The largest fires in California this year maybe housing prices in key areas. With record amounts of snowfall and large downpours our drought maybe fixed for a while and forest fires may retreat for a year, yet the spring housing market will take it’s place. Here in Santa Cruz there are a lot of reasons for the coming home price scorcher I see blowing our way.

There are a few factors that drive housing prices and rental prices to rise so steeply.

The great resignation of landlords.

For rentals it is the lack of them, a few years ago there was a push to pass rent control in the city of Santa Cruz. This caused a large amount of mom-and-pop rental owners to sell as they did not want to be caught in a very punitive rental market, where even selling the home to leave the rental market would be very difficult. There were a lot of other scary rules so many of the landlords quit. Then Covid hit and landlords were having take rent cuts or no rent at all due to the pandemic and as soon as the tenants left another round of landlords quit. Then those homes turned into single family dwellings again being sold to tech, out of towners (who can be investors as well yet the homes sit vacant) and UCSC families. I did a quick survey of 12 home sales from Oct-Nov 2021, and found most buyers were of professions with incomes that can withstand the increasing prices. Only one property looked as though it maybe rented out and it was in an industrial area with very little curb appeal. This could push people who would rather rent into the housing market as well.

Reading through so many housing predictions only one real estate site had it half right on why buyers will buy and pay premiums.  Redfin housing market predictions stated a myriad of reasons buyers will buy and where but as usual try to apply broad national statistics to the real estate market and miss the mark because real estate is local.

As they state in their countdown, #7 home buyers will take climate risks seriously and in #8 Housing policy will become central to political battles about climate change, possibly I am not arguing this. but they missed is in high priced areas buyers that worry and believe climate change is happening are moving to areas where they feel better in the environment. They state the price of insurance and other levies caused by natural disasters will have an effect. We live where there are floods, fires, Tsunamis and earthquakes I do not believe it will curb demand as I have not seen it. 

With that I there will be a rise in prices predicting a rise of 2.9% in the next year. Last year in the 95060 we saw a rise of 18.8% with 28 homes for sale per’s monthly report, needless to say our increase will not be 2.9% and will definitely be closer 5%-11%.  I found in the same survey of 12 homes in Oct-Nov all 12 of the homes sold for over list price except the one in the industrial area. Zillow matched my 11% prediction and I think they have the right numbers.

I do believe more home sellers will jump in this year and one large factor is they know interest rates are going to rise it is a given as inflation is pushing down the door and raising the rate should help. Basically when interest rates are increased, consumers tend to save because returns from savings are higher. With less disposable income being spent, the economy slows and inflation decreases. Raising interest rates may cool things down, we will see…

The other reasons we may see more inventory is a lot of sellers have a wait and see approach. "We are considering selling but let us see how much longer it goes on" "not ready yet, to much insecurity in the world"  this can lead sellers to hold off, but I believe now we may see the ones who feel it is now or never for higher prices. In my experience I have never had a seller go I wish I sold at different time usually it is when it is best for them personally, yet the interest rate hikes will most likely spur more action.

Sellers may struggle still with moving as the areas Californians tend to move to are going up in price too, this could spur more sellers selling to move quick or keep them in place.

The continual construction in my neighborhood will probably never stop, with me upgrading too. Renovation is seen now as a more affordable alternative to moving or it is fixing the compromise made when buying. A home that needs work is very common in Santa Cruz we have a lot of older housing that a lot of time is only half of the upgrades are done at time of sale.

Bottom Line:

Buyers: there may be just a bit more to choose from there will still be multiple offers but maybe not as many on EVERY house.

Sellers: this is your year, figure out your selling strategy and shoot for the first half of the year for surer home sale results.

Posted by Michele Replogle on


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