2015 Where Is The Santa Barbara Real Estate Market Heading?
The true answer is that no one truly knows...but here are my thoughts.
Based on where we have been the last few years and the types of sales (thus buyers) that are going on, I am going to make some general points and give an educated guess as to where we might be in the coming year. Although we have seen substantial price gains over the last 2 1/2 years, the real estate market here in Santa Barbara has a very different feel than in the run-up from 2001 to 2007. A much more solid feel.
During the run-up in prices from 2001-2007, anyone and everyone was buying a home mainly because they could. What I mean with this is that much of the market was filled with buyers who really were not capable nor qualified to buy a home. As we all know now, this had to do with the entire lending mess. In contrast to 2001-2007, the run-up in prices over the last 2 1/2 years (May 2012 - 2014) has seen only qualified buyers buying homes. With new stricter lending guidelines, most every buyer has had to have at least 20% down as well as their overall financial picture being very strong. What I have seen as an agent is that in Santa Barbara, 20% has often been the minimum down payment. Upwards of 30% of all purchases across the board ($300K to $15 million) have been all cash over the last few years. In addition, many buyers have been buying with 20-40% down.
If you simply take this fact and then add in the price appreciation over the last few years, no one is in trouble. "Everyone" who bought a home in the last 2-3 years has now at least 20-30% equity...any many have much much more. Another way to see this is through the distressed market (foreclosures and short sales). This market has shrunk to a very minimal level in the last few years. Nowadays there really is not even a market for this from the Goleta to Carpinteria area. We are seeing only 1-4 listings on average a month across all price points. In 2014, roughly only 2.5 percent of all total sales were distressed sales (foreclosure or short sale). What this simply means is that almost no buyer really focuses on this any more as this really is not a market.
For buyers, these distressed sales then simply tend to end up selling at and often above market price. The people who do focus on this market tend to be investors that have the ability to buy at auction etc. As far as the entire thought about "shadow inventory" I have no idea. I have heard this term for years and still have yet to see any of this come on the market. A great reality about the gains in the last few years is that the homeowners who were in a lot of trouble and owed a lot more than there homes were worth are now seeing rewards...and much less stress. Most of these homeowners who at times owed 20-40% more than their home was worth are once again at break even levels or even have some equity in their homes. Awesome. Because of the above, the overall market feels very strong and not at all "frothy" as it started to feel like in 2006/2007.
In addition, there simply continues to be a very strong demand for homes in our area. Until this ends, or interest rates start to rise sharply, I would expect to once again only see increases in the value of Santa Barbara real estate. I tend to also think that after 2 plus years of limited inventory, we will finally start to see an increase of available homes as many sellers realize that the biggest gains are most likely behind us for a few years and thus many will look to put their homes on the market.
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For more information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in our wonderful town, please don’t hesitate to contact Kevin Schmidtchen at Berkshire Hathaway.
Thank you for reading. I hope you find Santa Barbara Real Estate Voice informative. Please feel free to contact me or comment below with any thoughts.