Jobs are the principal driving force behind the demand for housing and regional home sales. Right now there are near unlimited job opportunities as well as rising incomes, yet home sales have been unimpressive. In much of California, they even declined last year.
The demand for rental housing has dominated the housing choices, as both Millennial’s and Boomers look to non-ownership housing. Consequently, the emphasis has been on building apartments, though new single-family home production is also rising in most cities, including Santa Barbara.
Existing home sales are forecast to remain at muted levels in 2019 and beyond. The fall-out that occurred in 2018 (with sales falling 9 percent in Santa Barbara-Goleta-Montecito and 5 percent statewide) is unlikely to be reversed this year or next. This late in the expansion, home buyers are reticent to buy homes at record high prices with the expectation that a recession is coming.There is still the memory of the 2006-2007 housing bubble and the fear of buying at the top.
While lack of inventory had been a constraining factor on home sales in recent years, this year inventory is rising. With more supply and a reticence to buy, look for softening prices in 2019.
A meaningful correction in prices is not being forecast because the economy will remain strong,incomes will continue to rise, and many households will still elect to buy, especially as interest rates move lower.
Year to date, the median sale price is about 2 percent lower than values a year ago along the South Coast. For the first 3 months of 2019, the number of sales is actually ahead of last year’s pace.
Our base forecast for home price appreciation does moderate however, and the alternative forecast will turn negative if sales fall off. Again, a major correction in prices is unlikely to occur.
Mesa Market Report
Door Reopens for Short Term Rentals on Mesa
If you own a property in the Coastal Zone of the Mesa (the area between Cliff Drive and the ocean), you are again free to rent your home, or any portion of it, by the day or week. Recently, the City’s two year prohibition of Short-Term Rentals (STRs) was declared a violation of the California Coastal Act by Superior Court Judge Mark Borrell. In his ruling, Judge Borrell ordered the City to prepare “reasonable regulations” of STR’s that must be approved by the California Coastal Commission. The judge also ordered the City to return to the STR policy that existed when the City Council voted to prohibit STRs in June 2015. The rules at that time were that property owners must obtain a Business License, and also register to collect the 12% Transient Occupancy Tax.
The effective date for the judge’s order was March 8, 2019. You can thank (or blame!) Theo Kracke, owner of Paradise Retreats, for suing the City and winning. If you are looking for STR property management, Paradise Retreats is an excellent provider of professional property management services.
Client Talk…
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