2008 REAL ESTATE MARKET UPDATE

This is a brief summary of the 2008 Economic Forecast for the Southern Santa Barbara County real estate market. If you are interested in receiving the complete 2008 Economic Forecast, be sure to let us know. We would be happy to send it to you

Will there be a recession?   No one knows for certain, but it’s important to keep in mind that a recession requires a persistent and broad-based decline in overall activity. In this case, the forecasting experts believe it can and will be avoided for several reasons.

Real incomes do not yet appear to be in decline.   Lower interest rates and the gradual restoration of confidence in the credit markets will help to stabilize the housing market, a fix which has already been applied. Though the first quarter started out somewhat sluggish, this year’s forecast predicts that the second half of 2008 will seem like a more normal economy in our area.

Home sales last year declined, but a bottom may have been reached in the Fall of 2007.   Home selling prices will avoid collapse as serious home buyers recognize that home prices have bottomed and are unlikely to drop further. This will produce the sense of urgency needed to stimulate sales in our real estate market, and a small bounce is forecast for this year as reluctant buyers finally leave the sidelines.

Many residential projects were delayed in 2007.   Because of this, developers are still hesitant to begin new construction in 2008. Therefore, new housing production has virtually stopped. However, it is highly likely that more new housing production will commence this year as the demand strengthens.

Commercial real estate market remains active, resulting in a further tightening of vacancy throughout all South County sub-markets. Continued demand for commercial development with virtually no increase in supply has contributed to higher lease and sales rates. Office vacancies will remain tight with lease rates continuing to increase throughout the Santa Barbara market.

Even though consumer spending has slowed, retail center occupancy is full throughout the South County.   Spending continues as tourism remains vibrant, fueled by travel from existing residents and foreign visitors throughout Southern California, and which is expected to reach record levels this year.

The apartment market remains tight with vacancy rates in the South County falling to historic lows.   Rental rate inflation has slowed, but remains ahead of general price inflation.

Locally, employment growth is still positive.   Industrial production, while leveling off, is not declining. Consumers are still buying cars and durable goods, and while there may be more company down-sizing in 2008, and possibly some expansion or defection to inland areas of the state, the net creation of jobs will be close to zero. In contrast, entrepreneurial activities will continue to grow in all coastal areas, and smaller business expansion will continue to dominate business growth in Santa Barbara County.

Hospitality, education, healthcare and business services are expected to contribute to positive job growth during 2008. These areas are expected to offset possible weakness other sectors including, construction, financial services, some industrial sectors, and the downsizing expected to occur in the agriculture sector. Predictably, both the office and industrial markets should remain stable throughout 2008.

Dare we say there is a light at the end of the tunnel? According to mortgage data from the Mortgage Bankers Association (MBA), the buying season for housing may already have begun spurred by the rising affordability for many home buyers. The combination of falling interest rates and lower home prices is bringing many home buyers back into the market.

How soon real estate market recover?   While no one can predict with absolute certainty, it will ultimately depend on the degree of pent-up demand. Harvard University’s 2007 Joint Housing Task Force Study says more than 1 million new households per year will be formed over the next 2 decades. Combine this with the influx of echo-boomers born approximately from 1970 to 1986, which number as many as their baby boomer parents, and we will see both a substantial and growing demand for homes the rest of this decade. 

Whether it’s you, your family, or someone you refer to us, we are here to help those you care about.   Today, it is more important than ever to have real estate representation by professionals who understand the resiliency and strength of the Santa Barbara market, and have a proven track record of success.

Get started today.  We’d be happy to provide you with the complete version of our area’s economic forecast, information on the value of your home, our Best Home Buys, or specific market information on the values for your neighborhood.