Yes, The Market Is Changing!

[Dax Nollenberger]

You may have heard that the market is changing. That is particularly true here in Santa Cruz. The fed's interest rate hikes are having their intended effect of slowing the market and decreasing demand. 

March 2022 was a month of records for Santa Cruz real estate. Since then, we realized it was also the peak (at least in the short term). Median and Average Price, Price per/sqft, and Percentage over List Price are all down while New Inventory and Active Inventory are up. The median home price is down 17.2% from it's $1.6M peak in March '22. Meanwhile, price per sq/ft is $884, the lowest since January. The percentage over asking price is 8%, down from an all-time high of 9.8% in April. 

Active and new inventory are up and have been going up, for 6 consecutive months. That by itself tells us very little. Santa Cruz is a seasonal market; inventory goes up as we head toward summer and goes down as we head toward winter. What does tell us something is the new inventory. The best way to determine whether new inventory is seasonal is to compare it to previous years. Unlike other markets with new construction creating year-over-year growth in new inventory, Santa Cruz has stayed relatively flat. When compared to historical averages in new inventory for the month of May, this month was nearly identical to years past. This means that the recent shift in the market is almost exclusively related to how decreasing demand is impacting ACTIVE inventory.

To really determine how much demand has decreased since March, we need to look at months of inventory. Months of inventory for May is 1.8, up 68% from April! This means more available homes for buyers and less competition. While this is all good news for buyers, we still have a ways to go to reach equilibrium (a balanced market is 4-5 months). 

Buyer psychology dictates that as the market goes up, buyers feel the need to jump in before it goes up further. When the market goes down, buyers are frozen into inaction. 

If buyers are willing to take the plunge, they'll realize they have more leverage and less competition than there has been in 2+ years.  

Reach out if you have any questions!