Quick Take:
Santa Cruz County’s housing market picked up slightly in October despite a slow start to the often-busy fall season, but very high interest rates remain the driving force of low inventory and slow sales. Real estate agents still believe rates will fall within the next year or so, but there’s no certainty about when that might be.
Santa Cruz County’s housing market picked up its pace a bit in October after a slow start to a typically busy time for local real estate agents. Home sales ticked up slightly, and median sales prices increased as well, reflecting a more familiar picture of the fall market. Although interest rates are still quite high, they have begun to fall back to earth, and agents expect that to continue over the next year.
SANTA CRUZ COUNTY HOME SALES
➤ SEPTEMBER: Santa Cruz County housing market slows amid skyrocketing mortgage rates
➤ AUGUST: Santa Cruz County realtors say housing market to strengthen as pandemic-era buyers rethink remote work, second homes
➤ JULY: Santa Cruz County home sales drop in July as real estate agents hope for a fall resurgence
Across the board, the less frenzied market means agents are seeing fewer offers per property, and fewer of those offers going over the asking price. Local realtors point to the extended period of high interest rates as a main driver of that climate.
The county saw 112 home sales in October, a little over 4% more than in September, when there were 107 sales. However, this October was much more active than October 2022, when the county saw 91 home sales — which comes out to a 23% increase. Sales increased in the always-busy Aptos market and in the now-popular mountain markets like Felton and Ben Lomond.
The countywide median sale price jumped more than 18% last month to $1.356 million, compared to $1.142 million in September. That’s partially due to buyers purchasing larger homes on average and some especially expensive sales in Capitola, according to data from the Santa Cruz County Association of Realtors. However, that’s still beneath last October’s median sale price of $1.45 million. Coldwell Banker agent Jessica Wallace said the persistent high interest rates have kept final prices down.
“It’s absolutely a direct correlation,” she said, adding that she recalls seeing October sales reach 150 or higher, but in the past few years that number has hovered around 100 flat. “But we’re hoping that we got to the peak of interest rates; it just kind of depends on factors like inflation and job numbers, which we don’t have control over.”
Wallace also said that, on average, properties are selling for about 96% of the asking price. That’s a huge difference from the low interest rate days of 2022 and 2021, when buyers were more likely to pay over the list price. In those years, properties sold for an average of 102.4% and 104% over asking price, respectively.
“And most properties aren’t getting multiple offers at this point, maybe two or three at the most, unless it’s something really special and really underpriced,” she said, recalling the frenzied pandemic-era market, when properties would routinely get 10 or more offers.
After mortgage rates hit their highest point in more than 20 years in October — around the high 7% range — they have slowly begun falling back down, even if just barely.
“We’re talking about less than a half a percent,” said Marvin Christie, co-owner and president of Anderson Christie Inc. “That’s not a big break when they’ve gone up 5 percentage points in the last two years. It’s still very high relative to what we’re used to.”
Christie recalls the better part of the past year, when he continuously expected those high rates to fall by the end of calendar 2023. However, that hasn’t happened in any meaningful way yet.
The high rates have also contributed to low inventory, said Wallace, as a move in the current climate would prove financially difficult for many.
“If you were a buyer during the days of 3% interest rates, it’s a huge financial leap to go to upwards of 7% for your next house,” she said. “Most people are going to stay put for a while.”
The upcoming holidays will signal a market slowdown, as per usual, since many put thoughts of a potential move on the back burner while traveling or hosting guests. Wallace said that the market often picks up quickly after the holidays, usually in February or March. However, just how much the market heats up will, again, be significantly influenced by the interest rates at that time. And agents know just how uncertain that has proved to be.
“I think I expected rates to be about a percentage and a half lower today than they are,” Christie said. “I do think that they will come back down, but I’m no longer saying that will be in three months or six months, but probably within the next year and a half.”
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