June 2022 Market Update
Did you know that 4 out of the last 6 recessions actually saw an increase in home values nationwide? It’s no surprise that we often associate an economic recession with a housing market crisis, given that our last significant experience of a recession in 2008 did lead to home values plummeting like we’d never seen before. However, the circumstances behind a recession also impact what effect the recession may or may not have on the housing market. And, the circumstances of today’s economy do not mirror the circumstances of the years preceding the Great Recession in 2008. While this doesn’t mean we will not see a decrease in home values in the coming months and/or years, it does mean that we need to also consider indicators to assess the nature of our shifting market.
One of the strongest indicators of whether home values are going up or down is actually the absorption rate, also called months of inventory (MOI)–a metric that essentially measures the relationship between supply and demand. How does it do this? The MOI measures how much inventory we have (supply) in comparison to how fast inventory is selling (demand). For example, in the month of May, the MOI was 1.04. This means that if nothing else went on the market, all the homes would sell in just over 1 month. Usually, as inventory goes up, prices go down, and vice versa. If you’ve been following our updates lately, you know that Santa Barbara’s MOI has been historically low since November 2021, dropping below 2 months and fluctuating around 1 month for the last 18 months. While this metric has steadily risen over the last 6 months (from 0.5 to 1.04), the change has been fractional and home prices have reamined strong.
Another way we are experiencing these slight changes in our market is in the number of offers we expect to receive on our listings. While last year we might expect to receive over 10 offers on any given home, currently, we might expect 5-6 (depending on the home and price point). Because of this, buyers do seem to have a little more leverage than they had when competing against 9 other offers. However, offer prices still must be competitive enough to beat out the remaining 5 other buyers, so we continue to see strong outcomes for our sellers.
The decision to buy or sell in today’s economy and market is a nuanced one–none of our advice on the subject is one-size-fits-all. Reach out to your Zia Group realtor partner today to discuss what all this means for you and your real estate goals today so that you can make informed, confident decisions about your future.
South Santa Barbara County Single Family Homes for June 2022
Including annual change | See definition of terms