Real Estate on the Rebound

Despite all the negative headlines regarding our current economic situation and financial crisis, segments of our real estate market are rebounding in a dramatic fashion.  As predicted by many economists, those markets that were hardest hit by the real estate downturn are turning out to be the first to turn around.

Locally, this shift is most evident in the Goleta housing market which has experienced a higher level of distress sales (foreclosures and short sales) than other areas along the South Coast.  In Goleta where you have large neighborhoods of tract homes, when a few distressed properties in a neighborhood sell at low prices, this can quickly bring down the value of homes throughout that neighborhood.  Like other areas across the nation, those that saw the highest number of distress sales also experienced the sharpest price declines.  Therefore, many of the homes throughout Goleta have dropped $100,000 to $200,000 (some even more) from their peaks.

In essence, Goleta has gone on sale! The good news is that buyers are responding and are coming back into the real estate market.  Currently there are only 37 homes actively listed for sale in the Santa Barbara MLS between $500,000 and $900,000.  During the month of September, only 8 new listings came on the market and 19 properties went pending (received accepted offers and went into escrow).  With 37 active listings and 19 sales a month we currently only have a 1.9 month supply of homes.  Less than a year ago, we had more than a 14 month supply of homes in this price range.

The same phenomenon of increased sales activity is occurring elsewhere.  For example, a recent report out of Santa Maria, where approximately 64% of the actual sales are bank owned, shows an even more dramatic turn around.  Because prices in Santa Maria have declined by about 46%, this area is having a “half off sale” and again buyers are responding. Santa Maria has gone from a 17.4 month supply of homes to only a 2.9 month supply.

Pending sales activity is up across the Country as well.  In the West, pending homes sales surged by 18.4% in August from July and is up 37.8% a year ago.  Nationwide, pending sales jumped 7.4% in the month of August compared to July and 8.8% from a year ago.

Buyers appear to be taking advantage of lower home prices and attractive interest rates, both of which are making homeownership more affordable.  In most areas, the spread between a mortgage payment and a rent payment has narrowed sharply, so owning a home now again makes sense.

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