Tuesday, July 17 , 2018, 1:11 pm | Partly Cloudy 69º


Local News

Real Estate Signs Emerge for a Buyer’s Market

South Coast home sales begin to pick up but falling prices are eroding the sellers' edge.

The South Coast has a chronic shortage of entry-level homes like townhomes, condominiums and smaller single-family homes so federal stimulus spending could have a positive effect locally.
The South Coast has a chronic shortage of entry-level homes like townhomes, condominiums and smaller single-family homes so federal stimulus spending could have a positive effect locally. (Michelle J. Wong / Noozhawk photo)

Million-dollar home sales across California have plummeted to their lowest level in five years and South Coast median home prices have fallen to under $1 million, but for some lucky people, this is the best time to get that house in paradise that they’ve always wanted.

“For under a million, you can get a standard three- or four-bedroom home, maybe a single-level ranch style or the smaller two- or three-bedroom bungalow on the east or west side of State Street, some with a view,” said Alyson Spann, president of the Santa Barbara Association of Realtors and a realtor with Village Properties.

Home sales are picking up across the South Coast, said Spann, particularly in Goleta. More favorable interest rates are one reason for the increase in local sales of under $1 million. Prospective buyers are more likely to get off the fence when rates are low, she said.

Also, she said, people are just taking their chances with a down housing market.

“No one knows when we’re going to truly hit the bottom, and if you wait for the bottom to hit, you’ve waited too long,” she said. When the market turns around, she said, competition will make it difficult for prospective buyers to get the home at their price.

Some economists have predicted the economy will start coming back as early as late this year, with the housing market being among the first to turn around. Others are not so sure.

For the moment, however, the steep economic correction is the main reason why median home prices have dropped to around $750,000. Last year, except in neighborhoods like Hope Ranch and Montecito, the housing market was showing weakness all over the South Coast. Prices dropped for homes whose owners had to sell because of job loss, increased interest rates, or both.

Sales of bank-owned and short-sale properties in the Goleta area have been particularly successful, at least from Spann’s perspective. Those are the properties people can more easily buy through a jumbo loan, which is capped at $603,000 for the South Coast area, she said.

Of course, every silver lining has its cloud. While lenders have been receiving more applications for loans and refinancings, they are also pickier about lending. Generally, potential borrowers should have a fairly high credit score, enough for the down payment, the income to back up the loan and a couple months of reserves in the bank.

“(The banks) are probably going back to the old requirement of no more than 33 percent of your gross income for your monthly payment, including insurance,” Spann said.

Jumbo loans also require a higher down payment and are more difficult to refinance than standard conforming loans capped at around $417,000.

Bob Widing, a longtime realtor with Coldwell Banker, is a little more reserved about local home sales for under $1 million.

“It’s still slower than it has been in the past,” he said, although some areas, like Goleta, have been “making adjustments in a positive direction.”

The difference he’s seen from this housing market is that buyers are becoming more proactive and informed about their options. Lenders he knows have been receiving more applications for home loans and refinancings from people trying to take advantage of the lower interest rates.

The news of an increase in local homes sales is something of a good sign for Jennifer McGovern, who heads up the Housing Trust Fund of Santa Barbara County.

“Things have been on hold for a while,” said McGovern, whose nonprofit organization works with local employers to provide housing assistance to their employees. Because of the economic uncertainty, she said, employers have been reluctant to sign on to programs like the Trust Fund’s.

According to McGovern, the South Coast already suffers a “chronic shortage” of entry-level homes like townhomes, condominiums and smaller single-family homes. Now, state-subsidized affordable housing and rentals have been on hold as well, because of California’s funding freeze.

With a stimulus package that could include a funding program with Fannie Mae that provides homeowners with loans at 4.5 percent interest, billions of dollars for affordable housing, as well as a $15,000 tax credit for new homebuyers, the housing market looks like it could start to rebound. The House of Representatives passed its version of the $800 billion spending package last week, while the Senate has reached a tentative agreement but has not yet voted.

“It would be the biggest infusion of federal dollars we’ve had in decades,” McGovern said.

Despite the slowdown in the market, or even because of it, all agree that it’s become a buyer’s market.

“Buyers were at the mercy of sellers for years,” said Widing. Sellers, these days, he said, must exercise a little more patience and fortitude, and perhaps even be able to meet their prospective buyer more than halfway.

“I tell them there are properties selling out there, and they’re selling for less,” he said.

There are more sellers who have to sell than buyers who have to buy, he said, adding, “I call it buyer’s revenge.”

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