JANUARY MARKET UPDATE
The Montecito real estate market has transitioned into a new normal characterized by welcomed price stabilization, marking the end of the Covid-induced pricing frenzy. The current market reflects a healthier, more balanced pace, emphasizing traditional real estate fundamentals such as location, price, and presentation. Despite a plateau in prices, tight inventory persists, with more buyers than sellers, and a preference for remodeled homes, indicating a competitive market that remains attractive to prospective buyers in 2024. We have already noticed renewed energy on the high-end and are aware of multiple $10M+ properties that are under contract (at least one with multiple offers!) and closing soon.
If you want to learn more about Riskin Partners in-depth recap on 2023’s real estate market and what’s in store in 2024, visit the SitelineSB.com article.
Inventory
Over the past five years, and especially the past three years, inventory has steadily declined. There were 2,166 New Listings in the Santa Barbara MLS during 2023, down 15% from 2022, down 32% from 2021 (before the Fed started its rate hiking cycle), and down 37% from 2019 (pre-covid). Decreased inventory levels can generally be attributed to “would-be” sellers not placing their homes on the market due to the increased cost of financing on replacement properties. Those properties that do hit the market are primarily due to changes in life circumstances, lifestyle, or moving out of the area.
At the same time, however, demand for our area is near insatiable. We can view this dynamic in the Absorption Rate metric, or also known as “Months of Supply”. In 2019, South Santa Barbara County averaged 4.5 Months of Supply. In other words, it would take 4.5 months to sell every home on the market at the current sales pace. With 6 months being the minimum to achieve supply/demand balance, our area was already undersupplied going into covid. At the depths of covid, we experienced averages of 1.1 months and 1.2 months in 2021 and 2022 respectively; or extreme levels of undersupply.
As the Fed continued its hiking cycle throughout 2023, home prices increased, coupled with other factors creating macro uncertainty around the world, demand softened somewhat, and our area now sits just below 2 months of supply - still far below the 6 months needed for a balanced market.
Sales
From 2014 - 2018, the number of Annual Sales lived in a very consistent range between 1,730 - 1,870 sales. In 2019, Annual Sales reached 1,935, and then in 2020 and 2021, they exceeded 2,100 and 2,200 sales respectively at the peak of the covid market. Due to the significant reduction in available inventory, higher prices, higher rates, amongst other factors, Annual Sales declined to ~1,450 sales in 2022 and just 1,100 sales in 2023, a 43% decline from 2019.
Pricing
As a result of our long-term undersupplied market, pricing has appreciated substantially over the past five years. While the Median Price in 2023 at $1.7M decreased ever so slightly by 2% from the year prior ($1.74M), Median Price is 65% higher than it was in 2019 ($1.03M), an average increase of just over 12% per year.
Sales Volume
In 2019, the size of our market was just under $2.4 billion (# of sales x Median Price). During covid, due to price appreciation and higher sales, our market size peaked in 2021 at over $5.35 billion. Since then, as a result of limited inventory, sales volume has decreased over the past two years, to $2.8 billion in 2023, 6% lower than 2019.
Montecito
There were 10 closed sales in December, down from 15 last December. The highest priced sales in December were 1975 Inverness Ln for $7.55M (Riskin Partners’ sale) and 930 Knollwood Dr for $11.5M.
On a Quarterly basis, there were 38 sales in the Fourth Quarter, up 31% from 4Q22. Median Price in the 4Q23 was $5.4M, up 8% from the year prior.
When we take a longer term view, there were 163 sales in Montecito in 2023 at a Median Price of $5.1M. The number of sales was down 22% from 2022, largely due to limited inventory, yet Median Price remained 3% above the prior year. Compared to 2019 (pre covid), Median Price is up 72%, or 14% per year, two points higher than the overall South Santa Barbara County market average over the past five years.
The most expensive sales of the year were 319 San Ysidro Rd for $22M (Riskin Partners’ sale) and 550 Freehaven Dr for $20.35M (Riskin Partners’ sale).
Santa Barbara
There were 35 closed sales in December, a 20% increase from December 2022. The most notable sale in December was 3105 Las Gaviotas for $8.75M, which happens to be the most expensive sale in Santa Barbara proper this year, just edging out 20 Camino Verde ($8.5M) which closed in April.
On a Quarterly basis, there were 117 sales in the Fourth Quarter, even with 4Q22. Median Price also remained flat from a year ago at $1.71M.
On an Annual basis, there were 505 sales in 2023, down 20% from 2022 and 41% from 2019. Median Price remained even with 2022 but was 57% higher than 2019, or 11.5% higher per year on average over those 5 years, slightly below the South County average.
Hope Ranch
There were no sales in Hope Ranch in December and only 3 in the Fourth Quarter, compared to 0 in 4Q22.
On an annual basis, there were 28 sales in Hope Ranch at a Median Price of $7M. The number of sales was down 29% from 2022 and Median Pricing was down 12%. However, compared to 2019, Median Price was up 58%, or 11.5% per year on average over the 5 years.
The most expensive sales in Hope Ranch were 4689 Via Roblada for $13.5M and 4630 Via Huerto for $12.8M.
Carpinteria
There were 8 sales in Carp in December at a Median Price of $1.3M, both metrics on par with December 2022. The most notable sale in December was 7030 Shepard Mesa Rd for $4M.
On a Quarterly basis, the number of sales was down 35%, but Median Price rose 17% to $1.4M.
On an Annual basis, there were 113 sales in Carp in 2023, down 18% from 2022. Carp’s Annual Median Price of $1.1M was 5% lower than 2022, but 46% above 2019 levels, or 9% higher per year on average over the 5 years.
The most expensive sale in Carp (and the South County overall) was an off-market listing for $46.9M (Riskin Partners’ sale).
Summerland
There were no sales in Summerland in December. There were just 2 sales in the Fourth Quarter at a skewed Average/Median Price of $7.4M due to the sale of 130 Montecito Ranch Ln $13M (the most expensive sale of the year in Summerland).
On an Annual basis, there were 14 sales in 2023, down 26% from 2022. Even if you remove Montecito Ranch Ln and 2710 Montecito Ranch Ln ($11.5M, closed in March) (Riskin Partners’ sale) from the Median Price calculations, Median Price was 3% higher than 2022 and 84% higher than 2019, or 17% higher per year on average over those 5 years. Including those outliers, Median Price was 134% higher than 2019, or 27% higher per year on average.
Santa Barbara's real estate market is characterized by a unique balance of reduced inventory and sustained high demand. Over the past few years, there has been a gradual decline in available homes, leading to a more competitive market. The recent softening of demand, influenced by external factors, has not dampened the market's appeal.
In this landscape, the pricing dynamics demonstrate substantial appreciation, showcasing the market's resilience and desirability. Notably, in the high-end segment, we have noticed a surge in activity, with multiple $20M+ properties receiving offers and under contract. As we navigate through the intricacies of the market, the optimistic outlook suggests ongoing opportunities for both buyers and sellers in the year ahead.
