Santa Cruz Real Estate Market Update: April 2021
I’m getting questions every day about the Santa Cruz real estate market. And if or when do I think that it will have a downward shift? Will the expiration of the moratoriums and forbearance have an impact on our market? Hi. I’m Shemeika Fox, your Santa Cruz Real Estate Expert.
As of February 14th, that’s Valentine’s day, the Mortgage Bankers Association said that 84% of people who entered into forbearance are either out of it or working through it to set up repayment plans. 50.8% are paid in full, 33.6% worked out a repayment plan and only 15.6% are still in trouble. According to Elliot Eisenberg, Ph.D. of the MLS Listings Partner, Economist National Economic Overview, Despite early predictions of a soft first quarter, economic forecasts have steadily improved and 2021 quarter one GDP growth is likely to now exceed 6%. With the combination of the $1.9 trillion American Rescue Plan. Improving vaccination rates, substantial pent up demand from the last year, and sizable amounts of forced savings in the trillions. There’s every reason to expect growth of over 8% in 2021 quarter two and 2021 quarter three. By 2021 quarter four we will likely see growth slow to a still remarkable 7%, as we begin to slowly return to normal trend growth, by the end of 2022 or early 2023.
While the federal reserve has revised their 2021 forecast for inflation, GDP and unemployment, they have barely modified their 2022/23 forecasts. This means the fed very much thinks the latest stimulus monies, will lead to a short-term boost to the economy, but nothing more. They are essentially looking through this short term growth and any corresponding inflationary effects. As such, they remain strongly wedded to their existing inflation fighting plan and do not anticipate raising short-term rates before 2023 and are unlikely to commence their tapering of the $80 billion a month in treasuries and 40 billion a month in mortgage backed securities before the start of 2022.
Not surprising at all but definitely validating, what we right here in Santa Cruz are experiencing in our Santa Cruz real estate market. According to Dr. Eisenberg, the most impressive single statistic coming from the Silicon Valley is without a doubt, the rapid and sustained rise in home prices due to many factors, some of which are largely unique to this region. Across the country, we see home buyers expressing a desire for more space due to being at home more, as well as the ability to work from home, even post pandemic. However, Silicon Valley is unique in that higher percentage of employees can work from home here than in almost any other geography, to wit, high-tech firms were early adopters in allowing their employees to work from home. And moreover, gave them early guidance about future work arrangements.
In addition, tech as an industry has not just survived but thrived during the pandemic and thus has benefited more than almost any other sector. As a result, tech stocks have largely outperformed other traditionally strong sectors, such as energy, banking and healthcare.
Lastly, the equity performance has been enhanced due to the widespread practice of granting stock options to employees. As a result the increase in wealth in and around San Jose has been very impressive and has enabled home prices to easily rise at levels outpacing much of the nation. Another factor impacting the local housing market is undoubtedly emigration from San Francisco. While there is no evidence of any wholesale out migration from the city. There is evidence of a small but meaningful decamping of households to other areas.
As noted in a recent article in The Chronicle net out migration from San Francisco rose from roughly 17,000 in March through December, 2019, to approximately 53,000 over the same period in 2020. Importantly, a sizable number of those 2020 outbound migrations reported a new address in San Mateo at 6,637, Santa Clara at 2,592 and Santa Cruz at 286. While these numbers are not large, in a tight housing market exhibiting little if any new construction an inflow of very wealthy buyers can easily alter house price dynamics given the general lack of inventory. However, it is reasonable to think that we have witnessed peak migration as prices keep rising and life in the cities reverts to a new version of normal.
And here are the numbers for the Santa Cruz real estate market. The median sales prices in Santa Cruz County jumped to an all time high of $1.1 million a 21.2% gain over last year and average prices rose 27% to $1,222,877. Dr. Eisenberg says, Santa Cruz County is apparently capturing a meaningful number of migrants from San Francisco. Your prices rose like it had a rocket assist.
New listings are close to normal for this time of year at 510, while closed sales rose 35.5% over last year. New pending sales are nearly double the level we saw at the end of March, 2020 and are at the highest level since mid 2015. Single family inventories in Santa Cruz County are near all-time lows with just 259 active single family residential listings. Dr. Eisenberg, notes that whereas Santa Cruz County used to be relatively inventory rich compared to neighboring counties, inventory levels have declined to where they are at the national average at two months supply of inventory. The sales price to original list price ratio rose this month to 103%. The highest level in recent memory and average days on market declined to 42%, the lowest quarter one in decades. I hope you found this Santa Cruz real estate market update helpful and informative.
If you would like more information or to discuss how this market will impact you if you’re considering selling your Santa Cruz home or buying a home right here in Santa Cruz, reach out to me for a confidential, complimentary consultation. I’m Shemeika Fox and I hope you’re having a wonderful day and as always, I’m here to help.