Quick Take
While the January and February housing market reflected a familiar winter slowness, that could be on its way out. Realtors say people are beginning to prep their properties for the market and holding open houses, while mortgage advisors believe interest rates will continue to drop throughout 2024.
Santa Cruz County’s housing market slowed a bit in January and February after a modest December surge. February, however, did see more sales than January, and real estate agents and mortgage advisors alike say they expect slowly falling mortgage rates to possibly spur a hot summer market.
Countywide, there were 28% fewer home sales in January than in December — 58 versus 81 in the final month of 2023. However, there were 15% more home sales in February than January — jumping to 67 from 58, according to data from the Santa Cruz County Association of Realtors. Both of the first two months of 2024 saw a comparable number of home sales to January and February of 2023, clocking in at 62 and 58, respectively. Santa Cruz, Aptos and Watsonville saw the most home sales in both January and February, as is typically the case.
The countywide median sale price jumped about 28% from December to January — from $1,049,500 to $1,349,000. Then, in February, the median sale price dropped a bit from $1,349,000 in January to $1,250,000 — about a 7% decrease. The January median sale price was about 8% higher than in January 2023 — $1,349,000 compared to $1,249,000 last year. In February, the median sale price was about 5% higher than it was in the same month in 2023 — $1,250,000 compared to $1,189,000.
Those fluctuations are typically due to a difference in average home size or a small number of very expensive sales. In January, two separate sales — one in Corralitos and one in Soquel — neared $2 million, when the priciest sale in February was $1,675,000. Both of the first two months in 2024 saw a higher average home size than in 2023, bringing the median sale price in both months up from last year.
Homes spent a very similar amount of time on the market on average in both January and February — 54 days in January and 51 days in February. That is slightly longer than the same months in 2023, when properties stayed on the market for 43 days and 47 days on average, respectively.
Although the market mostly reflects the generally cooler economic climate typically seen during the winter months, Santa Cruz County Association of Realtors agent Jennifer Watson said it appears that people are preparing for the spring and summer already. She said she’s been seeing an influx of open houses countywide, adding that March through May is typically the time of year where prospective sellers begin prepping their properties.
“People are starting to see blossoms coming out, the time changed, and that glimpse of good weather gets people thinking about what they want to do,” said Watson.
She also said that she has connected with more first-time buyers over the past few months who have entered the market with a bit of a different perspective than many buyers in the immediate post-pandemic era. Since current first-time buyers were not in the market at the time right after the acute stage of the pandemic, they did not experience the mortgage rates at that time, which sometimes dipped below 3%. As a result, they are not as hesitant as some of the previous rounds of first-time buyers.
“They didn’t really know about those 3% interest rates, because that wasn’t their market,” said Watson. “We’re getting a lot of new buyers who know how the market is now and what their expectations should be. They’re much more ready to jump in.”
Mortgage rates are currently sitting in the high-6% to low-7% range for 30-year mortgages, the most common mortgage term for buyers. While that’s much higher than the 3% range buyers saw in the years leading up to and right after the most severe stage of the pandemic, it’s still lower than when rates peaked above 8% in 2023. Even so, Watson added that some buyers have started to increase their down payments in order to get a lower rate.
“Lenders are getting really creative and saying if people can pay a bit more in front, they can get their mortgage rate down,” she said, adding that buyers can refinance if rates drop further as well. “I think if people talk with their lenders, they’ll be really surprised at what they can do.”
Monterey Bay Mortgage advisor Scott Goodrich said market projections have predicted rates to gradually fall throughout 2024. By the fourth quarter, he said many projections show rates around 6.1% — and the U.S. Federal Reserve could make cuts before then.
“You won’t see the Fed cut in March, but it’s expected they will cut by June,” he said. “What that does is it sets up a summer that could be much better than last year.”
Goodrich added that it’s too early to tell now, but a cut could bring forth a summer market that’s “a little friendlier” toward buyers; right now, he said, it’s often a tough market for buyers. He recalls two sets of buyers he recently worked with who were looking at two properties in Scotts Valley and Santa Cruz, both of which were in the $1.3 to $1.4 million range. Both properties had numerous offers — eight and 15, respectively — and both sets of buyers were outbid “quite substantially.” He said that if rates do continue to fall as predicted, buyers might have a little more breathing room.
“You may see some potential sellers be more inclined to enter the market,” said Goodrich, adding that lower rates could finally bump up the county’s low inventory.
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