June 2023 Market Update
Welcome to the monthly real estate market update for South Santa Barbara County. In this update, we will review the real estate statistics for the month of June 2023 and discuss the current trends and outlook for the Santa Barbara market.
Interest rates play a significant role in the real estate market, impacting buyers’ purchasing power. The Federal Reserve recently decided not to increase the Fed rate in June, but they have hinted at potential future increases before the end of the year. While the exact effects on the local economy and real estate market remain uncertain, it is a factor worth monitoring.
Currently, the market continues to experience a shortage of available homes, resulting in fewer options for buyers. This limited selection has led to a decrease in purchase decisions and, consequently, fewer property sales. On average, there has been a roughly one-third reduction in new listings and sales compared to previous years. Although monthly fluctuations may deviate slightly from this average, the overall trend remains consistent.
It’s important to note that the reduced activity is not due to a lack of buyers but rather the challenge of finding suitable homes to purchase. Therefore, if you are a home seller, the current market conditions still strongly favor you due to the imbalance of supply and demand.
Regarding prices, there has been a softening in sales prices on the median and average levels compared to the previous year. Year-to-date, we have observed an approximately 7% decline in these price indicators. However, when excluding luxury areas like Hope Ranch and Montecito, the average sales price shows no change from last year. This divergence indicates that different market segments are affected differently by factors such as interest rates. It is worth mentioning that Santa Barbara and its surrounding areas boast a substantial cash market, with approximately 40% of escrows closing as all-cash transactions.
In terms of market activity, properties priced between one to two million dollars for single-family homes are in high demand and sell rapidly within one to three weeks. The luxury market, although slower relative to previous years, remains active, with 11 sales above the five million dollar price range. On the other hand, the low to mid-two to low to mid-three million dollar range experienced comparatively slower activity in May, with properties taking an average of eight months to sell.
Taking an overall view, including luxury homes, affordable properties, and condos, the average time to sell a property is currently around one and a half months. This timeframe has increased from the previous year and the peak markets of 2020 and 2021. It’s important to consider that the slower pace of sales is primarily due to the limited inventory available.
Sellers have begun adjusting their listing prices to reflect the current market conditions, leading to a 5% decrease in the median listing price compared to the previous year. This adjustment indicates that sellers are becoming more realistic, which is positive news. Consequently, market activity is picking up, albeit constrained by the scarcity of inventory.
In the luxury market, notable sales include the property at 1045 Cold Springs Road, which sold for just under 16 million dollars, and a nearly 6 million dollar condo on Via Alicia, located in the Eucalyptus Hill neighborhood between Santa Barbara and Montecito. The condo offers stunning panoramic ocean views and set a record-breaking price for its complex.
Looking ahead, one of the key indicators to watch for price trends is the absorption rate or months of inventory. This metric represents the number of months it would take to sell all available homes at the current sales pace without new listings. Currently, the regular market has an absorption rate of approximately 1.8 months, slightly up from previous levels, while Montecito and Hope Ranch show over four months of inventory. The uncertainty in the market, including economic factors and potential interest rate changes, might explain this slight increase. Savvy buyers and investors are taking advantage of the current economic situation, seeking good deals and long-term investments in anticipation of future market cycles.
Overall, the market remains active during the summer season. Although there has been a slower start due to the “June gloom,” the weather is improving, and more attractive properties, especially those with ocean views, are expected to enter the market. However, the pace of market activity will likely remain measured due to the limited inventory. Currently, it is still more of a seller’s market than a buyer’s market.
In conclusion, the Santa Barbara real estate market shows signs of stability and resilience. If you require personalized advice regarding buying or selling a property, our team at Zia Group is here to offer confidential consultations. We prioritize your best interests and can assist in developing a strategic plan tailored to your specific situation. Whether it is the right time to make a move or wait, we provide neutral advice to guide your decision-making process.
Thank you for tuning in to this update. I will provide another market update in July. Have a fantastic month ahead!
South Santa Barbara County Single Family Homes for June 2023
Including annual change | See definition of terms