Dax’s Data: Santa Cruz Real Estate Review Through Q3 – A Year Unlike Any Other
In the world of Santa Cruz real estate, 2023 has been nothing short of unprecedented. From a historically sluggish beginning to mortgage rates soaring to heights not seen in two decades, and a shockingly low supply of available properties, this year has presented challenges and opportunities that have left buyers, sellers, lenders, and Realtors alike in truly uncharted territory.
In this Dax’s Data, we’ll take a deep dive into the remarkable journey of Santa Cruz’s real estate market throughout the first three quarters of 2023. We’ll uncover record metrics that impact buyers and sellers alike and highlight the trends that will shape future market conditions. Whether you’re considering buying, selling, or simply curious about the current state of affairs, this review will provide you with valuable insights to help you navigate the unpredictable market and arm you with the confidence to make these life-altering decisions.
So, fasten your seatbelts as we embark on a journey through the remarkable landscape of Santa Cruz real estate in 2023.
Let us start with a bit of a recap of the year so far. The year started with a series of devastating storms that left local businesses wrecked, roads washed, and cliff faces eroded. Hampered by a series of atmospheric rivers, Real Estate in Santa Cruz took a temporary back seat in Q1. The combination of seasonality and improved weather heading into Q2 had many Realtors optimistic about a strong activity recovery. Unfortunately, that optimism produced only below-average results. As expected, we saw peak activity for the year in the height of summer and a steady downward activity trend as we transitioned into fall. While the numbers improved, the consistent theme throughout 2023 has been historically low and historically high. Historically low supply battling the other half of the S&D equation in suppressed demand (as a result of high rates). The result= low activity and steady prices.
The year so far. I’ll highlight some important metrics momentarily but without historical context, these metrics don’t tell a whole lot. As noted above, Active and New Listings were historically low to start the year and that is reflected in the January & February metrics. Homes were taking longer to sell in Q1 but have since improved despite continued spikes in mortgage rates. Prices, contrary to the naysayers predicting a crash, have continued to stay steady and VERY strong from a historical perspective. Both activity and prices peaked in Q2 and have since leveled out closer to Q1 numbers.
With a historical data perspective, I intend to highlight just how pressing (and rare) our supply issue is, prove that sellers still have the upper hand, and provide evidence that should give buyers a real sense of urgency going forward.
While I have been banging the drum on historically low supply for the better part of 2 years, available MLS data (for most metrics) only goes back to 2010. Using Santa Cruz Association of Realtors (SCCAR) data, I can analyze data all the way back to 1997. The results are shocking!
Big picture, our supply crisis started well before the ’08 housing crash. If the data were available, I’d suspect there would be a strong correlation between decreasing supply and the passing of Prop 13 in ’78 which capped property tax increases at 2% per year. With that stated, let’s look at the data on hand.
Analyzing this data, you’ll realize that the 14 lowest New Listing numbers have occurred in the last 14 years (2023 not included). The 10 lowest Active Listing numbers have occurred in the last 10 years. 3 of the 5 lowest total sales years occurred between 2019-2022. Sales-to-New Listings Ratio (SNLR) measures the percentage of homes that go on the market and actually sell. Most consider 50-60% a balanced market and anything more, a seller’s market. With that logic, we have been in a seller’s market for the last 12 years. Expanding to ’97, we have been in a seller’s market for 22 of 26 years. … and yet there is historically low supply.
Those metrics alone are enough evidence to show that the prices aren’t going down. Let’s add a cherry on top to hammer this point home. Buyers sitting on the sideline… listen up and get in the game.
The trend lines are clear, we have decades of evidence that real estate prices (in Santa Cruz especially) go up over time and new listings are on a continual and steady decline.
Read more about how Homeowners in Santa Cruz County Strike Gold with Appreciation.
I’m sure some of you are reading this hoping that 2023 is better. Sorry to disappoint but it is much WORSE.
Through Q3 of 2023, Santa Cruz County Real Estate is on a HISTORICALLY low pace. 2022 was the lowest number of new listings on record. 9 months in and 2023 has 284 fewer listings (18% less) than in the same timeframe last year. The average number of yearly new listings since ’97 is 2895, we would be lucky to get half of that in 2023.
As a result of these low new listings numbers and the continued decrease in Average Days On Market, we have seen a steady decline in available homes for buyers to choose from. This increases competition for each individual listing and increases seller leverage.
Because there are fewer homes to sell, naturally there are fewer sales. That said, 2023 has been particularly shocking. We are on pace to shatter the 26-year low for sales. All the more reason to choose a Realtor that is actively helping buyers and sellers in this market.
While supply is the story of this historical data, Demand also deserves front-page consideration in 2023. Mortgage rates have been a shock to the system for buyers locally and nationally. Affordability has eroded as mortgage rates have spiked to 20-year highs. That said, historically they are very much in a normal range. Since 1971, the average mortgage rate is 7.73%. Right on par with where we are today.
The difference is, of course, prices.
So, why isn’t suppressed demand pushing down prices?
That great equalizer we have been highlighting: supply.
The result is we are on pace for the second-highest average price on record. My concern for buyers sitting on the sideline is this, the supply crisis is not going away but the demand suppression will. As evidenced by historical data, we are in for a long-term continuation of low supply. Demand, on the other hand, is bubbling below the surface waiting to explode when rates provide some relief.
In conclusion, Santa Cruz real estate in 2023 has defied expectations and entered uncharted territory. The year has produced a series of challenges for buyers and sellers alike. Despite historically low supply and surging mortgage rates, prices have remained remarkably steady.
Analyzing historical data reveals the severity of the supply crisis, with decreasing supply evident over the decades. 2023 is on pace to shatter previous supply lows. The metrics clearly show that prices aren’t on the decline, emphasizing the urgency to act while demand and prices are suppressed.
The unique conditions of this year have reshaped the Santa Cruz real estate landscape, making it crucial for both buyers and sellers to navigate this market with the expertise and guidance of a quality (active) Realtor.
If you’re ready to navigate the unique and challenging Santa Cruz real estate market in 2023, don’t hesitate to reach out. Whether you’re a buyer looking for opportunities, a seller seeking to capitalize on strong prices, or simply in need of expert advice, I’m here to assist you every step of the way. Email me today at [email protected].
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