Santa Cruz Real Estate Market Update: June 2023
Welcome to the Santa Cruz Real Estate Market Update for June 2023. Join us as we delve into the exciting world of Santa Cruz’s housing market. From stunning coastal properties to charming neighborhoods, Santa Cruz offers endless possibilities for homebuyers. Let’s explore what June has in store for Santa Cruz’s real estate scene. In this update, we’ll share insights from the Residential Economic Issues & Trends Forum held during the National Association of Realtors 2023 legislative meeting.
During the forum, Lawrence Yun, the Chief Economist of the National Association of Realtors, expressed his views on the Federal Reserve’s rate hikes and their impact on the housing market. Yun believed that the recent rate hike was unnecessary and anticipates that the Fed will halt further interest rate increases. He pointed out that these aggressive great hikes have negatively affected regional banks and the housing market, in general. Yun noted that, while inflation has started to calm down, rents on apartments and single-family homes remain high. However, he expects that inflation will decrease to around 3% by the end of the year. Yun highlighted that apartment construction has reached a 40 to 50 year high, and as a result rent growth is likely to slow down due to increased supply. That’s what we’ve been waiting for.
Now let’s talk about home sales. Yun mentioned that new home sales have returned to pre-pandemic levels, but existing home sales are historically low. This scarcity of housing inventory, which predates the pandemic, continues to hinder the housing market. Yun stressed the need to address this issue and emphasized that more home building is necessary for a long-term solution. Yun acknowledged that housing prices have surged due to the shortage of homes, but he believes that recent price declines are temporary. He stated that rising home prices are beneficial for homeowners, leading to wealth gains.
However, he also highlighted the wealth gap between homeowners and renters, emphasizing the importance of increasing the home ownership rate to ensure broader wealth distribution. Yun’s forecasts for mortgage rates predicted a decrease to around 6% in 2023 and a further decline below 6% in 2024. He expects that new and existing home sales will reach a bottom in 2023 followed by an upturn in 2024. Santa Cruz home buyers have faced higher mortgage rates this week as negotiations over the nation’s debt ceiling remain a focal point in Washington. The 30-year fixed-rate mortgage has risen to an average of 6.57% according to Freddie Mac’s reports. Economists warn of dire economic consequences if the United States were to go into default on its debt, and this would undoubtedly impact borrowing costs.
Nadia Evangelou, Senior Economist and the Director of Real Estate Research at the National Association of Realtors, expressed concern about the impact of rising rates on housing affordability. She acknowledged that, while the housing market is recovering, and home sales activity is above recent cyclical lows, the increasing rates are keeping affordability low. This presents a challenge for home buyers and potential sellers who are hesitant to give up the low mortgage rates they locked in over the past few years.
But there is a glimmer of hope. Sam Khater, Freddie Mac’s Chief Economist, thinks this affordability issue and limited supply might just be a golden opportunity for builders to tackle the housing shortage in the country. Let’s hope they bring some much needed relief to the market. According to a study by LendingTree, mortgage rates have shot up like a rocket in the past year, and it’s seriously affecting buyers’ purchase decisions.
Even a small increase of 1.85% points in rates can mean significantly higher monthly payments, especially for those six-figure loans. This study also revealed that rising annual percentage rates or APRs have caused an average increase of about $121 per month in mortgage payments. That’s an extra $1,452 in new yearly expenses. So as you can see, these wild fluctuations in mortgage rates are having a direct impact on the mortgage application market. They’re shaking up buyer’s affordability and making it trickier for them to make those big purchase decisions.
Let’s switch gears and look at the Santa Cruz County housing numbers for May of 2023.
For single-family homes in Santa Cruz County, the sales-price-to-list-price ratio increased from 101% in April to 114.4% in May, which is up from 110% a year ago in May of 2022. The average days on market for single-family homes for the month of May was 40, down from 45 in April, which is up considerably from 24 days on the market a year ago in May of 2022. The average number of active listings for the month of May for single-family homes came in at 262 homes, and the number of single-family homes that sold in Santa Cruz County was 124 with the median sales price decreasing slightly from 1,349,500 in April, 2023 to 1,337,500 in May, which is up from 1.3 million a year ago in May of 2022.
For condos and townhomes in Santa Cruz, we saw the sales-price-to-list-price ratio decrease from 103.3% in April to 101.3% in May, which is down from 106.9% a year ago in May of 2022. The average days on market for condos and townhomes for the month of May came in at 43 days on the market, up considerably from 18 days in April. The average days on market has increased significantly from nine in May of 2022. The median sales price for condos and townhomes decreased significantly from 950,000 in April to 742,500 in May. This price is down considerably from 855,000 a year ago in May of 2022. The number of active listings was 47 this month, and the number of sales for condos, townhomes increased from 17 closed homes in April to 25 closed in May, 2023, which is down from 29 that closed in May of 2022.
And there you have it, our comprehensive Santa Cruz Real Estate Market Update for June, 2023.
Until next time, you may remain curious and continue to explore the dynamic world of real estate right here in Santa Cruz. If you would like additional information or a market evaluation for a specific property, or if you’d like to get started searching for your dream home here in beautiful Santa Cruz, call me for a complimentary, confidential consultation.
I’m Shemeika Fox, your Santa Cruz real estate expert and your personalized real estate concierge. Have a great day.
