Montecito Heat

Lately I’ve heard comments such as “Montecito real estate will never be this affordable again” and “We are extremely overpriced and the entire Montecito market will, in the short term, continue to adjust downward.” Despite oft-heard comments such as these, the correct observation will be worth hundreds of millions of dollars to buyers and sellers in our community in the coming year. Should you have the answer, there is a place for you at Phillips Real Estate immediately. Forecasting to that degree is unfortunately beyond my ability. What we can determine with certainty, however, is what is happening in our market at this moment.

The Montecito Heat Index measures buyer demand for single-family homes in Montecito in five price sectors. Heat does not address the number of houses sold – data that is at least thirty days old – but rather homes under contract yet not closed escrow. The result is leading data as to present market strength and predictive of future sale data. The precise formula is the ratio of present active listings to homes under contract or pending x 100. And since demand measurably varies from month to month, today’s demand is compared to this date a year ago. All data is from the Santa Barbara MLS.

$1-2m Sector enjoys Greatest Demand

The entry level $1-2million group is again the leader with a score of 20, more than tripling last year’s score of 6. Thirty days ago this sector led with a 13 and above its prior year score of 7. This group began 2008 as the weakest sector, started firming in the summer and has continued to outperform.

In the $2-3million category, demand decreased from last year’s 17 to less than a third, down to 5.

Firming a bit from last month’s score of 8, the $3-4million group scored a 13, up from last year’s 10.

The High-End Continues to Suffer

The $4-5-million sector repeats the last three consecutive months with a zero score. That is a long time with no buyer interest at all. And in the $5-million-and-up group, weakness prevails with a score of 3; off by a third from last year.

The total Heat score is 41, considerably off last June’s score of 81, and lagging last year’s score of 51.

Today, finding an exceptional Montecito home in every price group is easy; securing half-decent financing therefore is quite another matter. In the meantime, our median sales price is falling daily as the national economy contracts and the low-end homes receive nearly all the attention. And compared to this period last year, new listings are up 58%, while homes sold are off by 45%.

Fortunately for the high-end sellers, active listings in the high-end sector have come down nearly 25% in the last month, and yet are still currently nearly double the number of just a few months ago. How many Montecito homeowners will be facing steep adjustable mortgage rate increases, as a significant percentage are shortly due to reset, remains to be seen. This could well force additional properties to the market. In the meantime, should you actually meet a real buyer, be extra polite; we need more of them each day.