As we step into fall, the once red-hot housing market in Santa Cruz County is cooling down, echoing the broader U.S. trends. However, this doesn’t mean the market is collapsing—it’s stabilizing. With price reductions becoming more common and homes spending longer on the market, we’re seeing a noticeable shift from the seller’s market frenzy that characterized the last few years.
So, what’s really happening in Santa Cruz County’s real estate landscape, and what does it mean for buyers and sellers? Let’s dig in.
Key Market Data (August 2024):
- New Listings: 205 (down from 223 in July 2024)
- Under Contract: 134 (no change from last month)
- Total Homes Sold: 133 (up from 126 in July)
- Median Sale Price: $1,300,000 (down from $1,365,000 in July)
- Days on Market: 30 (up from 28 last month)
- Sold Above Asking: 37% (similar to last year)
- Sale to List Price Ratio: 97.70% (down from 98.58% last month)
- Months of Inventory: 2.99 (slightly up from 2.89 in July)
- Price Reductions: 30% (up from 18% last month)
- Expired Listings: 13
- Cancelled Listings: 26
Price Cuts Signal a Cooling Market
Nationwide, Realtor.com has reported that 19.3% of homes saw price cuts in August—the most in five years. Santa Cruz County mirrors this trend, with 30% of homes seeing price reductions in August 2024. This is a significant leap from just 18% the month before.
What’s driving this? Sellers are starting to lose patience as their homes sit longer on the market, and they’re adjusting their prices to meet buyers where they are. The combination of high mortgage rates, economic uncertainty, and buyer hesitancy has led to a market where overpricing no longer flies.
Insight: For sellers, this means that strategic pricing from day one is more important than ever. Listing your home at an inflated price in hopes of catching a high offer is increasingly unlikely to work. Buyers have more negotiating power now than they’ve had in years.
Days on Market Increase, Offering Buyers Breathing Room
In the first half of 2024, many homes across the U.S. flew off the market within weeks. However, as the Santa Cruz County market cools, homes are now sitting on the market for an average of 30 days, compared to 28 days last year. Nationally, homes are sitting on the market for about 53 days, meaning Santa Cruz remains a competitive area, but the days of bidding wars within hours of listing are fading.
Buyers now have the luxury of time to explore options and negotiate, as homes no longer vanish the moment they’re listed. This is a dramatic change from the height of the pandemic when buyers were forced to make quick decisions and often offer far above asking to secure a deal.
Insight: For buyers, this cooling market presents a golden opportunity. With homes sitting longer and price reductions rising, buyers can be more selective and take their time crafting offers. However, expect to pay close to asking price—while negotiations are possible, Santa Cruz County is still competitive.
Mortgage Rates Drop, But Is It Enough?
In some hopeful news for buyers, mortgage rates have dipped slightly to 6.35%, the lowest rate in over a year. While this might not seem like a significant drop, every bit helps in a high-priced market like Santa Cruz County, where even a small change in rates can affect affordability. In Santa Cruz County, a 0.25% rate drop on a $1.3 million home can increase purchasing power by about $35,000, while a 0.5% drop can boost it by roughly $71,000, making even slight reductions impactful in this high-priced market.
Yet, it’s essential to keep expectations grounded. As Realtor.com’s chief economist Sam Khater said, the market has been waiting for a shift in rates for months, but a meaningful drop that spurs buyer activity may still be a ways off.
Insight: Buyers should be watching mortgage rates closely, but not pinning all their hopes on a major drop in the near future. Instead, focus on improving your personal financial situation—boosting your credit score or saving for a larger down payment can make a bigger impact than waiting for rates to drop another fraction of a percent.
Inventory Levels Rise, But Remain Tight
Inventory levels in Santa Cruz County are creeping up, but not enough to fully alleviate the supply-demand imbalance. August saw 2.99 months of inventory, compared to 2.22 months at the same time last year. This is good news for buyers who have been starved for options, but it’s still a tight market overall.
With slightly more homes available, the urgency to make offers on the first home you see has lessened. However, Santa Cruz’s desirability as a coastal market means inventory will likely remain low for the foreseeable future.
Insight: Sellers should still expect to sell their homes, but patience is key. Price realistically, market strategically, and be prepared for homes to stay on the market longer than you’re used to.
A Shifting Landscape: What Does This Mean for Buyers and Sellers?
For Buyers:
The Santa Cruz market is finally offering a little breathing room. More homes are available, price cuts are up, and mortgage rates have dipped slightly. But buyers need to remain strategic. Instead of waiting for a dramatic drop in prices or rates, it’s wise to shop around for mortgage deals, strengthen your financial profile, and focus on realistic expectations.
This might not be the time for bargain hunting, but it is the time for negotiation. Many sellers are pricing high, expecting the quick sales they saw in 2022, but as the market cools, they’re more open to offers below asking. Use the longer days on market to your advantage and negotiate with confidence.
For Sellers:
The time of listing your home on Thursday and accepting offers by Sunday may be behind us, but Santa Cruz County is still an in-demand market. Realistically pricing your home from the start will attract the right buyers without the need for price reductions down the road.
It’s also essential to be patient. Homes are staying on the market for longer, and buyers have more time to make decisions. This doesn’t mean your home won’t sell—it simply means you’ll need to adjust your expectations to match the market’s new normal.
Looking Ahead:
Santa Cruz County is undergoing a market recalibration, and that’s not a bad thing. The market is shifting from a seller-dominated landscape to a more balanced environment where buyers and sellers can meet on more even ground.
This rebalancing was inevitable. The sharp rise in home prices over the past few years, coupled with increasing mortgage rates, made it difficult for many buyers to compete. Now, with more listings, slower sales, and price reductions becoming more frequent, the market is gradually returning to a more sustainable pace.
Final Thought:
The days of frenzied buying and selling may be over, but Santa Cruz County remains one of the most desirable housing markets in California. As we head into the fall and winter months, expect continued stabilization, with more balanced opportunities for buyers and sellers alike.
