The State of the Santa Cruz Real Estate Market
BY seb frey
2020 has proven to be a year like none in living memory, and with a contentious presidential election right around the corner, you know it’s going to get stranger. Yet in the midst of a global pandemic, nationwide civil unrest, and the sudden loss of many millions of jobs…a strange thing has happened to the Santa Cruz real estate market.
The year started off strong. The fourth quarter of 2019 saw a market that was flagging–homes were taking longer to sell, and many sellers were making painful price reductions to get their homes sold before the holidays. But just as we flipped the page of the calendar into a new year in January, the market abruptly turned a corner and came to life. Buyers were out and homes were selling, often with multiple offers.
It looked as though 2020 would turn out to be a strong year for real estate sales– and then, the pandemic hit. The market literally ground to a halt, until the infamous “shelter in place” ordinances were revised to allow real estate agents to show homes again.
But showing real estate in the pandemic, with strict protocols to protect everyone’s health and safety, looks much different than in pre-pandemic times. Despite all the precautions the industry now follows when selling property, many would-be home sellers decided they didn’t want the risk and pulled their homes off the market.
Normally, the spring market sees a cresting wave of homes coming on the market, but this year, the tide went out and took the inventory with it. The Santa Cruz real estate market has long been characterized as one difficult to buy in, with too many buyers chasing too few properties. Today, inventory is far lower than normal for this time of year – yet buyer demand is exceptionally strong.
Homes in Santa Cruz are flying off the shelf. The number of homes sold in June and July was about 30-50 percent higher in 2020 vs. 2019– even with painfully few homes for sale. The pundits tell you that people are moving to Santa Cruz because they’re working from home now and will probably be able to continue working from home, much of the time at least, for the foreseeable future. If you can work from home–why not make it a home near the beach?
This boom in demand for Santa Cruz real estate has really put the hurt on many would-be homebuyers, especially local Santa Cruz residents competing for a small pool of properties against many well-funded high-income buyers from points north. Today’s market is characterized by homes selling quickly after receiving multiple offers, and often selling far in excess of asking price.
Dusty and Myriah McKenzie are two of many homeowners who pulled their property from the market when the pandemic shut down the market in March. He’s an anthropology professor at Cabrillo and she’s an esthetician. Since then, they’ve watched the market from the sidelines as homes come onto the market and are quickly snatched up in spectacular bidding wars.
Their own home, before they pulled it from the market, had been well-received; it was a Redfin “Hot Home” which is all but a guarantee of multiple offers and a sale over asking price. They’re sure they could sell their home today in a New York minute. But then what?
They still need a place to live. Selling in today’s market is easy–but selling, and buying? There’s a very limited number of homes to choose from, with the best homes selling at nosebleed prices. Might it not be better to wait until the market actually cools off, before proceeding with their plans to upsize?
They remain on the fence – like many would-be home buyers and sellers in Santa Cruz. There’s no shortage of desire to make a move, but the market – never easy to navigate – is tougher than ever.
The accompanying charts tell the tale of this market in stark relief. The first chart shows the “months of inventory” for the past two years. As you can see, Santa Cruz is far below normal inventory for this time of year – below six weeks. A six month supply is considered a market that is balanced between buyers and sellers, and this market is nowhere near that.
The second chart shows closed sales in Santa Cruz county in 2020 vs. 2019. You can see the dramatic spike in sales from May to June and shooting up sharply higher in June. This is especially noteworthy as you can see that in July 2019, there were fewer sales than in June 2019, which is what typically happens as we enter the summer – but in 2020, July sales in Santa Cruz took off like a rocket
These certainly are unprecedented times – the pandemic, civil unrest, a high-stakes Presidential election…and a real estate market that, despite all the uncertainty, is setting records for sales and prices.
It’s a challenging market for the McKenzie family, and for many other Santa Cruz families just like them. Of course, every family’s wants, needs, resources and timelines are different, but with a good mindset, fortitude, and a little luck, buying a home in Santa Cruz is possible for many. As those charts show, hundreds of families are doing so, every month. Maybe it will be your turn next!