The U.S. economy survived 2023 without going into a recession, as consumers turned out to be more resilient than most economists
expected. Despite going through high inflation, banking crisis, and rounds of layoffs by some of the high-profile companies in the past
year, consumers remained upbeat and their confidence recovered somewhat at the end of 2023. The housing market, on the other
hand, had a rough year as mortgage rates remained elevated and supply continued to be tight.
Hi, I’m Shemeika Fox, your Santa Cruz Real Estate Expert and your personalized real estate concierge.
I am excited to share the March 2024 Real Estate Market Update. Hit that like and subscribe button to stay up to date on all things real estate!
The Fed is expected to cut its policy rate this year but has also indicated that they may not pull the trigger until they see more signs of easing in inflation. They do not want to reduce rates just to turn around and increase them again, so the plan is to watch closely and instead of the expected decrease in mortgage rates happening in the first half of the year, we are now looking to the second half of the year to see rates reduced. The uncertainty of future rate cuts could increase interest rate volatility in the next couple of months, but the average 30-year fixed rate mortgage should slowly decline back to 6.5% by mid-year. Mortgage rates will continue to trend down in the second half of 2024 and could reach 6% by the end of the year.
With interest rates expected to decline gradually in the next 12 months, the lock-in effect will begin to ease, and more properties will be released onto the market. More newly built housing units will also be available as developers continue to rev up new constructions to address the persistent housing shortage issue. While supply in 2024 will remain below the norm by historical standards, active listings could increase between 10% to 20% as market conditions and lending environment continue to improve.
Lower costs of borrowing and an increase in housing supply are factors that could motivate buyers and sellers to reenter the market in the upcoming home buying season. First-time buyers who were priced out or got squeezed out by market competition last year will give it another shot to attain their American dream. Repeat buyers who have overcome the lock-in effect will also return to the market as rates slowly trend down. Sales will have a soft growth in Q1 2024, but momentum should pick up later this year as rates decline further.
California home sales will bounce back with a double-digits gain in 2024 after declining more than 20% in 2023.
Lower interest rates and tight housing supply will also put upward pressure on home prices in the coming year. While more sellers will
be listing their properties on the market, demand will also rise as affordability improves, resulting in market competition remaining
intense. Meanwhile, with rates expected to dip in the next 12 months, buyers will have more financial flexibility to purchase homes at higher prices. Assuming a healthy economy with either no recession or a mild recession in 2024, home prices should rise modestly across California, with the state’s median price growing 5.7% year-over-year and reaching a new high after falling 0.6% in 2023.
S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for December 2023 show that 17 out of the 20 major metro markets reported month-over-month price decreases.
YEAR-OVER-YEAR
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in December, up from a 5.0% rise in the previous month. The 10-City Composite showed an increase of 7.0%, up from a 6.3% increase in the previous month. The 20-City Composite posted a year-over-year increase of 6.1%, up from a 5.4% increase in the previous month. San Diego reported the highest year-over-year gain among the 20 cities with an 8.8% increase in December, followed by Los Angeles and Detroit, each with an 8.3% increase. Portland showed a 0.3% increase this month, holding the lowest rank after reporting the smallest year-over-year growth.
MONTH-OVER-MONTH
The U.S. National Index showed a continued decrease of 0.4%, while the 20-City Composite and 10-City Composite posted 0.3% and 0.2% month-over-month decreases respectively in December.
After seasonal adjustment, the U.S. National Index, the 20-City Composite, and the 10-City Composite all posted month-over-month increases of 0.2%.
“U.S. home prices faced significant headwinds in the fourth quarter of 2023,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices. “However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs in 2023. Ten of 20 markets beat prior records, with San Diego registering an 8.9% gain and Las Vegas the fastest rising market in December, after accounting for seasonal impacts.”
“2023 U.S. housing gains haven’t followed such a synchronous pattern since the COVID housing boom. The term ‘a rising tide lifts all boats’ seems appropriate given broad-based performance in the U.S. housing sector. All 20 markets reported yearly gains for the first time this year, with four markets rising over 8%. Portland eked out a positive annual gain after 11 months of declines. Regionally, the Midwest and Northeast both experienced the greatest annual appreciation with 6.7%.”
“Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years. With trend growth at the national level of 4.7%, a 5.5% return demonstrates solid, steady growth. While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages. We previously suggested that the surge in home prices during the COVID pandemic could have accelerated home ownership temporarily. The past two years reflect consistent growth slightly above trend, suggesting a more secular shift in home ownership post pandemic. In the short term, meanwhile, we should be able to measure the impact of higher mortgage rates on home prices. Increased financing costs appeared to precipitate home price declines in the fourth quarter, as 15 markets saw lower values compared to September.”
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, recorded a 5.5% annual increase in December 2023. The 10-City and 20-City Composites reported year-over-year increases of 7.0% and 6.1%, respectively.
Now, let’s look at the housing numbers for Santa Cruz for February 2024!
The median sales price for Single family homes in February 2024 throughout the County of Santa Cruz came in at: $1,200,000 which is up from the median sales price of single family homes in January which came in at $1,160,000.
The average days on market came in at 44 days on market which is down from 47 days on market in January 2024. The number of active listings in February was 200, up slightly from 196 in January 2024. The number of new listings for February was 131, up from 106 in January, so we are seeing the seasonal increase as we exit the winter months and head into spring selling season!!
And the number of sales came in at 68 closed transactions in February which was up 10 more closed sales from 58 in January 2024.
Now lets take a look at the Santa Cruz stats for Condos and Townhomes right here in Santa Cruz County! The median sales price for February 2024 came in at $660,000 which is a significant decrease from the median sales price in January 2024 which was $729,000. If you are considering a condo or townhome purchase, it is a great time to get a deal!!
The average days on market came in at: 52 days, showing a decent increase for days on market since January 2024, when the average days on market was 36. Are you considering a condo or townhome purchase? If so, these numbers may actually align with a better deal for buyers considering a condo or townhome purchase right here in Santa Cruz. Call me so we can discuss strategy and how to get you a great deal!
The number of active listings in February 2024 was 55, which showed a very slight increase from January, when the number of active listings was 53. And the number of sold condos/townhomes was up from 19 in January 2024 to 23 in February 2024. The number of new listings for condos and townhomes right here in Santa Cruz was down by a mere one property, coming in at 33, versus the 34 count of new listings in January. This is typical winter time fluctuations. I do anticipate that as we get out of the wet winter months and as the weather warms, so will the real estate market.
If you are thinking about selling your home, or whether now is the “right time” to buy, give me a call so we can navigate this market and strategy together.
It is crucial to have an expert in your corner. I’m Shemeika Fox, your Santa Cruz Real Estate Expert and personal real estate concierge and as always, I am here to help!