Santa Cruz Housing Update (& How Events Halfway Around the World Affect Our Local Market)

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

This last month saw Germany looking for Greece to pay their own way. Greece went begging for more time and money to the European Union and the International Monetary Fund. Germany capitulated and Greece received a restructured loan deal and the housing market in Santa Cruz benefits.

Say what?

How does the Greek debt crisis have anything to do with the Santa Cruz housing market?

And by the way, since when did this become a blog about international monetary policy?

How does any of this really have any relevance to rents, home prices, and the real estate market in Santa Cruz?

Well it all has to do with the strength of the dollar around the world and interest rates closer to home. Long story short, because the European Union lent the money to Greece we averted an international monetary crisis and the dollar came out stronger while interest rates remained stable. Thus, everything basically stays the same and the banking system and the Federal Reserve take a sigh of relief.

Now we can focus on the big question on everyone’s mind once again:

Are we in a bubble?

In our March 9th article we commented on how the 2015 market was coming out of hibernation and perhaps into a bubble. Other economists and industry experts seem to believe that we are in a bubble:

• Bay Area Entering Housing Bubble? One Expert Thinks So
• San Francisco exhibiting potential signs of a housing bubble
• Head’s up! There’s a housing “bubble” forming in markets beyond San Francisco

Yet others say that we are in fact NOT in a bubble:

• No Housing Bubble in Sight

In considering your opinion, take these two piece of information as you will:

1. The Santa Cruz County median home prices are the highest they have been since 2007
2. The National Foreclosure Inventory Is the Lowest it has been since December 2007

For the housing market’s continued recovery, there is no doubt that affordability is going to be a major deciding factor.

What do the numbers say?

From our perspective the numbers are about as flat as the surf has been this last week or so.

New listings are barely up, moving the needle only slightly up 0.3% from last month.

The median home price bumped a little to $750,000. This means your equity is climbing, but a little more slowly.

The Townhouse/Condo market is up a few thousand dollars and sales are also up a bit, but nothing to write home about.

This begs the question:

Are we starting to see a slowdown?

To our readers who follow this monthly post we would love to hear from you.

What are you seeing and feeling?

There is some speculation that because of the tight inventory, home prices are pushing up against the county’s affordability ceiling. A combination of this low inventory and interest rates continues to push prices up and above many buyers’ comfort levels.

While inventory is still considered low, listings are up by 7% compared to a year ago as we find ourselves more than halfway through 2015.

Why the slight boost in inventory over the last year?

We think it might be coming from pent-up sellers who are realizing their equity gains from recent years.  Perhaps these same sellers see that prices are the highest they have been since 2007 and concerned that these prices and low interest rates won’t sustain themselves forever.

Solid price appreciation and an improving economy (in both Santa Cruz and the Bay Area) is providing some homeowners the push and financial capability to sell and trade up or down.  Trouble is, the majority of these sellers are likely buying another home and there isn’t a ton of inventory out there to choose from.

How’s the market in your ‘hood?

The big winners this month are Aptos, the San Lorenzo Valley, the Scotts Valley area and Bonny Doon.

The median home price went up significantly in these areas.

Bonny Doon is a bit of an outlier since so few home sales are recorded but the numbers jumped big time. Aptos had a $76,000 increase in the median sale price.

Way to go Aptos!

The big loser was Soquel. Not to worry though, this may be only a statistical anomaly and not anything to panic about. We will keep an eye on this for you next month.

Our regular readers will remember the camel back chart from previous months that show a downturn after mid summer in market activity. All in all, everything looks about right as we enter late Summer and the start of school for our local kids.

Santa Cruz will be Silicon Valley’s first fully fiber city (no pun intended based on last month’s article). Read more over at Santa Cruz Tech Beat.

Residents and officials protest and express frustration over FAA flight paths.

Bubble Trouble: Santa Cruz County test scores show a decline in college readiness.

New City of Capitola Homebuyer Assistance Program – Capitola announced a new program to provide a down payment loan to income eligible purchasers. Learn more here.

Planning for Future Growth in Santa Cruz County – Learn about some of the proposed changes being considered in the draft County Housing Element. This important planning document outlines how the County expects to accommodate future population growth in terms of additional housing.