Quick Take
Santa Cruz County's housing market ended 2023 on a positive note after months of slow activity. Real estate agents say buyers are returning more actively to the market than they normally would at this time of the year as mortgage rates begin to come down.
Santa Cruz County’s housing market picked back up in December after November’s noticeable slowdown, despite the holiday season often being a slower time of the year for home sales. Real estate agents say that mortgage rates finally starting to fall has spurred some of the waiting buyers.
Countywide, there were 17% more homes sold in December compared to the previous month — 81 versus 69 in November, according to data from the Santa Cruz County Association of Realtors. Home sales were about on par with where the market was in December 2022, when the county saw 84 home sales. Santa Cruz, Aptos and Watsonville saw the most home sales in December. Ben Lomond saw a resurgence after a slow November, jumping to 10 from just one in November.
The countywide median sale price dropped by nearly 19%, from $1,292,500 in November to $1,049,500 in December. However, the November median sale price was skewed high due to two high-priced home sales in La Selva Beach averaging over $5 million. The December median sale price was up about 5% from the same month in 2022.
Properties spent more time on the market on average in December than November, jumping to 50 days from 36 days. But that figure is similar to December 2022, when properties stayed on the market for 46 days on average.
A slower market over the past few months is no big surprise for local real estate professional, as the entire winter season — especially during the holidays — is never particularly busy. However, Jennifer Watson, an agent with the Santa Cruz County Association of Realtors, said that a drop in interest rates over the past month or so could be the reason for more buyer activity in December and early January.
“We’re seeing new buyers out there, so maybe that was enough to entice them,” she said. “And maybe their standards have changed, and they’ll take something that’s not 100% perfect, but maybe 85% perfect.”
As of Friday, interest rates for 30-year mortgages stood at about 7.3%, while 15-year mortgages were at 6.48%. Last year saw rates peak at over 8%, which scared off many prospective buyers. While mid-6s to low 7s is a far cry from the 3% range buyers enjoyed during and right after the acute phase of the pandemic, people are coming around to the fact that those days are likely gone for good.
“People are realizing that rates have come down enough that if they have to or want to move they can do that and not feel horrible about it,” said Watson. “We were experiencing a weird phenomenon but now this is kind of the normal average.”
Scott Goodrich, a mortgage advisor with Monterey Bay Mortgage, said lower rates have provided optimism for both buyers and sellers.
“Buyers have come to grips with the fact that they won’t get those 3% rates anymore,” he said, adding that even so, there are opportunities for creative money management. “We’re advising clients to get into a house if they qualify for the mortgage and really like it, and look at refinancing down the road.”
Watson added that the area is still getting plenty of out-of-towners moving in. She said she recently sold to a man from Oregon who decided to retire in Santa Cruz, and has another sale pending for a family from Sunnyvale. She said that first-time buyers often seek a spacious property, but have stayed wary of mountain residences because of pricey insurance.
Inventory has been quite low since at least the beginning of 2023, but Watson said that number might start to climb sooner than some think.
“We’ve had a few more homes coming on from people realizing that there will be buyers getting some pretty darn decent buys right now, where the selling prices are very close to their listing price,” she said. “Maybe a little over, and maybe a little under depending on where you are.”
Marvin Christie, co-owner and president of Anderson Christie Real Estate, agreed that things are picking up already.
“We’re getting a ton more calls with people wanting to list and get their properties ready for the market,” he said, adding that inventory is up by about 20% compared to last January, but still generally low overall. “So even if that inventory is still low, the pipeline is more full.”
However, even with that inventory potentially ticking up, Christie said he can see a scenario where the market could get “frenzied” again.
“Buyers are still being more cautious than they were 18 months ago, but it’s definitely back to the point where they’re accepting less than perfect,” he said, agreeing that more people are willing to go for a house that might not be exactly what they wanted, but still close. “Multiple offers and over asking price is the new norm.”
How hot the market stays will likely hinge on where the mortgage rates go. And with issues like inflation, global conflicts and a presidential election coming up, Goodrich said he believes there will be plenty of market changes throughout 2024.
“This year will ebb and flow with economic activity,” he said. “I think it will be a dynamic year.”
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