Market Update for Santa Cruz County
Housing prices were flat in January, not unusual for this time of year but a far cry from last year at this time. This is likely a reflection of what is to come in 2023. If there is any movement in prices this year, one way or the other, it will be slight.
Our market has changed. It likely started changing last year about May when we began seeing inventory climb. (see chart below) The increase of homes for sale was more a factor of some homes staying on the market a little longer than an increase in new listing
I thought I’d show what this graph usually looks like over a much longer period of time to emphasize what a unique market we were in the last few years. If you look at the 2009 – 2023 graph you can see that the inventory is usually way more than the monthly sales numbers over the past 24 years.
The last few years has truly been a unique time in real estate! There have been a myriad of factors affecting this unprecedented phenomenon; prolonged period of low interest rates making it a smart time for borrowers (aka buyers) to get in the market, low inventory of homes for sale which only increased as more buyers came to play, and then the pandemic hit which brough the work-from-home scenario mainstream giving workers the ability to move to areas they want to live, rather than the home that eased the commute.
2023 should start to lean toward a more “normal” and quieter market. Sellers may be waiting a little longer for the right buyer to come along and buyers may just have more than 1 or 2 homes to choose from. A nice change of pace if you ask me.
I feel like I get the urge for “spring cleaning” in January. As the new year comes in, all I want to do is re-organize; my room, the refrigerator, the garage…pretty much my entire life! As I was cleaning out a cabinet full of magazines I had collected from last year, I came a across an article about pantry re-organizing and a line that I couldn’t resonate more with!
“One of my favorite forms of procrastination is reorganizing the cabinets in my apartment. I call it procasti-cleaning.”
What great timing and guidance to something that we probably all need to do more of! I just had to share the top tips from this article. Which, by the way, is out of the American Lifestyles Magazine that my mom and I send to clients. If you are interested in receiving one, let me know! It’s full of stories from artisans, home designers, farmers, chefs…all over the country!
Now, back to the pantry…
I 100% agree with the author of this article, that there is nothing quite as satisfying as pulling everything from the cabinets, starting fresh, and restocking them like it’s a curated art show of foodstuffs. Why does this bring one so much joy?!
First things first: do a clean sweep. Take everything out of the cabinet and start to sort your items. Throw away expired foods and make a donate pile of things you won’t eat/use. Now get in there and dust (or in some cases, heavily clean) your shelves so you have a nice clean space to work with.
Time to assess the situation. Group like minded items together; baking ingredients, pasta and grains, snacks, etc. Get rid of bulky boxes and containers, and consolidate where you can. Clear, see-through jars and bins are great for bulk items like pastas and grains. Baskets can hold an array of snacks for kids (or adults) to grab and go. Stackable racks are handy for bulk storage of canned and jarred goods. And absolutely invest in lazy susans! They are a must for any pantry. I picked one up at a garage sale just the other day!
Once you have items grouped and consolidated, start putting them back into your pantry. Ingredients that you use more frequently should be placed towards the front of your pantry. Consider the height of where items are placed as well. For example, I put the sweets out of reach from my four-year-old.
Now sit back and enjoy that newly organized pantry. Maybe even take a photo! Because next week you know it won’t look anything like what it does now. But oh, didn’t it bring you so much (temporary) organizational joy!?
New Years Resolutions for Sellers and Buyers
1. Begin prepping your home for the market.
·Simple projects like trimming trees to improve curb appeal or adding a fresh coat of paint – can have a big impact
·Take care of neglected repairs. More and more buyers are looking for move in ready homes. The less projects they have to take on, the more money they are willing to offer.
·Move up spring cleaning. Declutter, depersonalize and make your home look like no one lives there.
·Take advantage of the time you have now to get a jump start on packing items you won’t be needing for a few months.
2. Determine the right time to sell. Buyer demand can vary by season, but its also important to consider your family’s unique needs. Do you want to be in a certain school district by the fall, do you have a big vacation planned, are you expecting a baby? These are all life events to take into consideration when planning a move.
3. Start looking for your next home. Whether you plan to stay local or move farther away, its never too soon to start searching.
4. Talk to us! Hiring a real estate agent is critical to your success. We work with both buyers and sellers, so we have lots of experience having been on both sides of a transaction; which gives us an edge during negotiations!
5. Prepare Mentally. Selling a home is a big deal and can be very stressful – it helps to be mentally prepared for it! It’s hard to remove the emotion from the process, but if you can treat the transaction more like a business deal, you will come out better on the other side. Your home has much more meaning to you, than it will to prospective buyers. Your memories will stay with you forever – so try not to attach them to your home when it comes time to sell. Lower your expectations and be prepared for some inconvenient and maybe even offensive encounters. From picky buyers to less than professional agents, they are out there, but we will do our best to shield you from them all. Keep in mind to take it in stride and know that we have your back through it all.
Whether you’re ready to list or just starting to think about selling…don’t hesitate to reach out for some guidance. We are here for YOU!
1. Know what you can afford. Affordability is dependent on a number of factors, with the most important being: your credit score, interest rates, how much your family earns, and the cash you have on hand for your down payment.
2. Check your credit score .This number is essential to landing a mortgage, so its important to know where you stand. Many credit card companies and banks allow you to check for free!
3. Get established with a trusted lender. Who you work with matters – this can be said for anything in life but it’s especially important when buying a home. Lenders can make or break deals, so be sure to get established with a reputable company. We work with some good ones, so reach out for recommendations.
4. Pay down debt. The amount of debt you hold affects both your credit score and the amount you are eligible to borrow. The less you owe at the time of purchase, the better!
5. Save up for a down payment. The more you can offer, the more options you’ll have – but don’t forget to set some money aside to cover closing costs and moving expenses.
6. Decide what tradeoffs you’re willing to make. Even though home prices are leveling out, it doesn’t mean you will get everything on your wish list. As an exercise with your family, sit down and make 2 lists: everything you want in a home and everything you can’t live without. We call this your “wants and needs” list. It’s a very useful way to prioritize what is most important to you as a buyer.
Wondering what else you need to do to get ahead of the game? Reach out! We can help prepare you for a home purchase.
Months of Inventory
Months of inventory refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. May 2022 the number was 1.5 months. The end of January 2023 was 3.5 . Statistics are interesting —always happy to chat about it.
Please contact us If you would like a hard copy of our newsletter sent to you!
Uncertainty – that’s for certain! But what else is new?
The housing market has reached a pivotal point, but no one really knows what is next – hence “uncertainly” is the buzz word I hear most these days. Bidding wars and outlandish price increases seem to be behind us. The perfect storm that has been raging for months has passed and we are entering calmer seas.
That perfect storm resulted from raging demand, tight inventory and what appeared to be endless amounts of available money. Though many winning bids went to the cash buyers, the low interest rates provided plenty of would-be competition to the market, which is part of the formula for bidding wars and fast-rising home prices. Now that mortgage rates have ticked up, many buyers have put the brakes on and are re-evaluating. Rates are still historically low. The quick sales at exorbitant prices were stressful for all involved and is likely now a thing of the past.
This could mean a break for buyers. And just in time for the renters out there because the rental market is soaring – across the country and especially right here in our neck of the woods. Renters will likely be looking at some steep rental rates for the next few years. Those that were on the cusp of buying may not to be able to reach their goal now and will be forced back to the rental market. Renters might re-evaluate what they are paying in rent compared to what their mortgage could be if purchasing a home. Yes, interest rates are higher, but they are still good. And the adjustable-rate mortgage has come back into fashion.
Many are wondering if the prices are going to take a nosedive. Most experts are saying not likely nationally, though there are a few cracks showing. Demand is down and most homes are not selling as fast or at prices far above their asking price. However, our area is unique and what is happening in Phoenix or Tampa is not likely happening here in the Santa Cruz area. What is happening here, as most places, is that inventory remains low. Months of Inventory – a measurement of how long it would take to sell every home on the market if nothing new came on – has been as low as 1 month since Jan 2022. As of the end of August that number has grown to 2.6 months. Still low compared to the norm of 2019 which was about 3.5 – 4 months, but noticeably higher than earlier this year and before interest rates jumped.
Let’s talk about those low, low rates of “yester-month”. The super low rates may not have done us any favors. They helped to stoke the flames of a wildfire of increasing prices making many homes un-affordable even with the low interest rate. Rates in the 5-6% range, still an historically low rate, make for a more sustainable housing market. The frenzy of 2020 and 2021 left no room for negotiations. This current market, still good for sellers whose homes have appreciated, presents more of an opportunity for the buyers willing to get in. There’s some breathing room. You can take some time to look and evaluate the homes you’re considering. You don’t have to push your way through the only open house available with throngs of other hungry buyers. Now you can look at the view, the neighborhood, see if it’s right for you and not just the only thing out there forcing a desperate bid to be lost, or worse, simply ignored.
Settling into a more normal pace is good for everyone. Sellers are still looking at good prices for their homes compared to what it was worth a year or two years ago. They might have to wait more than a week – or even 2 weeks, heaven forbid, to get an offer, but it will be from a buyer that has had the time to peruse the available properties on the market. It will likely be a buyer that is buying because they love this home more than any other home they’ve seen. Yes, there could be negotiations and you will still do better by having your home looking it’s best and with all the lights working, polished floors and sparkling windows. I always feel that the best sale is one in which both parties are happy with the transaction. Buyers get a home they love, or at least like a lot, and sellers get a good price allowing them to move on to their next chapter.
We are always happy to help you evaluate your situation. Whether it’s buying or selling, it’s best to make a plan. We know how to do that and can help you. It might be a plan for a month or two out or a year or two out. Plans can change but getting a handle on it in the first place gives you direction and room to dream, and dreaming is always good!
The Importance of Referrals
A pretty common conversation we have with friends and family goes something like this:
Friend or Family Member: “I love receiving your marketing materials, but I can’t imagine ever wanting to sell my house. Am I wasting your money by receiving these materials?”
Bettsy/Maddie: “Absolutely not! We love any chance to connect with you, and it’s no biggie if we never do business together. But, there are 2 ways you can still help us, and us you. Refer your friends or family to us, and/or ask us to help you find an agent if you want to buy out of the area or state.”
Let’s break these two situations down.
Referring Friends and Family
Our business depends on referrals. And what better way to help out one of your friends of family members, then by referring them to a trusted, experienced, and fun real estate team like us? ?? It also helps us in having a connection to someone through someone else we already know.
Keep us in mind, when talking with your friends and family about real estate.
Asking for a reference to buy elsewhere.
Don’t think that just because we don’t do business in San Diego or Sacramento, doesn’t mean we can’t help you buy or sell there. We sure can! Our network is extensive – we have connections with agents EVERYWHERE. And you can rest assured that we will put in extra hours to research agents, call colleagues, and find the best REALTOR to represent you. And if we are successful in finding you an agent you want to work with, we can then be a part of your real estate experience. We will be there to help answer questions and be a sounding board. We are not there to run things, just as an advisory.
So please refer us and we will help to refer you. Working with people you know and trust is always better than working with a stranger.
Housing and Construction Projects in Santa Cruz County
This project calls for 205 market-rate housing units with ground-floor shops. The project takes up the entire downtown block between Pacific Avenue, Front and Laurel streets. The project has six stories plus two levels of underground parking.
Pacific Station housing project at Downtown Santa Cruz bus depot, 925 Pacific Ave.
This project includes a total of up to 179 affordable units above ground-floor commercial space. It also includes a new downtown Pacific Station Metro bus station and medical office space.
130 Center St. (across from Depot Park)
This project calls for a six-story apartment complex with shops at 130 Center St. in Santa Cruz. The lot near Depot Park now has an auto body shop and a Hertz rental car shop.
The 1500 Capitola Road project near 17th Avenue calls for 57 units of affordable housing. The project will include two clinics: a Dientes Community Dental Care and a Santa Cruz Community Health Center.
53 affordable housing units have been approved for construction at Freedom Boulevard and Atkinson Lane.
50 apartments will be built at 558 Main St., south of East Fifth Street in Watsonville.
Please contact us If you would like a hard copy of our newsletter sent to you!
State of the Real Estate Market – what it means for the players.
I, like so many of you I suppose, have been reading all kinds of articles lately from one economist or another in trying to sort out what will happen to this red-hot real estate market. Common sense tells us it will cool, of course, but when and how much and who will be affected by it the most? The reasons for the hot market are well known because we are looking in our rear-view mirror of the past 2 years.
Inventory has been low. New construction of homes is low due to a decade long dry spell and now supply chains are hindering building materials continuing to slow new construction. Buyers have been plenty; millions of Millennials have reached their prime home buying years; investors have been out in droves (accounting for almost 21% of buyers last December). Interest rates have been at record low numbers. Unemployment is low, and work from home options have increased allowing buyers to move out of the more expensive cities to burbs. Whew! Well, if that’s not enough to make your head spin, I don’t know what is! So many factors affect a market and there are plenty in our current market to add to the mix.
A rise in interest rates over the past months has certainly pumped the brakes on a small percentage of buyers. However, with interest rates on the rise, many buyers are more determined than ever to buy and buy soon. Which is partly why some are predicting prices to continue to rise this year. And historically, those interest rates at 5 or even 6% are still low. The Feds are wavering on how much to raise interest rates being that real estate has always been a battleground in fighting inflation and makes up a significant part of the U.S. economy.
Sellers are confronted with the choices to stay put and keep that low interest rate achieved from re-financing, or to take advantage of the equity they’ve gained so quickly over the past few years. In our area homes have appreciated as much as 30-45% based on our increase of average sale price in the county. It’s a common scenario to put a price tag on your home. We in real estate rich CA often look at our home through dollar signs. Until, that is, when we come back to the reality of where we would move to. This decision should always fall back on where we are in our life and what is the end goal.
If you are thinking of moving/selling – or buying, it’s always good to have a plan in place. It’s not about timing the market and “luck is not a strategy.” A recession in our future may not mean lower home prices, but likely slower home appreciation. In many ways, this could be a good thing and bring us to a calmer environment of selling and buying homes.
We are always available to help provide values, ideas and plans for those mulling these ideas around.
Let's Talk About Loans
As realtors, it’s our job to counsel our clients on all things HOMES. That includes knowing a little bit about every aspect of the buying and selling process…including financing. Now, we are nowhere near the experts on lending, but we know people who are! Don’t ever hesitate to reach out to us for a reference to the BEST lenders in the area. And yes, they can even represent you out of the area!
So, let’s break down the most common types of loans.
Conventional Loans consist of fixed rate mortgages and adjustable-rate mortgages. Fixed rate mortgages are self-explanatory: your interest rate and mortgage payments will stay the same for the duration of your loan. You can always refinance, to lower your rate if the market decreases. Adjustable-rate mortgages are quite the opposite. ARMs are available in a variety of different forms and term lengths, with the most common being 3/1, 5/1, 7/1 and 10/1. The first number represents the number of years your interest rate will remain fixed. The second number represents how often your interest rate will change after the fixed rate period expires. ARMs are ideal for those that only plan to stay in their home for a short amount of time. Many of you may not be very familiar with ARMs, and that’s likely because they have not been a common option for the past few years because interest rates have been so low. However, now that interest rates are increasing, ARMs are coming back around.
If you do not have much of a down payment, an FHA loan might be your best option. FHA loans are insured by the Federal Housing Administration (hence, the name, FHA). Though this option does not require a large down payment, it does require the borrower to pay monthly private mortgage insurance (PMI) in addition to the interest payment and mortgage payment. Once the borrower pays off a specified amount of the loan (usually 20%), they no longer need to pay for PMI.
Conventional lending will only loan up to a certain amount, and anything over that falls into a jumbo loan category. Jumbo loans can have either a fixed rate or an adjustable rate – it depends on what fits the borrower’s lifestyle and length of anticipated time owning the property. Like we mentioned before: if you are planning to live in your home for a short amount of time (under 10 years) an ARM may be more favorable. However, if you are planning to live in your home long term, a fixed rate may be the better option.
If you have ever served in the military, you are eligible to apply for a VA loan, which is guaranteed by the Department of Veterans Affairs. VA loans do not require any down payment, one does not need to be a first-time home buyer, and private mortgage insurance is not needed. VA loans do require certain repairs to be completed before the close of escrow, like section one termite work.
As you can see, loans come in many shapes and sizes. What works for one borrower, may not work for another. It’s best to connect with a lender who can find the most favorable option for you. We are always happy to help connect you with a trusted and proven lender.
Please contact us If you would like a hard copy of our newsletter sent to you!