A lot has changed since we greeted 2023, with much of it having to do with the historic interest rate hikes that were imposed to slow inflation. And yet here we are in a town where inflation remains part of our daily life with $22 sandwiches and $17 drinks, and mandatory tipping has become a way to keep the hired help housed and fed out of necessity.
Unfortunately for agents, there is no tipping in real estate, so the declines in both activity and sales prices have led to many taking a serious cut in their income, which has driven some to the point where they are starting to seek other employment options as earnings from home sales dropped to their lowest level since 2016.
December saw the Median price for a home in Santa Cruz County fall to $1,050,000, down 7.6% from the prior December to its lowest level since November 2020, and down 22.3% from last year’s peak of $1,352,000 that was reached in May. Our number of sales also dropped, to 1,197 homes, down 19.1% from 2022, and down 46.7% from the 5-year peak that was reached in 2021, when 2,088 homes were sold.
For a glimpse of what lies in store, we traditionally look at statistics of supply and demand to provide some indication. With inventory constrained at 200 homes on the market in December, despite the slow rate of sales it translated to a very light 2.5-month supply, which is a positive trend from the 3.8 months of inventory we saw in November. Based on historic correlation this puts an upward pressure on prices for the coming months.
As evidenced by the low Median and the high number of homes that were pulled off the market in the past two months, December may end up in infamy as Santa Cruz County’s darkest hour for home sales in recent years. In contrast to this, based the combination of low inventory we are seeing and the significant rate cuts that the Fed has announced for the first half of 2024, I am advising agents and sellers alike to hold the line and not lose hope.
Strategic recommendations on price and timing remain specific to each project, based on the segment of relevant comps used during analysis. However, it is likely we will see an increase in overall inventory as conditions heat back up this Spring with the anticipated interest rate adjustments.
This means that in certain cases it could make sense for sellers who recently decided to pull their homes off in despair to put them back on the market for a fresh chance at selling before the rate decreases go into effect and inventory starts to climb again.
As for where things stand in a year, that remains to be seen, but based on these initial indications, it appears that brighter days lie ahead.
