Santa Barbara Economy

February 2010 Market Update

Santa Barbara Homes, Estates & PUD’s Market Update

While 4 more homes closed escrow in Feb of ’09 than Feb of ’10, 9 more home/estates went into escrow in ’10 than in ’09.
Interestingly enough the days on market time was almost identical for the properties that closed escrow in February at 92 and 94 days.
The sales price to original list price was just about 80%.
The $740-800k range saw the great amount of activity with 7 sales. Like the last year or so, the general $400-900k range is still seeing the greatest activity, though in February the number of sales in the $1.4-2.25m range was significant compared to the recent past.
The Luxury market was slow though with only 2 sales above $2,250,000 and only one of those above $5million (1169 Hill Rd at $12,943,000), where we have seen 2-5/mo in recent months.
The number of homes/estates sales so far in ’10 is higher than both ’08 and ’09 numbers. 14% more sales than 2009 and 16% more than 2008. That said, our sales volume is still 23% below ’07 volume by this time last year.
The medium home price so far is $775k for the entire market. Interestingly enough, if you take out the Montecito/Hope Ranch market the medium home price is $760,000 which is actually over 6% more than last year ($715k).
The number of “pendings” so far this year, those properties that have gone into escrow are right around ’08 levels and 6% more than at this time in 2009.
Interestingly enough the Fall through rate, defined as the percentage of properties that go into escrow, and then fall out is the highest it’s been since 2006 at 12.6%. That means roughly 1 in 8 properties are currently falling out of escrow. At certain times of the year and in past year, title companies have quoted this figure as being as high as 25% or 1 in 4 properties falling out of escrow.
While many buyers suffered from the poor selection caused by lower inventory levels in certain price ranges, this year while we have the same number of current new listings compared to ’09, there are actually 6% fewer homes current available for sale. Price ranges like $400-900k are still suffering from a shortfall of inventory with anxious buyers continuing to miss out on properties as so many are selling so quickly.
West of State street and SB/Goleta South are the two districts that have had the most dramatic reduction in the number of new listings compared to last year in those districts (roughly 25% fewer listings). SB/Goleta North on the other hand has seen a dramatic increase in new listings (roughly 30% more).
A fairly dramatic figure is the volume of sales which so far is $136,000,000. That is nearly 30% more volume (dollar amount vs number of sales) than last year at this time.
While the Luxury market continues to give mixed signals, since the first of the year (compared to ’09) there have been 25% more sales.
In addition, the first two months of the year saw significantly higher average sales price for both Montecito ($4.54 million) and Hope Ranch ($3.58 million) than the first two months of ’09 (70% and 50% respectively). This means that either more of the higher end listings are selling which is dramatically pulling that average sales price figure up or there have been some sharp outliers that are skewing the data.

CONDOS

The sales activity in February 2010 was significantly better than 2009. 18 condos sold (closed escrow) this year compared to 10 in ’09 (80% more sales) and 26 went into escrow compared to 19 in ’09 (37% more sales).
The days on market was 66 days for the closed condos and 91 days for those that went pending.
Interestingly enough, the sales price to original list price ratio was only 93%, meaning that sellers are on average selling their condos for 93% of that original price they start with. This is also a higher figure than the same time last year.
The “hot” price range in the condo market in February was $400k-500k with a total of 10 of the 18 condo sales. The lease expensive condo sold for $230k and the most expensive for $3,000,000.
The total number of condo sales this year compared to last year at this time is significantly higher as well (77% more than ’09 and 18% more than ’08), though still under ’06 and ’07 levels.
The current median price for condos so far this year is $430k.
While the condo fall through rate is significantly higher than what we see in the homes/PUD market, 17.6% vs 12.6%, it’s still significantly below last year’s Condo fall through rate at 23.5%.
While sales activity is up significantly for condos so far this year, the inventory levels are down significantly offering buyers even fewer choices than last year. Currently the active inventory is down over 21%.
The sold volume for condos is up even more dramatically that on the Home/PUD side of the market with nearly 70% more volume (number of dollars) sold at this time compared to last year at the same time.

Notes from the 2009 Forecast

A summary of the 2009 Forecast can be found Santa Barbara Real Estate Blog - News, real estate market updates and insights from Daniel Zia and the ZiaGroup team. Visit the Santa Barbara Real Estate Blog by clicking here.f

Notes from the 2007 Santa Barbara Real Estate and Economic Forecast

Distributed at the 23nd Semi-Annual Santa Barbara County Real Estate and Economic Outlook Conference held on Sept 21, 2006

1.0 Who’s Buying Homes in Santa Barbara County?

In the second half of 2006, the percent of local buyers was 69 percent.
About 13 percent of buyers originated from out of the state with 8 percent from eastern states, 4 percent from western states and 1 percent from foreign countries.
Just over 15 percent of buyers were from other areas in California in the 2006 surveys
The most frequent origin of the California buyer was the Los Angeles area, which accounted for 42 percent of total sales by buyers living in other areas of California.
Ventura County counted for 18 percent of total sales by buyers living in other areas of California.
Investment purchases declined to 9.8 percent of all sales in the 2006 surveys, from 15.4 percent in 2005. Secondary home buyers increased to 13.8 percent, from 9.9 percent in 2005.
The combination of investment and second home purchases represents 23.6 percent of all home purchases in the South Coast
First time home buyers purchased 17.3 percent of homes in the 2006 survey.
For condos, first time buyers paid a median price of $637,000, while repeat buyers paid a median price of $697,500. The difference in single family estate homes was more pronounced as first time buyers paid a median price of $928,250, compared to $1,329,000 for repeat buyers.
For all of 2006, 54 percent of primary home sellers were downsizing,
43 percent of local sellers relocated within the local South Coast area in the 2006 surveys.

1.1 Who’s Buying in SB Summary

The results of our sixth consecutive survey reveal the following trends in the South Coast market:
Primary home purchases are on the rise, while the combination of investment and second home purchases is declining. However, the change is gradual, rather than dramatic.
Other areas of Santa Barbara County are not a significant source of buyers or a destination of sellers.
Less than 50 percent of sellers relocate within the local market, and the percentage has been relatively constant over time.
Sellers continue to cash out by downsizing. In 2006, the percentage of downsizers jumped to a record high.

2.0 Residential Real Estate

Some of the most impacted areas in terms of price declines are San Diego County, Northern and Southern Santa Barbara County, the Sacramento Valley, Palm Springs, Santa Cruz, and the Northern California Wine Country. However, none of these markets had an annual price decline in excess of 5 percent with most posting declines of 1 to 2 percent.
The median selling price of condominiums declined 2.9 percent in 2006 to $659,000 for the calendar year. This was the first decline in annual prices since 1995 and broke a string of eight consecutive years with at least 14 percent appreciation.
The median selling price of an existing detached home declined 4.4 percent in 2006, the first decline in prices since 1995. The median price for the calendar year was $1,195,000.
Condo sales declined 27 percent in 2006 to the lowest level since 1996.
There has been a redistribution of sales over time into the higher end markets, namely Montecito. In 1992, Montecito accounted for 12 percent of all sales in Southern Santa Barbara County. Last year, 19 percent of all sales occurred in Montecito. The Goleta market share has been declining over time, falling from 34 percent in 1992 to 27 percent in 2006.
In 1992, Montecito and Goleta both accounted for between $90 and $100 million in single family home residential
transactions. They equaled 50 percent of the total Southern Santa Barbara County market, 26 percent in Montecito and 24 percent in Goleta.
By 2006, transaction volume in Montecito had increased more than six-fold to $619 million, equaling 37 percent of the market. Goleta, on the other hand, had a transaction volume of $251 million in 2006, equaling just 15 percent of the market.
According to the California Association of Realtors, the median selling price of homes sold in Ventura County increased 2.7 percent in 2006 to $686,300. That is the lowest rate of appreciation since 1996. In the prior seven years, annual appreciation ranged between 8 and 30 percent.

3.0 Rental Market

In 2006, rent appreciation exceeded home price appreciation
In the city of Santa Barbara, vacancy rates remained below 1.0 percent all year long. In Goleta, average annual
Vacancy rates have declined in each of the past three years from 6.0 percent in 2003 to 4.2 percent in 2006. Average rents rose 4.7 percent in Santa Barbara and 4.3 percent in Goleta.

4.0 South Coast Buyer Characteristics based on Loan Data from SBB&T

In 2006, the median value for single family estate and condominium purchases requiring a loan made by Santa Barbara Bank and Trust was $922,500.
The share of adjustable rate mortgages fell sharply from 2005 to 2006, but still fifty-nine percent of all loans were made with adjustable rate mortgages for the properties in the sample.
In 2006, 81.5 percent of loans were made to existing residents of the South Coast.
In 2006, 13.8 percent of loans secured were for non-owner occupied homes.
The share of loans made for investment purchases fell dramatically in 2006. In 2006, 13.8 percent of loans secured were for non-owner occupied homes.
The median household income of buyers purchasing single family units increased in 2006 to $150,000, from $135,000 the year before.
Annual salaries in Santa Barbara County now average approximately $50,000 per worker
Not only are most single worker households are shut out of the housing market, but most two full-time worker households cannot afford the median priced home.The percentage of mortgage loans made to buyers who are self-employed rose over time, from 21 percent in 2002 to 41 percent in 2005. In 2006, it declined to 36 percent.

5.0 2007 Real Estate Forecast

Higher mortgage rates and higher home prices impacted the demand for purchase housing last year. But since neither interest rates nor home values are forecast to rise sharply this year, sales of existing homes should not be affected any further.
We expect sales in 2007 to rebound slightly in both the north and the south, due to falling mortgage rates, and the realization by buyers that selling values are unlikely to collapse. Sales are forecasted to rise about 15 percent countywide. While this may seem strong, sales levels in 2007 would approach levels of activity that last prevailed in 1996.
Regarding home values, a dramatic correction is still not expected in 2007. A slowdown in home price appreciation has been long overdue, and a drawn out period of home value malaise is likely to prevail in Southern California and elsewhere. However, downward price rigidity together with an otherwise healthy economy and a fully employed labor force prevents a material decline in home values this year.
The median price of existing detached homes will remain close to 2006 values or decline marginally.
For Southern Santa Barbara County, selling values remain between $1.1 and $1.2 million due largely to continued buying within the high end of the market. The “affordable” market will decline between zero and five percent in 2007. In 2008, values rebound slightly, averaging 3.5 percent. In inflation adjusted dollars, appreciation is negative in 2007 and zero in 2008.
For Southern Santa Barbara County, selling values remain between $1.1 and $1.2 million due largely to continued buying within the high end of the market. The “affordable” market will decline between zero and five percent in 2007. In 2008, values rebound slightly, averaging 3.5 percent. In inflation adjusted dollars, appreciation is negative in 2007 and zero in 2008

6.0 Santa Barbara Residential Income Market

Overall, the South Coast continues to be very active but prices have remained relatively unchanged since 2005. Currently the South County has a greater supply of properties for sale than in previous years as sellers hope to capitalize on the tremendous appreciation
from the past 5 years.
Rents in the South County have been exceptionally strong with 2006 showing 5-7% increases across all South County
sub-markets
rents. Vacancy rates less than 3% are the norm throughout most of the South and North County.
Currently interest rates are still in the low ranges for apartment
properties over 5 plus units though not at the historic
lows we previously saw. The 10 Year Treasury rates are at approximately 4.7% as of mid February 2007 which puts interest rates in the mid to high 6% range for at least 5-year fixed rate money. Though interest rates did move up during 2006, we are now back to rates only slightly higher than this time last year.
The combination of slightly higher interest rates and increased supply put slight downward pressure on prices and GRMs and resulted in slightly higher capitalization rates in 2006 over 2005. In terms of raw data, the 2005 price per unit for 5-9 unit buildings was $240,435 versus a 2006 PPU of $235,690; a 2% decrease which is insignificant.
The 2005 price per unit for 10+ unit buildings was $216,260 versus a 2006 PPU of $203,073; a 6% decrease which is still relatively insignificant. In 2006, Gross Rent Multipliers, for both 5-9 and 10+ unit buildings were about 10% less than in 2005. 5-9 unit GRMs in ’06 were 14.82 versus 16.40 in ’05 and 10+ unit GRMs were at 13.88 in ‘06 versus 15.35 in ’05. Inversely, capitalization rates showed an increasing trend of about 10% for the 10+ units but were basically flat for 5-9 units.

6.1 Short term Residential Income forecast for 2007

Average sales for 2006 for 5-9 units were $235,690 per unit and $203,073 for 10+ units. We should see the average price per units remaining relatively flat for the remainder of 2007.
Cap rates will be in the high 4’s to low 5’s. However, this will change if interest rates go up. Average CAP rates in 2006 were 3.93% for 5-9 units and 4.43% for 10+ units.• Gross Rent Multipliers will stay in the range of 13.5 – 15.0. This also will change if interest rates rise. Look for 2007 to continue to be a robust year for sales in the South County with available inventories being absorbedby the strong demand from apartment buyers.

7.0 Crime

The number of reported crimes in Santa Barbara County is 38 percent lower than the average for the state of California.
Even the City of Santa Barbara has had an 86 percent rise in motor vehicle theft reports per capita. There were 1,112 motor vehicle theft reports in Santa Barbara County in 2005, compared to 450 in 2000. That’s a 147 percent increase during a period in which the population remained constant

If you would like a copy of the entire Real Estate and Economic Forecast (110 pages), please give us a call at or email us at the contact page and we’ll email you it to you in PDF format. The complete report has some additional charts and graphs, as well as some sections not covered in this highlight sheet.

To contact Daniel Zia, please call (805) 637-7148 or email Daniel@ZiaGroup. Follow all the latest real estate news on the Santa Barbara Real Estate Blog or Follow Daniel Zia on Twitter. The Zia Group Team looks forward to serving you and your Santa Barbara Real Estate needs.