County housing market remains steady as Federal Reserve hikes interest rates

The Santa Cruz County housing market held no surprises in August, with buyers and sellers remaining quite active as summer winds down. However, on Wednesday, the Federal Reserve hiked short-term interest rates by a quarter-percent — a move that many experts and markets predicted ahead of time. While that won’t raise mortgage rates in and of itself, the bond market has started to rise above the 5% mark, which can concern prospective buyers.

“It does put pressure on mortgages because that’s what mortgages are tied to, the long-term rates,” said Monterey Bay Mortgage advisor Scott Goodrich, who explained that the move is likely to affect everything from credit cards and auto loans to home equity lines of credit. “That affects people, and it’s just another borrowing cost that people will have to incur,” he said.

The number of available homes was higher, with 462 available in August compared to 444 in July, according to the latest data from the Santa Cruz County Association of Realtors. Properties sold faster in August than in July, averaging 34 days on the market compared to 46 in July.

In August, 111 sales closed, lower than the 137 that closed in July. The countywide median sales price was roughly the same in August as it was in July, coming in at $1,350,000 and $1,375,000, respectively.

Sereno Group agent Jennifer Watson said that following a mild slowdown in July, business largely picked back up in August, where she expects it to stay through most of the fall. Even though the higher number of available homes often causes a slowdown in sales, Watson said the rising inventory also brings more prospective buyers into the market, which tends to balance the market dynamics.

“If they’re priced well at listing price or just slightly below, they’ll probably still go pretty quickly. But again, it sort of depends on things like location, and bedroom and bathroom count,” she said.

Goodrich said the market continues to show signs of greater balance, although there are still more buyers than sellers. While homes in popular areas go quickly, the number of homes on the market gives buyers more power in their decision-making, as there are more options to explore and, in some areas, fewer buyers per property.

Watson also said that September is likely to be the last month of the year when the county will see noticeably rising inventory rates, because even though October remains largely busy, November is when the county begins to enter a seasonal lull for the winter. This could keep people considering putting their property on the market from doing so, as December through part of February is the slowest time of the year and it could take longer to sell the home.

The way that inflation and mortgage rates play out over the coming months could affect the market as well, said Goodrich. He said that this year was when mortgage rates were expected to dip, potentially even into the 5% range.

“That’s not happening, and there’s no clear indication of when we’re going to start seeing any downtick,” he said, adding that mortgage rates are actually inching closer to the 7% mark. “That psychologically plays on anybody looking to buy a home.”

Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here.