Homeowners want to stay in Santa Barbara, contributing to lower sales numbers and higher prices
REAL ESTATE UPDATE
Dianne and Brianna Johnson
Editor’s note: Dianne and Brianna Johnson, a mother and daughter real-estate team associated with Village Properties in Santa Barbara County, join the News-Press’ roster of real estate columnists today.
’Tis the season for feeling grateful, and we’re feeling so thankful to live in our beautiful Santa Barbara community.
It’s no surprise that lots of people enjoy living in the Santa Barbara area, and when they come, they stay.
This is quite apparent in our local real estate market numbers from the month of October. Sales numbers are down about a third from this time during the frenzied market of last year, and inventory numbers are down almost 29%!
Many Santa Barbara homeowners just aren’t wanting to give up their little piece of paradise, contributing to the lower sales numbers and higher prices despite national news headlines.
We need to keep in mind that the euphoric real estate markets of the last couple of pandemic years are the outliers, not the norm. During the last half of 2020 and all of 2021, the market was in a virtual sprint, and we all know you cannot sprint forever. Sometimes you just need to slow down and catch your breath.
All real estate is local! Our local Santa Barbara area market is still moving forward more positively than the national headlines suggest.
Watching and reading the national news, one might think the real estate market is collapsing. It isn’t. It is so important to note that all of the housing market statistics are compared to that frenzied 2021 market.
Looking at the current national statistics, the number of sales this year has decreased, and prices have still been increasing this year, but at a more moderate rate. Nationwide, at one point, inventory of homes for sale was up over 40% year over year.
Locally, the latest Santa Barbara numbers show our inventory of homes for sale has actually dropped 28.4% and, consequently, the number of sales has also decreased by 33.5%. Our local prices are up 16.1% over last year at this time.
Speaking of inventory, did you know there are currently only approximately 142 homes and 40 condos currently available all the way from Carpinteria through Goleta in all price ranges? (Fifty-four of the houses actively for sale are over $5 million!) At 960 homes for sale year-to-date, we are critically below inventory levels of the more normal pre-pandemic years of 2018 (1,385 YTD) and 2019 (1,435 YTD.)
Lack of inventory is definitely the log jam in the system. With so many want-to-be sellers fearful of placing their homes on the market and having nowhere to go, they are holding off and not contributing to the available inventory of homes for sale. This is creating a block in the usual flow of homes for sale.
There are several ways to strategize the marketing and negotiating the sale of a home so these sellers don’t feel “homeless.” Sellers can offer their home for sale subject to finding a replacement property. They can accept an offer with a rent-back provision that allows them to stay in their property while they continue the search for their next home, and/or they can negotiate a long escrow.
Additionally, active sellers may be wary of accepting an offer contingent on the sale of another property. Oftentimes, they reject that contingency. It would be advantageous to both parties if the home were already in escrow and/or actively on the market.
The Fed’s attempts to control inflation and deliberately slow the U.S. economy by rapidly raising interest rates, has resulted in “U.S. 30-year fixed mortgage rates increasing by 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in over 50 years,” according to Freddie Mac.
This has certainly affected buyers’ purchasing power and lessened the number of buyers who are able to purchase.
But there are still many buyers out there. While we are currently not seeing many homes with 15 or 20 offers, well-priced homes in good condition are still selling. We are still seeing some multiple offers, but a seller only needs one!
So far in 2022 in our area, 34% of home sales have been all-cash transactions with no mortgages involved.
Many economists are predicting an upcoming recession. Do you realize that in four out of the six last recessions, housing prices actually rose?
We all recall the Great Recession that was actually triggered by faulty lending requirements. Fortunately, the lending requirements put in place after that debacle have created a much more stable basis for home ownership. Thank goodness, this is not 2008!
Like all markets, real estate is controlled by the laws of supply and demand. Our supply is severely restricted, and Santa Barbara still has huge demand from within and from all around the world. Again, we are blessed to be able to call this sweet place our home.
Wishing you a beautiful holiday season in our little town by the sea.
Dianne and Brianna Johnson are a mother/daughter real estate team with over 45 years of experience in sunny Santa Barbara making it their mission to help clients realize their home dreams. See www.welcomehome-sb.com.