Santa Cruz- 2022 First Half Review

[Dax Nollenberger]

From all-time real estate highs to a significant regression and fears of a recession, what a wild year 2022 has been. The market has certainly changed the past six months. In my latest Dax’s Data (reach out for blog link complete with charts or google BrezsnyAssociates/blog), I dove into the changes so far in 2022 and came across some unforeseen nuggets that may help predict the next 6 months.

The market peaked in March when the median home price for Santa Cruz County SFH hit $1.6M. June '22 was $1.325M, 17.18% lower than the year's high. At face value, this indicates a significant dip in our market but zooming out provides perspective. March was an outlier. The jump from February to March was the third largest jump in a month since 2010. Historically, major jumps like this are either preceded or succeeded by consecutive months of decreasing pricing. In this case, the downward price trend succeeded the March high.

Active listings have been on a continuous climb since January. That, by itself, is expected as Santa Cruz is a seasonal market. The pace of increased active listings is not expected. Interest rates have had a significant impact on demand in our market and that has been reflected in the price-to-list ratio dropping close to 100% after hitting nearly 110% in April. The decrease in demand is also evident in the months of inventory. 2.1 months of inventory is the highest since May of 2020.

The decrease in demand is understandable after you dive into the impact that interest rates have on the overall cost. On a million-dollar loan, an interest rate increase of 1% adds $558 to the monthly payment and $200,921 in additional interest cost over the life of the loan. A 2% increase adds $1152 to the monthly payment and $414,783 in additional interest cost over the life of the loan. That is what occurred in a matter of months.

The increase in interest rates does not explain the decrease in new listings. At 207 new listings, June ’22 had the lowest number of new listings for June in 12+ years. This is noteworthy because it means that not only are there fewer buyers in the market, there are fewer sellers. For the homeowners that weren’t incentivized to sell when we were experiencing the greatest sellers’ market ever, they certainly aren’t motivated to sell now. The potential residual impact is TBD. It’s certainly something to keep an eye on.

If you’d like to read my whole blog report, are in need of a Santa Cruz Realtor, or have any questions about Santa Cruz real estate, please reach out!