Bright Future for Santa Barbara
I felt that I was experiencing the power of Santa Barbara’s future after a few days visiting on the Amalfi coast in Italy. It has beautiful coastal views from hills sloping down to the Mediterranean Sea, red tile roofs on houses with water views, weather to live for, and thousands of tourists. It’s a garden paradise with citrus orchards covering the hills, wonderful hiking, yachting, water sports, and sailing from perfect little pocket harbors. It’s remarkable how much it reminds me of our slice of paradise. And our beaches are better…
Amalfi, Sorrento, Minori, Maiori, and Positano have been places to see and be seen since Roman times. Santa Barbara is so new in comparison, but we have a good future. Every piece of Santa Barbara real estate is just a fortune waiting to happen: you may need to be patient and give it time. That makes every turn and twist of the real estate market an opportunity.
Are Clouds Gathering?
The clouds that are gathering over the Santa Barbara and Southern California real estate market are exactly that—foggy clouds—not a real storm—at least not yet, and we cannot tell exactly what is going to happen. In July the Mesa had 40 active listings—up from June’s 36 and May’s 29. Inventory is climbing, while the number of homes selling has slowed. The median price for a Mesa home has increased this year but most of that increase was before April. Price increases have slowed. The number of sales of all homes on the South Coast is down 9 percent from last year.
Since 1988, Southern California, on average, experiences an increase of 6 percent in the number of homes sold from May to June. CoreLogic and CNBC both point to an 11.8 percent decrease from May to June this year in the number of homes and condos sold throughout Southern California. Sales of new homes were particularly weak for June – 47 percent below the month’s average from last year. A market slow down is not a crash: it is a signal that the long upturn in the Southern California market has hit its first bump.
Interest rates are moving toward 4.75 percent, with higher rates on the horizon. What concerns me the most is people buying $1.4M homes on the Mesa. The cost of buying is increasing. For the $1.4M Mesa home, the difference for a standard 80 percent mortgage at 4 percent vs. 4.75 percent is $500 per month. The new tax code adds another $800 per month to the cost of this Mesa home because it limits the deductibility of both property taxes and mortgage interest. That makes the cost of buying a $1.4M Mesa home $1,300 per month higher than buying a year ago. Still, ownership is more desirable than renting, and rates are low.
With slowing sales and plateauing prices if you plan to buy a home and keep it for at least 7-10 years, then you should go ahead and buy. If you do not plan to stay for 7-10 years, consider staying where you are. If you are thinking of selling in the next three to five years, maybe you should sell sooner—for more ease in marketing. This market slow down is not a crash—and I don’t expect prices to drop. It is much more likely to be a “normalization” of the market, with flatter prices and longer marketing times. The future is indeed bright, but markets change. If you are a landlord, Prop 10 in the November election could affect you—you need to be prepared for possible big changes in the rental market. If you need to buy or sell I am prepared to help.
Mesa Market Report
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