How Hot is Today’s Market?
The Montecito Heat Index identifies today’s demand for Montecito single family homes in five price sectors. By measuring buyer demand (pending sales), rather than sales (closed escrows), which is lagging typically thirty days, we create a forward looking indicator of both market strength and direction. The Heat Index metric 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.
In April, every year over year metric was higher. Comparing 2019 data to perhaps the most unsettling year in recent Montecito memory, we were not shocked by such strong numbers in spite of a measurable downturn in sales and median price in most of California and, but for a select few markets, throughout the country. And the likelihood of a shift to a buyer’s market was looking increasingly probable.
Once again, however, and counter to all trends, today’s year over year data is higher in every measured category. The Median Sales Price which was up 6% in April is up 14% and the Average Sales Price is up 22%, continuing to show strong demand above our median sales price. And the total number of sales rose to 32%, way ahead of our surrounding locales. Added up, one must conclude that sellers remain firmly in control of the Montecito market despite that a year ago was still a very uncertain time here.
Take a look at the adjacent graph and things look considerably different than the year over year data displayed. Most notable is the entry level $1-2m group. For the first time perhaps ever, it found not one buyer. And the $3-4m sector underperformed by a sizable 164.3%. Yet at $4m and above there is noticeable interest with the $5m and above group besting last year’s demand score by 28.6%. Last year’s total demand was 53.6% higher than today.
For at least the past six years, prices have been steadily rising as sellers have been in control and defining both price and terms. A relative lack of homes on the market made it difficult for buyers to have much to say, especially to Montecito’s strong sellers. Inventory is now up by a significant 22% over last year. This, of course, gives buyers more options while reducing competition with other buyers. The result should be falling prices as buyers gain more negotiation power.
While it appears likely that entry level buyers have stepped back from increasingly expensive properties, it was reported that prices are so high relative to average salaries in the three communities in the Bay Area that down payments are approaching 49% to meet the mortgage requirement that no more than 30% of income be allocated to housing costs – it’s not clear that the high-end here will face the same result from their buyers as a result of higher inventory. After the Thomas Fire, the $5m and above sector dropped to the 40s; today it has increased to 80 and is enjoying strong buyer interest.
