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The Big Picture

“Why would anyone sell or buy a home in THIS market?” We get that question all the time, and with all the bad press in the media, it’s a good question. The people who consistently do well in “down” markets - the Warren Buffetts of the world - understand that there are two sides to every story, and how you look at the “upside” makes all the difference. Mr. Buffett has been quoted as saying “You can’t buy what is popular and do well”, and “The time to get interested is when no one else is”. If the most successful investor in the world gave you advice, wouldn’t you listen? Those pearls of wisdom aside, here are a few reasons that may hit closer to home.

► Whether you are buying or selling, you’re probably doing so to solve a problem. That problem can be anything from not wanting to climb stairs anymore, to needing more space, wanting less yardwork, needing to be in a better school district, or wanting to invest in a second home, etc. Whatever the reason, you’re making a lifestyle change, hopefully for the better. The first thing you need to do is ask yourself, “Is now the time for me to make this lifestyle change, and if so, how much is that life improvement worth to me?”.

► Assuming you are selling your home to buy up or across into a home that you wouldn’t normally be able to afford, you’ll want to consider the whole picture. Let’s say the market dropped 10% across the board, and you’re selling what would have been a $1 Million home (in a better market). You’re taking a $100,000 loss, and your home is now worth $900,000. BUT, you are looking at a home that was $2 Million in that better market, that is now available for $1.8 Million. You’ve lost $100,000 on your sale, but you’re making $200,000 on your purchase...you’re $100,000 in the black, AND you’ll be going in at a lower property tax base.

► Interest rates are historically low...certainly, the best I’ve seen in 28 years in the business! How long they’ll stay this low is anyone’s guess, but one thing is for certain: Each 1% interest rates go up will reduce buying power by about 10% (depending on down payment and loan amount). Once rates start going up, that house you had your eye on may not be affordable any more. Also, as inflationary dollars saturate the economy, the ratio between dollars spent today, and dollars necessary to buy in the future will expeditiously add equity.

► Homes is Montecito and Santa Barbara are pretty unique in style, vintage and location, and represent an anomaly to the statistical tracking applied to most developed urban areas. They are more like art than commodity. It’s not like you can wait for another one “just like the one you saw” to come on the market. Historically, home values in the Santa Barbara area DOUBLE about every 10 years. If that perfect home you’re looking at right now sells and doesn’t come back on the market until 2019, “waiting for prices to hit bottom” is going to seem like an irrelevant concept.

► Despite what you’re hearing in the news, things in the Santa Barbara area aren’t that bad. Foreclosures and short sales make up a relatively small part of the market (especially compared to other cities around the state and country); Inventory levels are actually pretty good, so if you’re buying, you have a lot of choices. Competition is down (except in the under $1M market, where it is up), so you may be able to negotiate a better deal. And let’s not forget those very low interest rates. If you look at the BIG picture, it’s really a good time for anyone who can see the silver lining in our real estate market.

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