Is There A Housing Bubble In Santa Barbara
Welcome to the Santa Barbara Group and thank for spending some time with us. We’ve been getting a lot of calls, texts and emails asking if we think the current housing market bubble with burst soon. This article and video will address this very question and let you know, in our opinion, if you should sit out and wait or dive in and buy a property in Santa Barbara, CA. Your time is valuable so lets jump right into it.
FYI: Our opinions refer to the Santa Barbara area market only. Other real estate markets may and usually do perform quite differently.
If prefer watching over reading, check out the video below.
What is a Housing Bubble?
The folks at Investopedia.com have a nice definition of a housing or real estate bubble:
A housing bubble, or real estate bubble, is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse. Housing bubbles usually start with an increase in demand, in the face of limited supply, which takes a relatively extended period to replenish and increase.
Is Santa Barbara Experiencing a Housing Bubble?
There are many factors that have to come together to create a bubble and, more importantly, cause it to burst. As the definition explains, it is created when demand outpaces supply resulting in an UNSUSTAINABLE drive up of prices.
Let’s look at home sweet home here in SB.
- Do we have high demand? Absolutely! Santa Barbara is an amazing place to call home and lots of people dream of living here.
- Is our housing supply low? The answer to that is another “Yes.” There are not a lot of houses or condos on the market. This is true for several reasons.
- Covid has kept people in their homes.
- Well over ½ the properties in the Santa Barbara area are NOT owner occupied places. Many properties are rentals, and the rental market is a great investment. With the possibility of inflation and rising values, investors are holding on to their places.
- The Santa Barbara area is not known for lots of new build homes and condos. This means we do not get much new inventory hitting the market.
- The effect of capital gains keeps many people in their homes. Who want’s to pay taxes on their home sales when they have a lot of equity?
- Are prices going up in an unsustainable manner? We do not think so, at least not to the point of a crash in values like we saw in 2008-2011. Why do we believe this is so?
- Compared to some other coastal cities, Santa Barbara homes are not crazy expensive. People coming out of San Francisco and parts of LA see us as normal, if not affordable.
- There is a lot of money out there and special towns like Santa Barbara offer the lifestyle and amenities attractive to people around the world.
- We are still seeing multiple offers and many of the buyers come to the table with cash.
The Santa Barbara Real Estate Market Bubble – Our Conclusions
2020 and especially 2021 have been explosive with regards to housing prices and values. Some homes in the Santa Barbara area have seen single-year valuation increases approaching 20%. Although we do not expect 2022 to be so upwardly mobile, we also do not expect a dramatic drop in Santa Barbara real estate prices.
If you have moved out of the buying side of the market, you may want to reevaluate your position. In our estimation, values will continue to rise in 2021 and into 2022.
If you have questions, want to jump into the home-buying waters or are interested in selling a place, please know we are here for you. Just give us a call, text us or drop us an email. We will be there for you!
Joe, Garrett and Avi
The Santa Barbara Group
Response to "Is There A Housing Bubble In Santa Barbara"