The pressure on would-be buyers is only increasing, with 33 to 50% of the homes on the market attracting all-cash offers.
How bad is the Santa Cruz County housing market? Those trying to find their way in are seeing not only astronomical prices, but also the lowest inventory of homes available in 10 years.
As of publication, the county’s single-family home inventory had decreased to 130 active listings, an 84% drop from 10 years earlier.
At the end of March, the multiple listing service (MLS) showed 189 listings, both active and pending, for single-family homes in the county. That was slightly higher than the 111 active listings (with a median sale price of $1.28 million) the Santa Cruz Association of Realtors showed during the month — but a fraction of the MLS inventory for March 2012, when there were 807 listings.
“Six months ago, we started seeing our inventory drop — by December 2021, we had only 85 active listings in the entire county,” says Janet Romanowski, a longtime David Lyng realtor. “When you talk about supply and demand, right there, something is fueling that … this year was the extreme of what was happening. This doesn’t compare anywhere to 10 years ago, when we were more of a normal market.”
Back in 2012, Romanowski said there would be 800 to 900 active single-family home listings on the MLS (the listings source real estate agents nationwide use), with the average price in the $500,000 range. Before the pandemic lockdowns in March 2020, Romanowski found only 310 active listings in the MLS inventory.
The meager inventory, of course, has helped drive a 153% increase in prices over the past 10 years.
“When you put a listing on the market, you look at the comps [real estate comparisons] to determine price … but now, you keep having to throw the comps out,” she said. “Because every time a listing comes on, the people that lost out on the last house are bidding more — they want to make sure they get a home.”
The pressures only grow, and that affects how much prospective buyers are putting forward, says Romanowski. Over the past six months, 33 to 50% of homes for sale have received all-cash offers.
As Walter Stauss of Coldwell Banker Realty — whom Lookout spoke with in November regarding a 328-square-foot Seabright home that sold for $1.025 million — puts it, “buyers are at the mercy of the sellers.”
“There are reasons a seller picks a buyer — some have objective reasons, others have subjective reasons,” he said. “Sometimes they pick the highest all-cash offer, no matter what.”
For prospective buyers who want to be more competitive in such a tight market, Romanowski and Stauss said they are seeing more coming in with cash, either from early inheritance funds, parental help or larger loans, and many offers removing contingencies. While that could lead to home ownership, both emphasize understanding what that risk means.
“Buyers are desperate, and they may do things they wouldn’t have done in a different market — desperation can get you into a less-than-ideal position, but this might be the only way you can get a house,” said Stauss.
The generational divide here is clear.
“Most young Santa Cruz families don’t have enough to afford a house here,” he said. “They want to buy a home, but can’t now, and feel like they’ll never be able to.”
“We as a community can’t control who comes in, but we’re seeing our community, the people who work here as teachers or nurses or doctors, having more of a challenge of buying,” Romanowski said. “We’re in a very challenging situation, and how do you fix it? … You can’t just keep skyrocketing and skyrocketing.”
“It’s very, very frustrating being a buyer right now,” she added. “It’s very frustrating being an agent, to work with people who deserve to have a house, who need to have help. We need you in our community … and people need housing, where can they live?”