Santa Cruz Real Estate Market Update: October 2022
Are you still considering selling your house in 2022 but have some reservations? There is no denying, the real estate market is experiencing a shift. Hi, I’m Shemeika Fox, your Santa Cruz Real Estate Expert. Welcome to the October 2022 Santa Cruz Real Estate Market Update.
In the last couple of months the housing market has seen a shift where the buyer demand has slowed down and the inventory of homes on the market has gone up or increased. But as a Santa Cruz home seller, should that deter you from putting your home on the market now? Not necessarily, the shift can actually give a seller some unique benefits and opportunity.
One of the biggest concerns for sellers is will I have a place to go after I sell? If you’re selling your Santa Cruz house to make a move, chances are you will have more properties to choose from that check all the boxes for your move, and it is easier to get a contingent offer accepted right now, and if your home is priced right it’ll still be in demand. Another opportunity is that your home equity has substantially increased in the last few years making it possible to move up. According to Danielle Hale, Chief Economist at Realtor.com, homeowners trying to decide if now is the time to list are still in a good position in many markets as a decade of rising home prices have given a substantial equity cushion. That’s right if you have been worried and holding off on how rising prices can affect your next Santa Cruz home search, keep in mind, increasing equity, in your Santa Cruz home can help cover the next down payment on your next home.
Another thing I’m often asked is should I renovate my house before putting it on the market? The answer to this question is yes and also no depending on your situation. In today’s market, increased inventory has given buyers more options than previous years, this means as a homeowner, you may not be able to ignore some updates or repairs that may not have been necessary or that could have been overlooked in previous months. In a recent article from Realtor.com, “to stand out in today’s market, sellers should make their home attractive to buyers which usually means some selective updates.” However, since we are still in a seller’s market technically, renovating a few key areas in your home may be enough to make your house stand out from the competition. That said, you’ll need to consider the return on your investment. According to the 2022 Remodeling Impact Report from National Association of Realtors, “hardwood flooring, refinishing and putting in new flooring has the most significant value in today’s market.” In order to ensure the details of the projects you have completed are shared with potential buyers, make sure your Santa Cruz realtor has a list of all the upgrades you have done prior to putting your Santa Cruz home on the market. And finally, the best recommendation is to spend your time and money wisely by consulting with a professional realtor to decide where your money will be best spent on making your house market ready.
Another question to analyze as both a Santa Cruz home seller and Santa Cruz home buyer, are buyers still in a good position to buy this fall? Now that summer has come to an end and fall is here, what are the experts saying about the housing market for buyers for fall of 2022? The fall housing market does look promising for buyers according to Lisa Sturtevant, Housing Economist for Freddie Mac and I quote, “after the end of summer lull, and as mortgage rates stabilize, we may see a return of buyers and a relatively strong fall housing market.” While interest rates have gone up, much to the buyer’s advantage, they are still historically low, and along with increased inventory, more options continue to become available to home buyers in a market that is still competitive but not one where a home buyer is continuously out bit. This in turn gives Santa Cruz home buyers the opportunity to purchase while experiencing seller concessions which we were not seeing before, that may not have been available in the last couple of years. This can include closing costs, credits, rate buy downs and sellers covering costs of repairs.
Also, if you are considering buying, please consider this short list of things to concentrate on to put you in a better position; having a good credit score, personal savings in the bank, a down payment, what is your debt to income ratio? The type of loan you’ll be applying for, are all really great questions a home buyer should focus on. When you combine these with the increased level of inventory that we have on the market as a Santa Cruz home buyer, you are in a better position to purchase a Santa Cruz home and may have more room for negotiation than we have seen in previous months and years.
Let’s talk about this inevitable question of to rent or to buy? This is a great question and there are lots of details to consider such as; how owning a home can improve your net worth? What is the monthly cost of rent versus the cost of home ownership? Do you know about tax benefits of home ownership? Today, more than ever, owning a home is not only a big achievement but also a major financial milestone to your net worth. As a homeowner, you are able to build equity in your home which in turn gives your net worth a boost. So, if you want to increase your financial security now might be a good time to invest in real estate home ownership and get rid of that rental or that lease agreement. A recent report from the National Association of Realtors talks about the net worth of a homeowner compared to that of a renter and finds that the average homeowner’s net worth is roughly 40 times that of a renter. This is because as a homeowner, your equity grows as your home appreciates in value and you continue to make monthly mortgage payments to your loan so the balance comes down. If you are a renter, you do not have this opportunity. In a recent article from Cnet, it was noted that, “Homeownership is still considered one of the most reliable ways to build wealth. When you rent, you are not investing in your financial future in the same way you are when you are paying off a mortgage.” In most markets, home equity will continue to build wealth over time and your home will become an asset that has the potential to appreciate in value as you continue to pay down the balance of your mortgage. These are just a few things to consider when looking at the option of ownership versus renting.
If you are seriously considering buying a home in today’s market but are feeling a bit uncertain about the rising mortgage rates and affordability, check out these three important tips to help you overcome the uncertainty and make your dream of home ownership a reality.
- Tip number one: If you have been concentrating on a specific area that now seems out of your price range, as a Santa Cruz home buyer, you may need to expand your search area and criteria to an area that may be more affordable. Opening up your search to a location further out may open up additional options and opportunities as a Santa Cruz home buyer. Also, prioritize your wish-list to not include all the upgrades you had originally planned for can help reduce the cost of your home purchase. According to a recent article in Cnet, “Area growth is likely to keep pace with the market, which means that the outskirts of town might be hopping in about five years. By searching in the nearby cities, you may find better prices and more square footage.” As we say in the industry, drive a little and save a lot.
- Tip number two: Work with a great lender and an experienced real estate agent who can discuss different loan options with you, scenarios, and even alternative financing programs and options that could be available to you so that you can get the best possible rate. This could save you thousands of dollars over time.
- Tip number three: In today’s market, it is key as a Santa Cruz home buyer to shop for programs that point you in the right direction for your home purchase. When shopping, look for certain options like gift funds, are they allowable? Down payment assistance, grants, is there anything out there that would allow you to get a grant? Is it possible to negotiate seller credit for rate buy downs or find out if the seller has a low interest rate and if the loan is assumable.
We have covered a lot in this Santa Cruz Real Estate Market Update, I know, one more thing I think is crucial to go over, are home prices depreciating or just stabilizing in today’s market? That’s a big question. What is actually predicted to happen with home prices today? It seems to be on everyone’s mind.
Nationally, there is still ongoing home appreciation even though at the same time sellers are reducing the price of their homes. This leaves buyers and sellers super confused about what really is going on in today’s housing market. Let’s break down the three terms; appreciation, depreciation, and deceleration, that are used in the industry by experts to better clarify what is actually happening.
- Appreciation is when home prices increase.
- Depreciation is when home prices decrease.
- Deceleration is when home prices continue to appreciate but at a slower pace.
In today’s housing market, experts are saying nationally we are in a market of deceleration, where home prices continue to appreciate but at a slower pace than previous years. This means we are not seeking the record-breaking appreciation we have seen in 2020 and 2021. According to CoreLogic, in 2021 home prices appreciated by an average of 15% nationwide, this year, experts are seeing a deceleration pace of 10 to 11% appreciation of course, in certain select markets you may see declines more drastic, but when we look at what is going on in the country on a national level, the projection from the experts is home prices will not depreciate but continue to appreciate at a moderate level.
Now let’s look at the local Santa Cruz County Housing Numbers for October, 2022. In Santa Cruz County, we currently have 437 active listings; including both single family homes and condo/townhomes. There are 58 new listings that were brought to the market in Santa Cruz County, again, single family and condo/townhouses, 20 homes were marked pending for single family homes and condo/townhouses in Santa Cruz County, and 40 homes closed escrow in Santa Cruz County for both single family homes and condo/townhouses.
The median sales price for single family homes dropped from $1.3 million to $1,195,000, the average days on market is up to 31 days on market compared to 29 from the month before, homes sold for 97% of the list price, we add a 100% the year before. Our absorption rate is 2.2 months of inventory meaning, if we had no other properties come on the market with the current buyer’s demand, our inventory would be sold out in 2.2 months. This is still considered a seller’s market believe it or not, it takes six months of inventory to be a balanced buyer and seller market. Anything above six months is considered a buyer’s market.
I hope this helped shed some light on what we are experiencing at both the national and local levels in our Santa Cruz real estate market.
If you would like additional information or to discuss how we can help you achieve your real estate goals, please reach out for a complimentary confidential consultation. I’m Shemeika Fox, your Santa Cruz Real Estate Expert and as always, I’m here to help.
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