Santa Barbara 2025 Real Estate Economic Forecast For Santa Barbara, Montecito, Carpinteria, and Goleta

Santa Barbara 2025 Real Estate Economic Forecast For Santa Barbara, Montecito, Carpinteria, and Goleta

2025 Economic Forecast for Santa Barbara, Montecito, Goleta, and Carpinteria Real Estate

For Sellers:

 In the current market, turnkey and move-in ready properties are highly sought after and tend to sell quickly at a premium. High-end buyers are particularly attracted to homes with historical significance, scenic views, lush gardens, seamless indoor-outdoor living spaces, and sustainable features like solar panels and energy-efficient systems. Privacy remains a top priority for these buyers.

Across all price points, the primary selling feature is the property’s readiness for immediate occupancy. Homes requiring renovations often see buyers negotiating for credits or discounts during the contract phase.

For investors, maintaining occupancy is crucial. Multifamily property buyers are looking for investments free from stringent rent controls and governmental interference, providing the opportunity to achieve market-rate rents and properly screen tenants.

For Buyers:

CAR Chief Economist Jordan Levine advises potential buyers to act now. He emphasizes, “Buy now and refinance later. Current rates shouldn’t deter you. Historically, home prices in California continue to rise.”

The accompanying graph illustrates how homeownership can steadily grow your net worth, as property values in California have shown resilience with only temporary setbacks. A home purchase allows you to leverage bank financing—also known as Other People’s Money (OPM)—while simultaneously enjoying the benefits of homeownership.


 Although the market anticipates potential Federal Reserve rate cuts this year, these are unlikely to significantly impact mortgage rates, which are more closely tied to long-term financial indicators like the 10-year treasury bond. Significant mortgage rate reductions would require a substantial drop in the 10-year treasury yield.

Some buyers are increasingly impatient with the current interest rate environment. Historical interest rates below 4% have often coincided with economic downturns, such as the pandemic or market crashes. Rates around 6% are considered historically normal and are expected to persist until at least 2027, when they might dip below this level, presenting a refinancing opportunity.

For those considering a purchase, winter offers distinct advantages. With higher inventory levels and longer market durations, sellers are more open to price negotiations. It's akin to enjoying a trip to Disneyland with shorter lines and cooler weather by visiting in February instead of peak summer.

For cash buyers, 2024 saw 41% of sales made entirely in cash. Specifically, 42% of sales under $5 million, 37% under $2 million, and 49% between $2 million to $5 million were cash transactions. Cash purchases can be facilitated through various means, including liquid assets, portfolio loans, or leveraging existing real estate.

Overall, property prices are stable, with annual increases of around 3% to 5%. 

Challenges for Both Buyers and Sellers:

- Interest rates (see more below!)

- Insurance costs

- Low inventory levels

- Global economic uncertainty

- Shifting living and work trends

- Regulatory changes

While the Los Angeles area fires have not yet impacted the local market, their long-term effects remain uncertain. Fire victims currently face immediate challenges, such as dealing with insurance and finding temporary housing, which may eventually lead to increased mobility and relocation decisions.

Interest Rates Forecast

TODAY'S RATES

Rates are now well below the highs of 2024, which were 7.5%, according to Mortgage News Daily (MND).

MND is reporting average conforming 30 year fixed rates at 6.79% to start the day. Jumbo 30 year fixed, they are seeing, still averaging over 7% at 7.09%.

I’d expect jumbo rates to break through the 7% barrier if treasury yields remain around 4.25% for the next week or two.

.75% DROP IN FED RATE BY YEAREND?! 

What we can expect ahead, based upon current bets on Wall Street, are still lower rates in the fall / winter of this year.

Wall Street is pricing in an 86.8% chance of the Fed lowering their rates another .25% by end of July and an 85% chance their rates will be at least .5% lower by end of the year. There’s now a 56.5% chance they’ll have lowered rates by .75% by year end this is according to The CME Group.

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