Here is a summary of San Lorenzo Valley, Los Gatos Mountains, Scotts Valley and Santa Cruz home prices.

PRICES   Average single family home prices in Santa Cruz County rose about 1% during the second quarter of 2016, following an increase of about 10% during the first quarter.     Some communities and price brackets remain “hot” with multiple buyers pursuing a limited number of homes.     The San Lorenzo Valley continues to be one of the most affordable regions in Santa Cruz County, with home prices at about 66% of the county average.

INVENTORY    The main issue facing the market is still too few homes for sale.    San Lorenzo Valley only has 49 single family homes for sale (versus 48 at the end of the 1^st quarter).    Scotts Valley: 46 (41).   Los Gatos Mountains, 26 (29).    In contrast, the City of Santa Cruz has nearly twice the number of listings right now at 43 (26).

DAYS ON THE MARKET Santa Cruz County homes are on the market for about 25 to 32 days on average now before going into escrow with a buyer.  Well priced and particularly the most affordable homes are still selling quickly with multiple offers, but some upper middle to higher end listings are lingering on the market.   I believe part of this is because home prices are less affordable now for many entry level buyers.   It’s the entry level buyer that in many cases triggers current home owners’ ability  to buy a larger or better home, so it’s an inevitable chain reaction in my opinion.       Santa Cruz County now has 396 homes for sale in (compared to only 288 homes in the first quarter).

SILICON VALLEY Santa Cruz County is influenced by real estate conditions in the Silicon Valley.    In Santa Clara County, single family homes started 2015 at a median sales price of about $850,000…rising to about $945,000 by December 2015.   By March 2016, the average sales price was $1.38 million, holding relatively steadily through the end of July.

SANTA CRUZ COUNTY’S APPEAL Besides the obvious appeal of our relatively lower home prices, many people from the Silicon Valley are enchanted by our beaches, numerous state parks, smaller cities and towns … The Santa Cruz lifestyle also conveys benefits like lower stress, crime rates and smog. I often hear people say they would rather commute through the mountains than sit in traffic and spend more money to live “over the hill.”       Right now I’m working with a first time home buyer who works “over there”, an investor who’d rather not pay rent for their UCSC-bound post-grad student, and some retirees who simply love it here.       The sellers I’m currently working with are retiring to mountains and lakes elsewhere.

TECHNICAL ANALYSIS – IS SANTA CRUZ COUNTY APPROACHING A REAL ESTATE BUBBLE?

Real estate typically moves in about 7-10 year cycles.    Here, we started to see appreciation around 2011, after the low in 2009.     Analysts are looking carefully at metro areas across the country to see if there are any bubble conditions yet.    Some of the factors that lead to bubbles include price appreciation that’s faster than wages and rents: San Jose and San Francisco arguably fall in this category.    On the other hand, mortgages have been difficult to obtain during this cycle, and renting is very expensive, so my feeling is the likelihood of default is pretty low.   Finally, population and jobs are growing faster than the rate of new construction throughout the Bay Area.     My hope is that this cycle functions more normally, moving toward price stability.   That’s how I interpret Santa Clara and Santa Cruz County home price comparisons between the first and second quarters this year.

The two sets of charts below illustrate this bit of a pause in the market right now:   A normal market, balanced between buyers and sellers, has about 6 months’ worth of housing inventory.   Santa Cruz County had about 2 ½ months of inventory at the beginning of the year.     Right now, there is about 3 ¾ months of inventory county wide, still in favor of sellers.    You can also see this is one of the factors that drove prices upward.  Now that there are more homes to choose from, prices are a bit subdued.     If this trend continues, it may increasingly favor home buyers.

Next, you can see a correlation between months of inventory (a measure of supply and demand), and prices:

Next: Santa Cruz County real estate price trends so far this year:

REAL ESTATE MARKETS ARE HYPER LOCAL!   Nothing can replace the advice of a local and knowledgeable REALTOR® who can show you the specific trends in your neighborhood market and your specific price range.   Different communities and different price brackets definitely do not move in tandem. The question of how much a buyer should offer, or what price a seller should list at, takes in-depth research and knowledge!   Buyers or sellers should choose a REALTOR®who knows the inventory well and can knowledgeably compare a home’s asking price to other recent home sales.    I believe the best way to serve both my buyers and sellers is by consistently touring properties, talking to other agents, and tracking the final sales prices.

INTEREST RATES Given the weakness in the global economy, compounded by the uncertainty of “Brexit,” many think the Federal Reserve will pause and let the market absorb their first increase in interest rates in a decade last December.    Right now the market is expecting at most one more increase this year.   Most buyers are still able to get mortgage rates in the high 3% to low 4% range, depending on personal factors.

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*Statistically, these communities had too few home sales for the percentage changes to be meaningful.

Sources:  MLSListings.com (Single Family Residences), Reuters, Inman News, REALTOR.org, ActiveRain.com, Mercury News