REAL ESTATE UPDATE
Cristal Clarke
As we begin to regroup from the recent rain events that blew through our local communities, I hope everyone is safe and well.
It was certainly a wonderful sight to see. Almost all of our reservoirs are full or at near capacity, which is something we have not seen for many years.
The question on both sellers’ and buyers’ minds at the moment appears to be whether the recent rains dampened the enthusiasm that had started to build in buyer demand in late January. Of course, after the holiday season, buyers had started to re-enter the market place, albeit somewhat cautiously, and properties were, if priced correctly, beginning to see increased activity levels compared to late 2022 and the first part of January 2023.
The problem continues to be inventory.
As of this writing, there are 27 single-family residences for sale in Montecito. Of these, 12 are priced above $10 million, four are priced between $6 and $10 million, and 11 are priced between $2 and $6 million. It is not hard to see that the disparity in available inventory between what has typically been considered affordable, below $6 million (yes it seems strange to say that), represents less than 50% of available inventory. If you are looking in the middle of the field for available options, you are very limited, while the ultra-luxury market has many options for buyers to choose from.
If you are looking in the condo market, you have a grand total of four options available.
Taking a look at Hope Ranch, the inventory is even more critical, with only eight available properties: five priced over $10 million, with three of the five over $20 million, and three priced under $6 million.
Within the Santa Barbara area, there are a total of 35 single-family residences for sale, of which three are priced below $1 million.
There are 21 properties priced between $1 million and $4 million, eight priced between $4 million and $6 million, two priced between $6 million and $10 million, and only a single property priced above $10 million. There are eight condos currently on the market.
So where do we stand looking ahead? Expect to see continued interest rate hikes by the Federal Reserve as it continues its efforts to rein in inflation, but don’t be surprised if we see a reduction in rates in late 2023.
Rates should ease somewhat as more companies, and companies that have exited the marketplace, come back in and start issuing policies. State Farm is one example of this.
However, expect companies to have quotas, and, once filled, they will again hold off writing new policies. Start making calls.
Inventory levels will continue to remain restricted and, as such, support prices to a certain extent, but will ease as the year progresses.
The luxury market, properties over $10 million, will remain strong with many transactions being all cash sales.
Properties in Montecito priced in the $6-10 million range will have the most restricted inventory levels, and for Santa Barbara the range will be $4-6 million. Hope Ranch properties priced below $6 million will also be few and far between.
Sellers should expect price sensitivity and certain market segments to be interest rate dependent, but A+ properties, with good location and updated, will still see strong interest if priced in accordance with the marketplace.
Expect reduced sales volume as the number of units sold will drop dramatically compared to previous years due to continued concerns about inflation, interest rates, consumer confidence and consumer sentiment and, as mentioned, available inventory.
Wishing everyone a wonderful Valentine’s Day and, as always, if you have any questions, please feel free to contact me. All inquiries are fully confidential. And don’t forget to follow me on Instagram and Facebook for the latest on the real estate market.
Cristal Clarke is a real-estate agent at Berkshire Hathaway HomeServices, which serves Montecito and Santa Barbara.
