Mid-Year Real Estate Update

Steady Gains in Median Prices and Number of Sales

Sue Irwin | Credit: Courtesy

The South Coast real estate market has been quite lively this year, a nice comeback after a bit of a slowdown in 2023. Over the first six months of 2024, the median sale price of homes has steadily increased, and in many local areas, it has surpassed the median price reached two years ago. Comparing the first six months of each year, the median sale price of homes throughout the entire South Coast was $2,250,000 in 2022, then dropped -5.5 percent in 2023 to $2,130,000. So far this year, however, the median sale price for South Coast homes — $2,242,500 — is an increase of 5.3 percent higher than last year. For condos, the median sale price went from $950,000 in 2022 down to $911,250 in 2023 (-4 percent), then rebounded to $969,550 in 2024 (+6.4 percent over last year). Not only were prices on the increase this year, but the inventory of available properties for sale has risen as well as the number of total sales.

Not every sector of the market enjoyed the same percent of increase: Median sold prices in Montecito, Carpinteria/Summerland, Goleta, and the condo market as a whole exceeded the 2022 record highs, while Santa Barbara bested 2023’s median but not 2022’s high. Hope Ranch’s median prices resembled a roller-coaster ride from 2022 to 2024, from $5,937,000, then up to $8,150,000 and back down to $5,495,250 —illustrating that in a small area with very few sales, even one or two transactions can swing the median price dramatically enough to make statistics unusable.

The other notable increase this year has been the total number of closed transactions. While not matching the total sales seen in 2022, compared to last year, 2024 has seen increased sales across the board in all areas of the South Coast, with 13 percent more homes and 5.8 percent more condos sold.

One reason more properties sold this year is simply that there have been more homes to sell. Although not shown on the graphs, there were nearly 18 percent more homes listed for sale this year than last year, and 7.6 percent more condos, giving buyers more to choose from.

Another reason for more sales this year is a gentle decrease in mortgage interest rates, allowing more buyers to qualify for loans and perhaps providing some confidence that rates will continue to decline. Indeed, mortgage interest rates are predicted to decline the rest of the year and into 2025, but not dramatically. From highs more than 8 percent in late 2023, rates settled in the low 7 percent range for much of the year. By the end of July, the Federal Reserve Bank of St. Louis reported mortgage rates for 30-year conforming loans to average 6.78 percent across the country. For the rest of the year, the Mortgage Bankers Association, Fannie Mae, and the National Association of Realtors predict average rates to be 6.6 percent or 6.7 percent by year’s end. Longer-range forecasts currently hint at rates moving lower next year but remaining above 6 percent.

There are also some softening trends to this year’s real estate market that are worth mentioning. Escrow companies have reported more canceled escrows (fallouts), with those properties having to go back on the open market to get another offer. We are also seeing fewer multiple offer situations, and homes are taking longer to sell — about 30 days on market before going into escrow — roughly 30 percent longer than in 2023. Condos are selling faster than homes — about 22 days on market on average — but not as quickly as in 2023.

Another way of presenting our slightly slower-paced market this year is shown in the Months of Inventory (MOI) column on the charts. The lower the MOI, the hotter the market. By the end of June in both 2022 and 2023, the MOI for houses was 1.8 (meaning that at the rate homes were selling, all listings on the market would theoretically be sold in 1.8 months). This year, however, the market is cooler, with 2.6 MOI for homes. This is still considered a seller’s market, but is very close to becoming a balanced market overall. We still have hot seller’s markets for Goleta homes (1.0 MOI) and the condo market in general (1.6 MOI). Buyers can expect to compete with other buyers for the nicest Goleta homes as well as for condos throughout the region.

This year, we are also seeing a greater price gap — and days-on-market gap — between properties that are totally turnkey and those that are not. Because there is less buyer competition overall, buyers have a better chance of purchasing a turnkey home and many choose to forego the time, effort and expense of making repairs, even if the home costs less.

While the market feels stable and interest rate predictions are hopeful, buyers and sellers are facing a growing challenge this year with regard to home insurance. News reports mention rising insurance costs across the country, and insurance companies are increasing their requirements to qualify a home for insurance coverage at point of sale. Recently we have seen repair requirements from insurance companies, such as adding automatic shutoffs for water and gas utilities in case of leaks, to be done within a specified amount of time after close of escrow. Insurance is now its own buyer contingency category on the Residential Purchase Agreement, and buyers, lenders, and listing agents begin researching insurance availability and costs as soon as possible with a new listing or new sale.

As summer fades to fall and winter during this dramatic election year, who knows what we will experience in the real estate market? Take the election out of the picture, and it’s easy to imagine a continuation of the trends we have seen so far this year, perhaps with a seasonal decline in activity during the holidays.

It would be remiss to end this article without mention of the recent changes affecting standard real estate practices here in California and across the nation. August is our transition month, and by August 17, the changes will be fully in effect. Listing agreements, residential purchase agreements, and many associated transaction documents have been substantially revised to reflect legal changes regarding how compensation to buyers’ agents is negotiated and documented in each transaction. Additionally, buyers will be required to sign a buyer-broker agreement before viewing a property with their agent.

These changes will take some getting used to, but Realtors are up to the challenge and are attending training sessions to educate themselves on the revised contracts and new practices in order to best serve our seller and buyer clients. Moving forward, buyers and sellers can expect the same high level of professionalism and market knowledge from our highly trained local Realtors.

Data for this article was compiled by the Santa Barbara Multiple Listing Service and analyzed by members of the Statistical Review Committee of the Santa Barbara Association of REALTORS®. Writer Sue Irwin is in her 20th year as a full-time Realtor, and is an associate of Berkshire Hathaway HomeServices California Properties.