December 2022 Santa Barbara Real Estate Market

While we’re seeing national headlines about economic uncertainty and a downward market shift, the Santa Barbara market is currently much stronger than many other locations in the country. Santa Barbara homes continue to sell and sell at high price points overall. This is not a new phenomenon as our market typically sees less volatility than other markets across the country. Put in a historical context, absorption rate data is always a strong indicator of the nature of the market overall and our ability to best anticipate the coming market. Historically, we have never seen a long-term, sustained decline in sales prices with less than 6 months of inventory in the market. Currently, we have 1.4 months of inventory–meaning that if no new homes came on the market and homes continued to sell at the rate we’re tracking, it would take 1.4 months until there were no homes left to sell. This is a very positive statistic for homeowners and sellers in our area. In 2020 we saw 2 months of inventory, in 2019 we saw 3.8 months of inventory, and in 2018 we saw 4.6 months of inventory. As you can see, when comparing this November’s data to that of years prior, the only better December market update would have been last year, when we saw 0.94 months of inventory. Otherwise, this is actually the strongest absorption rate data for the month of November in recent records. 

Even with that extremely low absorption rate, however, we do seem to be seeing an adjustment in the market. The market does appear to have been quieter this year overall, with fewer sales this year than we have seen in the past 11 years. In the month of November, we also saw a slowing overall, with homes taking twice as long to sell compared to this time last year. Both of these trends continue to suggest what we have been saying in months prior, that buyer demand has gone down overall, whether due to economic uncertainty, interest rates, media coverage, or an overall concern that home prices might come down. Sustained demand for homes in Santa Barbara partnered with low home inventory, however, continues to buffer us from seeing home prices drop precipitously. We also saw that 81% of the homes that came on the market actually sold. While this is lower than recent years in a record-breaking seller’s market, when compared to earlier this year, this is actually an increase in the percentage of homes sold overall. Data surrounding the percentage of homes selling in the past months does not suggest a precipitous decline in the market overall. 

The uncertainty in buyers and sellers that we’re seeing does appear to be factoring into recent sales. We’ve seen some properties sell above what they might have a year ago, and we’ve also seen some properties sell below what they might have a year ago. In month-over-month data, we have actually seen lower median and average sales prices when compared to November of 2021, but when you look at the entire year, the average sales price from 2022 is still higher than that of 2021. In other words, sales prices do suggest that the market appears to be balancing out a bit compared to the last few years. Contrary to a major downturn, however, in our market buyers and sellers seem to be getting a healthy touch of realism in negotiations and sales. Unlike what we were seeing in the extreme seller’s market of the past years, sellers now–particularly those of single-family homes–do seem to be making some adjustments in their expectations, with homes selling on average at 3.5% below their last asking price and 9% below their original price. In the condo market, however, we’re not seeing this trend, with condos still selling at on average 100% of the original asking price. Looking at Zia Group’s sales specifically, on average we are actually still seeing that we’re still selling our listings for above the asking price–whether single-family homes or condos. In other words, our strategies are still proving to be successful today, even in an adjusting market. We are expecting the market to remain constrained in the coming months with a fewer number of sales, but we do believe that there are going to be a lot of serious buyers out there who are looking to find sellers that are motivated and pricing their homes right in the context of today’s market. Now more than ever it is important that you work with a team that understands the nature of a shifting market and can help position you as either a buyer or a seller for the best possible outcome overall. Want to know more about today’s real estate market and what it might mean for you? Reach out to your Zia Group Realtor Partner today.