Ending the year with record high home prices: A deeper dive into the data
While the holidays are usually a slow time for home buying and selling, this quick review of November real estate sales in Santa Cruz County showcases how citizens might be getting used to a “new [real estate] normal” in the midst of the pandemic.
This has been the longest running, highest flying, craziest-making “up” market any of us have ever seen. For nine years, a historic low level of supply has held sway over the market and leveraged a remarkable rise in intensity, competition and of course, prices.
Along the way, records have been broken and most standards of normal have fallen by the wayside. In fact, the entire process of preparing, pricing, marketing and negotiating homes for sale has been forced to morph in the face of multiple-offers, overbids, a wild influx of cash, disappearing contingencies and the ever-expanding appetite of sellers.
Due to distractions and a relative lack of listing and buying activity around the holidays, November is usually a slower month for real estate sales in Santa Cruz County. And yet, almost all the measurable data gathered from last month indicates that seasonal norms we’ve been used to in our marketplace may be missing in action in the new post-pandemic environment.
Late into 2021, prices continue to ratchet up year-over-year close to the all-time highs the year has already established, while days on market and available inventory continue to drop to new, historic lows. The only category that softened last month was the overall number of sales transactions, a factor that was undoubtedly influenced by the low number of active listings that were available for buyers to choose from (one of the catch 22s of a low inventory marketplace.)
Single Family Residence (SFR)
The Median Price for SFRs in Santa Cruz saw a dramatic year-over-year increase of more than 20%, going from $1,040,000 in November 2020 to a near record high of $1,260,000 in November 2021. The number of closed SFR transactions remained more or less even with 162 sales in 2021 compared to 166 in November of 2020.
The average number of days on market dropped from 23 days in November of 2020 to an even tighter 19 days in 2021, while the average SFR sold for 104% of it’s list price compared to 103% in 2020 - both indications that competitive-offers and overbids continue to be mainstays of the current marketplace.
Meanwhile, the already low inventory level fell to historic new lows ending November with a scant 1.1 months worth of supply heading down the homestretch towards 2022. That was well below the number of active listings for the previous December. Currently there are less than 100 active SFR listings in Santa Cruz County.
Condos & Townhomes
In November, the condo/townhome category approached a record median price of $797,000, very close to the all-time high of $800,000 logged earlier in May of this year. That also represented a 10+% increase year-over-year compared to the $715,000 median price in November of 2020.
While the overall number of condo/townhome sales dropped by 20% compared to the previous year, the average number of days on market plunged from 34 in 2020 to 13 days in 2021 while condos/townhomes also sold for 104% of their list price, well above the 101% registered in November of 2020.
The month’s supply of inventory for condos/townhomes also dropped year-over-year by a significant margin going from 1.8months supply in 2020 to 0.8months supply in 2021. Currently there are fewer than 20 active condo/townhome listings on the market in SC County.
Key Thoughts About the Market Going Forward
The only factor poised to slow sales to any measurable degree is the lack of inventory which appears to be headed for another historic low to start 2022. With record low supply, it doesn’t take much demand to sustain the ongoing imbalance in the marketplace, so we expect that the median sales price will remain high and possibly ratchet up to new record levels above $1.3 million.
December sales on the Coast will look similar to November, less overall intensity but plenty of demand and competition for the few new listings that do come on. Sellers traditionally hold new listings back between Thanksgiving and New Years and they also often withdraw active listings until after the first of the year to reset their published days on market back to 0. The significant lack of choice will also push many committed buyers out to early spring as they reset their own processes and prepare to relaunch in 2022.
Inflation fears are increasing and that probably heralds change with the FEDS and a rise in rates in early 2022 but in the short term that makes 30 year fixed rates in the low 3%’s even more attractive which will have the effect of hurrying more buyers into the home-buying process in January and February.
The December market in Silicon Valley is showing significant strength and a surprising number of active buyers and multiple-offers scenarios. When the pace of the over the hill market increases and drives competition and prices higher, more buyers migrate their home search over the hill to Santa Cruz County. The 2022 wave appears to be on its way.