2021: The Santa Cruz County real estate market in review
2021 has brought forth another year of crazy activity and record high prices as the paradox of the pandemic continues to stimulate a huge surge of demand for a rapidly shrinking supply of homes.
It’s hard to believe that the market is entering into year three of that alternate universe known as real estate in the time of coronavirus. I guess time flies when you’re having a mind-boggling tryst with a global pandemic.
Of course, time has been a notable casualty of the pandemic. All the normal routines that once helped us set our internal clocks have been disrupted and now the days seem to eke by like slow-motion replays while the years slip by in a blink of an eye.
So, let’s do a quick rewind on the real estate market in 2021 before we find ourselves staring at another vertical wall and the start of 2023! If hindsight really is 20/20, we can use all of it for added perspective. The simplest thing to say about the real estate market in 2021 is that it brought us a lot more of the same- as in way more of the same shocking intensity the market experienced in the second half of 2020 right after the initial coronavirus surge and the two months of shelter-in-place that followed.
To recap, the world came to a grinding halt in March of 2020. The virus was raging as sensible people began sheltering in place, all but a few businesses started to shutter, and schools & travel were essentially shut down. Life as we once knew it was up in the air. It felt like 6 to 9 months could easily go by before another house sold and realtors were digging in for the long haul. Open houses were against the law and in-person showings were restricted by byzantine protocols. Besides, the general assumption was:
Who in their right mind would want to buy a house during a global pandemic?
While supplies of toilet paper and COVID tests were running dangerously low, there was one thing people suddenly had in abundance: free time- whether they wanted it or not! As cases grew and the pace of life slowed, more existential moments found their way into the cracks. Those moments were unscheduled invitations to reflect on the past and reevaluate the future. What are we waiting for? There are no guarantees! Let’s live in the moment. What makes us happy? These thoughts and more became personal calls to action.
Since everyone was already sheltering-in-place, homes became the makeshift incubators where new plans were hatched. People emerged from the lockdown with a deeper appreciation for home and a strong desire to change the future. And so, the great reshuffling process began as an unexpected surge in activity swept over the real estate market in early June. The intensity ratcheted quickly up to levels few of us had ever seen, except in the hottest of markets. We were dumbfounded by the sheer speed and velocity that it took off with.
A new kind of cognitive dissonance came with the changing market. There we were, trying to figure out whether schools should reopen and whether to close our beaches or wear masks outdoors and whether anyone could go to the office or get a haircut. Meanwhile, new listings were going into escrow as fast as they came on the MLS, accompanied by multiple offers and prices we’d never seen before. Real estate felt untethered from the everyday reality of COVID that the rest of the world was living.
This was the first real glimpse of the paradox in the real estate market that was beginning to be shaped by the pandemic. At a time when buying or selling a house should have been the last thing on people’s minds, it seemed like it was the only thing that more and more people were thinking about. And it wasn’t happening despite the pandemic, it was happening because of it. Who could have predicted it?
During all that time in which people were hunkered down in their homes, they were discovering that they liked working virtually and were more efficient. They didn’t miss the commute. They needed bigger homes for offices & exercise rooms, added separation of space from kids, and extra room for homeschooling & visiting family. They needed bigger yards and neighborhoods that were less dense. They needed to be closer to open space and the beauty of nature.
It was all an unexpected shift that would grow in size and scope over the next few months and then continue on with escalating levels of energy for the rest of the year. Our normally relaxed fall and winter seasonal markets were replaced by same kind of March madness that the market usually experiences in the spring. The median price for single family homes in Santa Cruz County broke the $1 million mark for the first time in July and hovered well above there for the rest of 2020. The average price soared past $1.2 million that same month and also settled into stratosphere for the duration.
If 2020 was the craziest, busiest, fastest-appreciating market on record, 2021 came out of the gate in January without missing a beat. It took off like a rocket ship on the same steep trajectory; and over the course of the next twelve months, it never took its foot off the accelerator. Virtually, all of the records that 2020 set for median and average prices, price per square foot, days on market, and percentage of sales price over list price were left in the dust by a widening margin.
In May of 2021, the median price hit a staggering $1.3 million while the average price settled in well above the $1.3 million mark, reaching just shy of $1.4 million in November. In 2020, the days on market had been averaging between 30 and 40, but for much of 2021 that number slipped down into the teens. This meant that the average home was selling in less than three weeks! What was perhaps most telling was that the historic low inventory levels that helped drive multiple offers with low or no-contingency periods and 20-30% overbids in 2020 fell even lower in 2021. The year ended with a minuscule 75 single family homes actively available in the entire county, with almost 25 of those being listed under the special “Members Only” designation- which meant they could not be shown to prospective buyers yet.
Comparing year-over-year numbers for 2020 and 2021, the biggest take-away is pretty clear: the life changes and the cultural shifts that were triggered by COVID are still in play, at least where real estate is concerned. In 2022, the paradox of the pandemic will continue to create significant demand that will compete for and overwhelm the once again historic low supply of homes that are available.