Did the recent weather fool anyone else into thinking summer had arrived in Santa Cruz County? Well, the weather cooled just as quickly as it heated up and activity in the local housing market in January is a sound reminder that it is (alas) still winter.
While everyone groggily emerged from the holidays and contemplated our gym memberships and awkward Christmas presents given to us by the dog (we know you had help wrapping the frisbee you gave us), nothing truly remarkable happened in local real estate in January, but there are still some things to take note of and think about for the year ahead.
The median sales price of single family homes has been one of the hottest topics in the market over the last year - and rightfully so as it has far exceeded where the market was in 2006 before the crash - so lets start there. In January the median price in Santa Cruz County dropped six percent to $787,000. You are probably thinking, "but Liz, that IS remarkable!" The thing is in ten out of the last twelve years January reported a dip in median price compared to December. This dip in median sales price averages eight percent. So, don't get to excited about prices dropping just yet.
Buyers and Sellers may wish to take note of this annual trend for the year(s) ahead. As a Buyer entering into contract on a home at the end of the year may save you money. Sellers, this obviously isn't such great news for you. Before you start planning ahead for 2018, lets remember that interest rates are on the rise - something I'll touch on later in this post.
New listings of single family homes jumped 49% with 121 coming to the Multiple Listing Service (MLS) in Santa Cruz County in January. This is five percent more than in January of 2017. If you recall in my last market update I wrote that "despite December's new inventory being lower [than November], more listings came to the marked in both Q3 and Q4 of 2017 than in 2016." So maybe, just maybe, 2018 will continue to see a gradual uptick in inventory. Again, don't go getting too excited just yet about there being more listings compared to December. In thirteen of the last thirteen years January reported an increase in inventory compared to December with an average increase of 44%.
When you put annual inventory trends into a graph it looks like this (something I like to call this the Camel Back Chart Of Inventory):
Other Noteworthy Statistics From January:
- Homes took an average of 56 days to accept an offer compared to 45 days in December and 52 days in January 2017.
- 44% of homes reduced their price before selling in January compared to 33% in December and 31% in January 2017.
- They sold for an average of 0.95% below the asking price compared to 1.08% below in December and 1.1% below in January 2017.
- There is currently 1.14 months of inventory for sale. This means if no new homes are listed for sale the existing inventory will be sold in roughly that amount of time.
Fannie Mae, Freddie Mac, the National Association of Realtors and other industry experts have all dusted off their crystal balls and shared their predictions for 2018 and where they expect mortgage interest rates will be by the 4th quarter.
Some consumers are thinking "yeah yeah, they said this last year and rates didn't increase much". This time around, however, individual predictions for the year ending rates range from 4.1% (Fannie Mae) to a shocking 4.9% (Freddie Mac and the Mortgage Bankers Association) for 30 year fixed rate loans.
Obviously they're not cleaning their crystal balls with the same stuff.
Shashank Shekhar of Arcus Lending does an excellent job of explaining all of this in his recent article: Mortgage Interest Rate Prediction for 2018.
Over the last year, home prices across the country have continued to rise and inventory of homes available for sale fell dangerously low. Oddly enough, despite these hurdles, most Americans continue to hold a rosy outlook on the housing economy. Sentiments may fluctuate over the next few months as buyers and sellers sort out the implications of the newly passed tax laws on their household finances and interest rates continue to rise.