THE PERFECT (HOUSING) STORM
With all the troubles we have had with Mother Nature in the past year, it is being suggested by some that the four seasons be recognized in California as Fire Season, Earthquake Season, Flood Season—and Spring.
In the midst of all this, we are also seeing a “perfect” storm of a different sort in the housing
market. During what is traditionally the off-season for home sales, we saw prices in Santa Cruz County once again hit all-time highs in January, with the Median reaching $1,110,000 and the Average hitting $1,239,515.
The conditions for this storm are largely being fueled by interest rates dipping below 3% while increasing numbers of buyers with large capital reserves from San Francisco and Silicon Valley learn that they may now be working from home indefinitely, while also realizing that it is cheaper to buy a place over here than what they pay to own or rent where they are.
Correspondingly, recent months have also seen the average time on market drop to as low as 10 days county-wide, with the available housing supply hovering at just over half a month’s worth of inventory. The inventory is further constrained because move-up and move-down buyers in the core 35-50 age group are paralyzed at the prospect of paying higher property taxes unless they move out of state or to a less expensive area of the state.
Adding another twist, Prop 19 will likely create further inequity and higher prices by opening
the door for retirees from out of the area to come buy a place on West Cliff and pay their old tax base, while families who have owned homes there for generations are forced to sell when their kids aren’t able to afford the tax consequences of keeping the property, thanks to
inheritance exemptions being largely eliminated under the new rules.
So, what happens in a housing storm?
Showings get booked solid for several days in 15-minute increments within hours of a listing coming on the MLS, and its Calendly schedule becomes a “hotness” indicator.
Buyers are provided pre-prepared packets of disclosures and reports to sign along with their offer, which could be up against 10-20 others.
In order to be competitive, some buyers submit offers with no contingencies at prices that can run hundreds of thousands of dollars above asking.
Buyers end up committing to a home they have only seen once for as little as 15 minutes in some cases after dark—and with immediate deposits required.
Pre-emptive off-market deals and “dream offers” pressure Sellers to accept terms before their publicly posted deadlines, rendering the normal rules of engagement obsolete.
In short, we are experiencing the logical impacts of the “perfect” combination of factors which brought things to this point, which is indeed perfect for some, but not so perfect for others.
In the meantime, consider this: while we may all be in the same storm, each of us are in different vessels. And the best that some can hope for is to hang on and see what happens in the Spring.