Seven years ago, in 2005, the median sales price for houses in the Santa Barbara area rose 24 percent over the year before. That was the 10th straight year we saw an increase in median price, eight of those years in the double digits.
At the end of 1995, our median price for houses in the Santa Barbara South Coast (the area from Goleta to Carpinteria) was $300,000. At the end of 2005 —– the top of the market — it was $1.25 million. That is a 316 percent increase in median price in 10 years. Today, the median price stands at its lowest in nine years: $790,000. We predict that this is the end — not of the world, as the Mayans have told us, but the end of this cycle of depressed sales and declining prices.
November’s median home price of $790,000 is just slightly lower than median price at the end of November 2011 ($793,750), and the lowest median price Santa Barbara has seen since 2002. While we have had price fluctuations during the last 12 months, we have hovered around $800,000 all year long — in fact, the median price of a house here has remained close to $800,000 for the last two years. (See Table 1; note that median price hasn’t changed too dramatically since 2009, as the bulk of deflation occurred in 2006 through 2009.)
The median price for a condo on Santa Barbara’s South Coast stands at $409,000, down about 2 percent from November 2011’s $418,000. As with houses, condo median prices slid steeply from 2006 to 2008 and declined less dramatically during the last four years (see Table 2).
In order to gain perspective and understand the transformation in our local real estate market, let’s look at what’s happening both statewide and in some other California communities, as well as details about recent local sales. First, let’s look at real estate numbers for our Golden State.
The median sales price for single-family homes in California rose 23 percent from October 2011 to October 2012 (the latest numbers available), as reported by the California Association of Realtors. For condos, the median statewide sales price rose 20.1 percent (see Table 3). Every county in California except Tuolumne reported an increase in median price over the past 12 months. The Los Angeles metropolitan area median rose 19.5 percent, and the Bay Area saw a jump of nearly 28 percent. Just up the coast in San Luis Obispo, median price is up by 8.4 percent. In Ventura, the median price is up 4.3 percent year over year.
Although the median price has remained flat for our South Coast of Santa Barbara (Goleta through Carpinteria, as stated above), our entire county is showing a dramatic overall increase in median price since this time last year. Santa Barbara County (including Santa Maria, Santa Ynez and Lompoc) wins the prize for the largest median price increase — from $328,570 to $529,600, a whopping 61.2 percent — in just one year’s time.
Speaking about the California market as a whole, California Association of Realtors chief economist Leslie Appleton-Young reported, “The year-over-year price gain … has been accelerating since early 2012, as sales of higher-priced homes continue to improve. With the supply shortage, especially of lower-priced homes, expected to remain an issue in the near future, we will likely see solid year-over-year price gains through the first quarter of next year, as sales of higher-priced homes grow.”
October was the eighth consecutive month of annual price increases and the fourth consecutive month of double-digit annual gains in California, according to a recent CAR press release.
It’s not clear why the Santa Barbara South Coast has been lagging in median price gains up until now. Perhaps it is because our inventory (number of homes for sale) is so low and because buyers are scooping up homes at the lower end of our market (homes under $800,000), and because our “low end” is defined quite differently than the low end of other communities. Evidence that buyers are eager to purchase more affordable homes and condos can be seen in the number of buyers bidding on the same home, especially for homes priced under $800,000.
November saw tremendous competition from buyers. A two-bedroom, one-bath fixer near Mission Canyon was listed for $549,000 and had 23 buyers submit offers. It sold for more than $600,000. Another house nearby, listed for $525,000, had 17 offers and sold for well more than the asking price. A remodeled Goleta tract home hit the market mid-November at $649,000 — a reasonable list price considering the sales so far this year in the neighborhood. There were 16 offers on this house, several of them all cash, and it sold for well into the $700,000s, about 10 percent higher than recent sales of nearby similar homes.
A bank-owned house in San Roque, a true fixer with serious building violations, was listed for $459,000. In a short time it had 12 all-cash offers. One house on the Mesa had just a three-hour window for buyers to view it. It was listed for $649,000, had seven offers, and rumor has it that when it closes escrow, the sales price will show more than $700,000. Similar scenarios are unfolding in the condo arena as well. These are the tales of a real estate market that is in rapid transition.
The median price for condos stands near $400,000 — but as of the date of this writing, there are only 10 condos for sale under $400,000 in the entire area from Goleta to Carpinteria. Of these 10, two are part of the affordable housing program and two are in a 55-plus community, which makes only six condos available for most buyers to choose from in this price range. For condos in all price ranges, November saw 35 condos get an accepted offer (pending sale). With just 63 active condo listings, our inventory stood at only 1.8 months. (A “normal” market has an inventory of four to six months; larger inventories favor buyers and a smaller number of homes for sale favors sellers.)
To illustrate the diversity in our Santa Barbara condo market, the least expensive condo that closed escrow in November sold for $215,000 (in the complex called La Goleta near UCSB), and the most expensive closed at $4.65 million (an oceanfront Montecito condo).
Our inventory of houses for sale, while higher than that of condos, is also in seller’s market territory at 3.3 months. At the end of November, there were just 33 homes for sale in the price range of $600,000 to $900,000, and the 30 days of November saw 30 homes in this price range go under contract. That’s an inventory of one month in this segment! At the end of November, there were only 14 houses for sale listed under $650,000 (in the entire area from Goleta to Carpinteria).
So if it seems like there are “no houses for sale,” this is why. If this rate of sales were to continue, all the homes in this price range would be bought up by the end of the year. New homes hit the market every day, but right now there are more buyers for homes than there are well-priced homes for sale in the under $1 million market. In contrast, at the end of November, there were 96 homes for sale priced between $1 million and $2 million, and 24 homes in that segment went pending in the previous 30 days — meaning there are four months of inventory in that segment. More balanced, but not a buyer’s market in this price range either.
Again, to point out the diversity in our market, the lowest price house that closed escrow in November sold for $400,300 (a west downtown fixer on a small lot), and the highest priced home sold for $12.5 million (a gorgeous Montecito hilltop estate).
If you have been thinking about putting your house or condo up for sale, especially if it is priced under $800,000, now may be a great time. With pent-up demand from buyers in this price range, with interest rates low and with some promise of economic recovery, buyers are creating bidding wars. And you’d have very little competition from other sellers as there are so few homes on the market! At some point, people who need to sell but have been waiting for a little more price appreciation will put their homes up for sale. This increased supply should dampen a bit the upward pressure on prices from such low inventory.
But even with an increase in inventory, it seems clear that the Santa Barbara SouthCoast will soon post median price gains like the rest of California. I wouldn’t be surprised if we have a double-digit increase in 2013. This will be influenced not only by the vast numbers of people eager to buy at the bottom of the market and bidding up the sales prices, but also by purchases of higher-priced homes, both of which influence median price.
What are your predictions for 2013? The Mayans predicted the end of an age. My predictions are much less dramatic — but still thrilling to those of us who love real estate — not an end to the world, but, finally, an end to declining home prices in Santa Barbara. With each ending, of course, comes a new beginning. May you have a wonderful and blessed holiday season and a prosperous 2013.