By Datta Khalsa, Broker
I feel a twinge any time I use a surf reference, ever since Huntington Beach bropropriated our title as Surf City USA, but when talking about housing market cycles it’s hard not to use the obvious metaphor.
The consensus nationwide is that the real estate market has indeed peaked and that we are
headed into a recession. A few weeks ago, the yield curve between the 2-year and 10-year
treasury bond inverted, which traditionally precedes a downturn, and once we see a second consecutive drop in the GDP at the end of Q2 it will be official.
Inflation and interest rates are on the rise, and across the state we are starting to see both Days on Market and housing inventory starting to creep up, but in a submarket like Santa Cruz County there can be some surprising outliers to the national trends.
Countywide, our home prices hit their all-time high in March, when the Median clocked in at a staggering $1,612,500, a few months after our inventory hit its all-time low of 94 in December at a time when homes were selling at over twice the rate they were coming on the market. What we are seeing now is a return to a more manageable—and frankly sane—market.
The impact of the Feds raising interest rates has made a noticeable change on the numbers of offers since that peak, with residential listings often seeing their offer review dates come and go with just a few buyers competing compared to the numbers we were seeing before.
Inventory has remained relatively tight as some people have opted against selling as they face the prospect of not only their property taxes but also their monthly mortgage payments
increasing if they were to move. And in a related twist, the increased rates have driven many first-time homebuyers back into the ranks of tenants vying for an already diminished inventory which has continued to push rents upward.
A quick look at the MLS today shows 395 homes on the market, compared to 211 last month, and 343 last May, which is certainly an uptick, but that’s partly seasonal. And some sectors such as the luxury beach market continue to see price increases, fueled largely by Silicon Valley buyers willing to pay top dollar for premium properties even as the stock market shows signs of softening.
The last time we went into a recession, prices in our county went only down incrementally
compared to elsewhere, and there are some who speculate that we may not see a price drop at all since our median home price is still about a half million dollars less than it is in San Francisco. Ultimately, our local inventory levels will tell the outcome, and in the meantime we will continue to navigate the peaks and troughs along the way.