Santa Cruz Mountains housing market is still popular post-CZU — but buyers face new difficulties

Coldwell Banker real estate agent Jessica Wallace was surprised when, in the months following the 2020 CZU Lightning Complex fires, she was still getting multiple offers on properties in the Santa Cruz Mountains — even those that had some of their land burned. She said that although some of that was due to historically low mortgage rates in the COVID-era market, many were simply unfazed by the fire.

“Some people were like, ‘Well, it got rid of a lot of the underbrush, so it will be good for a while,’” she said.

Sereno Group agent Jennifer Watson had a similar experience. While she attributes a lot of the area’s business to those very low pandemic-era mortgage rates, many looking to move into the area from out of town approached it like business as usual.

“When asked, they didn’t even know what CZU was, nor did that prevent them from buying,” she said. “They just said they needed a place, and this was the area [in the county] they could afford.”

The housing inventory in the Santa Cruz Mountains is often considered to have some of the better deals in the county, with buyers typically getting better bang for their buck compared with some of the area’s larger jurisdictions like Santa Cruz, Watsonville and Aptos. In the years following the fire, that has stayed true, although real estate agents say buyers do face new challenges.

There are still reasons why plenty of buyers find the mountains to be an attractive place to live, said Wallace. Most notably, the privacy and serenity of the woods compared to a more bustling part of the county. 

“There’s more for them to question and think about when buying a property up there,” said Wallace, adding that there are some prospective buyers who are more hesitant to look in the mountains now. “Just buying something in town is a lot easier to wrap your head around.”

Agents say that relatively few buyers express strong concern about fire risk, but the difficulty securing good fire insurance is a new — and major — hurdle to overcome. The insurance picture is “a little bit of a mess,” given the lack of options, said Wallace.

Santa Cruz County homeowners have been losing their homeowners insurance policies in large numbers in the years since the fire. Last year, an analyst from California Insurance Commissioner Ricardo Lara’s office told Lookout that about 15,000 homeowners in the county overall were in the process of “non-renewal” at the time. Around the same time, State Farm insurance notified around 4,300 Santa Cruz County residents that it would not renew their home insurance policies. As a result, many hunting for coverage find themselves resorting to the California FAIR Plan — the state’s last option for homeowners shopping for fire insurance. That plan can end up costing three to four times more than a standard homeowner’s policy and typically offers minimal coverage.

Scotts Valley-based agent Robert Aldana said the ramifications of this shift have largely been reflected in average sales prices. He said the average sales price in Scotts Valley came down nearly $100,000 this year compared to last year, and that’s mostly due to people buying smaller, lower-priced homes to offset the significant increase in insurance costs.

“Before, a homeowner’s insurance was like $100 to $200 a month at most. Now you’re looking at $700 to $1,200, depending on what you’re buying,” he said, adding that in some cases, sellers have begun listing homes at lower prices. “They realize they need to adjust that price to make up for that insurance impact so people can still afford it.”

Aldana noted Lara’s set of executive actions, aimed at incentivizing major lenders to come back into the market. He said that there was widespread excitement over this possibility, and then the Los Angeles fires earlier this year took the wind completely out of the plan’s sails, leaving people with the same pricey options they’ve been facing for the past few years. 

“We have not had a property sale that has not been able to get insurance,” he said. “But I will say they’re having to pay more.”

Beyond the complicated and distressing insurance situation, there are some new aspects of the homebuying process that might be for the better. Wallace said that more often, buyers want to do a defensible-space inspection with Cal Fire at the point of sale. That involves fire professionals thoroughly evaluating the land surrounding a home, checking the landscape and vegetation to make sure there is enough space between the structure and any potential fire hazard.

“That’s something we never really did before CZU,” said Wallace. “It wasn’t brought up often [before the fire], so this really did bring it to the forefront.”

Wallace also said that Firewise communities — neighborhoods that collaborate to reduce wildfire risks and improve safety — have become more common in the years following the fires. Watson said that speaks to a higher level of awareness surrounding fire hazards and preparation.

“It’s like how in California, we all know we’re going to have an earthquake, but rarely do anything about it,” she said. “Now, people help harden homes and there are lists of things you can do to protect your property. People are definitely more aware.”

But while preparedness might be better than pre-fire days, the cost and difficulty of finding insurance is still by far the biggest barrier to buying in the mountain communities. And unless something gives, people will continue approaching properties with more caution and hesitancy.

“You’re seeing a lot of people who are a little more careful when they’re buying homes in the mountains and asking questions they never asked before,” said Aldana. “I think the days of $800- or $1,200-a-year insurance are gone. At some point, hopefully, insurance agencies will come back into the fold, and it’s more manageable.”

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