The Santa Barbara Groups Real Estate Blog

Santa Barbara Real Estate through the end of January 2010 for Montecito, Hope Ranch, Santa Barbara, Goleta, Carpinteria and Summerland

Starting 2010 for the Home Estate/PUD market in Santa Barbara Real Estate, Montecito Real Estate, Hope Ranch Real Estate, Carpinteria Real Estate/Summerland Real Estate and Goleta Real Estate January ended with about 60 sales. This is a drop from 95 in December which is to be expected but substantially ahead of the 44 that closed in January ’09. The decline in the number of sales was most evident in the $1 to $2 million category which went from 27 in December to less than 8 in January. But the below $1 million price range also declined from over 50 sales in December to 44 in January and the $2 million and up category went from 11 sales in December to 7 in January with 2 of those sales over $5 million compared to 6 in December.

Accompanying the decline in the numbers of sales is a drop in the median sales price which for the month of January ’10 went down to about $750,000. This drop to the $750,000 level has occurred every other month for the past 6 months falling from about $850,000 in December ’09.

The number that really jumps out at me however is the Sales Price to Original List Price ratio which dipped down to just about 75% for January. That means if a property was listed for $1 million the average sales price was about $750,000. Certainly a lot of the sales in January were the ones left over from the end of ’09 with a significant number of foreclosures and short sales in the mix but a 75% Sales Price to Original List Price ratio is as low as I have ever seen it and even the Sales Price to List Price ratio which normally hovers around the mid 90th percentile is below 85%.

There were however about 56 escrows opened for the month with the median list price for those properties around $825,000 so we’ll have to see if the Median Sales price for February bounces back up to the mid $800,000 mark as it has done every other month for the last six months.

Looking at the districts, Carpinteria/Summerland has 8 sales already compared to 1 last January and the median sales price has gone from $500,000 in ’09 to $675,000 this year. In Montecito there have been 7 sales so far this year with a median sales price of $3.3 million compared to ’09 when there were 6 sales but the median sales price was about $1.7 million. I think that $3.3 million median sales price is an anomaly however because the 8 homes that went into escrow in January had a median list price of about $1.6 million which means the median sales price should continue to trend downward.

Sales on the East Side have jumped up from 10 in ’09 to 20 in ’10 but the median sales price has dipped from $970,000 last year to $839,000 this year. The West Side on the other hand has fewer sales with 8 this year compared to 10 in ’09 and the median sales price has also dropped from $886,000 last year to $727,500 this year.

Hope Ranch has 2 sales so far this year with a median sales price of about $3.6 million while in ’09 there was just 1 sale for $2.175 million. But, just as with Montecito the price trend is downward with the 1 escrow that opened in January displaying a list price of about $1.7 million compared to ’09 when there were 2 escrows opened with a median list price of about $2.5 million.

Goleta South has 8 sales so far this year compared to 6 last year but the median sales price has dropped substantially from about $790,000 last year to approximately $550,000 this year. And finally Goleta North has 9 sales this year compared to 11 last year with the median sales price falling from $700,000 in ’09 to $674,000 in ‘10

There is still a lot of activity in the marketplace but until the foreclosures and short sales have left the inventory this descending price trend should continue and unfortunately it looks like those distressed properties will continue to appear.

For the condo market, ’09 started with about 12 sales but in 2010 the number is over 20. But, last year those 12 sales had a median sales price of about $480,000 and this year the median sales price is closer to $375,000. Just like with the Home Estate/PUD market there are a substantial number of short sales and foreclosures that are part of that mix which is driving the price down but even so that’s still the lowest 1 month median sales price in years.

It looks like the median sales price should come back up however because in January there were 27 escrows opened with a median list price of $429,000. The Sales Price to Original List Price ratio is also a lot stronger compared to the Home Estate number of 75% with condos currently hovering around the 92nd percentile.

Condo prices have been fairly stable since quarter 2 of ’09 going anywhere from about a $450,000 median sales price to a $500,000+ median sales price each month with a slight upward pressure until this January. At this point I tend to think the big drop in median sales price this January is an anomaly rather than a trend.

What is a trend however, is the decline in the upper end of the condo market. Of the 21 sales in January, 19 were from $510,000 down with the least expensive condo selling for $215,000. Above $510,000 there were only 2 sales, 1 for $815,000 on the East Side of Santa Barbara and 1 for $1,050,000 in Montecito. Of the 319 condo sales in ’09 less than 20 of them were for $1 million or over with most of the higher priced properties selling either in downtown Santa Barbara or Carpinteria not Montecito.

Looking at the districts, Carpinteria/Summerland had 5 sales in January ’10 compared to 3 in ’09 with the median sales price falling slightly from $340,000 last year to $330,000 this year. In Montecito there was the 1 sale in January that I mentioned for $1,050,000 compared to none in ’09.

On the East Side of Santa Barbara January had 7 sales this year compared to 3 in ’09 but the median sales price fell from $850,000 last year to just $310,000 this year. On the West Side of town there were 4 sales in ’09 compared to 2 in ’10 with the median sales price dropping from $496,000 last year to $443,000 this year.

For Goleta South there were 3 sales in January ’10 compared to 2 in ’09 but the median sales price fell from $667,250 last year to $465,000 this year. And for Goleta North there were 3 sales this year with a median sales price of $459,000 compared to last year when there were none.

The condo market for the greater Santa Barbara area looks like it’s going to continue with between 25 and 30 sales a month and for the foreseeable future the median sales price should be about $450,000 with some slight upward pressure. The inventory after falling to an all time low of only 111 available units from Carpinteria to Goleta in December is starting to come back but this lack of inventory is the one element that would keep this portion of the market from moving forward.

For both Home Estate/PUDs and Condos the median sales price in January 2010 took a beating primarily because of the significant number of foreclosures and short sales that were a substantial part of the sales figures. There are definitely more properties in both categories coming on the market but whether it’s a flood or a trickle will determine whether prices remain where they are currently or move in one direction or the other.

The Fed is center stage this morning, and will continue to be for the next few days. Fed Chairman Ben Bernanke is expected to be confirmed to a second term later this week. In addition, the Fed's comments for the Fed Funds Rate and their Mortgage Backed Security purchase program could have a big impact on the markets on Wednesday.

In today's news, Existing Home Sales for December were weak, likely due to individuals who would have normally purchased in December moving their transactions into October to ensure they'd benefit from the tax credit. Rates continue at low levels all eyes on the fed.

It seems that everyday when I read the paper, I am bombarded with conflicting news on the real estate market. One day sales are up...the next they are down. One day rates are up...the next they are down. It is confusing to say the least, but as an agent on the front lines I have my own opinion.

Our market below $800K is on fire. Homes in this range sell immediately unless they have something wrong with them. Inventory in this price range in low. In some neighborhood there is nothing for sale.

$800K - $1.5MM is slow and there is a lot to choose from.

As we creep into the upper mid range, $1.5MM - $4MM we are starting to see quite a few sales fueled by price drops. Good properties are selling.

Most interesting is the upper upper end which has dropped by about 50% and is now moving I notice four closings at $12MM and up. When the big boys feel good about buying it reverberates throughout the market and confidence builds...we will see.

Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth

By Marc Roth

As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.

In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers. But they weren't happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.

Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.

Contrary to popular belief, buyers shop for homes all year round, including the holiday season. In fact, sellers who put their homes on the market during the holiday season (roughly between November and January) may have an advantage because there are fewer houses on the market so there's less competition. There are several other reasons to consider putting your home on the market during the holidays:

1. Many home buyers have extra time off during the holiday season so they have more time to look for their new home.

2. Because of the limited supply of homes for sale, sellers may be able to receive a higher purchase offer than expected.

3. Buyers looking for homes during the holidays are usually highly motivated to buy before the end of the year so they can get extra itemized income-tax deductions for mortgage loan fees, interest and pro-rated property taxes.

4. Festive lights and holiday decorations can help a home "show better."

5. Because January is traditionally the month for transfers, having a home on the market at the end of the year can capture the transferees who may not be able to wait until the spring to buy a home.

Santa Barbara’s real estate market is pretty much active year-round because we have such a comfortable climate. Other areas that experience the full force of winter with snow, ice and freezing temperatures slow down for those reasons, which lead many to assume the drop in sales is universal. We are blessed here in Santa Barbara. We have even seen tourist with deep pockets fall in love with our city while on holiday and spontaneously choose to buy property here…sounds like a fairytale, but it does happen.

When selecting a REALTOR®, you want to find one you are comfortable with, but there are many other factors to consider. Are they committed to being a full-time agent or just part-time? Do they have a proven track record of success? Are they in a productive office with lots of other productive agents to network with and get you a jump on new listings? These are some basics that just about everyone considers when choosing an agent, but there are other important factors that most don’t consider.

One big factor is the agent or brokerage’s reputation within the real estate community. Santa Barbara is a small town and the real estate community is even smaller. If you are working with an agent or brokerage that has burned a lot of bridges, you may come up against some resistance from the listing agent because they are concerned about getting into a deal with the agent you’ve selected. Choose wisely and it can have the opposite effect where the listing agent wants to make a deal. In a competitive market, all things being equal this can be the difference between success and failure.

Be carful of gimmicks and ploys to earn your business. If an agent needs to resort to these tactics, it is usually a way to make up for some sort of inadequacy. You may find yourself doing all the grunt work of scouring the market place yourself, which means you’re missing out on opportunities that never make it to the internet where the general public finds it. A good REALTOR® will be proactive in the search for your home. Meaning, they will network on your behalf asking other agents for up-coming or pocket listing. They will solicit home owners in the locations you desire, searching for a home owner who wants to sell. There are many tricks of the trade that they can bring to the table…and if they are not doing this for you it may be time for a change.

To help you understand what the new tax credit details mean to you, we've put together a concise overview of the new tax credit deadline, income caps, and more.

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,

2. Right to obtain legal title upon full payment of the purchase price, 3. Right to construct improvements, 4. Obligation to pay property taxes, 5. Risk of loss, 6. Responsibility to insure the property, and 7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:

* They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from "step-relatives.")

* They do not use the home as your principal residence.

* They sell their home before the end of the year.

* They are a nonresident alien.

* They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)

* Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

* They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

High Balance $729,750.00 - 85 % LTV

Condo's now available to 85%

BREAKING NEWS!

Tax Credit Extension & Expansion is Approved!
Please share this information with your agents.

President Obama has approved a bill for the Housing Tax Credit Expansion and Extension. Here’s what it means:

The $8,000 First-Time Homebuyer Tax Credit is Extended!

· Now, qualified first-time home buyers would receive their $8000 tax credit if they sign a purchase contract by April 30, 2010 and close by June 30, 2010.

· The home purchased must be their primary residence

· Buyer cannot have owned a home during the past three years

· Tax credit is up to 10% of the home value (not to exceed $8,000)

· Annual income caps to qualify for the tax credit have increased ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245K for joint filers.

·

PLUS New $6,500 Tax Credit for Current Home Owners Purchasing a Primary Residence

· Eligible home buyers must have lived in their current home for 5 consecutive years of the past 8 years.

· The new home does not have to cost more than the old home.

· Eligible for homes with purchase agreements written by April 30, 2010 and that close between November 6, 2009 and June 30, 2010

· Annual income caps to qualify for the full tax credit ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245K for joint filers.