Santa Barbara South Coast Third Quarter Update 2019
It seems everyone is talking about whether or not we will be seeing a recession in 2020, as has been predicted by many economic forecasters. But there are two very different stories being put out there by the media, so which one are we supposed to listen to? CNN reports that Morgan Stanley says the likelihood of a global recession is “high and rising”, while Goldman Sachs has come out to say that 2020 will NOT bring with it a recession. Will there be a recession and if so, how will it affect local home prices?
Our job as your real estate consultants is to keep you informed about data and facts that affect your most valuable assets. So, let’s look at some important facts and trends from the past that may help us understand what may happen to the real estate market if and when we do see an economic slowdown:
1. Only 2 out of the last 5 recessions caused home prices to come down (The GREAT recession of 2008 being one of them). In the other 3, home prices actually went UP as consumers consider real estate a more dependable asset.
2. Two key indicators can point to a housing crisis: the delinquency rate and the cure rate. In 2008, the delinquency rate (borrowers are 90 days behind on making their mortgage payment) and cure rate (rate at which borrowers bounced back from their delinquency) skyrocketed! Only 5% of delinquent borrowers bounced back from late payments. That number right now is the lowest it’s ever been.
3. In the years leading up to 2008, almost anyone over the age of 18 who was breathing was able to get a mortgage. This is measured on a specific index. A conservative lending score is about 375-400, but back then the numbers went up to 900. Today that number rests around 200. Banks aren’t handing out loans to people who can’t afford them.
4. Right now in the country, 53% of home owners have more than 50% equity in their homes. Even more exciting, 30% of homeowners don’t have mortgages at all! People have stopped using their homes like ATM machines, and instead of buying boats, cars, and vacations with their equity, people are either not taking money from their equity, or are using it for things like college tuition or value-adding home improvement projects.
So when you hear “recession”, DON’T PANIC! We are likely facing an economic slowdown that will have minimal influence on the local real estate market. The Santa Barbara market is healthy and quite “normal” in most price ranges, meaning prices aren’t rising faster than buyers can keep up, and supply (inventory) and demand (buyers) are in a normal range. Qualified buyers are able to get inexpensive loans and are ready to purchase from realistic sellers. So spread the word, keep calm, and call us to discuss how to achieve your real estate goals!
|HOMES & PUDS|
|Median Sales Price||$1,288,500||$1,249,000||$1,250,000||+3.1%|
|Median Sales Price||$658,000||$650,000||$620,000||+1.2%|