For the past few years, local real estate agents have seen a drastic dip in the inventory of homes in Santa Cruz County. And with the ongoing pandemic and recent wildfires that destroyed close to 1,000 homes in the Santa Cruz Mountains, the market is tighter than ever before.
By summer 2020, it was clear that real estate was one industry that was busier than ever despite Covid-19. The market boomed, with prices skyrocketing due to increased demand.
According to Santa Cruz County Association of Realtors (SCCAR) data, in February 2021 there were 225 single family residences listed available. Of these, 124 were sold, at an average of 39 days on the market. Comparatively in February 2020, only 87 of 283 single family homes were sold, at an average of 73 days on the market.
For homebuyers, especially those looking for loans and insurance, it’s been a major challenge.
“We are at an all-time low inventory, and recent disasters have exacerbated everything,” said SCCAR President Pete Cullen. “It’s a super competitive market out there. I recently had a client who put in an offer with eight other offers … they couldn’t get it. Sometimes something will go on the market and get bought within a week.”
Cullen described what he’s been seeing with his clients as “buyer fatigue.” Homebuyers are getting frustrated going through the process of putting in offers over and over again and not getting the house, he said.
“I think buyer agents themselves are feeling it too,” Cullen said. “As a listing agent you’re in a good position, but for buyer agents it’s been exhausting.”
Guidelines for showing homes have also changed during the pandemic, leading to more challenges for buyers and agents. There are now constraints on how many people can view a home at once, and in what way. As such, people have been depending on smartphone apps and online resources.
Both Cullen and real estate agent Renee Mello of Keller Williams Realty said they have noticed an increase in cash sales recently. Mello, who focuses a good deal in South County, said the Adult Village area of Watsonville has seen an influx of cash buyers.
Many of these people, she said, were fleeing the Santa Cruz Mountains after the CZU Lighting Complex fire last summer. Many could not rebuild, others just decided against it and looked to safer, less disaster-prone areas.
“People were going and getting cashed out on their homes in the fire area, coming into Watsonville with all-cash offers,” she said. “Between the fires, the possibility of rainstorms, not having power … a lot of them are thinking, ‘I am so done with Boulder Creek living.’’”
Added Cullen: “It was traumatic for them. They don’t want to be there anymore. We’re definitely seeing this movement from mountain communities to urban areas … and that contributes to the competition.”
It has also been making it difficult for people who want, or need to purchase with a loan, Mello said. In February 2021, the average sale price of a single family residence in Watsonville was about $645,000. For those who want to purchase a home through a loan, they might be out of the question if another bidder is able to offer that amount in cash.
The inaccessibility of insurance, Mello said, is another big issue that is bringing more and more people away from areas with heightened risk. Fire insurance and general homeowners insurance is extremely hard to come by—companies want to collect, taking large monthly premiums, but they don’t want to pay out, she said.
“I’ve heard that of everyone who is insured in California, people who have been affected by fires are a small percentage. And yet, the insurance companies keep raising their rates,” she said. “Something is wrong there.”
But it’s not all bad news, Mello said. Thankfully, unlike nearby Silicon Valley, Santa Cruz County has not removed contingency periods—that is, a time for prospect buyers to do a thorough investigation of a property’s condition.
“Removing that puts the buyer at risk,” she explained. “You have every right to know about the state of a house before you commit to it.”
Cullen said that the most important thing for prospective homebuyers is to get help from professionals they fully trust.
“It’s vital that buyers work with a realtor, with someone who is experienced, who knows the market, who will write a good offer,” he said. “In general, you should have a good relationship with them. That can make a big difference.”
