Housing market shifts to communities like Watsonville, Boulder Creek as Santa Cruz County home sales heat up
Quick Take
What has been a fairly cool housing market for the better part of 2023 might be heating up again soon as mortgage interest rates are expected to fall by the end of the year. Santa Cruz County realtors are advising prospective buyers to act sooner rather than later.
Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here.
Home sales rose slightly across Santa Cruz County in June while median prices fell as more single-family homes hit the market. However, realtors say the prospect of an end to interest-rate hikes could mean a turning point for the local housing market, enticing both buyers and sellers back into the fray.
June’s monthly rebound in sales comes after the local housing market had a pretty slow first half of the year, with few new homes coming onto the market and home sales dipping to their lowest point since the post-2008 recession over the past 12 months.
There were 150 single-family home resales across Santa Cruz County in June compared to 123 in May and 143 in June 2022. The median resale price fell 9.5% last month to $1.23 million, compared to $1.36 million in May.
Countywide, median prices fell an annualized 5.7% last month to $1.23 million from just over $1.3 million in June 2022, in part as buyers purchased smaller homes and sales shifted away from expensive markets like Santa Cruz and Scotts Valley to communities such as Watsonville, Boulder Creek and Ben Lomond.
The city of Santa Cruz saw 34 single-family home sales last month, down from 38 in May. There were 22 single-family home sales in Aptos, up slightly from 20 in the previous month.
Home sales rose sharply in Ben Lomond, Boulder Creek and Watsonville, which collectively saw 48 single-family homes trade hands, up from 23 in May.
Quick Take
The drop in home sales and new listings in Santa Cruz County can partly be attributed to the “mortgage lock-in effect,”...
Boulder Creek’s median sale price rose more than 11% compared to a year prior, from $739,000 in June 2022 to $822,500 in June 2023. Watsonville prices rose nearly 3% year-over-year to $925,500 in June.
Santa Cruz’s median sale price jumped from $1.48 million in May to $1.57 million in June. However, that’s lower than last June, when the city’s median home sale price stood at $1.6 million.
Ben Lomond’s median price fell slightly to more than 3% from last June to $895,000. Aptos’ median sale price fell, too, dipping to $1.42 million in June from $1.5 million a year prior as buyers purchased slightly smaller homes than they did last year. Capitola had the highest median sale price in the county at more than $1.77 million but saw just two home sales.
Local real estate professionals say the market might be rebounding soon due to a number of factors, including buyers noticing less competition and the potential for mortgage rates to come down.
Federal Reserve officials are signaling that the cycle of aggressive interest rate hikes is coming to a close, Reuters reported Monday. In Santa Cruz County, realtors say they are telling their buyer clients that now might be a good time to buy even though mortgage rates are still high.
“We always tell people if you find this house of your dreams, buy it now and then refinance,” said Santa Cruz County Association of Realtors president Jennifer Watson. “Your payments might be a little higher at first, but if you refinance when the rates come back down, then you’ll be in a better situation while in the house that you always wanted.”
Watson says mortgage brokers are pointing to young buyers who have held off on entering the market as they wait for interest rates to come down. She’s hearing from brokers that lenders expect to see rates in the 5% range by the end of this year or beginning of next year, rather than the current 6% to 7% range. That should help heat up the housing market again in the near future, Watson says.
“It’s kind of a sweet spot where buyers don’t have a lot of competition, and all indications are showing that mortgage rates will be headed down by next year,” she said. “If they’re not buying now, they’re going to buy at the same time when rates go down.”
That in itself could spur more sellers to put their properties on the market, says Watson. She explained that sellers will see more homes getting snatched up, prompting them to take action at what appears to be an active time.
“They’ll say, ‘Oh my gosh, these houses got well over asking [price], so I’m going to put mine on the market now,’” she said. “You’ll get that flurry of excitement from both sides.”
Quick Take
Santa Cruz County tops the list of most expensive rental markets in the country, according to the nonprofit National Low...
Marvin Christie, co-owner of Anderson Christie Real Estate, attributes the recent market lull to buyers adjusting to the state of the economy and higher interest rates — a difficult reality to face after extended periods of uncharacteristically low rates.
“If you feed your toddler candy for a week, and then try to feed them green beans, they’re going to have a hard time,” he said. “I do think we were spoiled by low interest rates, and it was a culture shock when they started rising.”
Christie said that although the Federal Reserve will continue to raise rates in the short term, he also anticipates rates in the 5% to 5.5% range by the end of the year, which will be a welcome sight to everyone: “I think we’re going to celebrate when we see that this time, whereas before that would have seemed high.”
But the potential increase in market activity in the wake of lower interest rates can cause undesirable market conditions, too. If a high number of cash buyers enter the market all at once, they can waive certain requirements typically needed to close on a mortgage. That makes them far more competitive buyers.
“When those rates drop, those people will come rushing back to the market, and it will be another crazy time where you will not have contingencies,” said Christie. “You’ll have ultra competition for every well-priced property.”
Those aiming to buy might be better off looking now, added Christie.
“We’re in a little bit of a transition period where I think people should be taking advantage of the lesser activity and the lack of a frenzy,” he said. “Because I think that frenzy will come back as soon as those rates come down.”