Recently I was asked for my opinions from a reporter from the Santa Barbara Newspress so I thought it would be interesting to post my thought on Santa Barbara Real Estate, Montecito Real Estate, Hope Ranch Real Estate, Carpinteria Real Estate, Summerland Real Estate and Goleta Real Estate.
The inventory is down in every area of the South Coast except Hope Ranch which is up about 6% year over year. Most areas are down in double digits with Goleta South falling 15% and Carpinteria declining 13%. East of State St is the closest to where we were last year falling only 4%.
With listings down in most areas by double digits sales have declined even farther with Goleta South down 29%, Goleta North down 23% and Carpinteria down 20%. Montecito sales decline matches the decline in inventory as does East of State St but West of State St has fallen 17%.
The number of new listings has fallen for five years in a row from a high of about 550 units for sale in 2010 to less than 280 in 2014. Currently I don’t see anything to reverse this trend.
The three top factors shaping the Real Estate industry in 2015 are first, the inventory. If a property isn’t listed you can’t sell it. Then second, there’s Interest Rates. The Fed has stopped Quantitative Easing but has said that they will keep interest rates low. The longer the Fed artificially suppresses interest rates the more extreme the reaction will be when they stop that suppression. Then third, is fuel prices. If fuel remains low then it could be the one element that spurs growth. We’ve just seen the Dow go over 18,000 primarily on the Fed’s statement that interest rates will remain low and low fuel costs have spurred consumer spending leading to a 5% growth in GDP in the quarter. Thus far that consumer spending hasn’t impacted Real Estate but if it continues then it could foster more activity.
The strengths I see are a diverse collection of housing from homes in the $20 million plus range down to condos just above or below $300,000. The weakness is the lack of inventory. It’s really at the heart of industry.
Currently interest rates are still historically low which is driving what activity is there. If interest rates rise then prices will have to come down because it’s nice to say that we’ve had a 20% increase in the median sales price but we haven’t seen an increase in wages. People, other than the very wealthy are about at the top of what they can pay so if interest rates go up prices have to fall.
The first time home market is better than it has been because we’re not seeing the investors in the marketplace that were buying most of the lower end properties and usually paying cash. We still see situations in which mom and dad buy the property for cash then when the escrow closes the child goes and gets a mortgage to pay them back.
As of now I’m predicting that sales will go down because the listings will continue to fall. There have been a few agents that have done very well but there are a lot of agents who have had a tough year.
I’m not sure what the values of commissions question is asking? Agents would like to receive 6% but it’s not unusual for commissions to be below that number anywhere from 5.75% to 5.5% down to 5% with some offices and agents lowering their commissions significantly.
Real Estate leads are still primarily coming from the internet. What’s interesting is the big sites like Zillow and Trulia have huge traffic residing on the front page of Google results but we find that when people get down to really buying they go to individual agent sites. A little known fact is that most print advertising is really for the seller who wants to see their property advertised. But predominantly what sells a house is other agents and the sign. People drive the neighborhood they would like to live in and call on the signs.
The elevator pitch is listings down, sales down and if interest rates go up then prices will fall.