Santa Barbara South Coast Mid-Year 2023 Real Estate Market Update

“Sales Down 34 Percent” makes for an attention-grabbing headline, but it only tells half of our local real estate market story this year. As you can see from the chart, the math is correct: 748 houses and condominiums sold in the first half of 2022, and just 508 sold in the first half of this year. However, if there had been more homes available to purchase, most of them would have sold!

Having said that, our market is cooling down slightly, and not all homes are selling right away or attracting multiple offers. Buyers are predominantly seeking well-priced and well-presented homes, and they are willing to compete for them. Sellers of these desirable, value-priced properties might receive three to five offers this year, versus the eight to 10 offers they would have expected in 2021 and 2022. Average days on the market have also started to increase in most neighborhoods, giving buyers a little more time to consider their purchase.

The real headline: Inventory Crisis. The number of homes for sale is down 71 percent from pre-pandemic levels.

At the end of June 2019, we had 558 houses and condominiums available for sale; this is across all price ranges, and all areas, from Carpinteria to Goleta. Today, we have just 160! A buyer might have only two or three properties to consider that match their criteria. One compelling reason for the low inventory numbers is what one lender termed, “mortgage lockdown,” where a homeowner refinanced in the past few years at 3 percent or below and has postponed their next move for the foreseeable future.

[Click to enlarge] Credit: Courtesy

Months of Inventory

In real estate statistical analysis, we often illustrate the strength of the market in terms of months of inventory. Months of inventory, alternatively referred to as market velocity, shows the current pace of sales, by dividing the number of active listings by the number of properties in escrow. As a general rule, anything less than three months of inventory is indicative of a sellers’ market. This statistic is particularly useful in assessing current buyer confidence — whereas analyzing “sold” data reflects sales activity 45 to 60 days earlier.

Market-wide, from Carpinteria to Goleta, there are only 1.8 months of inventory for houses, the same as one year ago. Statistically, this means that at the current sales activity level, assuming no new listings, it would take a little less than two months to sell everything! From a practical standpoint, however, as the South Coast market comprises several micro-markets, and a wide range of prices, each sub-market performs differently. Goleta, for example, currently has a fast-paced three weeks of inventory, as does the South Coast condominium market. At the other end of the scale, Montecito now has 3.3 months of inventory, indicative of an active market, however slightly slower than last year’s 2.5 months of inventory.

Which Market Segments Are Out-Performing Others?

As reported through our local Multiple Listing Service, almost 40 percent of the first six months’ closings of 2023 were less than $2 million. The highest-performing market segment is the $1 million–$2 million price range, which saw 197 successful closings. In our luxury market, 33 homes priced more than $8 million sold in the first six months, down 25 percent from the same period last year, though still evidence of strong market confidence.

What About Prices?

Some good news for buyers: Yes, prices are down slightly. The median price for South Coast homes is $2,130,000, which is down approximately 5.3 percent from one year ago. The double-digit, year-over-year price increase trajectory since 2020 was not sustainable. Historically, we have seen where an annual appreciation of homes of 5-6 percent is sustainable. 

Following the surge in prices in the past few years, directly related to pandemic migration to our beautiful environs, buyers have now become value-sensitive, and sellers have had to temper their previous over-exuberance in pricing. Sellers who price their homes too high initially are faced with reducing their prices to recapture attention, which is often tough to do.

What’s Next?

We do not see a decline in buyer desire in the foreseeable future. The recent spate of high temperatures across the country will only cause more people to seek out cities with temperate climates like our own. Prices may continue to plateau for the rest of the year, but market forces point to a future renewed uptick in prices, albeit at more sustainable levels in the lower single digits.

Looking back over many years, our local market has only really been significantly impacted, as far as price levels, by significant world events, financial and otherwise. The analogy of the saying “When is the best time to plant a tree?” bears true for investing in Santa Barbara real estate. Real estate is a long-term investment and is one of the most important contributors to an individual’s wealth over time. National studies have shown that the net worth of a long-term homeowner is as much as 40 times that of a long-term renter.

Whether you are a buyer or a seller in today’s hard-to-navigate market, your Realtor is your best resource for success.

Data for this article was compiled by the Santa Barbara Multiple Listing Service and analyzed by members of the Statistical Review Committee of the Santa Barbara Association of REALTORS®. Writer Jackie Walters is a Realtor with Village Properties, and has been writing these columns for 14 years. Jackie has over 30 years’ local experience and can be reached at (805) 570-0558 or jackie@villagesite.com. DRE Lic# 00835438