The August Montecito Heat Index

The Montecito Heat Index measures the intensity of buyer demand for Montecito homes within five price sectors. The formula is: Pending Sales (homes under contract yet not closed) divided by Active Listings (homes offered for sale yet not under contract) X 100. And since the market fluctuates seasonally, if not monthly, buyer demand or “Heat” is compared to demand on this date last year.

As compared to Sold data (homes that have closed escrow), which is a look back at the market and is considered trailing data, the Heat Index reports leading data, present activity analyzing where the market is today. Although future data is what we would like to have, leading data is as close as we get to predicting tomorrow’s market. Yet, as my grandfather would often remind me, close is really only important when slow dancing. Thus the Heat Index is best viewed as the most accurate present data and whether it becomes a predictive tool remains to be unveiled.

July’s Heat Index registered 109, up 22% over last year’s 84 and showed once again a divergent market among the price sectors measured. Montecito homes in the $1-to $2-million sector showed the greatest buyer demand, scoring a 32. The $2-3 million group posted a 25, up an impressive 150% over last year. The lowest score was the high-end $5m-and-above group.

So how “Hot” is the August market and what price group is the hottest? Today the Heat Index registers 83 compared to 73 for this date last year. For all single-family detached Montecito homes, buyer demand is up 14%.

The strongest relative buyer demand is in the $1-to $2m sector at 26. The $ 2-$3m and $3-$4m sectors registered a 24 and 22 respectively. These three groups were all above last year’s numbers and had the lowest Days On Market at 97, 94, and 120 respectively.

Our weakest sector both this month and last is the $5m-and-above group, scoring a 5. The $4-$5m sector scored a 6. These two groups were below last year’s numbers, with the $4-$5m group down 78% from last year. They also experienced the longest Days On Market with 135 and 175 respectively. The graph below provides today’s scores for all five sectors and as of a year ago.

Year to date, the Montecito single-family detached home market continues to be stronger than last year and defined by sellers. Buyers purchased 18% more homes than last year and paid sellers more than $516 million for the privilege; an increase of 12% over last year. And the median sale price increased by 7% to $2,850,000. All in all, sellers should be pleased.

It isn’t that the buyers have been completely compliant. In fact, they generally believe sellers are very glad to see them and have been very effective in negotiating their purchase price. The differential between list and contract price best demonstrates this point. The current average listing or asking price is $5,279,785 while the average pending or accepted price is $3,430,950. That’s $1,848,835 of discussions, a gap of 35% between asking and selling price.

The Condominium Market Good Too

The condo market, not included in the Heat Index, has also been good to sellers. Last month, the percentage of sold properties was up 144% year to date. This month, the number has risen to 155% and the dollar volume of sold units has increased 177% over last year. If you are looking for the average priced Montecito condo today, you are going to pay $ 1,730,000.

It is difficult to believe, but according to the National Mortgage Bankers Association, the average American does not want to live here. No, they would prefer to live in North Carolina, Virginia, Florida, Colorado, or Oregon. Foreigners, or “international residents” however, seem to get it; California is their first choice. And according to the same report, these international folks are going to have increasingly fewer home choices. It seems that when we become seniors we are more likely to “age in place” than to migrate to other locations. So start being nicer to your neighbors; when “senior” happens, only five percent of us are likely to move to a new home. In the meantime, perhaps some interesting accents will be overheard at Jeannine’s and Pierre LaFond. On the other hand, the mortgage folks don’t always get it right.