January 2023 Market Update
Overall, 2022 was an interesting and variable year for Santa Barbara real estate. It started out very strong-similar to what was seen in 2020 and 2021, but we saw a slowing in April and May when interest rates started to rise dramatically. While it is typical that when the market slows down sellers pick up the pace and start listing their homes to capitalize on peak prices, we actually did not see the home inventory rise in response to the slowing that many would have expected. We actually had 22% fewer home listings come on the market in 2022 when compared to 2021, and that was one of the primary reasons we saw about ⅓ fewer sales in 2022 when compared to 2021. This means that if you were a home buyer in 2022, with rising interest rates, you likely had decreased buying power alongside fewer homes coming on the market to make it more challenging to find the right home for you to buy. As a response, many buyers decided to wait on the sidelines, and many remain on the sidelines as we’ve entered into 2023. Today, there are still a lot of buyers out there ready to buy but waiting for the right home inventory to come on the market – a trend that we actually did see in the December market specifically (more on that below).
The month of December was actually a strong end to the year despite 7 straight months of low inventory and rising absorption rates. In December, we actually saw the absorption rate go down for the first month in quite a while, with the highest percentage of homes coming on the market selling in December compared to any month in the last 24 months. In that sense, we saw a lot of success in the market even though there wasn’t a tremendous number of sales compared to the number of homes that came on the market in December. Looking at the year as a whole, we saw just under 1500 homes and condos sell in total, which is interesting because it shows that we actually have far more agents than we do homes that sell in a given year. In that sense, a number of real estate agents “went hungry” this year and didn’t sell a single property. This is fairly common but feels significant following the big boom in the market that we saw in 2021 and 2022. As a result, I would expect the number of agents to decrease in the coming years as the market continues to balance or slow down compared to the surge of the past years.
When it comes to home prices, you might be surprised to learn that home values have actually still risen year over year when you look at 2022 versus 2021 in both median and average home prices. More than likely this is reflective of a continued rise in values during the earlier part of the year, followed by the softening that we saw in the second half of the year. Consequently, there is actually more optimism going into 2023 than a lot of us expected, both locally and throughout the nation. Part of that is due to the steadily lowering interest rates that we have seen recently, allowing for renewed excitement for both buyers and sellers.
To put it all into context, a home today is worth nearly five times as much as it was 25 years ago. This means that if you are a homeowner in town and who purchased your home 25 years ago for 500,000, the value of your home today is likely a little under $2,500,000–a phenomenal return on investment! In short, even though our market has been a little bit frothy lately, a lot of people are continuing to see the value of homeownership over the long term. Looking forward to 2023, we expect another interesting year in real estate, and we will continue to provide these monthly updates to help keep you informed on what we’re seeing as time progresses. It is our continued commitment at Zia Group to continue to be your real estate economists of choice. If you would like to learn more about the market and what it might mean for you, reach out to your preferred Zia Group realtor partner today!
South Santa Barbara County Single Family Homes for January 2023
Including annual change | See definition of terms