Santa Cruz is a Top Housing Market
But That’s Not Necessarily Good News
by Seb Frey
…areas with strong housing demand and rising prices combined with robust economies, lots of good-paying jobs, and the amenities that make a place desirable. These markets have lots of restaurants, bars, and shops as well as reasonable commutes to work.
Unless you’ve been living under a rock, you’re probably aware that the Santa Cruz real estate market has gone completely bonkers. Prices are skyrocketing, supply remains very constrained, and buyers are in a world of hurt.
And it’s not just first-time buyers who are feeling the burn (although they do feel it most acutely). Buyers in virtually all price ranges are experiencing the pain – it’s not much less common to be outbid on a chic $2 million home than it is on a $750K condo.
In fact, the market in Santa Cruz is so competitive that it’s receiving national attention. Real estate portal realtor.com and the Wall Street Journal have teamed up to produce an “emerging housing markets” report for the United States. In their first report, released in late April of this year, the only area in California listed as a top emerging market in the USA was…Santa Cruz.
That’s right. Santa Cruz is the #10 hottest “emerging housing market” in the United States. And, unsurprisingly, Santa Cruz was the most expensive of the top 10 markets, by a comfortable margin. And what makes these emerging markets so hot? To quote from realtor.com, these markets are:
“…areas with strong housing demand and rising prices combined with robust economies, lots of good-paying jobs, and the amenities that make a place desirable. These markets have lots of restaurants, bars, and shops as well as reasonable commutes to work.”
Sound like Santa Cruz?
While Santa Cruz is making the national news, another headline that’s getting a lot of attention is the sharp uptick in inflation. In April, the U.S. recorded the highest inflation in nearly 13 years, punching in at an annualized rate of 4.2%. But month over month, inflation jumped 0.8%, far above the 0.2% the “experts” had been expecting. Read all about it on MarketWatch.
We’re seeing inflation everywhere in the economy now: food, gas prices, building materials, electronics – you name it, things are getting more expensive.
And we’re seeing inflation in the real estate market too. Prices are up dramatically in a short period of time – and much of this is, in fact, inflated value. However, simply because prices have inflated does not mean prices will deflate.
The United States experienced a decade of significant inflation between 1973 and 1982 – averaging 9% per year in that time. Strikingly, home prices likewise averaged 9% annua l increases in that same time period.
In 1970, the median U.S. home price was $17,000. In 1980, it was $47,200. In 1990, it reached $79,100. But by Q1 of 2021, the US median home price reached $347,500.
Real estate provides a wonderful hedge against inflation. Prospective homebuyers who today may look at what’s going on in the market and think how expensive homes are really aren’t considering the full picture. They’re only expensive compared to what they cost 1, 5, or 10 years ago.
Long term, I expect prices to continue to rise – even if only in inflated dollars (although I do expect prices locally to rise above the rate of inflation). Rent will rise in price too – as will almost everything, including, probably, incomes.
Buying a home means that one thing that won’t be going up much over time is your housing cost. Locking in your housing cost for a long period of time, as inflation eats away at the real value of your mortgage debt while increasing the price of your home is the way that most families are able to build wealth, over time.
Having said all that, allow me to share with you the latest real estate statistics for Santa Cruz county. These numbers all compare the first 4 months of 2021 to the first
4 months of 2020, and they’re quite eye-popping, for the most part.
- Median house sales price:
+ 26%, $1,152,500 in 2021 YTD
Median house $/sq.ft. value:
- Total sales volume:
- Luxury home sales, $2,000,000+:
- Active listings at end of month:
– 26% (4 month average)
- Months supply of inventory:
– 48% (much less supply vs. demand)
- Median days on market:
down to 10 from 14 days
- Percentage of sales over list price:
up to 60% from 30% of sales
- Median SP to LP %:
up to 102% from 100% of list price
Yes, buying a home in this market is especially challenging. But it’s never been easy in Santa Cruz, and it’s probably not going to get any easier – the NIMBYs who fight against dense housing projects, a growing University, and a tsunami of Silicon Valley money will see to that.
If you want to get into this housing market (which, if you plan to live here long term, needs to be a high priority goal for you), you’ll need patience, perseverance, and a plan. While the market may seem daunting, buying a home in Santa Cruz may well prove to be one of the smartest financial decisions (and commitments!) you’ll ever make.
Realtor Seb Frey is the author of the book Get It Sold! Check out his videos on Facebook and YouTube – search for “Seb Frey TV.” Learn more on his website and reach him at