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(Kevin Painchaud / Lookout Santa Cruz)

Santa Cruz County home sales drop in July as real estate agents hope for a fall resurgence

Area home sales fell in July after a mild June surge, but the market could heat up again sooner rather than later. A late-summer lull before a fall surge is not uncommon, Santa Cruz County Association of Realtors president Jennifer Watson says, and people looking to buy should take advantage of the slower market.

Santa Cruz County’s housing market dipped into a late-summer lull last month after a flurry of activity in June as both sales and median prices fell in July, while fewer homes hit the market.

The local housing market had a fairly slow first half of 2023, as home sales dropped to their lowest point since the post-2008 recession over the past 12 months. But late-summer stagnation is nothing new to local real estate agents, who point to vacations and the start of the new school year often creating a slow market before a fall resurgence.

There were 125 home sales across Santa Cruz County in July compared to 150 in June and 119 in July 2022. The countywide median sale price dropped 8.5% last month to $1.12 million, compared to $1.23 million in June. That’s in part due to buyers purchasing smaller homes on average, according to monthly housing data from the Santa Cruz County Association of Realtors.

The city of Santa Cruz saw 37 single-family home sales in July, three more than the previous month. Santa Cruz’s median sale price was $1.5 million in July, down slightly from June but around 4.6% higher than last July.

Aptos saw a couple more sales, too, with 24 in July compared to 22 in June. Median prices were up more than 8% from July 2022, hitting $1.55 million last month. Capitola saw just three home sales in July, up from two in June. The city’s median price was the highest in the county at $3.1 million.

Sales dipped in communities that had been among the county’s hottest markets earlier in the summer: Ben Lomond, Boulder Creek and Watsonville.

Collectively, 24 homes changed hands in July in Ben Lomond, Boulder Creek and Watsonville, down from 48 in June. Last month, six homes sold in Ben Lomond, four in Boulder Creek and 14 in Watsonville. Sales had increased significantly in those communities in June as buyers shifted away from the most expensive markets in the county, such as Scotts Valley, which also saw fewer home sales in July.

The low number of home sales isn’t much of an anomaly, said Santa Cruz County Association of Realtors president Jennifer Watson. For most, the school year is starting up and families are taking this time to go on vacations and short trips to end their summers, fostering a slower market.

“There’s usually a little blip in this time frame, but it should pick up again soon through Thanksgiving,” she said, adding that the late-summer lull contributes to low numbers of new listings as well. “Once kids are settled in school, parents in the market will look to make moves before the winter.”

The drop in home sales and new listings in Santa Cruz County can partly be attributed to the “mortgage lock-in effect,”...

Watson notes that the county’s inventory of available homes for sale has been low for some time now, and that can be chalked up to a variety of reasons. Building houses is both costly and time-consuming, and the market is still flush with buyers. “The same amount of housing but with more people is a problem,” said Watson. “Then we have quite a few people that already refinanced during those rare low interest rates, so they’re not going to move.”

During the pandemic, interest rates fell as low as 2% to 3%. That ushered in both pros and cons for the market: Buyers were able to lock in low 15- to 30-year mortgages, but that meant they could be potentially handcuffed if they’re looking to move again, as interest rates have risen to between 6% and 7%.

“It’s great if they love where [you] are, but if you’re wanting to move, then you may be feeling a little bit stuck,” Watson said.

However, a quieter July housing market didn’t necessarily translate into slower price growth. Ben Lomond’s median sale price ballooned more than 35% compared to a year prior, from $755,000 to $1.025 million. Six homes sold in July, the same number as in July 2022.

The huge jump in Ben Lomond’s median price can be explained in a few ways, Watson said. Given that each month saw only six sales, the median price can easily be skewed by one or two larger, expensive property sales. Ben Lomond is also a hot market, with two groups of buyers converging — those wishing to live away from the urban center, and those looking for more affordable properties that aren’t as far up in the mountains. That means greater competition, which can lead to higher selling prices.

Watson said she expects the market to heat up again later this year if interest rates eventually come down.

And although the Federal Reserve raised interest rates once again in late July by a quarter-point, the cycle of aggressive hikes could come to an end soon. CNN reported Monday that there is only a 2.5% chance of multiple hikes through the end of the year. Because of that caveat, and a possible local market surge in the fall, Watson is encouraging her home-buying clients to purchase now then refinance their rate later.

“It’s best to get into the market when there’s no competition or less competition,” she said. “We are expecting a pretty big flurry once the rates go down again, and you’re gonna be thinking woulda, coulda, shoulda.”

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