Tuesday, February 9 , 2016, 6:29 am | Fair 48º

Laurel Abbott: Local Real Estate Demand Rising, But Median Price Trailing for Now

By Laurel Abbott |

All over California, real estate markets are experiencing a lack of housing for sale. Our inventory in Santa Barbara dramatically dried up in the last quarter of 2012. The release of REOs (foreclosure properties that are now an asset of a banking institution) have slowed to a trickle, and until the Mortgage Debt Relief Act was extended last week, there was basically a moratorium on short sales until sellers knew that those tax protections would be in place.

Even with the old adage “Real Estate is local,” equity sellers were likely holding back due to the uncertainty of our national economy. This lack of homes for sale has been constraining home sales in all sectors and many areas of California are reporting price increases. The lack of inventory is very evident in Santa Barbara. We currently have about 300 homes for sale between Carpinteria and Goleta, with just 50 in the under $1 million category.

What we haven’t seen yet is a measurable increase in home prices. How can this be? All over town, there are multiple offers and properties going over the asking price. I asked our man with the numbers, Gary Woods with Home Realty, for some backup from the stats on what we are seeing on the ground. He reported that of the 125 home sales in December, 26 were over asking price. As you can see by the graphs Gary provided, the median price remains basically unchanged year over year, but recent activity indicates that upward pressure is building.

This is such a unique market. It’s a great time to be both a buyer and seller. Buyers are still getting historically low prices and interest rates while sellers have a choice of qualified buyers. I venture to guess that many equity sellers are still holding on to the idea that spring is the prime selling time, but any Realtor in town will tell you we have a year-round market in Santa Barbara. There are ready, willing and able buyers now. Our median price hasn’t gone up yet, but clearly demand is high, and Economics 101 deems it inevitable.

In these complex times, it is more important than ever that you consult with your Realtor to see how this market can work for you.

Laurel Abbott is a real estate agent with Prudential California Realty and president of the Santa Barbara Association of Realtors. Contact her at .(JavaScript must be enabled to view this email address) or 805.879.8050. The opinions expressed are her own.

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» on 01.13.13 @ 02:49 PM

The data certainly bears-out your conclusion that if things continue on this path, eventually prices will increase, at least in the sub $1 million property range.  The problem is assuming things will continue exactly as they are now.  The big unknown is the interest rate situation.  The government has been conducting massive bond buying to drive long rates to artificially low levels.  This will end, sooner rather than later.  Once the bond buying programs end, rates are going to jump, ad will continue to rise over time.  Rising rates are highly detrimental to home prices.  The ability of the average buyer to afford the monthly payment is directly linked to interest rates - the higher rates go, the less a person can afford to pay in monthly payment, given a fixed home price.  Again, rising rates therefore dictate lower home prices.  Just as you rightly point out that higher demand and fixed or declining supply should result in higher prices over time, rising interest rates and fixed personal incomes dictate lower home prices over time.  Will shrinking inventories be enough to offset the negative impact on prices from rising rates?  I seriously doubt it.

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