Hot real estate market in Santa Cruz County expected to level off
Slowing demand from the San Jose area expected to effect Santa Cruz area home prices
September 12, 2016
by Maggie Barr, Keller Williams Santa Cruz
The summer heat might be dying down in Santa Cruz County but real estate prices are still hot in the residential market. When the Sales-Price-to-List-Price ratio is above 100% as it was in August that means buyers on average are paying more than asking price for the homes they are buying. This usually happens when there are more buyers and sellers, and buyers are competing with each other to find a house. Often in a hot market like the one we are experiencing now there are multiple offers for a single home meaning an informal bidding war occurs and the highest offers win.
Homes are Selling Fast
Days-on-Market on average will also go down as the market heats up because listings will be snapped up quickly. Average days-on-market in August of 2015 was 38 days, and in August of this year it was slightly higher, 46. But that is still substantially lower than the slower winter season when day-on-market was 59 in February. Compared to last year the market isn't quite as hot, but buyer exuberance is still very high. Homes in August are selling on average in 34 days. Homes priced properly are selling in two weeks.
Silicon Valley Jobs Impact Home Prices
As a rule of thumb when there are more jobs added to the San Jose area job market then there are jobs removed the net effect on home prices in San Jose is an increase. New employees moving into the Silicon Valley area are often experiencing sticker shock if they're coming from the Midwest, South, or other more affordable markets in the country. While an average 2-bedroom home in Texas with 1500 sqft. costs $350,000, an average 2-bedroom home in San Jose costs $950,000. Event with Silicon Valley incomes that's hard for a family to afford. Many families are discovering nicer homes, quieter neighborhoods, and much lower prices in Santa Cruz, Felton, and Boulder Creek. A 1500 sqft. home in Santa Cruz County cost $755,000 on average, or 20% less than in San Jose. But the increase in jobs in San Jose results in higher prices in Santa Cruz County due to the overflow demand.
Fall Market Expectations
Because many families prefer to shop for a home in the summer months when kids are out of school, the fall and winter markets in Santa Cruz County tend to be slower. A high Sales-t-list ratio on average is common because sellers are pricing their homes at summer prices when there are fewer buyers in the market to serve. And Days-on-market tends to go up in the fall and winter for the same reason. When there are just as many buyers as there are sellers, or more sellers than buyers, prices tend to even out.
If employers in Silicon Valley reduce the number of net new jobs they add overall, home price increase will come to an end for the fall buying season. Presidential elections often cause a slowdown in the financial markets and hiring trends because corporations are unsure how their business will be affected by policy changes of a new administration. This it is likely that prices will level out or decrease in San Jose and Santa Cruz Counties over the next 6 months.