Is There Still a Housing Shortage?

Let’s face it

We still have a housing shortage. In spite of rising interest rates, low housing inventory persists. And the American dream of owning a home is still challenging for many. With the pandemic freezing people into staying put these last two years, as pandemic concerns have eased, those who could, moved. Many of these buyers discovered our area, and despite rising interest rates, many of these are all-cash buyers. Additionally, many would-be sellers chose to stay put, hence this year’s earlier deadlock. But as pandemic fears continue to lessen, more sellers will decide it’s time to sell.

A recent article from realtor.com:

“This fall, a more moderate pace of home selling, more listings to choose from, and softening price growth will provide some breathing room for buyers searching for a home during what is typically the best time to buy a home.”

The market is shifting. People still undergo life-changing events. As their needs change, they’ll continue to buy move-up homes, smaller or larger homes, or investment properties. This consumer behavior forms the backbone of all real estate markets. What causes a shift in the real estate market depends on the ratio of sellers to buyers.

Selma Hepp, Interim Lead of the Office of the Chief Economist, CoreLogic:

“record equity continues to provide fuel for housing demand, particularly if households are relocating to more affordable areas.”

So what’s different today compared to six months ago? Everyone watches the news and the stock market; now buyers fear overpaying. While they may still make strong offers, they’re more hesitant to get into a bidding war. And, once in escrow, they have enough leverage to make sizable requests for seller credits and price reductions, causing sellers to consider those requests far more seriously than they did earlier in the year. If more homes come on the market, sellers will face stronger competition.

Keep in mind that while many buyers continue to remove contingencies in their offers, they’re handling negotiations with more care. Buyers who test the boundaries with more aggressive negotiation tactics aren’t always successful and often compromise the deal.

What about our local market?

Here’s the market snapshot for Santa Barbara’s districts. This chart shows month-by-month AVERAGE (AVG.) from the beginning of October 2021 through the end of September 2022. Appearing as ACTIVE, PENDED, and SOLD listings, it reflects the number of listings according to market status in their related districts, according to price. Averages are derived by adding the total dollar volume of all sales in each district within the specified timeframe, then dividing the total number of sales. The MEDIAN SOLD PRICE reflects the number at which half of all sales are above this number and half are below this number.

It’s important to note the following: Average sales prices and Median Sold Prices will be affected by a greater or lesser number of sales on both the high and low end of the pricing spectrum. More “high-end” sales can cause the average to go up, while more “low-end” sales can cause the average prices to skew downward.

Taken from the Santa Barbara Multiple Listing Service, this snapshot demonstrates just how buyer and seller leverage played out this past year across all Santa Barbara South County districts, from Summerland to Goleta. Though deemed reliable, but not guaranteed, this information reflects the Santa Barbara real estate market in its entirety during that time. Different results will be produced using the same report for individual districts within the same timeframes, or different timeframes.

Danielle Hale, Chief Economist, realtor.com:

“For homeowners deciding whether to make a move this year, remember that listing prices – while lower than a few months ago – remain higher than in prior years, so you’re still likely to find opportunities to cash-in on record-high levels of equity, particularly if you’ve owned your home for a longer period of time.”

Real estate prices, however, remain strong. If you are selling, you may not receive the volume of offers that you might have a few months ago, but this doesn’t seem to be significantly limiting sales outcomes. At the same time, if you’re a buyer who previously grew tired of searching for a home because of bristling competition over every home on the market, now may be a good time to step back up to the plate.

Bottom Line

Mortgage rates, home prices, and the supply of homes for sale are top of mind for buyers and sellers today. Since the housing market is changing from the peak frenzy we saw over the past two years, you may have questions about what your best move is if you’re thinking of buying or selling before the end of the year.

To help you make a confident decision, lean on professionals for insights. If you want the latest information for our area, let’s connect today.

Call me or text me for a confidential, no-obligation consultation. For text, use the keywords, “real estate inquiry.”

I look forward to hearing from you.