March 2023 Market Update
Looking at February data, we see a significantly lower sales environment than in the recent past – with a little less than 40% fewer sales this year compared to this time last year. This is essentially the lowest number of home sales we’ve had in the past 10 years. At the same time, the market appears to remain strong in other ways. Almost every one of the listings our team has brought on so far this year has sold with multiple offers and we’ve been able to provide great sales experiences for those sellers. For properties that do come on the market, we’re still seeing a lot of activity thanks to a large number of hungry buyers looking for the next property to come on. In essence, the market is stalling with lower sales activity due to the limited number of homes for sale, and we are in turn seeing a similar stalling in terms of price appreciation.
During the month of February, we saw home selling closer to their asking price than they were in January or December of 2022. We saw homes sell at about 3% below their last listing price and about 4% below their original listing price. Condos, on the other hand, sold at essentially 100% of their original list price, and 102% above their last list price. This could be explained by the fact that there are about ⅓ the number of condos for sale today as in the market of 2019. Both median and average home prices were down year to date compared to last year, which might cause you to think that home prices are beginning to decline. This, however, may not necessarily be a long-term trend. 2015, 2017, and 2020 all demonstrated lower median sales prices than the previous year despite the fact that the overall long-term trend since 2011 has been steadily increasing home values. Each of those adjustments in the market did not precipitate an overall decline and it is hard to know if we will again see that pattern based on today’s data alone. On the flip side, the median sales price in February was actually the highest we’ve seen in the past 6 months and the percentage of homes that sold after coming on the market was up to 97%, which is 10% higher than this time last year.
The number of sales this year is about 5% more than in the years 2008, 2009, 2010, and 2011. While we’re technically selling more now than we were in those four years, the market today does feel a bit like those years in terms of sales activity even though the underlying cause is very different. In those four years market activity was down due to an oversupply of homes with buyers cautious to get into the market. Today, on the other hand, we have lots of buyers wanting to buy without enough homes on the market available for them.
It is important to acknowledge recent events and how they might affect our market moving forward. With the failure of Silicon Valley Bank and Signature Bank of New York both facing closures and FDIC coming in to take over both within days of each other. we’re seeing the largest banking failure since 2008. While the FDIC and Fed provided relief to depositors, the question lingers: “what is this event going to do to the real estate market as a whole?” While some are indicating that these are isolated events, there is a bit of lingering fear and uncertainty in the banking environment as a whole. Interestingly, this uncertainty and fear may not actually be a negative element for our real estate market because one way to hedge against financial uncertainty in the banking world is to choose to spread out your assets or withdraw from the bank. Those who are concerned that this might not be an isolated incident may begin searching for somewhere else to put their money, and to many, real estate provides a viable and secure possibility for assets in the midst of all that uncertainty. In this light, it is possible that the recent banking failures might not contribute to a decline, but rather to a boost in the real estate market. It is hard to know for sure.
In Santa Barbara, rain is actually another important variable to consider when we look at the market. We’ve had nearly 30 inches of rain just today in Santa Barbara, which is nearly twice as much as we typically expect in an entire year. Because our climate is typically 70 degrees and sunny, periods of rain often mean that buyers are less motivated to get outside and look at homes on the market and sellers also have a harder time capturing their homes in photography and video during periods of rainfall. This means that homes that were supposed to come on the market might be delayed due to rainfall, which again may have an impact on the activity that we have seen and the data we will later analyze for the month of march.
It is hard to know how all of the variables in our economy will influence our local market as we move forward. In our own sphere, we have actually already seen a number of clients indicate that they want to shift more resources into real estate, which if seen at a larger scale would be a boosting factor for our market. On the other hand, we’ve also had some express mounting concerns leading to paralysis, which if seen at large could be a softening factor for the market.
If you’re considering what the current market conditions mean for your own real estate goals, reach out to your preferred Zia Group realtor partner. We are happy to provide you with neutral counsel and help you navigate all of the interesting economic variables we’re currently facing so that you can come to the best conclusion for you and your family.
South Santa Barbara County Single Family Homes for March 2023
Including annual change | See definition of terms