It wasn’t supposed to happen until 2022. That’s what they said after it all went south, anyway. We weren’t supposed to see home prices like we’d been seeing for 15, 16 years – well it just goes to show what “they” know, doesn’t it? The big news in the Santa Cruz Real Estate Update April 2016 is that the median home price in Santa Cruz county has now exceeded the prior all-time high set in November 2005.
With just three complete months of home sales data under our belts in 2016, two months this year have already beaten the prior all-time high of $789,500. The median price for single-family homes in Santa Cruz county in February 2016 was $794,500 – and it was $790,000 in March 2016.
For those of you who can still vividly recall the bad-old days of 2005-2007, you may remember the debate surrounding the froth of the housing market. Irrational exuberance, housing bubble, any of that ring a bell?
Now that we’ve exceeded these prior high prices, shouldn’t we be asking ourselves if we’re in an asset price bubble once again? Anyone? Bueller?
Are housing prices too high in California, the Bay Area, in Santa Cruz? Yes, yes, and yes. Will they go down? Yes. Will they go back up again? Yes. Have they been too high for a long time? Yes. Is there a solution to high housing prices? Yes.
There’s a quick fix for high housing prices – we’ll have it in a year or two or three, or whenever the next recession hits. Prices will go down. 10, 20%. More? Maybe, but probably not, or not much. How do I know? I don’t, but a 20% drop in home prices is pretty large by historical measures. But then, prices will go back up again, as they have done since time immemorial. One day, that’ll stop too, if for no other reason than the sun finally explodes and the Earth is no more. Nothing lasts forever.
If you’re looking for long-term housing cost relief in a shorter time frame, you’ll either have to leave the area or vote for politicians who support more aggressive home building. Simply put, there is nowhere near enough supply to meet demand.
I’m looking at you, city of Santa Cruz. Blame the University all you want to bringing all those students to town. I lay the feet at the blame of the voters. Why are students living in single family housing? Shouldn’t they be renting small apartments, and shouldn’t single families be living in single family housing? Imagine what would happen to housing availability – and home prices – if there were say suddenly 1,000 apartment units available for students to rent?
Of course, nobody can imagine such a thing happening. This is Santa Cruz, after all. The idea of adding more, smaller housing units is anathema to the town. We’ve made our bed, and we’re going to lie in it.