Of Bulls and Horses
We are currently seeing a dramatic surge in activity unlike anything I have experienced in my 28 years of selling real estate in Santa Cruz, marked by irrational price increases and large numbers of all-cash buyers competing for any inventory they can find. In short, our once stable housing market is starting to resemble something more like the running of the bulls in Pamplona.
Oddly enough, this manic cycle was triggered in large part by the pandemic, where our community emerged as the preferred location for working from home by the economic juggernaut that is Silicon Valley, fanned by additional factors like a 30% rise in the stock market.
Santa Cruz County’s median housing price hit the $1,000,000 mark for the first time last July, and hasn’t looked back since. It has been hovering at around $1.1 Million for the past several months, but in recent weeks we have seen an explosion in overbids that is likely to show yet another quantum leap when the numbers come out for April. How big a leap remains to be seen, but judging by current activity, we could easily be looking at an additional 20% rise, and I’m not so sure it’s coming back down.
A home came on the market last week for $1,295,000 on the East Side, where a quick look at MLS activity for its price segment in the region showed 7 listings in escrow, with verbal confirmation that at least one of them went for $300K more, or a full 24% above its asking price. A review of closings for this segment showed 7 homes had sold in the past month, with average sale prices exceeding their list prices by 14.3%, and the maximum overbids closing at $405K (29%), $330K (22.1%), and $321K (22.3%) above list price. According to the listing agent they are headed well over the $1.7 Million mark.
Another relatively nondescript home in nearby Live Oak was priced at $999,000 and attracted 31 offers, with 13 of them all cash. It is rumored to be under contract at $1.8 Million (that’s more than 80% over list price) with a raft of other bids around the $1.6 Million mark. The alarming part, if you are a buyer, is that the other 12 all-cash parties who didn’t get this property are still roaming the streets actively looking. On the other hand, if you’ve been thinking a bout selling, now would be a pretty good time.
The market has entered a surreal state, where the list price has been rendered almost irrelevant, and where finding out the prices of comparable properties under contract has become an integral part of the research process, both for agents advising their clients on where they likely need to come in, as well as appraisers astute enough to realize that last month’s closed transactions are out of touch with today’s values. And in order to save everyone time and grief, listing agents are becoming increasingly transparent about where terms need to be in order to screen out all but the most serious bidders.
And in the meantime, to paraphrase Bukowski, the prices continue to run away like wild horses over the hills.