Interest rates driving the market this year
As we wrap up the third quarter of 2023, let's dive into the latest updates on the Santa Cruz County real estate market. One of the most talked-about topics and factors driving the market this year has been interest rates, and they have indeed seen some significant fluctuations.
The 30-year mortgage rate stands at around 7.5% today, representing a steady increase from the 3.5% rate at the beginning of the year. This upward trajectory has been a notable trend in 2023, with rates gradually climbing due to adjustments in the broader economic landscape. Compared to the last several years, where rates remained historically low, the current rate is higher, signaling a shift in the market dynamics that buyers and sellers need to navigate carefully.
Comparing this year's rates to the previous several years, we've witnessed a remarkable shift. We've never seen rates double in such a short timeframe. Despite these fluctuations, the median sales price remained relatively stable, with only minor fluctuations. This might come as a surprise to some, given the interest rate rollercoaster we've been on.
Low inventory balances a dip in buyer demand
However, one factor contributing to the market's stability is the historically low inventory of homes for sale. This scarcity can be attributed to the fact that a significant portion of American homeowners are enjoying incredibly low interest rates, with around a quarter having rates at 3% or lower, and a substantial 62% below 4%. It's almost like golden handcuffs, making homeowners less inclined to sell.
In September, we observed homes taking longer to sell, at an average of 37 days up from 28 in August. This resulted in decreased overall sales and an increase in the months of inventory available.
On average, homes were selling 3% below their asking price, compared to selling at the asking price in August. The median sales price held steady at $1,200,000 for three out of the last four months. Interestingly, there were fewer price reductions, which suggests that sellers are holding their ground and waiting for the right buyers.
So, what does all this mean for buyers and sellers?
Sellers should adjust their expectations and practice patience. Gone are the days when homes were selling for more than the neighbors' did the previous month, as we saw during the "unicorn years" of 2020 through early 2022. Offering incentives to buyers, such as assistance with closing costs or rate buy-downs, could set your property apart in the current landscape. Make no mistake; the market still predominantly favors sellers.
For buyers, it might not feel like it, but now is a favorable time to make a move. While interest rates are relatively high, home prices have remained relatively flat. Additionally, reduced competition means fewer bidding wars and price escalations, while some sellers are becoming more flexible and open to concessions.
In summary, remember to "date the rate and marry the house." Interest rates can be refinanced, but your purchase price and taxes are more difficult to adjust. It's a dynamic market, and navigating it requires a keen understanding of the current conditions, so don't hesitate to reach out if you have any questions or are ready to make your move in Santa Cruz County's real estate market.
There are still incredible opportunities out there for buyers and sellers. Lets put a strategy together for your goals.