Montecito Still Hot… And Getting Hotter

Last month, I introduced the Montecito Heat Index, a measurement of intensity of demand for Montecito homes in five price categories. More specifically, the Heat Index is a ratio of single family homes (excluding condos) present active listings (for sale and not under contract) to pending listings (under contract but not closed). And since the market can fluctuate not only by season but by month, and sometimes week, present demand intensity or “Heat” is compared to the same date a year ago: thus a finding as to whether the market is hotter or colder than last year at this point in time. The formula is Pending Listings divided by Active Listings x 100. (Data is derived from the Santa Barbara Multiple Listing Service, and is deemed reliable though not guaranteed).

Year to date, the Montecito market continues to be controlled by Sellers. The widely anticipated buyers’ market with associated stagnant sales and price erosion has not reached our shores. In fact, compared to this date last year, there were 15 more sales, an increase of 16%, and the median sales price rose from $2,572,500 to $2,850,000. And, new listings are down by 5% providing fewer choices for buyers and less competition among sellers’ homes than at this point last year. A total of $371,486,141 was paid to sellers since the first of the year, an increase of 10% over last year’s total sales number for this period.

The only possible bearish indicator is the Days on Market number. It took 23 days longer to complete a transaction than last year. That buyers took longer to select their piece of paradise suggests a stronger more reflective and less frenzied market and a reminder to sellers that properly pricing their homes is becoming increasingly important.

All in all, a very respectable first half of the year for our more patient sellers.

The above market performance data is trailing data and although it informs to a point, current data will, of course, always provide the best indication of market strength or heat today. And to understand one’s specific market, as opposed to the broader Montecito market, we must look at how the market is responding to discreet sub-markets best identified by distinct price groups.

Last month’s Montecito Heat Index, shown in graph A for the five price categories surveyed, found a divergent market. Homes in the $1-2 million, $2-3m and $3-4m categories showed greater buyer demand than higher priced homes. Surprisingly, the weakest groups were $4-5m and $5m-and-above, both significantly below last year’s numbers and until last month showing market leadership.

The results for this month’s Montecito Heat Index are demonstrated in graph B and are as follows:

Group 1: $1-2million, registers 21 and below last year’s 28.

Group 2: $2-3million, registers 11 and below last year’s 14.

Group 3: $3-4million, came in at 30, far exceeding last year’s 12.

Group 4: $4-5million, measured 12 slightly below last year’s 14.

Group 5: $5million and above, registered 11, far ahead of last year’s 5.

This month’s index shows divergence as did last month’s. Two groups, Groups 3 and 5, are more active and three groups, Groups 1, 2 and 4, are less active than last year.

Our current strongest sector is Group 3, $3-4million. It is up an impressive 131% over last year. The weakest group is Group 1, $1-2million, off 33% from last year.

Today, Buyer demand for homes in the $3-4million price group is the most intense and represents our hottest market segment, while the $1-2million, $2-3million and $4-5million groups are cooler than last year.

With the current pending median price (excluding condos) at an extraordinary $3,500,000 some may argue that it has become too expensive to live here. Since the first of the year, there are 133 buyers who appear to disagree.