Santa Barbara Real Estate Market Update

Current Santa Barbara Real Estate Market

Overview: Supply & Demand

The real estate market in Santa Barbara has overgone a market correction since August of 2005, with prices softening in all sectors of the market below $2 million. The luxury market, classified as either above $2 million or above $3 million (depending who you ask), has actually had very good sales activity the last three years and by all reports has actually appreciated. The "affordable" segment of the market, or the below $2 million market has seen a significant reduction in prices with single family homes now available even in the $500-600k price range. In many segments of the market, especially the below $900,000 segment, prices seem comparable to those seen in 2002 or 2003.

Current inventory levels are fairly high with a consistent, but slower # of sales compared to the last two years. The volume of sales is down roughly 30% compared to the last two years at this time. Many local buyers that have been watching the market believe, as I do, that real estate prices won't soften much more and that we have reached the bottom of the price curve. As such, we've seen a flurry of activity in the $500-800k single family home market, and consistent activity in the above $1 million single family home segment. Our recommendation is that now is best time to move back into the market before the market firms up. The market is still classified as a buyer's market, and it is a great time for dialogue between both parties to negotiate win-win situations. Sellers now have much more realistic expectations and are bringing their properties on at more competitive prices.

We expect sales to be significant this Summer as more and more end-users and investors realize that our current market shows more opportunity on the purchasing side than we have seen in the last 5 years.

Buyers

It's a great time to buy in Santa Barbara County if you are looking for a longer than 2 year hold. Our take on the market is that the next 8 months will be the most opportune time to purchase a home in Santa Barbara. After that, the market should be fairly firm with level pricing and potentially low single digit appreciation for 1-3 years. A large amount of buyers who have been watching the market have decided it's time to start purchasing. As such, be prepared for those well-priced "hot properties" to see multi-offer scenerios again, as the best deals are in escrow now within just af ew days. As long as you are looking at a minimum 3-5 year hold I would encourage you to get in to the market here in the next few months and beat the eventual larger wave back in. Seller's are motivated right now and are willing to make concessions on price and terms to interested buyers. Most sellers who are not motivated have put a long-term tenant in place to wait out the present dip. Buyers click here for more info.

Sellers

To home owners, it is a bit harder to make a blanket recommendation. If you need to sell, plan on pricing it competitively and getting a real estate professional to market it aggressively. Trying to price your property too high and you'll end up chasing the market and losing more money in the long run. Be sure you have a competent agent representing you as the market has changed and For Sale By Owners are only getting noticed by tire kickers and low-ballers. Your property needs active and aggressive marketing and representation or you'll become another one of last month's statistics. Again, it is CRITICAL to list your property competitively and not try to reach for a slightly higher sales price you may have gotten at the peak of mid-05. Price your property too high and you'll be chasing the market and any potential buyers that would have been interested--a mistake that could cost you tens of thousands of dollars. Click here for more info on selling your home

Additional Information

Have a question? Want to know more about the current market or these creative alternative? Contact your knowledgeable Santa Barbara Real Estate agent.

View home prices in Santa Barbara - track trends over the last five years

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I ran across another...

I ran across another fantastic deal today, it's located in North Gelida(?). It's a 4 bedroom home in excellent condition. Would make a really great family home. It' only gonna be available for another day or two. It's priced at 550. There are 4 offers on the table, the highest of which is probably in the 575 range. 585, I'm guessing. If you probably wanted to pick it up, it'll probably be around 600,000. Absolute great deal. Call me, or email some more details. Again, it will probably be gone by the 9th or the 10th, as it goes to an(?) estate still(?) as a foreclosure, and a fantastic deal. listen

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I just previewed an...

I just previewed an incredible value property at 935 West Valerio into the 3 bedroom, 2 bath, Spanish style home with a garage that's converted to a distal families living space probably not permitted but still a fantastic value I think some one can have pick this out for 525,000 which is an absolute field and it is a pretty good part of the west side as well, call me or e-mail me if you have more information on it and how many people know about it ___ is on the Santa Barbara ____. listen

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Santa Barbara Real Estate Update

Santa Barbara Real Estate update...

The real estate market definitely has softened the last couple of years, which has been great. We're in a much healthier market now, and buyers are having opportunities to actually negotiate with sellers, rather than just place multiple bids. One of the segments of that market that shows the most opportunity for great deals is the low end of Single Family homes (from $600k-950k). We're seeing quite a few motivated sellers in that price range and I've been very pleasantly surprised to see what some of the homes have been closing at. Some clients of mind found and incredible home in a good area of the Westside (on Lorinda) for $760k, which started at around $900k.

My pulse on the market is that this will be the transitional year where it goes from a buyer's market to an equalized market. I don't expect the market to shoot up any time soon, but by the Summer, I would not be surprised if the market has firmed up a good amount and we stay at a healthy plateau with either steady prices or some slight single digit appreciation. I don't think we'll see any double digit appreciation for another 3-4 years though, as the cycles tend to last 5-7 years.

My recommendation to current buyers is get in when the market is soft and you have those motivated sellers to capitalize on, rather than wait too long and have the market change and lose that serious motivation, not to mention then have to compete with everyone else that waited and all jumped back in at the same time. Interest rates are still at almost an all time low--historically speaking, and that just can't last forever. When the economy firms up a bit more, I'd expect those rates to start creeping up to the 7-9% level.

Fed rate cut--How it will affect mortgage market

Here is an exert from a good article by Kathleen Pender at the Associate press: 9/18/07:

People with home equity lines of credit will benefit first. These variable-rate loans are typically tied to the prime rate, which closely follows the federal funds rate. The prime rate is 8.25 percent today. If the federal funds rate drops by a quarter point, the rate on home equity loans will likely follow suit in the next month or so, says Keith Gumbinger, a vice president with HSH Associates.

Borrowers who have an adjustable-rate mortgage tied to the one-year Treasury yield could also benefit from a rate cut, though not directly. Treasury yields fell this summer, partly in anticipation of a Fed rate cut. An actual rate cut will help keep those rates low and if the Fed indicates a willingness to cut rates more aggressively, they could fall further.

"In early July, a Treasury-based ARM was around 7.75 percent. Now it's around 6.75 percent," says Gumbinger.

If you took out a Treasury-based ARM that was fixed for three or five years and the rate is about to go up, you will still see a big payment jump. It just won't be as big as it could have been.

On the other hand, people with ARMs tied to the London Interbank Offered Rate might not get any relief from a Fed rate cut. While Treasury rates were going down, Libor was going up. Although they normally move in the same direction, corporate credit concerns have put upward pressure on Libor and downward pressure on Treasury yields. A Fed rate cut won't automatically lead to a lower Libor rate.

Likewise, fixed-rate loans won't necessarily get cheaper. Unlike ARMs, which are tied to short-term rates, fixed-rate loans follow long-term interest rates, such as the 10-year Treasury note yield.

Over the past two months, rates on conforming fixed-rate mortgages - which can be sold to Fannie Mae and Freddie Mac - have fallen along with the 10-year Treasury yield. But they won't necessarily fall more if the Fed cuts short-term rates, and they could conceivably go up if investors fear that one or more rate cuts could stoke inflation"

1/2 Point, & Contrarian Investing

I've had conversations with several clients recently who are concerned about the equity markets and how that is affecting home loans and real estate in general. While I understand their concerns with what is occurring in the mortgage market. On the flip side of the argument, there are others who are "on the fence" as well, and may be sitting the rest of 2007 out. That causes a reduction in demand, which the current sellers definitely are feeling. As a result their level of motivation and willingness to negotiate is increasing dramatically. With the Fed's 1/2 point rate cut, that is going to have some positive effects on consumer confidence, though the trickle down affect to adjustable rate mortgages and the like, may take a bit of time. Often times contrarian investing can achieve the best long-term results. Buying, when others are selling and other consumers may be hesitant to step in, as longs you are planning to hold 3+ years, ensures that you purchase at a time when sellers are motivated and you can achieve a great price. Waiting 6-18 months, may just put you in the pool with many of the other out-of-town buyers and you may try to come back in when sellers are much less motivated, and you are competing with the flood of buyers back into the market.

And that is the best case scenario in my mind. If rates go up in the next year or two, and prices soften further (I strongly doubt they will decrease more than 5%--when my gut feeling is that we are going to see more of a level market with no movement each way), you could be in a situation where your monthly payment is significantly more, even if you paid slightly less. When I looked at the actual numbers from some of these prices decrease, but mortgage rates increase scenario, it was a real eye-opener for me, as well as for many of my clients.

My recommendation is that if you want in on the Santa Barbara real estate market, find the right property now, negotiate hard, and purchase it for a medium to long term hold.

Looking for a duplex in a good neighborhood?

If you want a duplex, for under $900k, there are a handful in Santa Barbara at any given time. Now if you want that duplex to also be in a good neighborhood, for that price, that is a tough bill to fit. There is one fantastic deal located in the Samarkand neighborhood at 22 Romaine. It just got reduced to $895k (was originally $995k) and it won't last long at that price. Two, 2/1 bath units stacked on top of each other. Located at the street's dead end. Call me for details: 805-637-7148.