Today’s Market Update
The real estate market in Santa Cruz County has been an amazing and interesting market to follow this last year. But to understand where it is at today, we need to take a brief look at where it has been. The chart below shows the median single family home price for Santa Cruz County for the last seven years.
The huge decrease in value from 2007 to 2009 is obvious and unforgettable for most of us who owned a home during that time. It was painful as the depressed market got flooded with foreclosures, REO’s and short sales. You can see that while the home prices in Santa Cruz stayed low (relatively speaking) during 2010 and 2011, foreclosures and other distressed homes sales where through the roof. See Chart Below!
In the first quarter of 2012, distressed properties began to represent a smaller and smaller percentage of homes on the market. As distressed properties waned, sale prices (and market traction) began to put feet on solid ground. Investors who had been waiting on the side lines for signs of a recovering market, began to see reason to jump back into the real estate market. Motivated by historically low interest rates and a hope that we had probably seen the bottom of the barrel, lots of new buyers flooded the market. Demand was high. On the other hand, supply was low. Everybody had lost incredible amounts of money in equity and many were under water (and still may be). Nobody wants to sell just when the market is turning around (and many felt like they simply couldn’t). This low supply coupled with the high demand was the catalyst for this frenzied seller’s market we have seen the first six months of 2013. And as typical for things in low supply, but high demand, prices have soared. This next chart shows the median price of a single family home in Santa Cruz County from January to June of this year.
Two things to notice here: First, the median listing price in June is $102,000 more than the average in January – that’s an increase of 21% in just six months. That is incredibly fast growth. While this was wonderful for the market and a great sign for home owners, it isn’t a sustainable speed of recovery and ultimately would lead to an unhealthy market if it continued for too long. Second, by the end of Spring, home prices began to be effected by the newly rising interest rates and the entrance of sellers back to the market in growing numbers. Sellers had determined there had been enough rise in price to begin listing their homes again. The increase in supply and a slightly less frenzied demand is steadying the market to a much more “normal” pace. Buyers are still out in numbers and inventory is not even near too much, but I think we are seeing the slowing of one of the quickest rise in prices we have seen in a long time.
What I hope to see (and believe we will) is a return to a slower pace of growth (with its smaller ups and downs) to pull us the rest of the way out of the housing pit that most had fallen into.
So…it is a good time to take a breath, evaluate what our short and long term real estate goals may be, and ask if it is the right time to make any changes!