Real Estate San Lorenzo ValleyColumns Real Estate 

Fall Real Estate Update

By M.C. Dwyer

As the bigleaf maple leaves turn yellow and brown, one by one they break loose, spinning and swirling down onto the ground. And so it goes with home prices: we are reminded that what goes up, often comes down.     

In their determined fight against inflation, the Federal Reserve has been putting the brakes on our economy. Based on standard measures, the US is in a recession. This pattern is being repeated across the globe: rising inflation, rising interest rates, slowing economic growth, declining asset values- stocks, currencies, real estate – and rising risks of recession. Experts expect that the Fed will increase interest rates by 0.75% in November, and likely again in December. Mortgage rates already factor this into consideration, but, may also move higher as a result. Mortgage rates are steadily marching higher, reducing many home buyers’ budgets. Housing news is more frightening than a dark, haunted house filled with fiends on Halloween.

Instead of fearing lurking monsters, looming larger than life in dark cobwebbed corners, let’s pull back the curtain and shine light on these fears.    We knew that home price appreciation of 20% a year wasn’t sustainable. We knew that 3% mortgage rates were the lowest in generations. Even though today’s 7% mortgage rates are the highest in 20 years, many have forgotten that historically, 8% was considered a reasonable mortgage rate. As a direct result of mortgage rates more than doubling so far this year, SLV home sales slowed to a rate of 14 so far in October (at press deadline) versus 39 for the exact same period in October 2021.

Many people incorrectly link recessions to falling home prices. We all remember the Great Recession of 2007-2009, when around ten million people lost their homes. Yes, home prices fell drastically (around 30%) then. Most experts think this won’t happen again now, because ever since then, it’s been much harder to qualify for a mortgage. Yes, average home prices in the SLV so far this October are +/-5% lower compared to 2021.    But home prices don’t necessarily decline during recessions. The best illustration I found is the S&P/Case-Shiller CA-San Francisco Home Price Index, which you can find at        

The chart above depicts the annual returns of the U.S. National, 10-City Composite and 20-City Composite Home Price Indices. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, recorded a 13.0% annual gain in August 2022. The 10-City and 20-City Composites reported year-over-year increases of 12.1% and 13.1%, respectively.

Housing markets cycle between price appreciation and depreciation. Since 2009, we’ve had an extraordinarily long appreciation cycle.  It was well past time to adjust. The market swings like a pendulum: one side favoring home sellers, in the center a balanced market, and on the other side favoring home buyers. But the pendulum analogy doesn’t work over time. Unlike a pendulum, the amount of time spent on one side or the other is uneven.   

As you can see from the growth in that index – from 50 in 1987 to 325 in July 2022, home price appreciation builds cumulatively over time.     Looking back a generation or two, the home prices our parents and our grandparents paid seem ridiculously small in today’s dollars.  Home prices of $25,000 were common back in the 1970s when the average salary was around $10,000 a year.   Now the US average salary is $54000; much of that increase is due to inflation. Real estate provides a hedge against inflation. Those $25,000 homes are worth half a million to a million dollars or more now. Consider the magnitude of 1970s homeowners’ gains, if they invested a down payment of 10% or 20%. Plus, along the way, many people qualify for tax benefits from mortgages.     

Homes are a unique investment class because they provide shelter – a universal need. Regardless of prices, people must spend money on shelter – either rent or a mortgage. Renters unfortunately face continually rising rents, whereas fixed-rate mortgages allow homeowners to control the majority of their housing costs.     

Regardless of the economy, people’s shelter needs change as their lives change:  family formation, growth or divorce, disability or death, job transfer, downsizing, etc. Professional real estate investors remain active in the market regardless of ups and downs. They design strategies for making money in every type of market. Instead of being frozen by fear and following the herd, people can benefit from discussing their housing options with experts.

Over time, studies have shown that homeowners build significantly more wealth than renters. The majority of the time, declines in home values are more than made up for by appreciation within the following 5-7 years. The key is to purchase at a sensible price given your financial circumstances and to keep ample reserves. The satisfaction and stability of home ownership may be intangible, but it’s significant. The sense of “roots” leads people who’ve lost their homes in disasters to want to rebuild in their community if they can, like our own CZU fire survivors.

Santa Cruz County home prices were about 9% higher than in September 2021, while Santa Clara County home prices fell by 5% in September, possibly an indication of our future…

Our CZU Fire Rebuild 

Last week, our contractor and crew added stem walls and rough flooring. The SBA  (Small Business Administration) is reconsidering my husband’s loan application, requesting more documentation, etc. They originally offered him a $2,500 loan, while the shortfall between insurance and rebuild cost is several hundred thousand dollars, thanks to inflation.


“M.C.” (MaryCatherine) Dwyer, MBA, REALTOR® 
CA DRE License 01468388   EXP Realty of California, Inc.
Serving San Lorenzo Valley and Scotts Valley since 2005
(831) 419-9759    E-mail:   Website:

*Sources:, Santa Cruz County Association of REALTORS®, Washington Post, S&P Dow Jones Indices LLC, S&P/Case-Shiller CA-San Francisco Home Price Index [SFXRSA], retrieved from FRED, Federal Reserve Bank of St. Louis;, October 21, 2022, and Santa Cruz County Board of Supervisors

The statements and opinions contained in this article are solely those of the individual author and do not necessarily reflect the positions or opinions of eXp Realty, LLC, or its subsidiaries or affiliates (the “Company”). The Company does not assume any responsibility for, nor does it warrant the accuracy, completeness or quality of the information provided.

Photo by M.C. Dwyer

Photo caption: Boulder Creek 2/bed 1/bath $625,000. Includes permitted deep pier and concrete perimeter foundation and enhanced septic system.

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