The Montecito Heat Index: How Hot is Today’s Market?
The Montecito Heat Index identifies demand for Montecito single family homes in five price sectors. By measuring buyer demand (signed contracts) rather than sales (closed escrows), we create a forward looking indicator of both market strength and direction rather than sold data which is typically a month or more old. This metric also shows us the price point(s) where value is most recognized by buyers and a forecast of likely properties soon to close escrow. And since real estate activity fluctuates often monthly, today’s Heat Score is compared to this date last year. All data are from the Santa Barbara MLS and are uniformly deemed reliable.
Comparing today’s demand to this date last year is sobering. No one needs to be reminded of the conditions on the ground here following the debris flow. The immediate impact upon our community including our real estate market was stunning. The difference between today’s buyer demand and that of a year ago is a notable 113.46% in spite of a potentially dangerous rain season and three municipally ordered evacuations. Very clearly, with very few homes to choose, buyers have come and taken a chance on a community in recovery.
As the adjacent chart demonstrates, all price sectors easily exceeded last year’s numbers except the high-end $5 and up estate properties. The $2-3m group is the buyers’ choice, scoring a big 35 compared to last year’s 15. The often difficult $4-5m homes, which had no demand last year, scored a strong 28, and close behind, the $1-2m group scored a 27. Last year there were 23 for sale in this sector, today 15.
Year over year, every metric is higher for Montecito. The Median Sales Price is up 6% to $3,049,500 and the Average Sales Price is significantly higher than last year, up 20% at $5,153,079 evidencing strong demand above our median price point. The total number of sales rose just 23% (Hope Ranch sales are down 38%).
These strong numbers may not be sustainable. In fact, comparison to an aberrant prior year may be masking a slowing market here in Montecito. Nationally the slowdown is well in place and in California, the number of sales has been down for ten months in a row.
For the past six years, prices have been steadily rising as sellers have been in control and defining both price and terms. This control is beginning to transition to buyers. With asking prices at or near 2006 highs, the California Association of Realtors claims buyers are objecting. And a staggering 30% of California sellers are today choosing to move out of state to more affordable markets, up 10% since 2013. The 2017 enacted Administration’s limit on mortgage interest and property tax deductions impacts virtually all of our market (95% of households nationally will be unaffected), making it even more expensive to purchase here. It seems that affordability has become a steeper barrier for too many buyers nearly everywhere.
The considered view is that with buyers stepping back from current asking prices, and the inflation threat most likely receding, median sales prices will slightly decline for the near future. Advantage buyers, yet most likely a slow transition. And here the transition will likely be slower than most places. In fact, whether future Montecito buyers, always facing limited inventory and steep prices, will be better able to negotiate future price and terms with our notoriously stubborn sellers remains a legitimate question.
