Santa Cruz real estate outlook 2019

Around this time of year, people start asking what the next year holds for real estate.    Let’s face it – if I had a crystal ball I probably wouldn’t be working any more.    Still, having worked through some peaks and troughs in this industry, and being a constant observer of not only our local market but also the national economy, here’s an outline of some trends.

This chart illustrates the number of homes for sale and the monthly number of homes sold in Santa Cruz County during 2018.santa_cruz_county_sfd_sales_over_time_2019-01-11

Sales – the number of sales is falling as a new trend emerges in home ownership.    On average, people used to stay in their home for about 7 years.    The average has recently extended dramatically to 10 years or longer.     This puts a constraint on the number of homes available for sale.    Meanwhile, the millennial generation – a large demographic – will soon begin turning 30: traditionally a prime age for household formation and home buying.

Interest rates – Mortgage rates rose nearly 1 percent over the past year, putting a pinch especially on first time buyers as their prospective monthly payments rose by as much as 10 percent given the complication of higher home prices too.      Most recently the Federal Reserve sounded like they may not continue to raise interest rates as aggressively as they’d been thinking of doing earlier this year.   On that news, mortgage rates immediately softened from 5% back down to about 4.6% now.    Still, forecasters say if there are any more signs of economic strength, that could cause the Fed to push rates up another ½% over the next six to twelve months, with the first ¼% increase as soon as this month.

Delinquencies – I watch this indicator carefully because rising delinquencies back in 2007 eventually set off the last financial crisis leading to the great recession where real estate prices dropped precipitously.     Recent mortgage delinquencies remain at a ten year low, attributable to stricter loan underwriting requirements, higher down payments, and home price appreciation.    CoreLogic measured August delinquencies at 4%, down from 4.6% last year.   They expect delinquencies to continue to fall due to national home price appreciation, but note some risk in overvalued metros like San Jose, should job growth falter.


The above chart illustrates Santa Cruz County Home Prices over the past 5 years

Prices – after years of double digit growth, we might be in for a healthy period of leveling off.    Normal long term real estate appreciation rates are around the inflation rate, so prices may rise 3-5% give or take.      There have been plenty of price reductions on the multiple listing service lately, but some of that is because those sellers were overly optimistic and initially listed their properties at too high of a price.      Just recently I’ve heard of a few companies issuing layoffs, so the steamy pressure spilling over into the San Lorenzo Valley from the Silicon Valley just might cool down.   On the other hand, with tens of thousands of homes recently lost due to wildfires, and continued job and population growth throughout the SF Bay Area, new homes simply aren’t being built fast enough to meet demand.

Bear Creek Road November 2012
Santa Cruz Mountains

I originally wrote this article in December for the Santa Cruz Mountain Bulletin.    Here is a link to an article I just read, that corroborates my outlook (always a good feeling!).

Here are major economists’ price forecasts for California as mentioned in that article:

California Association of REALTORS +3.1%

Chapman University                               +3.1%



Regardless of the macro or micro economy, each individual’s circumstances are unique.    Let’s meet to review your situation and see what works best for you.


Whenever you have real estate questions,    just text or call MC at (831) 419-9759, or,

Minolta DSC
Photo Credit John Urwin

e-mail me at

I’d love to help you buy or sell your home. Your home is your castle; I’ll treat you like royalty!

Click here to look at homes for sale or sign up for your own custom home alert.




Santa Cruz real estate market update: year end 2018

Santa Cruz, Scotts Valley and San Lorenzo Valley

Real estate market update: 4th Quarter 2018



Just as I reported in the 3rd quarter, the 4th quarter trend reflected continued price softening.     After consecutive years of double digit price appreciation, I consider this softening healthy for the overall housing market, although it is certainly disconcerting to home sellers.    Real estate is cyclical; the last trough in prices was nearly ten years ago in about 2009.    No one wants a repeat of the “great recession;” a soft landing is preferable.

As you look at the price chart, remember some of these micro markets (unincorporated areas like Lompico and Brookdale) have so few home sales, that percentage changes aren’t statistically significant and average prices can be dramatically skewed when one of the few sales exceed a million dollars.    It’s more useful to look at the San Lorenzo Valley as a whole, where prices rose about 9 percent over the 4th quarter of last year.    Scotts Valley rose in tandem with Santa Clara County at 13% and 14% respectively, while Santa Cruz County as a whole rose 7% for the year.   Nationally, home prices appreciated just over 5% in 2018.



These charts illustrate housing inventory over the past three years.   Around six months housing inventory is considered balanced between buyers and sellers.   Some sellers take their homes off the market over the holidays and relist them in spring, creating seasonal lows every January.   But these graphs show that each region is experiencing a continuing inventory shortage that is beyond just that seasonal pattern.     So, listing a home for sale early this year might mean beating the competition when the normal rush of sellers list their homes in late spring.

At the time of this writing, San Lorenzo Valley had only 40 single family homes for sale (down from 80 last quarter but similar to the beginning of 2018).     Scotts Valley has 24 homes,  (down from 32 last quarter), while Santa Cruz, despite having four times the population of Scotts Valley, has just 38 single family homes for sale, (down from 68 last quarter).


As widely expected, the cost to borrow went up again in December as the Federal Reserve steered the economy by increasing Fed rates to 2.5%.   Economic growth as measured by GDP fell to 3.4% in the 3rd quarter (4.2% in the 2nd quarter of 2018).    Consumer price increases (inflation) fell to about 2.2% (from as high as 2.9% in July 2018).    The unemployment rate declined to a very low 3.7% nationwide.    Wages still haven’t increased as much as workers would hope, but are up around 4.5 – 5% this year.

Concerns of a global economic slowdown, combined with these mostly softer US numbers, may lead the Federal Reserve to slow down the rate of future interest rate increases.     The yield curve (which charts the yield of T-Bills through 30 year treasury bonds) has been threatening to invert, which is often a precursor of a recession.   As a result, the rate on 30 year mortgages has fallen from almost 5% back to 4.6% as of 1/4/19.    Click here to see today’s 30 year fixed rate mortgages rates,


With an average single family home price of $1 million to $1.5 million across the Bay Area, affordability concerns continue to push people who work in the Silicon Valley to seek affordable housing anywhere within about an hour’s commute.    The San Lorenzo Valley continues to sparkle with some of the most attractive prices anywhere in the greater bay area and about a 45 minute to 1 hour commute to most major employers (Apple, Alphabet (Google), Facebook, Netflix…).    For those who prefer a small city, Scotts Valley offers a quick commute, followed by Santa Cruz with its great beaches, shopping, night life  and other amenities.


The average Santa Cruz home cost of $1.1 million could buy for example, a picturesque restored Victorian 3 bed 2 bath near downtown, or, a 2 bedroom lower westside home with a legal accessory dwelling unit midway between Mission and West Cliff.     The Scotts Valley average home price of $1.3 million could buy a 4 bedroom, 3 ½ bath 15 year old home near the high school, or for a more rural experience, a 3,000 square foot 1980’s home plus guest house on 3 acres a few miles from town.   The San Lorenzo Valley average home price of $685,000 could buy for example a 3 bed/2 bath home built in 2000 on about an acre about 2 miles outside of Boulder Creek, or a 2 bed/2 bath with a small studio built in the 1970’s on about 2/10 acre in Felton.


In contrast to Santa Clara County homes, which sold on average within the first month of being listed, San Lorenzo Valley homes take on average 60 days to sell: some will sell within the first week or two, while others will take longer than a couple of months to find a buyer.     At 39-40 days, Scotts Valley and Santa Cruz city homes typically took 10 days longer than a Silicon Valley home to sell.    Across the board, homes took about a week longer to sell in the 4th quarter of 2018 than they did in the 4th quarter of 2017.


People from the Silicon Valley are enchanted to discover Santa Cruz County: parks for hiking, climbing, horseback riding, mountain biking, and skateboarding.    There are dozens of beaches, from popular to serene, walk-in to hike-in.   The Santa Cruz lifestyle is informal: we cherish our slower pace.   With 1/3 the population density of Santa Clara County, there’s more room to spread out in Santa Cruz County, and consequently lower stress and crime rates.    (Just 440 people/square mile live here, compared to 1400 people/square mile living in Santa Clara County.)   Many people say they enjoy driving through the mountains to work, versus sitting in traffic and spending a lot more money to live in Santa Clara County.

CURIOUS WHAT YOUR HOME IS WORTH?   Visit  for a quick and easy estimate!    If you’re thinking of selling, I’ll help you evaluate cost effective ways to make your home appeal to the most buyers.    My customized marketing plan is exceptional: contact me to discover why I have so many repeat clients like these.

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REAL ESTATE MARKETS ARE LOCAL   The advice of a knowledgeable local REALTOR®, who can intelligently discuss neighborhoods and price trends, is invaluable.  Hire a REALTOR® you can trust, who has enough time to dedicate to you!    I will help you untangle the maze of decisions, preparations, negotiations, inspections, title and disclosures as you buy or sell your home.    Relocating? – I can also connect you to a trust-worthy REALTOR® wherever you’re going.   My goal is to make the entire process easier to understand, less stressful, and as cost effective as possible for you.

Minolta DSC
Photo Credit John Urwin

Whenever you have real estate questions,    just text or call MC at (831) 419-9759, or, e-mail me at

I’d love to help you buy or sell your home. Your home is your castle; I’ll treat you like royalty!

Click here to look at homes for sale or sign up for your own custom home alert.



Sources:, Reuters,,, Mercury News, CoreLogic, FreddieMac,     Month to month home sales prices fluctuate widely in small communities and cities, especially when property sales range between million dollar estates and fixer upper properties.   Because of this, percentage and average price changes often aren’t statistically meaningful for short time intervals.      *All stats as of January 2, 2019: single family residences.