How’s the Market? It’s a Normal Spring Market…Except for One Thing

The following market report is provided by Liz Kroft  & Lance Hulsey of Mainstream Real Estate Group.

Spring has sprung with few surprises in Santa Cruz’s real estate market, but there’s one thing that’s different. Entering into the 4th year of drought means more changes for homeowners from landscaping to plumbing.

Have you taken the necessary steps to meet your district’s mandatory water restrictions?

Before we dive (make that a very shallow dive) into the drought’s impacts on homeowners, let’s take a look at the numbers.

It may seem as though the market’s upward pace has slowed, but don’t be fooled. Santa Cruz real estate has emerged from its winter hibernation and is undoubtedly in the midst of the spring market.

Here’s how the market looked in April:

Notice any surprising numbers in that report? If you looked at March’s market analysis you would have seen a 54% increase in new listings compared to February. Last month saw only a measly 0.9% increase.

So who slammed on the brakes in April?

The market, just like all sun-worshipping Santa Cruzans, also experiences the winter doldrums.

With the first hint of spring, the market jumps drastically. It can’t, however, continue to increase at this rate so it tends to dip back down after March and then generally continue at a more sustainable rate through the summer.

Allow us to introduce you to what we like to call the “Camel Back Chart.”  The chart below shows how the number of new listings changes month to month over the course of the year.

See that large uptick at the beginning of the year (especially in 2013)? Do you also see the slower increase with the start of spring that continues through the summer? This is completely normal.

The nearing summer months traditionally experience a steady rise in the number of new listings and sales through to the start of the next school year. This is because many buyers try to lock in a home in their favorite school districts before school enrollment deadlines. This swell in home buyers increases home values which inevitably results in an increase in listings.

The number of new listings, however, almost always begins to decline at the end of the summer, typically when school is back in session.

Here’s how 2015 is looking on the chart so far:

We’re right on track, see? We’ve had our start-of-the-year uptick and are now entering the slow but steady rise in listings and sales that comes with the warm spring and summer months.

Good News for Homeowners

Looking at some of the other numbers in our infographic, we see that the median sales price of Single Family Homes in Santa Cruz County continues to rise. In April, this number jumped up $13,000 to a median price of $760,000. For those of you already in a home this is great news: Equity continues to increase each month as the median price rises and you continue to pay down your mortgage.

There was also a decline in the average number of days on the market for both Single Family Homes and Condo/Townhomes.

But wait.

The median sales price of Single Family Homes is on the rise but the price paid for these homes and for Condo/Townhomes in April was, on average, less than the asking price. This is reflected in the average sale to list price: 1.3% for Single Family Homes and 0.44% for Condo/Townhomes. In previous months, buyers were paying above asking price.

So what gives?

This decrease in April may actually just be an indicator of tighter, more accurate market pricing by REALTORS(r) and not really an indication of a trend in lower asking prices.

Buyers Need to be Quick and Qualified

We are currently stalled at 2 months worth of inventory (calculated by dividing current inventory by the number of homes sold in the previous month). This number is the same as March. Historically, 2 months is still very low and indicates that there are a limited number of homes on the market, so we’re still in a seller’s market.

This low inventory means that buyers need to be well-qualified and ready to quickly make offers on the homes they are interested in.

How’s the market in your ‘hood?

Brookdale sold 4 homes this month, up from 1 in February and 0 last month. Perhaps the pending opening of the Brookdale Lodge has something to do with that.

La Selva Beach saw an increase of 275% in sales this month over last.

Scotts Valley had a healthy increase as well.

Rio Del Mar had a slight dip in sales month over month. This could be because the summer vacation rental market is heating up and sellers are locking in the extra rental income before they list their rentals for sale again in the fall.

Overall the Santa Cruz real estate market remains healthy.  With the low inventory, great schools, new jobs coming to the area (see Amazon news below in the local news section), and the fact that our area is still quite inexpensive compared to Silicon Valley, we are still seeing a steady stream of buyers showing interest in the area.  We expect this will continue for the foreseeable future.

We’re also expecting the drought to continue  — are you ready for the new water restrictions?

Owning a Home in the Drought — What You Need to Know

The big talk around town in April was Governor Brown’s mandatory urban water restrictions — the first in state history. The rule takes effect June 1st. In Santa Cruz, our target water conservation rate is 8%.

The city of Santa Cruz has taken conservation one step further: The city has declared a Stage 3 Water Shortage Emergency with mandatory water restrictions starting May 1st. This mandate limits city residents’ water usage to 64 gallons per day. Exceeding 64 gallons can result in fines or attending Water School to waive the first penalty.

The City’s goal is a 25% reduction in water usage. The rest of the county water districts have various levels of restrictions in place so check with your local water district for details.

What Water Restrictions Mean for Sellers

All residential, commercial, and industrial buildings within the City of Santa Cruz water service area must be retrofitted with high efficiency plumbing fixtures when put on the market. In addition, all residential, commercial and industrial buildings within the unincorporated County area that are not served by a public water agency that administers a similar water conservation program, are also required to be retrofitted with high efficiency plumbing fixtures when put on the market. The certification becomes part of your seller’s disclosure package.

Not sure whether your home has high efficiency plumbing or is required to have it? Contact the Water Conservation Office to find out. You may visit their website or call (831) 420-5230.

Do You Really Need That Lawn?

The recent Santa Cruz Sentinel article by Richard Scheinin asks a question at the forefront of many Californian’s minds: Is it time to say goodbye to the front lawn?

Santa Cruz residents have long been in favor of “food not lawns” and the practice of xeriscaping (landscaping that reduces or eliminates the need for supplemental irrigation).

Have you jumped on the drought-tolerant landscaping bandwagon? If you haven’t, it’s time to ask yourself these questions:

• Do you really need that front lawn? Are you using it? Does it add value?
• How much water does your lawn require every month? What is the cost of this irrigation?
• How much would you save per month if you replaced your lawn with drought-tolerant landscaping?

If you’re worried about the upfront cost of replacing your lawn, your local water district may help deflect the costs through a rebate.

An increasing number of buyers in the Santa Cruz market are showing a preference for drought-tolerant landscaping that is both beautiful and meets the City’s new water restrictions

Here’s the latest for local real estate news:

• At the end of April, the director of Amazon’s mobile marketplace division announced their arrival here in Santa Cruz. Currently working with with a very small team out of NextSpace, Amazon plans to expand this Santa Cruz division to 20 employees at first and hopefully, if all goes well, up to 200. Current job openings at Amazon are already listed on Santa Cruz Tech Beat. More local jobs means a higher demand for local housing which is both good and bad for the market depending on your personal situation.
• The Hilton Hotel in Scotts Valley was sold to the Philadelphia based Arden Group Hilton Santa Cruz Scotts Valley, CA Sold to Arden Group. Ardes Group has a history of buying hotels and renovating them to maximize their investment income. Are big changes in store for our Hilton?
• Some Santa Cruz County residents are upset with FAA’s new flight path — does this impact your neighborhood? http://www.kionrightnow.com/news/local-news/some-santa-cruz-county-residents-upset-with-faas-new-flight-path/32681502