The Last Frontier of Affordable Housing in Santa Cruz?

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

Have you had the pleasure of riding the Giant Dipper at the Santa Cruz Beach boardwalk? As you leave the station you immediately enter a tunnel before the ride really begins upward. That ride is a perfect analogy for this months market update.

This months update is kind of like the tunnel before the ride starts upward. We know the climb is coming, it is just that a bit of uncertainty has crept into the market this month before it all starts. Enjoy our Giant Dipper of a market report this month.

January through March the market bursts out of the gates like horses at the Kentucky Derby (like Triple Crown winner American Pharoah), gathering speed in March and then coming to a steady trot in April and May. Gradually the market returns and stays at a fast gallop through the height of summer into July. Then it’s back to the stables as the weather cools off and school resumes. You can get a visual for this “market race” in the Camelback Graph below (it really does look like a camel’s back, don’t you think?).

And now a look at all of the housing statistics from the month of May:

In May the real estate market plateaued as usual with summer just around the corner,  but one thing stood out. Here’s a summary of what caught our eye from the numbers in the above graphic:

• The median price of single family homes dropped by $60,000 while that of condo/townhomes increased by $30,000.
• The average Days On Market for condo/townhomes decreased by a whopping 50%!
• The sale-to-list price ratio increased for all properties (fetching a sale price over the asking price), especially for condo/townhomes.

So what was different in May?

The condo/townhome market was HOT!  

Why might condo/townhomes be seeing so much action? From recent conversations with many homebuyers it feels like these types of properties are the Last Frontier of affordable homes as prices continue to rise, inventory remains low and interest rates creep up, If ever so slightly. These types of homes are also hot with real estate investors who want to enter the real estate investment market at a lower price point than with standalone single family homes.

Condos and townhomes are also excellent entry-level homes for first time home buyers that have left the rental market because they are fed up with continually rising rental prices and would prefer to invest their money as homeowners.

A recent email from a client shows how challenging it is to find affordable housing in Santa Cruz (names have been changed):

My name is John and I’m looking for a home for myself, my 10-year-old daughter Catherine and our cat Sparky (he’s a good citizen). We are looking for a two-bedroom bungalow to rent with some outside space within walking distance to the beach, as our current landlord is moving back into our house mid-July.  Our budget is around $2500 per month. However, after dipping my toes in the Santa Cruz rental market, I realize that’s more of a fantasy than reality so I’m open to other housing options and locations. I have a good job, references and an excellent FICO score (801).

John has a reasonable budget and expectations and meets all the requirements most landlords are looking for (except that he has a pet). Still, John is faced with the fact that he will have to settle for a less than ideal location to stay within budget.

In late May, Liz was having a conversation with a couple looking to move from Los Gatos to the Santa Cruz Mountains. Upon further consideration the couple thought they would prefer to be in Santa Cruz closer to the beach. The concern, however, was budget.  Liz asked if they would be comfortable with condo/townhome properties to which they replied “It wouldn’t be ideal. We’re pretty tired of having neighbors so close and the noise of shared walls.”

The moral of these two stories?

In today’s market buyers can’t always have their cake and eat it too.

Summer Is Just Around the Corner Along with Prime Buying Season

Even though buyers are finding that they have to compromise, that hasn’t stopped the onset of PBS (Prime Buying Season). To go back to our Kentucky Derby metaphor, the horses are galloping into summer.  Each year March through the end of July are often the most active months in the market.  

There are a few reasons for this: For families it is often most convenient to sell a home and move into a new property before the school year begins again.  Doing so over the summer means children can finish school and also have time to settle in somewhere new.  Homes and neighborhoods also generally look their best in spring and summer with plants in bloom and sunny skies.  It’s also easier to get a feel for an area and what the neighbors are like if the weather is nice enough to entice people out of their houses. It’s during these months that you’re most likely to see kids playing outside and people out in their front yards interacting with their neighbors, or not. This is your best chance to see what the neighbors are like. But the fact that summer is a popular buying season can result in more competition and higher prices.  Buyers may find themselves in multiple offer situations and feel pressured to make quick decisions.  For sellers this time of year can be hectic as well as looky-loos are ever-present and not necessarily ready to purchase. But the fact remains: PBS is here so if you’re buying or selling, be ready for it!

How’s the market in your “hood”

San Lorenzo Valley: In Felton, Ben Lomond, Brookdale and Boulder Creek the general market seems to be slowing down. Days on the market increased but home sales increased as well in some of the pockets of the San Lorenzo Valley. Why? Older listings are staying on the market longer and some of the newer listings are selling quickly. It’s not too difficult to deduce what’s happening here: A lot of the listings in the valley are older cabins that haven’t been updated. They take a special buyer with vision to see the potential. The newer listings are likely newer homes that are move-in ready which means an easy sell.

Scotts Valley is showing signs of the hot Townhome/Condo market we mentioned earlier with single family home listings down significantly from April but Townhome/Condo listings up a few ticks. Closed sales are roughly the same as last month and days on the market has dropped from 27 days to 17 days. We would rate Scotts Valley as still a very warm market.

Aptos needs a special mention here. The average days on the market has decreased significantly from 61 in April to 31 in May.  All other statistics are roughly equal with the exception of Average Sales Price which dropped from $921,571 in April to $749,353 in May — a change of over $170,000! This was due to a larger number of expensive homes  selling in April (33% of homes sold that month were over $1,000,000).

Rio Del Mar and Seacliff saw a lot of action in May. These areas are  vacation hot spot and as the summer months approach sales tend to increase.

Many of you may also find it interesting that historically “sleepy” neighborhoods are seeing a larger number of listings and sales recently.  Live Oak and Boulder Creek for example. Why might this be?

What trends are you seeing that come to your attention? Any Realtors(r) out there who read this have any comments or insight? We would love to hear from you. The state of the market means different things to different people depending on where you are in life as a buyer or seller and where you are in Santa Cruz County (or would like to be).

From high-achieving schools to a thriving tech scene, May was a busy month in Santa Cruz County news.  Here are some of the highlights as they pertain to local real estate:

Local Schools

Schools will always be an important aspect of a healthy and vibrant real estate market.  It is no surprise that our K-12 schools, university and community college continue to make exceptional headlines.

K-12

Six Santa Cruz County schools were awarded the California Gold Ribbon Schools Award this month.  Schools awarded were:

• Branciforte Middle School
• Harbor High School
• Mission Hill Middle School
• San Lorenzo Valley Middle School
• Scotts Valley High School
• Scotts Valley Middle School

UC Santa Cruz

The National Institutes of Health awarded UC Santa Cruz a $2 million grant which will aid in the development of a new instrument that will help researchers further understand the intricate structures and functions of the complex molecules of human health and disease. This could be a large breakthrough for the study of HIV. Read more here.

Cabrillo Community College

Not to be left out of grant giving, Cabrillo College received a large grant for $1 million to help build a communications lab.

Santa Cruz Tech Continues To Thrive

Drone Data X Conference

The Drone Data X Conference held May 1-3 at the Kaiser Permanente Arena drew an international crowd of drone aficionados and helped solidify Santa Cruz’s place on the map as a spectacular conference destination and tech hub.

CU Direct to Acquire Local Tech Company Intuvo

Scotts Valley tech company Intuvo, a leading marketing automation software company, is set to join CU Direct, the nation’s leading provider of lending, automotive and strategic solutions to the credit union industry.  You can read more over at Santa Cruz Tech Beat.

Watsonville On the National Map

The local tech scene is also putting Watsonville on the map and on a national scale! Digital Nest had a fantastic “Faces of the Digital Future” photography event in May which featured portraits of local youth at tech companies performing jobs they hope to have in the future. Just before this event the Nest’s Executive Director, Jacob Martinez, spoke at the first ever White House Tech Meetup to discuss innovation in education and the country’s growing need for tech and employment focused education. Read more here.

Local Landmark/Historical Property

How many of you remember the old Road House property that once stood on East Cliff  between 38th and Larch Lane in Pleasure Point?

This historic home built in 1902 was torn down in 2008 to many residents’ dismay.  In mid-May there was a neighborhood meeting to view and discuss initial designs for the Road House site.  The proposed project includes nine new homes along a pedestrian street and is being led by Thacher & Thompson Architects.

The Santa Cruz Rental Market / Housing Crisis

The exorbitant cost of living in Santa Cruz continues. More and more residents’ are putting most of their paycheck towards rising housing costs. Local reporter Jondi Gumz writes about the trials and tribulations of a local teacher’s adventures in renting.

Accessory Dwelling Unit Update

True to form though, the Santa Cruz community isn’t taking things lying down.  New Santa Cruz rules regarding Accessory Dwelling Units (the same ones Habitat For Humanity aims to build for seniors which we discussed here) aim to ease the housing crisis. Read more here.

Vacation Rentals

Santa Cruz property owners fight to keep the ability to rent in-law units as vacation rentals. How do you weigh in on this issue?  Join the conversation and cast your vote over at Civinomics.

The Consumer Financial Protection Bureau has issued new rules to make it easier to understand your mortgage terms when buying a house. The program is called “Know before you owe” and you can read about it here.

What are your thoughts on housing in Santa Cruz? Let us know in the comments!