Dax’s Data: The Seasonal Trends of Santa Cruz Real Estate
A common seller question: When is the best time of year to sell? The short answer of course is “right now!” I’m sure you have heard but we are in an all-time sellers’ market. In Santa Cruz County, the average single-family home in 2021 is $1.321MM, up a whopping 17.57% from last year’s average of $1.123MM.
In this market with these conditions, attempting to time the correct part of the year is both unnecessary and unadvised. We can’t say for certain that the market won’t correct. I do have a hunch (hint: It won’t, at least significantly). It’s simple economics, there is significant demand in the market with low-interest rates, lots of wealth in the area, plus the new work-from-home norms and supply is low with the cost of construction, building delays (from fire and COVID supply chain issues), lack of land, and years of accumulative building restrictions. So, a correction? Maybe, at some point. A 2008 crash? Highly unlikely.
Even if you shouldn’t try to time the market, you should have a feel for the seasonal trends that occur in the real estate market in a given year. The flow goes something like this: The end of summer marks the end of peak real estate season. As Autumn hits, a downward slope of inventory begins to occur. This downward trend continues month after month, culminating in the yearly low in December. As the new year rings in, a slight rebound begins to occur. Although, January and February still see the 2nd and 4th lowest inventories of the entire year (based on Santa Cruz County data over the last 5 years). March starts the trend of favorable inventory and May sees the peak. Inventory stays strong through the months of June and July before beginning its yearly downward trend starting in August.
So, what does this mean for buyers and sellers? Well, it depends. Based on the data above, it would be safe to assume that the best time to buy is during the summer when inventory is aplenty and the best time to sell is the winter when buyers have fewer homes to compete for. As you’ll see in the chart below, that logic is flawed. Turns out, in Santa Cruz County real estate, there is an inverse correlation between Days on Market and # of Listings. This is to say, when inventory is at its highest homes actually seller quicker, and when inventory is low homes take longer to sell.
The reason: Demand. During the summer months when there is more inventory on the market, there are also more buyers in the market. Loan officers actually call April thru September “Purchase Season”. Why? Well, quite a few reasons. The weather is a big factor. People are more active during the summer. They have the opportunity to visit and often actually commit to making Santa Cruz County their new home. Kids are out of school so families also have more flexibility to change schools and more time to explore moving opportunities. The opposite holds true during the winter. Winter is the time to hunker down, enjoy the holidays, and prepare for the new year.
So, when is the best time to buy or sell? Frankly, it’s difficult to say. As a seller, if you look just at the data, July is appealing because of high buyer demand, lower DOM, and the second-highest average price received (despite the 6th highest expected in an appreciating market). April is also appealing due to increasing demand after winter, a significant decrease in DOM over the previous month, and the 3rd highest average price received (despite the 9th highest expected price). As a buyer, the data suggests that the start of the new year is the best time to buy when there are minimal buyers in the market and homes go, on average, cheaper than any other time of year. Minimal inventory does have its drawbacks, mainly being that you are less likely to find your “perfect home”.
Past performance does not guarantee future performance. Rather than trying to time the market within the year, I’d argue it’s much better to analyze the market holistically year-over-year. If you do that, you’ll realize that prices are climbing rapidly, there has been massive appreciation compared to last year, and the fundamentals are there to project that the appreciation will continue. At what pace? We’ll see. The best approach is: Analyze the market in its current state, understand the fundamentals of supply and demand, and utilize that knowledge to make an informed decision.
Thanks for reading. Please reach out for all your real estate needs.