Real Estate Realities in a Relative World

Inventory of single-family residences in the Santa Barbara Multiple Listing Service has been slowly inching its way upward since December 15, 2006, when there was a net number of 444 listings. It hovered in the low 370s in March and as of April 14, the net number of listings was 436, a 3.8% increase from last year at this time. I arrive at ‘net number of listings’ by subtracting everything that is in escrow.

A year ago, the net number of listings was 420. I watched it burgeon to a high of 602 last August. The 2006 market slowdown paralleled this inventory increase. After August 2006, the inventory slowly went down. This year has started off strong, in terms of sales and more interestingly in the number of pending sales (listing going into escrow).

Punctuating the point of increasing inventory was the high of 46 new single family listings for the fifteenth week of the year, ending on April 13. (There were actually 47, but I do not count the vacation cabins on leased State Forest land located off Paradise Road.)

More interesting was seeing that almost 50%, or 22, of the 46 new listings were under $1 million. In 2006, there were weeks where the number of new listings was in the high 50s, but 22 is the highest number of new listings under $1 million that I have seen. The net number of listings available today under $1 million, 127, is a 46% increase from last year’s 87. Perhaps you can attribute this to a combination of sellers pricing their homes more realistically and, simply an increase of owners in this price category wanting to sell their homes.

For this same week, seven of the 18 listings reported as closed escrow were sold for equal to or greater than the asking price. One sale was a foreclosure whose list price was $822,900 and it sold for $881,000. (Data compiled from the MLS and for single-family residences only.)

In the national news you are reading that the increase in the number of foreclosures will cause the number of sales to decrease for 2007. Local headlines also tout that the number of foreclosures in Santa Barbara county is on the rise – but compared to what? We were at all-time lows in the past few years, so any increase at all should not come as a surprise.

According to Dr. Bill Watkins, director of UCSB Economic Forecast, foreclosures and/or short-pays will not impact prices in Santa Barbara county to any measurable degree – particularly the South Coast. I agree.

A short-pay is an interesting animal that differs significantly from a foreclosure. In a short-pay, the bank agrees in advance to consider accepting a payment for less than the amount owed on the loan. It can be tricky because you do not know what that exact dollar amount is until an offer is submitted.

During an interview on my radio show, Watkins alluded to a lot of uncertainty in the national and local economic picture. Obviously a recession would put a damper on all markets, including real estate. While some economists see a recession rearing its ugly head, Watkins is not one of them. A bigger concern, he says, is that inflationary pressures could cause the Federal Reserve to increase interest rates. While this would not necessarily cause mortgage rates to rise, it would put a damper on economic activity.

Mark Your Calendar

If you missed my radio interview with Dr. Watkins, you will have to pony up $175 to attend UCSB’s annual Economic Forecast Conference this Thursday at the Lobero Theatre. That includes a quality breakfast at El Paseo before the conference begins. (I’ll let you know whether their bacon is as good as what Fess Parker’s DoubleTree Resort served at another economic conference last month.)

In addition to Watkins discussing local real estate, employment, demographics and business, syndicated Sacramento Bee columnist Dan Walters will return to inform and entertain on the state of California. Economist Henning Bohn, a student of the new chairman of the Federal Reserve, Ben Bernanke, will discuss what monetary policy to expect under Bernanke. Phil Martin, a UC Davis professor, will discuss the economic impact of both legal and illegal immigration.

For tickets go to www.ucsb-efp.com or call 893-5894.