What to say & where to begin… here is the latest news in Santa Barbara real estate.

You may have noticed that we have not sent out a newsletter in a few months, a brief hiatus, part of that is simply life, but part of that has been this market. We have taken some time to observe and understand these changes.

2024 is a season of change with different market dynamics at play; high interest rates, uncertain economy & politics, and changes in the mechanics of the real estate transaction. Much has been happening in the real estate space, some predictable and others not.

Overall, the word that we have heard and repeated by many local Santa Barbara Realtors is “Quieter.”  And we are not saying quiet, but quieter than how it felt in 2023.  We have felt it and used the word ourselves.  What is strange is that compared to 2023, we are seeing slightly more sales.  We did not use the word in 2023 and in fact, sales are up by 9% for the first seven months of 2024, compared to the same time frame in 2023.

So what is going on?  In 2023, we had record low inventory with many homes still selling quickly, though it was a record low sales year.  Sure some buyers started to get priced out due to values and higher interest rates, but we still had many buyers compared to the limited inventory.

In 2024, the balance is shifting.  On January 9, 2024, we had 174 available homes and condos between Carpinteria to Goleta.  Through the first 5 months, inventory slowly grew to 219 properties on June 4, a decent improvement.  Since then it has continued to climb, on August 20, our inventory rose to 294 properties which is up 69% compared to the beginning of the year.

Some of the rise in inventory can always be due to overpriced properties, but other homes appear to be priced appropriately and still are sitting.  This simply speaks to less demand in our market.

Here is one set of statistics for single-family homes that reflects what is occurring in our market. Looking at all Sold Homes for the first 7 months of 2024 comparing their original list price to their sales price, shows the following:

• Homes sales below $2.2M sold on average for 98.4% of the original list price.
• Homes sales above $2.2M sold on average for 95.7% of the original list price.
• Homes sales above $4M sold on average for 94.3% of the original list price.
• Homes sales above $8M sold on average for 92.7% of the original list price.

One interesting trend for single-family homes in 2024 is that sales prices have remained strong when below the median sales price ($2.2M), but negotiations have been more prevalent for more expensive homes.

As we said in the beginning, markets vary and change, this could be the case for a relatively short time frame or linger for a while.  Hopefully, when the Fed begins to lower rates, which people are betting happens in September, our sales activity will increase.

Not to be missed… Quieter does not mean homes are not selling.  A few of our recent sales were very competitive, receiving multiple offers.  Sales are occurring, but being smart and strategic is more important than ever.

As always, we are grateful for your business and it is a great honor to receive your recommendation.

THE HIGH & LOW

July 2024 Highest Sale  |1030 Via Pradera, S.B. |  Sold for $10,000,000

July 2024 Lowest Home Sale  | 7490 Evergreen Dr, Goleta. |  Sold for $771,300

YTD | Jan. – July 2024

• Total Sales:  717 in ’24  vs  655 in ’23  |  UP 9%
• Total Home Sales:  514 in ’24  vs  457 in ’23  |  UP 12%
• Total Condo Sales:  203 in ’24  vs 198 in ’23  |  UP 3%
• Median Home Price:  $2,200,000 in ’24  vs  $2,125,000 in ’23  |  UP 4%
• Median Condo Price:  $967,500 in ’24  vs  $916,500 in ’23  |  UP 6%
• Sales Above $8M:  34 in ’24  vs  37 in ’23  |  DOWN 8%

July 2024

• Total Sales:  92 in ’24 vs 98 in ’23  |  Down 6%
• Pending Sales:  90 in ’24 vs 85 in ’23  |  UP 6%
• Total Off-Market Sales:  12 Sales  |  13%
• Total Cash Sales:  28 Sales  |  30%
• Average 30-Year Fixed Rate Mortgage: 6.44% as of August 23, ’24

Buyer Representation

Last week, the mechanics of the real estate transaction changed. As realtors, will need to be nimble, creative, and possess strong communication skills. Not to rehash something we discussed before, starting from August 17, sellers are no longer obligated to offer a commission to the buyer’s agent.

In some respects, this is a lot to do about nothing, and in other ways, this is positive as it makes every aspect of the transaction open and negotiable.

It is a lot to do about nothing in that, as there always is a limit to how much a buyer can pay, sellers will still focus on their net gain, and compensation is necessary for agents on both sides to sustain their business.

However, the positive aspect is that the change should enhance the level of service on the buyer’s side, and all financial aspects of the transaction will now be transparent.

How will this affect you?  

If you are a buyer, after August 17, we will need to sign a buyer-broker agreement before visiting homes together. This is a requirement for all real estate agents. In the agreement, we will outline the services we provide as your agent and agree on compensation to be paid upon successfully purchasing a home.

Additionally, a new twist is that a seller may or may not agree to pay compensation, and it will be the responsibility of the buyer and their agent to address this.

Most sellers are likely to elect to compensate the buyer’s agent in a financed sale because it is ultimately in the seller’s best interest. After all, every seller is concerned with their net proceeds from the sale.

Why is that?

If a financed buyer must use a portion of their down payment to pay their agent and cannot utilize financed funds, it significantly reduces their buying power, unless they have a sizable down payment.

Here’s an example: A buyer has a $400,000 (20%) down payment and qualifies for a $1,600,000 loan. If commissions are factored into the sale, it allows them to purchase a $2,000,000 home. However, if the same buyer agrees to pay 2.5% of the purchase price to their real estate agent out of pocket, their down payment is reduced to $350,000. Consequently, they would now only qualify for a $1,400,000 loan, reducing their purchasing power to $1,750,000. This is a simplified example as the commission would reduce as well, but the principle remains.

Moving forward, there will be more variables in a real estate transaction, but we will adapt and ensure the best outcomes for our clients throughout the process.