2021 Yearly Review
1/25/22
A few months after the first COVID shutdown, a new trend started taking root in our community: out-of-towners seeking refuge from their high-density cities started buying here and investors lured by historically low interest rates started investing more. As some came, more followed. Then in July of last year, the Wall Street Journal came out with an article that ranked Santa Barbara No. 1 on the luxury segment of their Emerging Housing Markets Index. As great as it usually is to be #1, this ranking is not only adding fuel to our affordability fire, but it is making it infinitely more difficult for our local buyers to compete with these all cash, out-of-town purchasers. When non-local buyers from higher priced neighborhoods see our prices, they see a deal and often don’t hesitate to offer well over the list price.
I decided to share about this because I am worried about the mid and long term implications of local residents not being able to buy in their own town. We’re no longer talking about just the critical work force, for whom this has been an issue for decades. We’re now talking people earning very strong incomes with 30-50% down! What will happen if local buyers can no longer compete because they don’t have all cash, or if they have a house to sell? Not only will they not sell, but they will be stuck in homes that no longer serve their needs. In other words, a small family with two young children living in an 800 sq.ft. 2/1 where the parents are now working from home thanks to COVID will have to continue living with the stress this is causing. Similarly, empty nesters, burdened by the maintenance of their properties, often opt to downsize. But in this environment, if they must sell in order to buy a smaller home and/or don’t have all cash, they simply won’t be able to compete. Instead, they will either prematurely have to move to a retirement community or stay where they are. In the latter case, that lovely home they have cherished for decades will now run the risk of deteriorating due to a lack of energy, resources or both.
There is not an easy answer to this dilemma. But there are things we can do to help ease the burden…even if just a little. There are at least two things we can do at the moment. First, if you are a buyer, you will need to work with your agent, financial advisor and lender to come up with a strong buying strategy that goes above and beyond writing a typical offer. The old way of doing business will not work in this market.
Second, spread the word throughout the community that this hardship exists. Sellers who are community minded and care about their neighbors, will take this into consideration and, if their financial circumstances allow, very well may choose a local buyer. In fact, without any encouragement from me whatsoever, three of my clients did exactly this. They not only chose a local buyer over an out-of-town one, but they were willing to sell for slightly less. I’m convinced that there are more sellers who share these same values and would choose to do the same if only they knew what was happening.
The moral of this story? If we believe in buying local, then let’s consider selling local, too. This is one way we can create a sustainable and vibrant community that honors and rewards those who have roots in our community and who are contributing to the well-being of our beloved Santa Barbara.
