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Number of Estate Sales Improving
Although the number of homes sold in
the Santa Barbara area for over $5
million during this past year was up
slightly from the prior year, the mood of the
market had not improved significantly from
the prior year. During 2010, 40 homes sold for
over $5 million compared to 31 in 2009. Most
agents and buyers agree that local property
values are down approximately 30% from
their highs of 2007. Our offices in the New
York Hamptons reported a very similar
increase among homes sold for over $5 million
this last quarter over the same period last year.
Buyers seem to be sharing an interest in
locating motivated sellers in the country’s most
exclusive communities. This gives most
analysts the confidence to declare the bottom of
the estate market has been reached.
Geographically across our area, Montecito and
Hope Ranch had the most notable
improvement in homes sold for over $5
million. In 2009, Montecito sold 21 homes
compared to 27 in 2010. Hope Ranch
improved their sales from 2 in 2009 to 5 in
2010. Santa Barbara sold no homes for over $5
million in 2009 but managed to sell 2 in 2010.
One segment of our market still demonstrating
significant weakness is our market for major
estate properties valued over $20 million.
During the past several years, Montecito
would normally sell anywhere from 2 to 5
major estates for over $20 million, but even
with having approximately 30 of these major
properties available, none from anywhere along
our entire coastal area closed escrow last year.
As has been the case for the past several years,
homes requiring the least amount of work
were the most sought after by buyers. Only 5
or 6 of the 40 homes sold could be classified
as requiring considerable renovation or major
reconstruction. Also, the homes that required
the least amount of work usually sold for a
price closest to their asking price. When a
buyer estimates what a property is going to
need in the way of renovation cost, he will
usually be very conservative and lean toward
what his advisors offer as the “worst case
scenario.” In our community, the difference in
cost between a reasonable repair and that
associated with a worst case scenario can be
substantial. Perhaps one of the reasons newer
homes or renovated older homes in the best
condition are the most sought after is because
so many of our buyers are looking in our
community for a second or seasonal home and
not as often for their primary residence. This
was especially the case among last year’s more
expensive homes sold. Managing a property
from long-distance encourages a buyer to
strongly consider the ease of managing a
property in better condition. And the two years
of administrating the renovation of a property
is often daunting even for a family in close
proximity.
Now that we are beginning a new selling
season, everyone is asking what this new year
will bring in terms of values and expected
sales. To buyers - I would advise them to seriously
consider buying sooner than later. Almost no
one disagrees that the bottom, or at least near bottom,
has been reached in market values and
financing is still very attractive. Estate sales in
our area reacted first to the economic
slowdown and will probably react first to the
recovery. This is what appears to be occurring
now. Sales are increasing, we’re seeing
multiple offers on homes that have
significantly reduced asking prices and there
are more buyers with a positive attitude about
the market in general. Buyers who are still
preaching doom and gloom are being passed
over by the market as more realistic buyers
who recognize our area for the special
community that it is are taking the opportunity
to buy at today’s reduced values.
To sellers - I’m advising sellers who want to
see a sale occur within the next few years to
sell now and not to wait for a hoped for
increase in sales prices. The general consensus
is that although the market may improve slightly this next 12 months, prices will remain
very close to where they are now due to the
large number of homes already available and the
number of homes that will become available
now that the market has stabilized. There are so
many significant economic hurdles holding
values down that it will almost certainly be
several years before we see any appreciable
increase in market values.
Sellers need to be aware that in today’s market
there are three different price ranges available to
today’s buyers: First Level: Homes that are new
to the market and priced at the seller’s “hoped
for” price perhaps based on what price was paid
a few years ago or after taking into
consideration work performed or based on
where the value was a few years ago. This
would have been considered the “normal”
market in the past, but virtually no homes are
selling from this segment in today’s market.
Second Level: The adjusted price after having
no success at the first level and probably about
30% below what may have been the 2007 value.
This is the bulk of today’s market and from
where the majority of today’s sales are
experienced. Third Level: An asking price that
most sellers would consider a
desperation price. Well below what
would have been considered
market value a few years ago.
Perhaps the asking price is at the
level of the debt against the
property or considerably below the
amount investment by the owner.
These are the very motivated sellers
who must sell immediately for one
reason or another. These homes are
beginning to vanish from our
inventory and are now beginning to
sell with multiple offers.
We all know that Santa Barbara is a
special place and thanks to our
wide and affluent audience our real
estate market enjoys a certain
independence from the national
economy. However, in very
difficult and broad reaching economic times
such as these, even our rarified market is
significantly influenced by the national trends -
and the national trends are still not good. We
should not expect the current real estate values
to improve in the short-term.
Sotheby's International Realty continued to
dominate the sale of the more expensive homes
in our area. Last year our firm represented 27
sides of the sales over $5 million compared to
our next closest competitor who represented 16.
Sotheby’s represented 11 sides of the homes
sold for over $10 million compared to 6 for our
next closest competitor. If I can assist you with
the sale or purchase of property, please don’t
hesitate to call. All inquiries are kept strictly
confidential. |
