Dax’s Data- Signs of a Slow Down?
The question everyone is dying to know:
Q. Are we finally seeing signs of a slowdown in the Santa Cruz County real estate market?
A. There are some encouraging trends but let’s dig deeper:
The first thing to note is Days on Market. DOM saw an increase from August when the average was 19 to September when the average was 26. What that means is that homes listed in September took a week longer to sell, on average. For the overall balance of the market (and for buyers particularly), that is good news. It means a slightly less competitive market than the month previous. In fact, 26 DOM is the longest average Days on Market since March of 2021. Unfortunately, that doesn’t tell the whole story.
The Santa Cruz County market has seasonal trends (I wrote in-depth on this here LINK). The summer is “purchase season” for buyers. This fact dampens the optimism we may be seeing a more affordable market in the near future. Let me explain: April through August sees a significant increase in willing and ready buyers. Historically, that demand begins to decrease in September. Analyzing the Santa Cruz Real Estate market data over the last five years, September, on average, takes 7.8 days longer (39 DOM) than August (31.2) to sell. That means the jump from 19 DOM to 26 DOM is in line with the seasonal trends. Also of note, every single DOM monthly average in 2021 was its lowest in the last 5 years (minus May 2021, May 2020 beat it by a smidge). Translation: The 2021 Santa Cruz Real Estate Market has been scorching hot partly due to so many strong buyers in the market. Check the market data below and then we will move onto another important metric, the Sales to List Ratio.
Both buyers and sellers really want to know when this trend of overbidding is going to change. Well, it’s starting to… sort of. In September, homes sold for an average of 3.60% over asking, down from 4.10% in August and down from a 5-year high of 7.80% over asking in April 2021. Unfortunately for buyers, we still have a long way to go to reach the true equilibrium of 0%. 3.60% over asking was the 7th highest Sale to List ratio in the 5-year data set. In Laymen’s terms, this does follow seasonal trends but a decrease of that significance IS good news for the buyer side. Don’t worry potential sellers, this is still an all-time sellers’ market. Just see the months of inventory, # of new listings, and average sales price next.
Months of inventory, an indication of how quickly the market would run out of homes if no more came on, was 1.2 months in September. This continues the trend of fewer than 2 months of inventory that started in June of 2020. From January 2018 to May 2020, the months of inventory was 2.85, on average. This means that even as we see more inventory, homes are still getting swooped up at a record pace.
The average price in September hit its lowest point since March of 2021. September sale price average was $1.33MM, down 1.34% from August ($1.348MM). Still, the average home price in September 2021 was 9.6% higher than September 2020. Now, comparing months has the potential to lead to skewed results so it’s best to look at data year-over-year. The average home price in Santa Cruz County increased 17.57% from 2020 ($1.123MM) to 2021 ($1.321MM). A staggering increase and the core reason why it has never been a better time to sell!
So back to our original question, are we finally seeing signs of a slowdown in the Santa Cruz County real estate market?
A. The answer is, it’s too soon to tell. Santa Cruz County real estate follows seasonal trends and the current downward trend that we experienced in a variety of metrics in September, is expected. Unfortunately, I am incapable of knowing the future. I can, however, analyze the historical data to make predictions about what may happen next. The data is telling me this, it has STILL never been a better time to sell and this seasonal trend is normal. As a reader of Dax’s Data, if these trends become abnormal, you’ll be the first to know.
Thanks for reading. Please reach out for all your real estate needs.