Prices of single-family homes in Santa Cruz County, Calif., soared to new records in May as the number of sales shrank.
The median price, the midpoint of what sold during the month, was $875,000, topping the previous high of $830,000 in April, according to Gary Gangnes of Real Options Realty, who tracks the numbers.
The average price, which tends to be higher than the median because of expensive oceanfront homes, reached a record $982,670.
Just 126 homes sold, down 23 percent from a year ago, repeating a pattern from March and April. Sales are nearly down to post-crash levels of 2011.
Listings are down by half compared to 2011 when many distressed properties were for sale. Of May's active listings, 51 percent are asking more than $1 million.
"A jump of $45,000 in one month seems to indicate a spike," Gangnes said, but he also noted the "unsold inventory index," which shows how long it would take to deplete the inventory of homes for sale at the current sales rate has been below normal for more than five years, pressuring values upward.
Paul Bailey, co-owner of Bailey Properties, who's spent more than 40 years in real estate, said he would not be surprised if the median price reaches $1 million in three years.
There aren't enough homes for sale to meet demand.
That's partly due to lack of construction but also due to baby boomer homeowners reluctant to sell and downsize to a smaller nest.
For a couple whose home is worth over $500,000 more than when they bought it — a realistic scenario locally — selling brings financial disadvantages.
That includes paying capital gains tax and giving up a low mortgage interest rate, Bailey noted.
Then there's the problem of buying a replacement home.
Say you're 70, your mortgage is paid, and the home you bought for $300,000 is now worth $1.5 million.
"You want to buy under $950,000, that's where everyone wants to buy," said Tom Brezsny, an agent with Sereno Group. "There's a stuckness and no easy solution."
Starter homes are nearly extinct, and the "low end" is more expensive than it was.
Buying a $600,000 home means laying $2,924 per month for a 30-year mortgage at 3.81 percent, property taxes and insurance.
"People are afraid they won't have a place to go," said Sue Seeger, an agent with David Lyng Real Estate.
As prices have risen, Brezsny has seen sellers confident they will get their asking price and buyers being more selective. "Buyers are pushing back," he said.
Bailey said Highway 1 traffic is keeping prices in Aptos 10-15 percent below those on the Santa Cruz Westside or Scotts Valley for people commuting on Highway 17 to Silicon Valley.
The drive to Aptos is shorter, he added, for software developers recruited by Amazon's Santa Cruz office and doctors recruited by Kaiser Permanente.
"We need workforce housing," Bailey said. "We're pushing our workforce south."
In May, the local home fetching the highest price — $3.675 million — was 3000 Pleasure Point Drive. It was on the market for more than a year, and the seller initially asked $4.385 million.
In contrast, the seller of a four-bedroom home at 917 King St. on Westside Santa Cruz asked $849,000 and got $880,000.
Seeger, who represented the seller, said, "There are multiple offers if the house is priced right." She said June has been slow, which she attributes to graduations and vacations.
