The media headlines are bringing cautious optimism that the real estate market is heading in a positive direction. Home prices have fallen from their peaks, but locally and nationally there is a great deal of data to suggest that the tide may be turning and this might be the time to seriously consider making a home purchase. Nationally, the number of existing home sales , and new construction are all up. According to this year’s National Housing Pulse survey from the National Association of Realtors, 83% of Americans still believe buying a home is a good financial decision. 75% of those surveyed also believe now is a good time to buy a home, a number that has increased steadily for the past two years. 33% of renters are also thinking more about buying a home than they were a year ago. Locally, many parts of Coastal California see the median home price is up over the past few months, something that has not been true for a number of years. There are many signs which indicate that the Fall of 2009 may be an excellent time to purchase a property in Santa Barbara.

The timing is also excellent on the financial front. The 2009 Stimulus Act which allows conforming loans to go from their previous limit of $417,000 all the way to $729,750 is set to expire at the end of the year. There are no guarantees that either the expanded limits or other incentives like the first-time homebuyer tax credit (see below) will continue into 2010. With the ability to lock in a 30-year fixed rate in what had previously been the jumbo range in the low 5’s (and perhaps even lower) and much of the housing inventory is becoming more affordable, buyers might look back at this time as one of those “magic moments” in which to have purchased real estate in this area. FHA loans, which only require 3.5% down payment are also available in the 5’s and up to the $729,750 limit! For buyers looking for larger sized loans, up to $5,000,000 (and higher for those that meet the Private Mortgage Banking thresholds), great long term fixed programs are also still solidly in the 5’s.

Loan Approvals and appraisals can still be challenging so the best advice is to speak with a lender as early as possible regarding any potential purchase you are contemplating. In addition to these challenges, because there are a number of factors that can cause rates to change suddenly, it is more imperative than ever that one speak with qualified loan professional who knows the current markets and has an understanding of where rates might be headed.

Finally, and most important if you are thinking of buying your first home, or have not owned a home for at least 3 years, you-may be eligible for up to $8,000 in the form of a federal tax credit. But, you must act quickly. To qualify for this credit, your purchase must be completed on or after January 1, 2009 and before December 1, 2009. If you are not sure whether or not you qualify for this plan, or if you have any questions about the timing and details, you should contact your tax professional for help and clarification.

With the deadline for taking advantage of this credit quickly approaching, buyers should be aware that the purchase must close before the deadline of December. This generally takes somewhere between 45 and 60 days from the date a home is selected, the negotiations are completed, and the escrow is closed. If you are considering buying but haven’t yet begun the process, now is the time to call a real estate professional and get started.
written by Maddox Rees of Private Mortgage Lending

Yes, the market has “improved”, but what does that mean for today’s and tomorrow’s sellers? Historically, local real estate cycles last approximately ten years – from peak to peak or between low points. At, approximately five years into this current cycle, one might suggest an upturn is within sight and certainly the statistics that follow support that view.

This summer’s increased activity continues to be under one million, (particularly under $800,000), where buyers are competing daily in multiple offer situations. That market seems to have found price traction, forming a foundation of value – seemingly in the $500-600,000 range, for a fixer tract home in Goleta, and $600-700,000 for a smallish fixer in Santa Barbara. In this small market segment we have entered “Sellers’ Market” territory, where the strong number of pending sales is giving buyers increasingly fewer homes from which to choose. What is new these past several months, has been the increase in sales over a million and even into the higher price ranges, including a $25 million closing in the Rivenrock community in Montecito and the famed Val Verde estate on Sycamore Canyon sold for close to $16 million.

However, the bulk of our market remains a Buyers’ Market, or, at best, a Balanced Market, and for sellers, selling under these market conditions just doesn’t feel very good. I encourage my clients to think very hard about their reasons for selling and their 3-5-7 year plan for their family.

Sellers looking to trade up in this market, have a distinct financial advantage for the following reason: If the whole market is down on average approximately 25%, (more for some segments, less for others), selling a $1 million property today will net you approximately $333,000 less than you may have gotten at the height of the market. However, that $2 million property you may have your eye on is “on sale” today for an attractive $666,000 discount.

Figure 1, gives us the all important Months of Inventory statistics. This is an important tool for sellers who want to price a home competitively. For homes and PUDs on the South Coast, there is currently 6.5 months of inventory. Also referred to as “Market Velocity”, this shows that given the current pace of sales, a seller can expect their property to sell anywhere between 1 and almost 200 days. Another way of expressing it is that there are 6 to 7 homes for every one buyer. Looking at the various districts, you will see Goleta, with its predominantly lower priced homes, has only 3.4 months of inventory, whereas, in spite of an uptick in higher-end sales, Montecito still has an 11.4 months supply of homes.

Figure 2 compares 2009 activity to the monthly average of the 5 year period 2004-2008. You can see how from January 2009 to July 2009 closed escrow numbers have crept closer to the 5 year average. August closings dipped slightly, but a look at the sales pending, (the most accurate snapshot of what is happening today, last week and the week before), it has climbed above the 5 year closed average for the month of August.

Figure 3 illustrates the concentration of the market activity under the $800,000 level and illustrates graphically the dichotomy of the Sellers’ Market vs. the Buyers’ Market, in this transitioning phase the current real estate market cycle.

Historically, Santa Barbara property values have at least doubled every ten years since the 1960s; indeed, values tripled between 1995 and 2005. Across the various cycles, the successive “peaks”, as well as the low points, have been significantly higher than the previous, making investing in real estate always a sound long term investment.