APTOS >> A decade after the housing market collapsed, turning thousands of local homeowners who couldn’t pay their mortgage into renters, Santa Cruz County faces a different sort of crisis.

The median home price at $885,000 has recovered all the value lost in the crash, to the relief of homeowners who have decided they will not move and pay higher property taxes.

Home building has lagged. Statewide, an average of 85,000 homes are built per year when 165,000 homes are needed to keep pace with growth, and the trend is the same locally.

Interest rates are up, with every 1 percent increase shrinking buyer purchasing power by 10 percent.

A decade ago, buyers with a credit score of 680 could get the best interest rates; now they need a score 720 to 740.

The housing affordability index shows 47 percent nationwide able to buy a home, 26 percent in California and 12 percent in Santa Cruz County.

Just 30 miles away in Silicon Valley, high-paying tech companies such as Apple, Facebook and Google have added jobs faster than homes were built.

Entry-level homes in Los Gatos are hotter than flapjacks.

What’s entry level? Anything less than $1.5 million.

During the second quarter of the year, the median-priced home — the midpoint of what sold — was $596,730 in California, $905,000 in Santa Cruz County, $1.405 million in Santa Clara County, and $1.625 million in San Francisco, according to the California Association of Realtors.

“As terrible as we think the pricing is here, we are so much more affordable than the San Francisco Bay Area,” said Robert Bailey, co-founder of Bailey Properties in Aptos, who started his real estate career as a college student and has chaired the MLSListings board.

Bailey shared his analysis with members of the Aptos Chamber of Commerce on Thursday morning.

PROP. 5

Tax law changes that capped property tax deductions at $10,000 are “certainly having an impact,” he said.

As for the scarcity of homes for sale, the reason is longtime homeowners are staying put.

Millennials age 37 and younger are the biggest group of home buyers nationwide but in Santa Cruz County and statewide, there is little for them to buy — 535 listings in July vs. 1,300 a decade ago.

Baby Boomers seem to have no desire to sell. If they bought a home in Santa Cruz for $300,000 in 1991, they have an asset worth $1 million. Their property taxes go up only 2 percent a year because of Proposition 13, adopted in 1978 after reassessments pushed out retirees who could not longer afford their property taxes.

New buyers of a $1 million home in Santa Cruz have a similar asset but pay double in property taxes because taxes are on based on the sale price.

That’s why the California Association of Realtors is backing a ballot measure to allow people 55 and older to be eligible for property tax savings if they buy and move to a home elsewhere in the state.

“Proposition 5 is critically important to us,” Bailey said, citing a California Association of Realtors forecast that it could increase turnover of homes by 10 percent annually. “It’s allowing a home to be sold to someone frozen out of buying.”

The Legislative Analyst’s Office said the measure could increase home sales, boosting property tax revenues in the tens of millions, and stimulate home building but at the same time could reduce property tax revenues for schools and local governments by more than $100 million a year.

COSTA-HAWKINS

The move to repeal the Costa-Hawkins Act, which is Proposition 10 on the state ballot, could allow rent control on every residential property in California, including single-family homes.

In Santa Cruz, building permits for approved residential development are not being picked up as developers are waiting to see what happens with Costa-Hawkins, according to Bailey.

“They can’t give lenders five-year projections for cash flow,” he said. “It would have a dire impact on multifamily housing.”

The Legislative Analyst’s Office noted the potential impact on housing construction and cited these financial impacts, landlords paying less property taxes and renters, saving on rents, spending more and paying more sales taxes.

In the city of Santa Cruz, tenant advocates are backing Measure M, which would not only limit rent increases but also extend just cause eviction rules to most rental property and create a rent board as the enforcement authority.

Landlords and property managers say such regulations will motivate rental property owners to sell — and likely to someone who will live in the home.

RETIREMENT PLAN

Mom-and-pop landlords were among those appealing to the Santa Cruz City Council this week seeking an alternative to Measure M.

“Our business plan has emphasized income for our retirement years and a desire to rent to families,” Terry Chandler emailed the council, noting rents since the home was purchased in 2009 are “significantly below market rates.”

In her email, Deborah Joyce said the modest three-bedroom home she had rented out on the Santa Cruz Westside has been empty since the tenants asked to leave before lease was up.

“We are not renting it at the moment,” she wrote.

The sellers of a three-bedroom house at 119 Chrystal Terrace in Santa Cruz, which was a rental, listed it for $1.125 million in March.

One deal fell through and after the price was dropped three times, the home sold this month for $930,000.

Local real estate agents are supporting Measure H, a $140 million bond to finance affordable housing in Santa Cruz County.

THEN AND NOW

These statistics from Gary Gangnes of Real Options Realty show how the September 2008 housing crash affected sales and median price for single-family homes in Santa Cruz County. Before the crash, the median price peaked at $789,250 in November 2005. Home values have more than recovered, as July 2018 data show, but inventory of homes for sale has not, with listings at historically low levels.

AUGUST 2008

Median price: $582,000

Sales: 151

Listings: 1,331

Inventory: 8.8 months

SEPTEMBER 2008

Median price: $475,000

Sales: 145

Listings: 1,286

Inventory: 8.9 months

JULY 2018

Median price: $885,000

Sales: 175

Listings: 535

Inventory: 3.1 months

Source: Real Options Realty