April 2023 Market Update
Alongside the improved, sunny weather, there appears to be an increasing sense of optimism in today’s market. Much of the fear surrounding bank failures that we were seeing in the past month and a half seems to have substantially diminished. Inflation has come down to 5%, providing some hope that in the coming months, we might see some relief on the interest rate front as well. The real estate market continues to be fairly firm when you look at the economics of homes coming on the market. Homes are selling fairly quickly with about one month on market average, and homes are also selling very close to their original asking prices, closing on average at 99% of last list prices, and about 97% of original list prices. Those numbers do demonstrate that sellers are having to adjust prices down at times in order to get one or more offers in, but overall homes are still going into escrow pretty close to their asking prices.
When comparing year-to-date prices between 2022 and 2023, we have seen a decrease overall in the median sales price and average sales prices. The interesting thing, however, is that comparing median home prices in March 2023 against March 2022 we actually saw an increase in the median sales price, but it is difficult to know if that change might be due to a small number of homes that happened to sell for a greater amount of money, or if the numbers we are looking at reflect a sort of tightening in the market. With respect to condos in Santa Barbara County, we’ve actually seen an increase of about 10% in condo values when comparing year-to-date between 2022 and 2023. While that is interesting, we have seen in the past that some of these short-term statistics might not reflect the overall trend in the market. Often, when we have one month of increase or decrease in home prices, people are tempted to assume that means that they will certainly see the value of their own property reflect a similar change. In reality, it is hard to know when looking at short samples of data whether or not the market is actually moving in a particular direction overall. With this in mind, it is important to consider the role of supply and demand whenever making predictions about the direction of the market overall. Additionally, the absorption rate is often a key indicator of whether prices will go up or down, and we are looking at 1.22 months of inventory, which is reflective of a very tightly constrained market. Statistically, this number suggests that prices should continue to stay firm.
One of the really unique factors of our market at the moment is that home sales overall are significantly down. We have actually had the lowest number of year-to-date home sales this year than we’ve ever had in the last 14 years. That is likely happening due to a variety of factors. First, as mentioned in nearly all of our recent updates, inventory is dramatically low. Looking at year-to-date data, we’ve had about 100 fewer homes come on the market each year to date compared with the previous 4 years-to-date. In other words, at this time of year four years ago there were roughly 600 active listings, but to date this year we have had only about 200 active listings on the market. That is a pretty dramatic difference, and it is keeping our market much tighter than a lot of other markets due to the constrained inventory with more buyers than homes on the market. This means that if you are a home seller – even though we’re not seeing the record-breaking prices we were 1.5 years ago, it is still a very good time to be a home seller thanks to the basic supply and demand in our market.
Another factor diminishing the number of sales this year compared to previous years is the overall reaction to the pandemic. The Covid pandemic instigated a significant migration of home buyers and sellers. The world was turned upside down and a much higher number of home buyers and home sellers ended up transitioning over a two year period of time the first two years after COVID and a lot of those transitions were actually scheduled based on normal life circumstances and catalysts not to happen for years. In a way, it could be said that “future transactions” which would not have happened under ordinary circumstances, were brought forward during the early years of the pandemic due to novel life circumstances for a number of buyers and sellers. Now that we’re in a very different season with COVID, it appears we may be coming into a sort of equalization season wherein we’re seeing that the people who would have ordinarily stepped into new life seasons at this time, already did that during the pandemic and as a result we now have fewer people looking to make the change today.
We are likely also seeing a reduction in activity in our area due to the significant wet weather that we had, which does not tend to encourage sales in our area, as well as paralysis in some buyers hoping to wait for interest rates to come down. That said, there are also still a lot of shrewd buyers out there moving forward in purchasing properties with the intention of refinancing later should interest rates come down.
The final factor that could likely be shaping our market is the overall economic uncertainty, which seems to give people an increased feeling of caution with regard to how they use their money in general. While there are a number of buyers and sellers who might be paralyzed by economic uncertainty, this same factor might also drive certain astute buyers and contrarian investors to have hard catalysis to move forward now while competition is lower.
When looking at the current market conditions, it is also really interesting to consider sales strategies. There are a number of strategies that were working in the past that are no longer working in the same way. During the peak of the market when it was somewhat easier to sell homes, homeowners were turning to friends and less experienced agents to sell their properties. More recently, we’ve seen that there is a really strong need for innovative and savvy sales strategies and professional marketing in order to successfully sell homes. Despite the extremely slow market, Zia Group has continued to sell the vast majority of our listings within the first week and with multiple offers. If you are a home seller now, it is strongly encouraged that you find a talented real estate team like Zia Group to help you get the best outcome for your transaction. Reach out to us for your complimentary and confidential consultation today so that we can help provide you with expert neutral counsel on your real estate needs.
South Santa Barbara County Single Family Homes for April 2023
Including annual change | See definition of terms