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Santa Barbara Association of Realtors: 2013 Midyear Review

It looks like Santa Barbara is the million-dollar city once again. After five years of declining and stagnant home prices, our median price for houses sold in June topped $1 million. Our median price for the 114 houses sold this past month rings in at $1,048,000.

Kalia Rork
Kalia Rork

By comparison, in June 2012, the median selling price for that first summer month was $830,000, over $200,000 less.

In this column, we often caution you to avoid using one month’s sales to interpret trends because our market is relatively small and a few sales at the low or high end can skew the median for one or two months. But now that we’ve had six months of statistics to review, the trend seems clear. The median home price is up so far this year — way up.

One year ago, our year-to-date median selling price for houses stood at $792,000, and remained steady through the second half of 2012, ending the year at $795,000. The median price for the first half of 2013 stands at $917,500 — that’s a 15 percent increase in six months!

Condo sales show similar trends. One year ago, condo median price stood at $400,000. At the beginning of 2013, the condo median hovered at just less than $400,000. What is it six months later? For the 215 condos that have closed escrow so far this year, the median is $486,000. While $86,000 may not seem like a lot (ha!), it is a 21 percent increase from the beginning of the year (see Table 1).

Perhaps we can put this in perspective by looking back. What has happened historically after price drops and price stability?

Santa Barbara home prices rose dramatically in the late 1980s, dropped and then stabilized in the early 1990s, and began to rise again in 1996. From 1996 to 2000, the median price for a Santa Barbara house rose 16 percent to 18 percent each year. 2001 saw a bit slower rise of “only” 9 percent (likely due to world events), but then increases jumped back to double-digits, with 2005 showing a more than 24 percent rise in the median selling price (see Table 2).

The year 2005 turned out to be the top of our market, with the median price exceeding $1.2 million — and a total of 10 years of steady gains. What we sometimes forget, however, is that prices didn’t start declining right away. Our median price hovered around $1.2 million for three years, surprisingly, through 2007. Then, after that period of stability came the steep decline. Home values lost more than 33 percent in two years, 2008 and 2009. And can you guess what happened then? Home prices stabilized again.

The median price at the end of 2009 was just about $850,000. At the end of 2012, three years later: $795,000. Although we definitely had times when prices dipped lower, when you look at it from a wider view, our year-end selling prices looked pretty darn stable from 2009 through the end of 2012. Our median price ranged from about $850,000 to $790,000 during those years.

So what can we say about two decades of home-price history in a nutshell: dramatic rises, stability, slight drop, stability, dramatic rises, stability, dramatic drop, stability. That brings us to this year: I’m sure we can call 15 percent in the last six months a dramatic rise. And if history is an indicator, we will see home prices rise for a few more years, if not as dramatically.

Table 2
Table 2.

Concurrent with the increases in median price are low numbers of homes for sale, our housing inventory. Here on the South Coast, we have a little mor than a two-month supply of homes for sale — definitely well into a seller’s market. It’s not uncommon for sellers to have many buyers bidding on their home within just a few days of it being listed for sale. Buyers are still competing with investors who have all cash and can offer short closings and few contingencies. Needless to say, if you have been thinking of putting your house on the market for sale, it doesn’t get much better than this.

We really need lower-priced homes and condos available for sale. As of the day of this writing, there is only one condo with at least two bedrooms for sale at less than $500,000 in all of Santa Barbara South Coast (Santa Barbara, Goleta and Carpinteria) — and there are a lot of buyers who wish they could get into a property for less than $500,000. If you increase that number to $600,000, there are only 10 to choose from. That’s tough for buyers, but very good news for sellers.

Do we think we will continue at this steep rise for the remainder of the year? It can happen, as it did in 1988 and in 2005, where we saw over 30 percent and 25 percent increases, respectively, for the year — but we suspect the rise will level out as mortgage interest rates increase and more homes come on the market. It’s easy to imagine sellers choosing to list their homes now while there are so many eager buyers, rather than risk what prices may do in the future. That said, if history has any lessons, we suspect we will see a few more years of home price increases along our lovely coast. And then, guess what? Stability!

The analysis in the article is overly simplified but will give you an idea of where we think home prices are headed. There are many other influences on real estate prices that are not included in this pithy analysis, and as we know even one comment by the Fed chairman can have a big influence. Plus, your home (or the one you want to buy) in unique. Please consult your Realtor to find out what home values are doing and where they are likely headed in your neighborhood of interest.

Also, be sure to check out our website at www.sbaor.com for the latest news and statistics. That site is also a great place to look for homes for sale. Syndicated sites like Zillow and Trulia have inaccuracies that can make your home search frustrating. The public real estate sites that have the most accountability are SBAOR.com (or any AOR.com) and REALTOR.com — plus your own real estate agent’s or company’s website.

These are all fed by the local Multiple Listing Services, which have strict rules and consequences for the timeliness of the information, the contractual legality of the listings of homes for sale, and the accuracy of the descriptive data — including penalties to agents for inaccurate data and misuse. For our Santa Barbara MLS, we have approximately 1,400 fact checkers who will report an error the moment we see one. Zillow, Trulia and other syndicated sites have no such filters.

— Kalia Rork is a Realtor at Prudential California Realty in Santa Barbara. She may be reached at 805.965.1098 or [email protected], and by clicking here. The opinions expressed are her own.

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