As the Scotts Valley real estate market continues its cooling off compared to earlier this year and versus the past couple of years, there are some signs that this area could be experiencing more of a correction than housing market tumble. In many ways, the market appears to be headed into more of a normal market.
For example, as we have seen the real estate market continue to break records in sales prices in the area earlier in the year, there always has to be a price point that home buyers can no longer afford and some buyers refuse to pay. The combination of rising prices, higher interest rates and what I like to call “buyer fatigue” has indeed taken its toll on the local market as well as the housing market in general. And with Silicon Valley housing prices cooling somewhat, many of the buyers coming to Scotts Valley from over the hill have decided to stay closer to where they work as they are now in positions to negotiate with home sellers and multiple offers although still present, are not as present as in the recent past.
The fact that Silicon Valley buyers can negotiate and maybe stay over the hill has made quite a difference on demand in the Scotts Valley market as that flow of home buyers has been squeezed out considerably. For the time being.
So is this becoming more of a normal market? It’s too early to say with certainty. Although it is no doubt not as hot as earlier this year and the past 3 years, we are seeing a little bit of an upwards tick in activity. More on that later.
- Watch my special VIDEO report on why the market cooled this year and what to expect by clicking here.
So to see where we are, let’s look at the numbers.
The September and October market this year cooled off considerably from May and June closings which generally is one of the most active and hottest times for home sellers as homes that sold in March through mid-May tend to close in May and June. Nothing new there. Closings in May and June for single family home were a total of 45 closings with an average days on market (DOM) of 45 days. The average sales price was 101.7% of asking price on average. So homes that closed in that time frame averaged above asking price.
But in September and October of this year that sales price to list price ratio has come down to 98.2% of asking price which is a 3.5% swing in that statistic. With the average list price in September and October being $1,249,617, that is a swing of $43,737 lower in what buyers were willing to pay versus asking price compared to May and June of this year. That is a big difference.
But is it indicative of a housing market correction or are we starting to see more of a shift towards a normal housing market?
Consider this: if you look at the stats above you will see that last year (2017), closings in September and October had an average sales price to list price ratio of 99.4% which is 1.2% higher than this year. But remember, last year was a very hot market, one of the hottest Scotts Valley has ever seen. But not as hot as this year in May and June as closings in 2017 within those two months had an average sales price to list price ratio of 100.7% which is a full 1% lower than this year at the same time. The gap this year is wider than last year.
But when you see homes selling on average for 98.2% of asking price, how does that compare to history? Pretty close actually.
5 YEARS AGO
I went back 5 years and saw that homes were closing in September and October in 2013 (which was when the market was already taking off after the huge housing market collapse of 2006-2009) and stats showed that homes were selling at a sales price to list price ratio of, get this, 98.2% which is exactly what this year did. The difference, other than higher sales prices is that homes averaged 57 days on the market which is actually higher than this year at the same time which averaged 53 days on the market. Not much of a difference, but still a difference.
15 YEARS AGO
So I went back again and this time went back to 2003 which was 15 years ago. Normal market, nothing crazy, maybe even a warm market. But nothing too out of the ordinary. In that year, September and October closings averages a sales price to list price ratio of 98.5% of asking price which is just .3% difference. Not 3%, but .3%. But what is even more telling is the days on market 15 years ago in Scotts Valley was 73 days which by today’s standards is considered very high, except that people have a short memory and home sellers have been spoiled for several years now as they put their homes on the market and already had multiple offers before the sign even went up.
BECOMING MORE OF THE NORM
I get the feeling we are veering more into a normal market. I really do. Want to know why?
Back in 2003 much of the real estate activity was locally driven. People in Skypark moved up to the Vineyards. People in the Vineyards moved to Monte Fiore. People in Monte Fiore moved to Skypark or bought a condo or townhouse on Bean Creek. The point is, people were moving and selling their homes, but they were not really moving out of Scotts Valley. They were moving within Scotts Valley as they enjoyed this city and other than the fact that they had outgrown their home or were empty nesters, they had no other reason to move. And there was not this huge rush from Silicon Valley buyers.
What I am seeing is a lot of this type of activity once again. Gone are a lot of the buyers that were coming in droves from Silicon Valley and many of today’s home buyers and sellers are staying here and either just moving up or moving down. There is a continued demand for homes in Scotts Valley, just not at the pace as it once was as the demand is coming from within more and more.
ADJUSTMENT WAS NEEDED
Is this a good thing or bad thing? I think that prices needed to calm down. When people get maxed out and stretched out beyond their comfort zone is when you have issues and collapses as buyers and lenders get creative with different types of lender financing that many times is short term. But today’s buyers are smarter and I think that most learned a very valuable lesson from the toxic loans of the previous decade. Today’s buyers are in mortgages that are fixed, mostly 30 year fixed and with payments that are more affordable. That is the difference in this correction versus the housing crash of last decade.
As I write this on October 6th, 2018, there are a total of 58 single family homes in the Scotts Valley area. But get this, 26% of these homes are now pending which is not the sizzling 36% that I reported in June of this year. But it is actually 6% higher then it was just about 10 days ago and given the amount of homes that have come on the market recently, that is a noticeable uptick.
Townhouses and condos on the market are 18 of them with 7 being the new development off of Enterprise Way. Without those, there are 11 resale townhouses and condos. Surprisingly, only one of those is under contract, being 45 Appaloosa Court which is a listing that I put on the market that is closing soon above asking price. Click here to see more info on that property.
I say surprisingly because most of the time townhouses and condos are one of the hottest commodities in the Scotts Valley real estate market. But unless you price it right and have a strong marketing plan, it will sit right now.
SELLER & BUYER TIPS
If you are a seller, the blazing hot market where you put any price on your home and it still sold over asking is no longer here. Be real with your price point and utilize a powerful marketing plan. This is not the time to go cheap with marketing and exposure.
If you are a buyer, there are some good deals out there. You can afford to be picky. You can negotiate. Your time is here so try and get in while the market has cooled and rates are still below 5% as they are expected to surpass the 5% range in 2019. And remember, always think long term when buying and financing.
As always, happy selling and happy buying!
REALTOR® since 1986
DRE # 00921165
Keller Williams Realty
831-252-3959 Direct Line
ABOUT ROB: Robert Aldana is a 32+ year licensed real estate veteran with Keller Williams Realty, and also a long-term resident and homeowner here in town. He is the founder of MyScottsValley.com and the popular local news and events page at Facebook.com/MyScottsValley.
Robert was also a nationally syndicated real estate journalist and was a highly sought after interviewee on the topic of real estate by local, national and even international media, in addition to being featured on HGTV and also NBC’s “Best of the Bay”.
In 2015, 2016, 2017, and 2018 Robert has been the agent chosen by more Scotts Valley area home sellers and buyers than any agent or team, and Robert was recently awarded the Santa Cruz Sentinel Readers Choice Award as the Best REALTOR® in Scotts Valley for 2016 and again in 2017. Robert was also voted 2017 Favorite Neighborhood Real Estate Agent in Scotts Valley in the first NextDoor Fav Business Awards by local residents.