first rate cut in four years has pushed some prospective buyers to enter the market. In mid-September, the Federal Reserve cut its benchmark short-term rate by half a percentage point, to a range of 4.75% to 5%.
“It’s spurring the people that were sort of on the fence,” Watson said. “It definitely sparked some excitement and was a reminder that this is actually happening, because we’ve been talking about it for a long time.”
Monterey Bay Mortgage adviser Scott Goodrich said that mortgage rates actually crept up a bit in that same time frame, which he said illustrates the uncertainty surrounding long-term mortgage rates.
“The Fed directly controls short-term rates, but not directly long-term rates,” he said. Goodrich added that rates have come down substantially from their peak last fall, but that it was not the Fed’s doing. Thirty-year fixed-rate mortgages peaked in October 2023 at around 7.8%, and they now sit at around 6.3%.
Goodrich said that while he doesn’t expect long-term mortgage rates to go “up, up and away,” they likely will not drop significantly in the near future: “Some people are waiting for rates to continue to come down before they jump into the market, and that’s proven to not be a great strategy.”
Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here.