Not bid-ness as usual: Current climate for home-buying in Santa Cruz County ‘hard to wrap your head around’

Houses
Four Santa Cruz houses scooped up in March went for a combined $2.35 million over asking price.
(Via Zillow)

Real estate prices have soared to record heights in 2021 as bidding wars with all-cash, no-contingency offers hundreds of thousands of dollars over asking have suddenly become the norm. Year-over-year prices are up between 30% and 40% in the county.

Despite the economic damage wrought by COVID-19, Santa Cruz County real estate prices have soared to record heights in recent months — boosting the median price of homes to more than a million dollars and sparking epic bidding wars amongst buyers.

The countywide median price for a single-family home sold in March was $1.1 million, a bit shy of the record-breaking $1.112 million median recorded in January, according to real estate data analyst Aculist.

Within the county, Capitola recorded the highest March median sales price with $1.487 million, and Boulder Creek the lowest at $670,000. The city of Santa Cruz clocked in with a median of $1.342 million, and the city of Watsonville recorded a median of $770,000 according to Aculist.

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While single family home prices are up nationally, Santa Cruz County is a notable outlier. Nationwide, the median price of single-family homes grew 18.4 percent year-over-year to a historic high of $334,500, according to March statistics from the National Association of Realtors. Over the same time period, prices in the city of Santa Cruz grew 34 percent to $1.342 million.

“We have just undergone the single biggest and most abrupt price increase in home prices in recorded history,” Santa Cruz Realtor Peter Cook recently wrote in an email to colleagues. “Year-over-year prices are up 30-to-40%, (with) 10-to-20% of this in just the last two months. I’m still trying to wrap my head around it.”

All-cash, thousands over listing

The run-up in prices has left home shoppers with average incomes and bank loans behind, as homes are snapped up with all-cash, no-contingency offers hundreds of thousands of dollars over listing price.

The median home sold last month in Santa Cruz County went for 105% of the list price, according to Aculist, with bidding wars on virtually every sale.

According to Cook, a home at 21 Ortalon Ave. listed for $1.7 million recently sold for $2.3 million; 1707 King St. listed for $1.15 million and sold for more than $1.4 million; 115 Hall St. listed for $1.395 million and sold for $1.8 million; and 770 Crystal Lane listed for $999K and sold for $1.8 million. The Crystal Lane property is in Live Oak while the other three are in Santa Cruz proper.

Part of the price spike is seasonal and due to low inventory, Cook said, as buyers flood into the spring home-buying season pre-qualified for loans and ready to go, while sellers take longer to prepare homes for sale. “For decades we’ve seen higher prices in January and February, with things moderating in June and July,” Cook said. “Every year, August is a better month for the buyer.”

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But high prices are also driven by a low inventory of single-family homes for sale, a long-term trend in a county where there is little new-home construction and most new construction is multi-family housing.

Also, home prices just across the county line in Santa Clara are vastly higher than those in Santa Cruz, making local homes a bargain for high-income Silicon Valley workers. With remote work now an option for many professionals, the prospect of commuting over Highway 17 is less of a deterrent, and out-of-town buyers are flooding in.

The median March single-family home sales price in Santa Clara County was $1.486 million — $386,000 higher than Santa Cruz County — and Santa Clara County has more than seven times the population of Santa Cruz County.

Meanwhile in Los Gatos

The median March home price in Los Gatos, just the other side of the county line, was nearly double that of the city of Santa Cruz, at $2.6 million.

“I’ve had clients moving here from Los Gatos, and every house I showed them they thought was so cheap!” Cook said. “It’s a different frame of reference.”

Nationwide, the surge in home-buying and mortgage refinancing has been spurred by very low interest rates, which are expected to drift gradually upward along with the post-Covid economy, putting a damper on home prices. But it’s unclear how much that will affect prices locally when many buyers are deploying cash and stock market wealth.

For local people seeking a family home, the surging market poses the threat of being priced out of their hometown.

“We’ve been looking and dreaming about buying a house for a few years, and have been seriously looking for two months now,” said one recently-married Santa Cruz resident who asked not to be named. “There haven’t been that many houses to look at, and every house turns into a bidding war, and that sales price serves as the baseline for the next place — it’s a vicious circle driving things higher and higher.

“It’s tough when you go after a place and get completely shot down,” he said. “It’s frustrating, and our Realtor doesn’t always know what’s going on any more than we do — we’re all trying to comprehend what’s happening right now.”

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