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Santa Cruz's Disappearing Market: Where did the entry-level market go???

I'll make the argument that the entry-level market has disappeared. Gone are the days when young couples would buy their first condo, accumulate equity, and then move up into their first single family home.

According to the WSJ,  the "number of first-time home buyers [has fallen] to lowest level in three decades." The last time we saw first-time homebuyers represent a 32% share of the marketplace it was 1987.  Historically, this figure has averaged around 40%.

The biggest obstacles noted by would-be first time homebuyers are saving for a down payment and high student loan debt.  Santa Cruz's rapidly increasing rental rates have only compounded the issue; higher rents have made it more difficult to save.

Further aggravating the issue is the non-existent price difference between a condo and a home.

Yup, you heard me right. The gap in price between a condo and a home is almost non-existent.

Within Santa Cruz city boundaries the two lowest priced active homes are listed at $575,000 and $599,000. Both are two bedroom homes, under 1000 square feet in size. The lowest priced two bedroom condo is listed for $549,000. However, with the condo's $380 HOA fee, the monthly cost to own the condo is essentially the same as the single family home.

170 Everson Dr is a condo listed for $549,000. 
315 Button St has been on the market for 136 days. Listed for $599,000
Now, on one hand, I can see some readers jumping up and down for joy. This is good news.  Why buy a condo when you can have a house for the same price?!

On the other hand, the affordability factor (or lack of it) is alarming.

If you have the typical 20% down payment saved up ($120,000) and $0 debt, you would need a household income of about $100,000 to purchase a $599,000 property. The median household income for Santa Cruz is currently $62,755.

With property values rising so quickly, the entry-level market has essentially disappeared. Condos and townhomes alike have risen drastically in value. Their prices are competing with that of single family homes.

(On a side note, this is GREAT news for condo/townhome owners who bought when the units were still at entry-level market prices.)

Affordable Options are available

Santa Cruz City currently has Measure O in place, a voter-approved initiative to require developers to designate a certain number of new units as affordable housing units.  Recently, developer Bill Brooks had 2 units set aside in the new Delaveaga Park Home development on Sunny Ln in Prospect Heights.  There was a wait list of about 20 parties who were interested in purchasing an affordable housing unit. Likewise, the County has a similar initiative in place- Measure J.

2 Measure O homes sold for $393,451 while the other market rate homes sold for $735,000+

Angel and I are passionate about housing and have had great success working with buyers of all different incomes and budgets. Whether it's your first purchase or you're 10th, we hope you will contact us to see how we can find an affordable option that meets your lifestyle needs.

Aimee Thayer-Garcia is a Real Estate Broker Associate at Bailey Properties. She is Top-Producing Agent and practices Real Estate full time with her husband, Angel Garcia. Mom of 3.  831-435-9146.