No More Buyers’ Markets?

No More Buyers’ Markets?

Continuing the conversation… talking about Buyers and Sellers Markets and wondering out loud whether we’ll ever see another Buyers Market again. In a perfect world, Buyers’ and Sellers’ Markets would ebb and flow every five years and maintain equilibrium between demand and supply. Neither would be in control long enough to drive the market to extremes. 

A quick look at our Coastal market since 1994, proves this isn’t a perfect world.  We’ve had a Sellers Market for twenty-one of the last thirty years.  We haven’t even come close to a Balanced Market, let alone a Buyers Market, in more than a decade.  Discounting the Great Recession as an outlier, we’ve only had a normal Buyers Market for three out of the last thirty years!  

And yet we keep entertaining the notion that a Buyers Market may be just around the corner with more supply and lower prices. Here are some of the reasons why we won’t see more supply anytime soon.

Slow Growth: We didn’t build many homes here for 40 years. You can’t make up for that kind of deficit quickly.  Plus we’re out of room to build.

High Rents: If supply increases and prices come down, investors will quickly snap up more properties because the numbers will work.  Also, more renters will become first-time homeowners for the same reason. 

Market is Small: We don’t have a lot of housing stock compared to neighboring counties where most of our buyers come from.  It doesn’t take much demand to hold our supply down.

Neighboring Markets Priced Higher: As long as homes in Silicon Valley are going for a lot more than homes here, Santa Cruz will attract buyers.

Work from Home:  As long as remote work remains a “thing”,  living near the beach will be a desirable option for Silicon Valley workers.

Second Home Market:  As long as the beach is the beach  Santa Cruz will attract plenty of second home buyers.

Aging Baby Boomers:  Most homes in Santa Cruz are owned by seniors and they aren’t going anywhere anytime soon. The trailing edge of the baby boomer generation is only 60.  

More Transactions:  As interest rates come down, demand will increase and supply will decrease. We’ve had the fewest sales on record over the last two years, that trend will reverse itself in 2025.