From a 2 bedroom 1,150sf home to a beautiful 4 bedroom 3 bath home in the $2 million range, from Skypark to Deerfield Drive, homes are selling at a feverish pace all over Scotts Valley with prices that are not only record breaking but historical figures that this area has never seen before. In fact, I believe that the past 18 months to the next few months history will tell us that our market was never hotter than the tail end of 2020 though much of 2022.
Homes are coming on the market and before signs go up, offers are already coming in. Buyers and their agents look for any edge to position themselves to be as competitive as possible when the right home, or any home for that matter comes up for sale. As dry as the water drought that we have experienced, the same goes for available homes for sale.
THREE CURRENT EXAMPLES: The following are just a few transactions that I have negotiated for home sellers recently which are record breaking sales prices, and with incredibly favorable terms:
HIGHEST PRICE PER SF IN HISTORY
111 Miraflores Road in Scotts Valley – I listed this 2 bedroom 1,150sf home for $1,189,000 and after a dozen offers, we negotiated and settled on a sales price just under $1.5 million. In fact, the price per square feet upon closing will be the highest ever in the history of Scotts Valley for any house, any square footage. Again, the highest price per square foot EVER, for any house and any square footage. • Click on the following link to view custom website with 3D virtual tour, floorplans, professional photos, video and more at: www.111miraflores.com
HIGHEST SALES PRICE EVER IN SKYPARK
1012 Aviator Court in Scotts Valley – This 3 bedroom home of just over 1,800sf sold at a record breaking price of well over $1.6 million. Previously I had sold two other homes in Skypark at record prices of $1.4 million last year, and those record breaking sales raised eyebrows. But this one really sets the tone for Skypark and will have reverberations throughout town. • Click on the following link to view custom website with 3D virtual tour, floorplans, professional photos, video and more at: www.1012aviator.com
ALMOST $400,000 OVER ASKING
556 Hacienda Drive in Scotts Valley – This beautiful 4 bedroom 3 bath home with an attached 2 bedroom studio had buyers coming from all over the Bay Area just to experience the redwood trees that stared at you from almost every room in the house. Such a special home. We were able to negotiate a price of almost $400,000 over the asking price along with favorable terms for my sellers. • Click on the following link to view custom website with 3D virtual tour, floorplans, professional photos, video and more at: www.556hacienda.com
The above are just a few current examples of what is taking place, and what we have been able to negotiate. As of this writing, I am in contract with a client to purchase a property in the Deerfield Drive neighborhood for well over $2 million. The highest sales price ever recorded prior to this sale was $1,860,000 which was a record for a beautiful home at 22 Deerfield Drive that I listed and sold just a few months ago.
Are These Homes Worth What People Are Paying For Them?
In spite of homes selling at these record breaking prices, appraisers are also taking note of this market and valuations are coming in at sales price for every transaction I have been involved in as they see the feverish pace that homes are selling at along with the amount of offers that they are getting. Typically, in normal markets, appraisals are a bit more stringent. But in my opinion, appraisers today are being realistic and are reading the market and market trends appropriately. I actually think they are doing a great job.
Important note: In the above scenarios and in almost all scenarios, I am able to negotiate a “no appraisal contingency” which means that if the home does not appraise, the buyers will still pay the sales price and will just have to make up the difference in cash between appraised value and agreed upon price. You can’t offer my clients a much higher than asking price offer and then say “only if it appraises” will you buy it. This is why I negotiate this safety net for my sellers.
But as mentioned, I have not yet had an appraisal issue. I say this as I am knocking on wood. And at the end of the day, a home is worth what a willing buyer and willing seller agree to with neither being under duress to buy or sell.
Mortgage Rates Are Up – How Does That Factor in the Equation?
Interest rates have rapidly gone up, over 1% in the past 45 days, but many of today’s buyers aren’t too concerned.
“To put this into perspective, the interest rate hike that we have seen has affected a $1 million mortgage by about $620 per month in higher payment” said Brian Dean of CrossCountry Mortgage, whom is one of my most trusted mortgage sources. “That means that buyer’s buying power has decreased by about $135,000 based on the higher rates of today versus where they were not too long ago.”
But the issue is that many home buyers are coming from Silicon Valley loaded with stock options and other wealth after selling their homes at incredibly high prices and are putting such a large downpayment that a hike in rates does not really matter much. Many buyers are coming with all cash which means interest rate hikes have zero bearing on their ability to buy a home.
The average sales price year-to-date in Cupertino and Sunnyvale is $2,702,261 where homes are selling for just under $500,000 above asking price on average.
In Scotts Valley, in the same time frame, homes are selling on average at a $1,937,640 and averaging $76,162 over asking price. So while our market is experiencing quite a jump in values and activity, it pales in comparison to what sellers are getting in Silicon Valley and many of those sellers are coming to this area with lots of buying power coming from both equity after the sale of their homes along with stock options from many years working in hi-tech.
The above paragraph is not minimizing our area or local buyers in any way, it is more to explain what is happening along with why and how it is happening.
Where Are These Buyers Coming From?
When I have open houses, I ask buyers what brings them to Scotts Valley and along with a search for better schools and better quality of life, they are also being told by their HR department to check out Scotts Valley as it offers a lot more bang for their buck.
I have stated this numerous times over the past couple of years, but it still rings true and that is that our area has gone through a major market correction upwards rather than downwards. Our area has been undervalued for decades in my opinion and it has been discovered. We now have Target coming along with Faultline Brewing Company and other eateries looking to open up business here, along with Humble Sea Brewing Company and Beer Thirty coming into our neighboring city of Felton. Not to mention SalesForce coming to 1440 with thousands of employees visiting at different times, these employees will take notice of this area.
So with the pandemic making working from home the norm for many companies and their employees, many continue to come to be close to the beach, hiking and biking trails, great schools and the lowest crime rate in the county.
These events and happenings have indeed created a higher demand and contributed to the higher prices of today.
Where Are The Houses?
But the problem is, there is very little inventory. And that in itself is also driving prices upwards because the buyers are still here, but there is not much to buy.
To put it in perspective, year-to-date (as of the writing of this article) there have been a total of 25 single family home closings and 6 condos and townhouses. At the same time last year we had 40 single family home closings and 14 condo – townhouse closings.
These figures are very telling. That is a whopping 43% less closings this year versus last year at the same time. Not because homes are not selling, but because there is very little to sell.
Bottom line, buyers are thirsting for inventory and willing to pay to get their foot in the door.
Much of the reason why inventory is so sparse is because of the tax consequences that home sellers have in capital gains taxes, in addition to some of the changes in tax laws a few years ago which limits the amount of property taxes that homeowners can write off on their owner-occupied homes. Unless of course they are 55 or over where they can transfer that tax base to a new property anywhere in California.
But aside from the tax consequences of selling, many sellers are fearful of putting their homes on the market because there is nothing for them to buy. The fear is real and valid. If they sell their home with multiple offers, they will laugh now but cry later when they become home buyers competing with other home buyers for their next home. In fact, there is now a section on MLS and the listing agreement that allows sellers to condition the sale of their home subject to them finding a replacement property. It is being done more often and it is a way to safeguard against selling and not having a home after they close escrow.
As of this writing, I have not had a situation where a home seller has sold a home and did not have another home waiting, but I have heard it happen to other sellers and I have had that safety clause in place when taking a listing even though I have not had to use it.
Click here to read: “The 5 Most AFFORDABLE and Easy Fixes To Get Your Home Ready To Sell”
Getting Out of California
Because of the above scenario, many are cashing out and buying out of state as competition is not as fierce and homes are not as expensive in other states as they are in this area and the Bay Area. From Idaho, to Arizona, Utah, Texas, Oregon and other areas, buyers coming from California have steadily increased through the years and I see the trend continuing for some time.
It makes sense to many to sell their home here and cash out, while purchasing an even bigger home with no mortgage as the retirement years take place, or a slower and easier quality of life is the hope and the dream.
At the end of the day, I see this trend continuing for quite some time. Last year when the year started I predicted that we would see the hottest market ever in Scotts Valley and in fact we saw a 20% appreciation. That was and is mind-blowing.
Earlier this year I predicted a “maybe 8-12%” appreciation, but I could be wrong and we may see it come in higher than that by the end of the year. Will it hit 20%? Normally I would say no as we cannot continue to sustain a price appreciation at that rate year over year. But maybe the price correction I spoke of earlier is still taking place. Or maybe it will taper off and we will begin to see a more manageable appreciation rate.
The truth is, I am scratching my head because this time I don’t know. Only time will tell where we go for the rest of the year but I see it continuing much in the same way it has went this first quarter so far. We are seeing some price gains that could set the tone from this point forward.
If you are needing or wanting to sell, your market is right here and right now. As we get closer to the end of May you will see it taper off as graduations and vacations take precedence over looking for homes. Come July through August we will see a slight cooling down until people come back from their summer vacations and get back into the market.
Remember, we live in an area where there is so much to do during great weather seasons. From beaches, to mountains, hiking and biking, the outdoors calls and locals along with visitors always answer that call. This is why we are affected more than other areas during the hot weather because there is just so much to do.
But regardless, I do believe that where we end up in terms of an average price this year will be the “new” new norm. And as long as Silicon Valley is rolling, so will we. As I always say, we are like barnacles on a whale with the whale being Silicon Valley. As the whale goes, we go.
As always, Happy Selling and Happy Buying!
Robert Aldana
REALTOR® since 1986
DRE # 00921165
Keller Williams Realty
831-252-3959 Direct Line
[email protected]
www.robertaldana.com
ABOUT ROB: Robert Aldana is a 35+ year licensed real estate veteran with Keller Williams Realty, and also a long-term resident and homeowner in Scotts Valley.
Robert is the agent chosen by more Scotts Valley area home sellers and buyers than any agent or team, and has been awarded the Santa Cruz Sentinel Readers Choice Award as the Best REALTOR® in Scotts Valley for four straight years. Robert is also the ALL-TIME leading real estate agent in Scotts Valley sales, and most recommended agent in the NextDoor online community.
Read the over 60 “Five Star” reviews at www.robertaldana.com/testimonials