REAL ESTATE UPDATE
Editor’s note: Montecito real-estate agent Cristal Clarke joins the News-Press roster of real estate columnists today.
The question on everyone’s mind these days seems to be: What will happen with the housing market moving forward?
Change is occurring, compared to the past 24 months, and while there are positive takeaways from the current market conditions, consumer sentiment and confidence may be reaching the tipping point.
That sentiment and confidence are two of the factors I follow as indicators of the future regarding the economic outlook. Readers who follow my monthly market updates and receive my mid-year and year-end market reviews have seen how the factors consumer sentiment and confidence, among others, can play into housing prices and affect long- and short-term market conditions.
What is consumer sentiment? The Consumer Sentiment Index is a statistical measurement of consumers’ opinions regarding the overall health of the economy. It considers personal and general economic financial health, as well as economic growth looking forward.
Consumer confidence is seen as a measurement of how optimistic or pessimistic consumers are, regarding their future financial situation. In a nutshell, the interpretation is that if consumers are more optimistic, they are more likely to spend on big ticket items such as real estate, and, therefore, stimulate the economy. They are less likely to do so, however, if they feel pessimistic about future economic indicators; thereby, curtailing their spending patterns, which, in turn, could produce an economic slowdown.
If we look at the monthly charts for consumer sentiment, we can see that since the middle of 2022 there has been a positive trend, with almost a 20% increase, to 59.9, in consumers feeling positive about their long-term financial and economic conditions. It should also be noted, however, the current levels are still below the levels of January 2022, 67.2, which is also below confidence levels seen in January 2021, 79, and January 2020, 99.8.
Looking at consumer confidence, we can see that the reverse is true. In the last month, consumers’ short-term views have grown pessimistic about spending on big ticket items such as real estate.
So what can be deduced from this data? I think we can all agree that there has been a change in the marketplace, which I think is good for the long term in our local real estate markets. The frenetic pace we experienced in 2020 and 2021 could not, and should not, be sustained for a healthy market to exist.
The current pause in market expectations, with prices stabilizing and, in some cases, showing reductions, was expected, and may continue for the near term. That is not to say our market is negative, but that it is more representative of what a normal marketplace should be.
Real estate located in prime locations and in A+ condition will still garner substantial interest, while properties with perceived negatives in condition or price point will see resistance. Buyers no longer feel they have to jump in with both feet — coming in over asking price and with no contingencies. That was never “normal.” Nor should we expect it to be.
We still have limited inventory levels and pent-up buyer demand, however, so expect prices to hold in the short term but expect a choppy start to early and mid-2023.
As always, if you have any real estate questions, please feel free to contact me at 805-886-9378, or email@example.com, and be sure to check out my website, montecito-estate.com, for up-to-date listings and community information.