2008 – The Year in Review
In my 20 years as a Realtor, I have never seen a more eventful year for real estate than 2008. Nationally, lending giants Fannie Mae and Freddy Mac as well as AIG insurance became wards of the Federal government. Foreclosures reached record levels, especially in Nevada, Arizona, Florida and California. As the economy faltered, prices in the country’s 20 largest metropolitan markets declined, down 23% from the July 2006 peak. Credit became virtually frozen in the last quarter of the year. Major stock market indexes declined 35-40%. Oil prices dropped below $40/barrel. Banks, automakers and brokerage houses began groveling for financial assistance from a staggering $700 billion federal government bailout plan, pleading “too big to fail.”
Locally, our market experienced a significant downturn, especially in the 2nd half of 2008. Overall, for South Santa Barbara County, sales volume was down over $570 million. For the year, median prices declined 15% to $825,000, while average prices dropped 6% to $1,457,561. The number of MLS sales in 2008, 1,212, is the lowest number on record, down 19% compared to the already dismal 2007 volume (there are currently 1,211 members of our MLS). Compared to the 2,546 sales in 2005, volume is down over 51%. The number of expired (failed) listings in December reached an all time high of 216.
Average prices fell from $1,879,523 to $1,636,571, a decline of 13%. Median prices have retreated to 2004 levels, falling from $1,071,000 to $900,000, a decrease of 16%. Perhaps most significant is the steep reduction in the number of sales over $1million. Down from a peak of 956 sales above $1million in 2005, we are at 463 sales so far this year – a decline of 37% from 2007 and over 51% from 2005.
In Montecito, the number of sales declined 16% to 180. However, median and average prices rose to $2,812,500 and $4,058,064, gains of 4.6% and 16% respectively. It would be misleading, though, to characterize these increases as appreciation in value. Unfortunately, I feel values in Montecito declined similarly with the rest of the South Coast. The changes in the median and average prices are more accurately a reflection of a substantial change in the mix of properties sold in different price ranges.
Expectations for 2009
One major bright light on the real estate horizon is lower interest rates. Conforming 30-year fixed-rate mortgages have fallen to historical lows (currently around 5%). Lower interest rates and declining prices improve affordability for homebuyers. The federal government has proposed utilizing lending institutions Freddie Mac and Fannie Mae to provide fixed conforming rates at 4.5%. When this happens, it will signal the bottom of the market for the lowest priced properties. Recovery will then follow into the higher price points as lower interest rates and reduced prices entice Buyers back to the market. The resulting stability of the market should eventually allow lenders to lower rates on jumbo mortgages as well. .
Despite difficult conditions, I have been able to achieve results by substantially increasing my marketing and advertising budget during a time when others are cutting back drastically. In 2008 I had 26 closed transactions, totaling over $103 million in sales. If you are interested in selling your property, please call me at (805) 565-4896. All calls will be confidential.
If you are interested in finding out what has sold in the past year and for how much, we now have the following sales lists available to view: Montecito, Beachfront and Hope Ranch sales. Please click
here to request these lists.