12/6/03
By MARIA ZATE
NEWS-PRESS STAFF WRITER
The phones were ringing off the hook at Century 21 A-Hart Realty on the day after Christmas.
It appeared that business was picking up much sooner after the holidays than agency owner Bob Hart had expected.
"On Dec. 26, we had more clients call us than at any other time," said Mr. Hart. "It was as if these callers were thinking, 'The holidays are over now, so let's start looking for a house.'"
Mr. Hart said that day gave him a preview of what he thinks the year will bring for the South Coast housing market.
"We're looking just as solid as ever," he said. "I think there's still a lot of pent-up demand out there. And the interest rates are still so good that even with the higher prices, the monthly payments come out lower than you would expect."
Low interest rates will drive demand for homes this year, said real estate agents and economists.
In early 2002, no one could have dreamed that rates would drop below 6 percent.
But rates continued to fall last year and created a bigger demand for homes than expected, thus driving up prices all over Santa Barbara County and California.
"Interest rates were extremely low and this continued to create a wild frenzy in real estate," said local economist Mark Schniepp.
Mr. Schniepp said while he sees interest rates remaining at current levels for most of this year, demand for homes will soften due to a flat job market on the South Coast.
In October 2002, the median home price in the North County hit a record level of $280,000.
South Coast home prices reached a median of $765,000 from January to November 2002, a 16 percent increase from the same period in 2001.
California's median home price is expected to increase by 10 percent in 2003 to reach a record of $344,300.
He expects home prices in the area to increase only about 5 to 8 percent in 2003. This compares to an expected increase of more than 12 percent for 2002.
"The economy here has really slowed and it's not creating new jobs. Jobs are the biggest driver of housing sales," he said. "When the job market really flattens out, we may see home sales flatten as well."
But even with zero job growth in 2002, the housing market still managed to perform well, said Bill Watkins, executive director of the UCSB Economic Forecast Project.
Mr. Watkins said that given the low interest rates, many wealthy Buyers from outside the area put an added squeeze on demand for homes on the South Coast and pushed prices higher.
Low interest rates caused the real estate market to perform better than Mr. Watkins and his group predicted in early 2002.
"We had a jump in prices last year and that was a surprise. We expected the market to start softening, but demand was stronger than we thought," he said.
The South Coast will likely not see double-digit price growth in 2003, Mr. Watkins added.
But in the North County, prices will continue to increase simply due to demand for lower-priced homes, he said.
The median price of a home on the South Coast is expected to top the $750,000 mark for 2002, according to data from the Santa Barbara Multiple Listing Service.
This compares to a median price of about $260,000 in the North County.
Mr. Watkins said he expects prices in the North County to continue to move upwards, as more homes are being built in that area and people trade up into bigger and more expensive houses.
"The demand will stay strong from Buyers coming from the South Coast, and in Santa Maria, Buyers are also coming from San Luis Obispo," he said.
Meanwhile, homes prices at the "high end" — defined by many as homes priced above $1 million — are seeing a slowdown in sales, said several real estate agents.
"There are so many homes on the market now that are over the $1 million mark," said Mr. Hart. "But the number of Buyers who are able to afford those homes is not increasing at the same pace."
Dan Encell, a real estate agent with Prudential California Realty in Montecito, said he has observed prices leveling off in the segment of the market priced between $2 million and $4 million, and he expects the trend to continue this year.
"Prices didn't go up in the upper range last year. But they did continue to go up in the lower end," Mr. Encell said.
Inventory is rising for the high-end homes and Sellers are starting to realize they may have been too ambitious with their listing prices, he explained.
"Many high-end homes were priced too high. We're seeing more price reductions from those homes that have been on the market a while, and more realistic listing prices from homes just coming on the market," Mr. Encell added.
"We're in transition period now, where Sellers' expectations are coming down more to meet Buyers' expectations."
