If you’re curious about Santa Barbara real estate trends, you’ve come to the right place.  The numbers are in for 2014 and if they’re any indication, we’re anticipating a busy Spring season for buying and selling.

How good were last year’s numbers? Well, would it surprise you to know that real estate values in Santa Barbara have nearly reached pre-crash levels?

Let’s explore the Santa Barbara real estate trends for 2014, and see what they tell us about the year ahead.

Market Recovery

One of the biggest real estate market trends in Santa Barbara and elsewhere is the continued recovery from the broader recession and real estate market crash of 2008. That recovery has been much faster than many expected, with home values up 18% over the prior year.

In 2007 before the crash, the median price of a home in Santa Barbara was $1.2M. Four years later, the median had dipped significantly to $790K. By the end of 2014, we are back up to $1.1M.

Speaking of median…

We like to use “median” instead of “average” prices in our Santa Barbara real estate market trends analysis because the average can be skewed by extremely high or extremely low prices.

For example, a single $20M home sale amongst several $1M home sales can swing the average up, signaling that all homes are appreciating. But that $20M may be an anomaly; a rare sale that has no real bearing on what the rest of the market is doing.

A median home price is the one in the middle. It’s more indicative of Santa Barbara real estate trends because there are as many homes that sold above that middle, as sold below it. The median isn’t affected by the bias that an average can introduce, and is a much better proxy for overall home values.

Pace of Gains

One of the biggest Santa Barbara real estate trends of note this year is rapid appreciation. The growth in our home values is in the double digits!

In 2012, the median price for a Santa Barbara home was $795K, and now it’s $1.1M, up 41% in two years.

Overall, longer-term homeowners are recovering the equity lost during the recession, and those who bought over the last five years have had an opportunity to build equity rather quickly.

A Driving Factor in Santa Barbara Real Estate Trends? Low Inventory

With home values in Santa Barbara experiencing strong gains, we look to one of the first drivers of price in any market — supply.

One of the biggest Santa Barbara real estate trends driving our market is tight supply of homes. Last year we had the smallest inventory of homes for sale on record (well, as far back as our board tracks the data) — continuing a four year decline in the number of listings.

In 2014, we had just 1,405 homes come on the market, down almost 7%.

Normally this translates to a strong seller’s market. With so few homes available and steady (or growing) demand, we’d expect to see sellers able to command high prices and sell quickly. Yet the number of days a Santa Barbara home is on the market suggests a twist on that conventional thinking.

Days On Market Another Santa Barbara Real Estate Trend

Days on market is a way of evaluating whether the home was priced well, and it’s also a proxy for buyer demand. Lower numbers generally mean buyers and sellers are aligned so they reach a price more quickly. Higher numbers typically signal a weaker market or overpriced homes that won’t sell until or unless they are reduced.

According to SBAOR, the average number of days that a home is on the market before receiving its first offer is 71 days. When you consider low inventory, it’s no surprise that sellers also see this trend and look to price at or above market.

But if you look at the number of day a home sits on the market, there is plenty of inventory past the 71 day average:

Well-priced homes in Goleta and Santa Barbara are selling fast: well below the 71 day average. For buyers this means once you find the right home, be ready to act fast. There isn’t a lot of time for back and forth and you have plenty of competing buyers vying for the best properties.

Look at the rest of Santa Barbara where unsold inventory has been on the market for more than three months! This means that the homes are overpriced and although there is low inventory and buyers ready to invest (thanks in part to record low interest rates and economic recovery), there is an upside limit to what the market will bear. Buyers are willing to wait on the sidelines for the right price.

Montecito and Hope Ranch appear content to wait it out on both sides, with high-priced homes listed on market almost double the length of time it takes a house to sell in other parts of Santa Barbara.

Price Appreciation

One of the other key Santa Barbara real estate trends we see is that higher priced homes in our more expensive districts of Hope Ranch and Montecito have pulled our median sales price up this year.

Despite the long sales cycle for high-end homes, nearly a quarter of all sales last year took place in these expensive areas.

One of the Santa Barbara real estate trends we expect to continue seeing in the year ahead is strength in home values along with continued low interest rates. We also expect to see more activity at the higher end as wealthy investors cycle funds out of the stock market and into real estate.

Takeaways

For buyers, the takeaway for these Santa Barbara real estate trends is this: Home prices are rising, interest rates are at record lows, and the best-priced homes are moving fast. There isn’t a lot of inventory in town, which means you’ll have a lot of competition for the best properties. Make sure you’re ready with pre-approvals to increase the chances your bid will be accepted and the escrow flows more smoothly.

For sellers, we have the best real estate market in five years. If you’ve been waiting to sell, it’s time to evaluate whether to list your home now. You’re also facing a discriminating buyer for whom the market crash is still fresh in their minds, and the possibility that interest rates will rise and depress housing prices.

If you want a quick sale, be ready to make concessions or face a long listing period. If on the other hand, you’re priced at or above market, make sure you’ve done everything possible to make the home move-in ready.

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