Santa Cruz Real Estate Market Update: June 2022
Summer is here and things are certainly heating up, outside at least, but let’s look at the Santa Cruz Real Estate market. Are we in a housing bubble? Looking at the history of the housing market, we are not in a place where the market is ready to burst. And we are going to break that down for you, right here right now.
I’m Shemeika Fox, your Santa Cruz real estate expert. And if we take a look at the history of the modern housing market looking specifically at prices, we see that there was only ever one significant fall in home values in 2008. There are two major reasons for this. Loose lending standards and cashout refinances. People could apply for a loan they did not truly qualify for, then take cash out of their homes to finance a lifestyle that they didn’t qualify for either. But will we see something similar today? As Danielle Hale from realtor.com says, “We have learned from history that prices can fall. The more important question is if it’s going to happen right now. And that’s hard to say.”
The last two years have been unprecedented and have led us here. There are two things that set today’s market apart from 2008, however. Let’s first look at risk, see graph above. Product risk and borrower risk. You can see the high risk indicated here, but you can also see that it is no longer a factor. The type of loans that caused those issues then are no longer in existence.
This has also led to our second factor to look at, which is foreclosure. Foreclosure in the U.S. is at an all time low. We can attribute much of this to those strict lending standards.
With more qualified buyers, this should lead to a lower chance of having to foreclose, but what about rising home costs? More expensive homes and higher interest rates must make it hard to find really qualified buyers. According to the federal reserve, this actually is not the case. While it has risen recently, the ratio of mortgage to disposable income shows that we have seen much, much worse. So this is all different from 2007 and 2008.
Forbearance was another main topic two years ago, but what happened to it? Did it actually help homeowners or has it put all of us in a bad situation? Two years ago, forbearance was used as a tool to help homeowners with their mortgage and it caused a lot of unease concerning the long-term effects. The good thing, the numbers concerning forbearance look great. With about 4.2 million people using forbearance at the start, we are now down to 690,000 loans still in forbearance. According to Black Knight, 92% of those in forbearance have since come out of it, whether they went through modification or paid it back already. For those who have not found a solution yet, there are still options. The big takeaway here is that because of the number of people still in these situations and the number of options available, lead experts do believe that forbearance will not create a bubble or a major downturn in the real estate market.
Many people are asking, “Should I wait for a downturn in the Santa Cruz real estate market?” Let’s take a deeper look to better understand the ever-changing market.
Here is what the experts are saying about the home prices and how they will appreciate. First, HPES has showcased their projections on appreciation, placing us at 9% in 2022 with a low of 3.4% in 2025. Then back up again in 2026.
But let’s break down 2022 some more and ask more experts what they think 2022 home price appreciation will look like. Fannie Mae gives the highest percentage at 10.8% with Freddie Mac close behind at 10.4%. Zelman and National Association of Realtors (NAR) are giving similar feedback, but Mortgage Brokers Association is coming in much lower than the rest at 6.2% appreciation. This all averages out to be 9% in home price appreciation in 2022.
So, what does this mean? How does this affect the housing market?
Bloomberg has said, “New data from the Harris Poll shows 84% of Americans plan to cut back spending as a result of price spikes. More than 70% of respondents said they’re feeling the effects of inflation the most in gas prices and groceries,” believe it or not. Taking projections into consideration, we can see the difference in where we were and where we are going.
I recently had the pleasure of listening to Dr. Elliot Eisenberg. His predictions of the market that there is likely to be a recession, but a recession unlike any other in 2023. Why unlike any other? Because we are still in such a deficit in inventory. Creeping from one month to one and a half months of inventory, but a stable housing market has six months of inventory, which means in this market, to sell all that is available, it would take only 1.5 months.
So despite the rate increase, we are still in a seller’s market. That said, with the prediction of a recession in 2023, we are imagining that the appreciation of pricing will slow, but we will not see a housing market crash.
Now for the local Santa Cruz real estate market analysis.
Santa Cruz County median single family home costs 1,312,500 and sold in nine days for 109% of the list price based on 156 sales in May of 2022. Inventory was up 291 houses from April. The average days on market moved down two days from 15 days on the market to 13 days or 13%. Median days on market gained one day from the month before. Number of new listings from the month of May was up 11% over April, down 18% from May of last year. Closed sales were down 14% from April from 182 to 156. Closed sales down 22% from May of last year.
In Santa Cruz County, the median residential common interest home costs 852,500 and sold in six days for 110% of the list price based on 28 sales in May of 2022. Inventory was 57 up 73% from April and the same as May, 2021. Average days on market moved down seven days from 14 days on market to seven days on market where 50% days on market median dropped down from the month before. Number of new listings for the month of May was up 31% over April, up 16% of May from last year. Closed sales were down 33% from April from 42 to 28 closed sales, down 39% of May of last year.
If you have any questions on how the current Santa Cruz real estate market could affect you and your real estate dreams and goals, please reach out for a complimentary, confidential consultation. I’m Shemeika Fox, you Santa Cruz real estate expert. And as always, I’m here to help. Make it a great day.
Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate, Santa Cruz Real Estate
