Inventory & Daisy Chains

If it seems like there have been more new real estate signs popping up in your neighborhood than usual, it’s not your imagination. Historically, our inventory tends to fall off at the end of Summer here, as it did last year when the number of houses on the market dropped by 5.3% between August and September, but this year has been a notable exception.

A look at the statistics confirms the number of listings has indeed jumped, with the current count at 567 Active listings on the MLS as of this writing, which is up by 25% in the 3 weeks since the monthly statistics were posted showing that there were 444 homes on the market at the end of July. 

The increase in our local inventory is consistent with the statistics from the National Association of Realtors from across the country in the face of rising interest rates, but while listings are stagnating in other markets, our inventory is moving here in Santa Cruz County, with 144 listings on the MLS under contract, representing a healthy percentage of our listings going into escrow.

Headlines report that the AI boom is driving real estate values in the Greater Bay Area to new heights, and activity for the upper end of our market—125 homes listed for $ 2 Million or higher—has surged as well with 17 under contract, which indicates there is a strong supply of buyers, but we aren’t seeing all of these transactions being funded by tech buyers flush with AI cash.

While some of these are indeed cash purchases, we have seen a trend emerging of offers being made by people who are selling their current home to buy up, which is likely contributing to the overall rise in number of listings, since for these deals to happen it requires twice the number of sales to get the first house to sell. This adds more complexity to the transaction, since there are twice as many moving parts, and twice as many things that can go sideways, which keeps us on our toes managing it all.

When you get an offer contingent on the sale of another home, it requires an additional layer of scrutiny on the terms under which they are able to tie up your listing, and extra safeguards need to be added to avoid a “daisy chain” effect where the buyer for your listing are relying on the buyer for their property selling their home, and so on.

It will be interesting to see whether the majority of these contracts stay together with all the additional moving parts, and our market will be able to hold as long as there continues to be a steady stream of entry-level buyers in order for all these escrows to be able to close on the high end homes that have been going into contract relying on someone else’s home selling.