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– The headline “Sales Down 34 Percent” only tells half of the story of the local real estate market.– There were fewer homes available for purchase, which resulted in fewer sales.– The market is cooling down slightly and not all homes are selling right away or attracting multiple offers.– Buyers are seeking well-priced and well-presented homes and are willing to compete for them.– Sellers of desirable, value-priced properties might receive three to five offers this year, compared to eight to 10 offers in previous years.– The number of homes for sale is down 71 percent from pre-pandemic levels.– Low inventory numbers are due to homeowners refinancing at low interest rates and postponing their next move.– Months of inventory is a statistic used to assess the strength of the market, with anything less than three months indicating a sellers’ market.– Currently, there are only 1.8 months of inventory for houses in the market.
“Sales Down 34 Percent” makes for an attention-grabbing headline, but it only tells half of our local real estate market story this year. As you can see from the chart, the math is correct: 748 houses and condominiums sold in the first half of 2022, and just 508 sold in the first half of this year. However, if there had been more homes available to purchase, most of them would have sold!
Having said that, our market is cooling down slightly, and not all homes are selling right away or attracting multiple offers. Buyers are predominantly seeking well-priced and well-presented homes, and they are willing to compete for them. Sellers of these desirable, value-priced properties might receive three to five offers this year, versus the eight to 10 offers they would have expected in 2021 and 2022. Average days on the market have also started to increase in most neighborhoods, giving buyers a little more time to consider their purchase.
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The real headline: Inventory Crisis. The number of homes for sale is down 71 percent from pre-pandemic levels.
At the end of June 2019, we had 558 houses and condominiums available for sale; this is across all price ranges, and all areas, from Carpinteria to Goleta. Today, we have just 160! A buyer might have only two or three properties to consider that match their criteria. One compelling reason for the low inventory numbers is what one lender termed, “mortgage lockdown,” where a homeowner refinanced in the past few years at 3 percent or below and has postponed their next move for the foreseeable future.
[Click to enlarge] Credit: Courtesy
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Months of Inventory
In real estate statistical analysis, we often illustrate the strength of the market in terms of months of inventory. Months of inventory, alternatively referred to as market velocity, shows the current pace of sales, by dividing the number of active listings by the number of properties in escrow. As a general rule, anything less than three months of inventory is indicative of a sellers’ market. This statistic is particularly useful in assessing current buyer confidence — whereas analyzing “sold” data reflects sales activity 45 to 60 days earlier.
Market-wide, from Carpinteria to Goleta, there are only 1.8 months of inventory for houses, the same as one year ago. Statistically, this means that at the current sales activity level, assuming no new listings, it…
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The real estate market on the Santa Barbara South Coast has experienced a significant decline in sales, with a 34 percent decrease compared to the previous year. However, this statistic only tells part of the story. The main issue affecting the market is the severe lack of inventory, leading to a crisis for potential buyers.
In the first half of 2022, a total of 748 houses and condominiums were sold, while only 508 were sold in the first half of this year. While this may seem like a substantial decrease in sales, the reality is that if more homes were available for purchase, the majority of them would have been sold. The high demand for well-priced and well-presented properties is evident, with buyers willing to compete for these desirable homes.
Sellers of value-priced properties can expect to receive three to five offers this year, compared to the eight to 10 offers they would have received in the previous years. Additionally, the average days on the market have started to increase in most neighborhoods, giving buyers more time to consider their purchase.
The underlying issue causing this decline in sales is the inventory crisis. The number of homes available for sale has decreased by 71 percent compared to pre-pandemic levels. In June 2019, there were 558 houses and condominiums available for sale across all price ranges and areas. However, as of now, there are only 160 properties available. This limited inventory means that buyers have very few options that match their criteria when searching for a new home.
One of the reasons for the low inventory numbers is the phenomenon known as “mortgage lockdown.” Many homeowners took advantage of low interest rates and refinanced their mortgages at 3 percent or below in recent years. As a result, they have postponed their plans to move, leading to a scarcity of available homes for sale.
To illustrate the strength of the market, real estate professionals often use the concept of months of inventory. This metric, also known as market velocity, measures the current pace of sales by dividing the number of active listings by the number of properties in escrow. A sellers’ market is typically characterized by less than three months of inventory. Currently, the market-wide months of inventory for houses from Carpinteria to Goleta is 1.8 months, the same as one year ago. This indicates that at the current sales activity level, assuming no new listings, the available inventory would be depleted in less than two months.
To bring it all to a close, while the headline of declining sales may grab attention, it is crucial to consider the full picture of the Santa Barbara South Coast real estate market. The inventory crisis, with a 71 percent decrease in available homes for sale, is the primary factor affecting the market. Buyers are facing limited options, and sellers of well-priced properties are still receiving multiple offers, albeit fewer than in previous years. As the market continues to adjust, it will be essential to monitor inventory levels and buyer confidence to gauge the strength of the real estate market on the Santa Barbara South Coast.
