SOFT – OR HARD – LANDING?

After reading recently that the California Association of Realtors’ Chief Economist Leslie Appleton-Young “has stopped using the term ‘soft landing’ to describe the state's real estate market, saying she no longer feels comfortable with that mild label,” I conjured up the image of a man on a runway directing airplane landings, frantically flailing his arms in an attempt to wave off the so-called ‘soft landing’ real estate market metaphor. “Turn back!; pull up!; your landing gear is down!” he screams but is unheard over the roar of the plane.

What Ms Appleton-Young is really saying is that one should price one’s property correctly and say goodbye to the frenetic “Buyers will throw money at sellers until you pick them” phase. She suggests that the housing market is finally getting back to normal, where one can expect to see a listing sit on the market longer than a New York minute (forgive me, I once lived in New York).

On July 21, David Streitfeld, L.A. Times staff writer, said “The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.” He is referring to the national and state real estate market. Although Santa Barbara is more insulated from certain conditions that impact the general real estate market, it is certainly not impervious to them. Current favorable interest rates, Ben Bernanke’s Federal Reserve electing not to increase rates at its most recent meeting, and higher inventory levels, create a comfortable position in which to be a buyer in Santa Barbara today.

Statistics from the Multiple Listing Service (MLS) for single-family residential sales from Carpinteria to Goleta through July 21 report an average of 16.6 sales per week versus just under 21 sales per week for the same period in 2005. For the same period in 2004, it was even higher, at 23.4 sales per week. Combine these fewer sales with a 51% increase in inventory from last year and you have a recipe for slower market…but not a falling-off-the-precipice type market. The median sales price dropped less than 2% from last year.

During the same period for Montecito and Hope Ranch in 2006, the average was 3.7 sales per week. In 2005, it was 4.62 sales per week, very close to 2004’s 4.55 sales per week. The median sale price for Montecito and Hope Ranch increased 8.9% from last year. The median price reflects the value of the prices of homes that are selling, not how the value of your house has changed. Another important note is that these statistics do not include sales that were not reported to the Multiple Listing Service. Some of the upper end properties are not reported to the MLS.

Streitfeld reported that “The Realtors Association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she “didn't feel comfortable” using the term “soft landing.” She promised to let the California Association of Realtors know when she comes up with a more appropriate sobriquet.

In the meantime, keep your seat belt fastened until the plane has come to a complete stop. Hang tight, and put your house on the market only if you are realistic about selling, and not if you simply hope to get your price. If you are a buyer, while no one is predicting an interest rate drop back to the historically low rates of the last couple of years, mortgage interest rates are still attractive. If you are comfortable with the payments, jump in. To paraphrase an ancient maxim: not only are they not making any more land, they aren’t even building any more Santa Barbara real estate.

REAL ESTATE SALES SUMMARY

by Jim Witmer

(Mr. Witmer is a Broker Associate with Village Properties)

Montecito Prices Continue To Move Up

Single-family home sales for the first six months of 2006 continue to move towards the slower and more normal real estate market that we reported on at the close of the first quarter. However, some neighborhoods and price ranges continued to appreciate nicely and outperform the rest.

Montecito’s performance for the first half of 2006 would confound those waiting for the local bubble to burst. Outperforming the rest of South County, the “Montecito Median” for the first two quarters reached $2,575,000, for a 8.4% improvement over last year’s $2.375 million. Sales of homes priced at more than $5 million for the first two quarters were impressive, with 21 selling above $5 million, versus 14 for the same time period in 2005.

For the first six months of 2006, new listings increased 17% – to 192 – relative to last year’s total of 164. As to home sales, 19 fewer homes were sold through the first two quarters of 2006 versus 2005 (91 versus 110), but as a result of the increased activity at the top of the market, total revenues increased 4.4% exceeding last year’s mark by $15 million ($353 million versus $338 million).

Condo Market Slows

The condominium market for Montecito declined in most categories our index tracks for the first two quarters, but the median price improved 4.8% ($1.73 million versus $1.65). The number of new condominium listings through June increased 55% (31 versus 20) while total sales declined (11 versus 17). The fallout from fewer sales hit the bottom line, with total revenue eroding a bit more than $12 million from last year’s $30.4 million for the first six months to this year’s $18.2 million.

New listings for South County are up 16% over prior year, and approaching 1,000. The $1.210 million median price for a single-family home in the South County for the first two quarters of the year, is 3% less than 2005’s first six month’s median of $1.248 million.

The number of homes sold in South County through the end of June 2006 was 432, a sharp 20.5% decline over 2005’s first six-month total of 544. Steady sales activity at the upper end of the market that encompasses those homes selling more than $5 million, however, remained strong with 23 homes selling in that price range versus 15 for last year’s first quarter.

The Big & The Small

The largest property sale so far this year remains the $28.5-million, 17-acre oceanfront Carpinteria property located on Padaro Lane. The property features two modest homes and a polo practice field. The most affordable home sale through June was described as a one-bedroom, one-bath retreat located on La Mesa Lane off Paradise Road, built in 1967; it sold for $342,500.

South County condominium sales for the first and second quarter of 2006, when compared to the same time period last year, do indeed indicate a slowing down. The number of new listings for the first quarter rose 40% (486 versus 348) while at the same time there was a 36% decline in the number of total sales (167 versus 261), leading to a 37% decrease in total revenues ($131 million versus $209 million). One bright note for the condominium market was the median price ($679,000 versus $676,000) showed a slight gain.

Data Source: Santa Barbara Multiple Listing Services.