Santa Cruz Real Estate Market Update: November 2020
Can the Santa Cruz real estate market keep up this pace? Do you expect another Santa Cruz real estate crash? Is this the top of the Santa Cruz real estate market?
I continue to get these questions over and over from people. And the bottom line is that no one actually knows these answers. But what I can do is let you know what is happening right now right here in our Santa Cruz real estate market, as well as nationwide. Some homes in the Santa Cruz market are still seeing multiple offers and selling above list price. But why? Well, let’s dive into it.
I’m Shemeika Fox, your Santa Cruz real estate expert. What we do know is that just as predicted by Real Estate Experts and Advisors earlier in the year that we would see a V-shaped recovery, which means that the market drastically dropped and slowed down when the pandemic hit, but they predicted that once things got back to normal or our new normal, the housing market would recover. Check out this graph from the Housing Market Recovery Index. This index looks at four components of the market. One, demand. Two, supply. Three, price. And four, time on the market. The index is showing that we are now exceeding levels prior to the pandemic.
Data from the Mortgage Bankers Association, Zillow, the National Association of Realtors shows that leading indicators that determine a strong market like showing times, purchase applications, pending sales, existing home sales, new home sales are all up. This indicates that we are in a very strong market. Also, factors like inventory levels for both traditional inventory and new construction are down. We have limited inventory, which again is an indication of a strong sellers market. So although I cannot predict what will happen in the future, just as anyone else can’t, what I do know is that right now, we are seeing a very strong real estate market right here in Santa Cruz.
How does what’s happening in the national and even globally economy have an impact on the local Santa Cruz real estate market you might ask? One would think with all the craziness, something’s gotta give, right? Well, I completely understand your concern. It’s valid. It can be scary. Some people may have to sell because of a job transfer or maybe a loss, but some may just be wondering if they should hold on and see if the market goes up so that they can get a better return on their investment or others may feel like they need to sell now so they can keep all the equity in case the market goes down.
There are certain factors and variables that can cause housing markets to go down and those factors also can have a positive or negative effect on the housing market as well. Unemployment is one contributing factor, and it was lower pre-pandemic and then spiked pretty high from April to July hovering between 8 and 14%, but it has been coming down month after month since April, which is a positive sign. Experts are projecting that it will continue to drop.
There have even been several recessions in the US throughout history, but if you look historically, at the times during recessions where the number of months that unemployment was greater than or equal to 9%, the recession of 2020 is actually the lowest. The Great Depression had 108 months. The Great Recession had 30 months. 1980s oil recession had 19 months. And in 2020, we’ve only had four months where the unemployment rate was greater than or equal to 9%.
Also, the number of people in active forbearance is decreasing. It’s continued to go down since May. More people are paying their mortgages as they are getting their jobs back. Many people are wondering, what will happen due to the election? I would recommend looking at a few factors. One, inventory is low. Back in 2008, the levels of inventory were very high, creating a buyers market. Home prices were depreciating because there was so much supply. Today, inventory levels are very low, showing that it’s a sellers market and prices are going up because buyers are paying more in order to secure their new home. Also, right now, the percentage of equity that homeowners have is very strong. John Burns Consulting tells us that 42.1% of the homes owned in the country are owned free and clear. They have no mortgage. And that 90% of homes have at least 10% equity, which indicates that less homes will go into foreclosure due to the equity they have. So there is a lot of data that points to a positive forecast for the housing market in the future.
So what’s happening locally in our Santa Cruz County real estate market? Everyone wants to know, is it a good time to buy a home right here in Santa Cruz? Or should I consider selling my Santa Cruz home?
Well, let’s take a look at the data so that we can make an informed and educated decision. According to Real Estate Expert Advisors, anytime you have low levels of inventory, we tend to call that a sellers market. And any time we have high inventory levels, we tend to be in a buyers market.
In Santa Cruz, inventory was up 9% from September and down 34% from October in 2019 with 352 homes available compared to 537 homes last year. Now this is historically low. Traditionally, during this time, there are many more homes that are active. The average days on market decreased by 15 days from 49 to 34 or 31%. Median days on market dropped two days from the month before. Number of new listings for the month of October increased 19% over September and is up 33% from October of last year. Closed sales decreased 8% from September from 192 to 182 homes sold. This is 31% from October 2019. And the median cost of a single family home right here in Santa Cruz County is 1,055,500.
So is it a good time to sell your Santa Cruz home or buy a new home here in Santa Cruz? I have given you a ton of data, and if you’re considering either buying a Santa Cruz home or selling your Santa Cruz home, please reach out to me for a confidential complimentary consultation.
I’m Shemeika Fox, your Santa Cruz real estate expert. And as always, I’m here to help.