New interest rate hikes affect Santa Cruz real estate

On the heels of the Federal Reserve’s first interest rate hike of the year, attention has turned to the housing market and how it may be affected. “Anytime there’s a change in interest rates it always affects the real estate market, up or down,” said Randy Turnquist, a Santa Cruz realtor. “So if they increase rates as much as a half percent, it could take half of the buyers out of the market or certainly knock them down to a much lower purchasing bracket.” According to Realtor.com’s 2017 national housing forecast, there will be a tight inventory of available homes, so buyers won’t have much to choose from. Turnquist says that’s already a problem for first-time homebuyers in Santa Cruz. “Once a buyer gets in, that’s fine. But the struggle to beat an investor who’s usually paying all cash, it’s really tough. So, in that sense, there’s not a lot of inventory. There tends to be a little more comfortable inventory in the 700 to million dollar range, but that’s not the first time buyer market,” said Turnquist. Some of the top housing markets for next year include Phoenix, AZ, Los Angeles/Long Beach/Anaheim in Southern California and Portland, OR. The list does not include any cities on the Central Coast or the Bay Area. There is some good news for sellers in California. The Association of Realtors reports that homes are selling much faster. A process that used to take six to seven months, now happens in two to threee. “Millennials doing everything on their phones and tablets has changed the market,” said Turnquist. “They’re warning sellers that if your home hasn’t been sold and into contract in two or three months, then change your strategy.” Despite the expected interest rate hike by the Fed, Turnquist says he doesn’t expect a huge surge in buyers rushing to buy a home. “Typically sellers take several months to prepare their house for sale and buyers typically start shopping six months to a year in advance, and they may not be ready to jump,” said Turnquist. “But it certainly is a trigger for some people when interest rates threaten to go up. The people who are on the fence threaten to make a move.”