Santa Barbara Real Estate Market Update For April 2022

April 2022 Market Update

Did you hear interest rates are set to rise another 6 to 7 times this year? What does this mean for buyers who still haven’t had luck in securing a home in this intense sellers’ market? What does this mean for homeowners who are considering selling their homes? What impact could rising interest rates have on you and your family? Let’s take a look.

When interest rates go up, buying power goes down. When buying power goes down, historically, we see home sales prices react by going down as well. Some feel that this trend will not continue this time around, given the strength of the market. From that perspective, buyer demand will far outweigh the impact of rising interest rates. While this is possible, it is also still possible that rising interest rates could lead to home sales prices going back down, as we have seen historically.

While we can’t predict the future, we can look at the market as it stands today as we help you to think critically about what choice is best for you and your family today.

When we look at recent market activity, we see that the absorption rate (or months of inventory) is lower than in previous months in 2022 at 0.66 (~20 days). In other words, inventory, as compared to demand, is still low. In March, 111 new homes went on the market. That is 18 more homes than in February. At the same time, 109 homes were sold in March–the highest number of sales in a single month so far in 2022. What does this tell us? Even as inventory goes back up, it still has not met buyer demand.

Will increased interest rates decrease buyer demand, thus resulting in lower sales prices? Will buyer demand persist for practical reasons (we all need a place to live!), thus continuing to drive prices up, despite buying power decreasing? These things remain to be seen, but it is all the more imperative to talk with your real estate advisor today so that you can create a plan and make educated decisions with the information we have. Call your Zia Group agent today.