Late Summer Housing Market Update

By M.C. Dwyer

As we move toward the end of summer, the housing market is showing resilience and adaptability. After peaking at 7.8% last fall, 30 year fixed mortgage rates fell dramatically. Lower inflation and softer national employment figures have led the Federal Reserve to hint at a potential rate decrease as early as September. While the Fed doesn’t directly set mortgage rates, their statements greatly influence the bond market, where investors quickly priced in a 75% chance of a September rate cut: this in turn affects mortgage pricing. At the time of this writing mortgage rates have eased to about 6.5%, providing a welcome boost to homebuyers’ purchasing power. To put it in perspective, each 1% drop in rates on a $500,000 loan can reduce the monthly principal and interest payments by about 10 percent.   

Local Housing Market Insights

In the Santa Cruz Mountains, home owners and buyers face unique challenges, including recent insurance constraints: California Fair Plan is essentially the only viable choice. We’ve helped our clients significantly reduce their insurance costs by recommending working closely with their agents. But these higher insurance costs reduce affordability, particularly for first time buyers. However, this environment has attracted a number of investors back into the market for two reasons: they often purchase homes with cash, and benefit from a stronger rental market when home ownership is less affordable.

The local market is showing remarkable strength. In July, 30 homes sold across the San Lorenzo Valley (SLV) with an average sales price of $980,000 – at 100% of the list price. This represents a 58% increase in the number of sales and a 14% increase in prices compared to last year. Although  Boulder Creek turned in an unusually low five sales, the majority of sales were in Ben Lomond and Lompico/Zayante. Homes spent an average of 28 days on the market. Similarly, 12 homes sold in Scotts Valley at an average 100% of list price and an average sales price of $1,792,000. Scotts Valley’s average home sold in 3 weeks, while the number of sales was 33% higher than last year, with prices up 14%. These strong results are likely due to the increased inventory of homes for sale this summer, coupled with the fact that our prices remain relatively affordable compared to the San Francisco Bay Areas.      

However, it’s worth noting that not all homes are selling at their original asking prices. In SLV, about 40% of the 86 homes that are still on the market had reduced asking prices as of the end of July. Similarly, roughly 33% of the Scotts Valley homes still on the market had reduced prices.

Across Santa Cruz County, the average home took 28 days to sell in July with prices down about 7% compared to last year, though the number of sales actually grew by 2%. In contrast, Santa Clara County continues to thrive, with homes selling in just 2 weeks on average, and prices rising  by 9% to $2,286,000. Sales in Santa Clara were 33% higher than last year.

BIG CHANGES in the Home Purchase and Sale Process

August brought significant changes to the home buying and selling process nationwide, following a settlement by the National Association of REALTORs®. This altered the way commissions are handled, particularly buyer agent compensation. While California disclosure forms have long been clear, many states’ disclosures lagged, leading to class action lawsuits from buyers who claimed they were unaware of who paid their agents’ commissions and that all commissions are negotiable.   

Now, buyers will be asked to sign forms before entering open houses, and they must enter into compensation agreements with their agents prior to touring homes. This agreement will determine how their agent is paid if the seller does not offer full compensation. It’s now up to buyers’ agents to negotiate their compensation with both buyer and seller.    

Previously, the practice of publishing seller offered commissions in the MLS provided transparency, but this is no longer the case. Now REALTOR®s need to inquire with each listing agent about the sellers’ compensation offer, and get buyers to sign disclosures detailing all compensation offers before showing homes. While some industry observers believe this will lower housing costs, I’m skeptical. Buying a home is one of the most significant and complex financial decisions most people will ever make. Professional representation is crucial in navigating the process, negotiating, avoiding costly mistakes, and ensuring a smooth transaction. 

Listing Spotlight

Here’s a charming example of what’s available in the mid $600,000 range in Boulder Creek.   

Photos by f8 Real Estate Media

This quintessential knotty pine cabin is nestled on a spacious .37 acre lot at the end of the street, featuring a circular driveway. The property boasts around 50 majestic redwood trees, forming several enchanting fairy rings.

Owned by the same family for generations, this retreat is just ¼ mile from the beautiful Boulder Creek Golf Course. Here, you can enjoy the benefits of rural living without the hefty HOA fees associated with nearby golf course condos.     

This home features a unique bar handcrafted by the sellers’ father. Another period feature is a circular metal fireplace; plus propane central heating. The well-maintained yard, regularly visited by turkeys and deer, backs onto a serene meadow of a much larger property, adding to the feeling of spaciousness and relaxation. Most upgrades are permitted, which is rather rare in this price range. There’s plenty of usable outdoor space to add a garage, park large vehicles or toys, host BBQs, or simply enjoy the beautiful Santa Cruz Mountains.

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