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Housing market shows signs of flattening

9/30/05
By MARIA ZATE
NEWS-PRESS STAFF WRITER

The go-go days of the housing boom may be nearing the finish line, ending the hefty annual appreciation Santa Barbara County residents have grown accustomed to over the past several years.

Signs pointing to a housing slowdown have grown more prevalent this year, and more economists now say the market may finally be close to or at its peak.

"I think we're at the peak now," said Mark Schniepp, economist with the California Economic Forecast. "I think this is it, although the evidence we have at the moment is not entirely convincing."

The California Economic Forecast presented its "2005 Real Estate and Economic Outlook" to more than 300 people attending a conference held Thursday at Fess Parker's Doubletree Resort in Santa Barbara. The conference is held each year in February and September.

Mr. Schniepp isn't the only one who thinks the market may be cresting. Economists at the UCLA Anderson Forecast voiced similar findings this week.

UCLA senior economist Christopher Thornberg was quoted in a Los Angeles Times story last Wednesday saying, "There are some signs that the housing party is ending."

Mr. Thornberg added that a housing slowdown would have a 50 percent chance or more of sparking a recession at the end of 2007, the Times wrote.

The housing sector has been leading economic growth for the past few years and "dominating all other sectors" of the economy, according to Mr. Schniepp.

"We have a lot of eggs in one basket," he said, and that dependence on the housing sector creates vulnerability in the economy.

Beyond the economy's lopsided leaning toward housing, another red flag signaling the end of the boom is the heavy dose of real estate talk, Mr. Schniepp said. The current chatty scenario mirrors much of the same characteristics seen in the final run of the dot-com boom.

"Real estate talk is unabating. Everyone is talking about it. It's the number one topic of conversation these days everywhere you go," he said. "And that's dangerous."

Beyond simple conversation, a rash of advertisements for get-rich schemes in real estate investments have mushroomed, tempting novices with promises of "how to make a fortune buying homes with no money down," or "flipping homes for big profits."

Home Buyers are also taking bigger risks when it comes to financing their mortgages. Interest-only and adjustable-rate loans have soared in popularity over the past two years, leaving an unprecedented number of Buyers dependent on steep appreciation rates to pay off their loans in time.

But Mr. Schniepp warned "that price appreciation is slowing everywhere in California."

He said, however, that "the extent of the slowing is less than what's been forecast."

On the South Coast, appreciation gains in the median price so far this year have tempered most in the exclusive Montecito area.

Median price is the point where half the homes on the market sell for more and half sell for less. It represents the mix of all homes sold, not appreciation rates on individual properties.

In Montecito for the eight-month period from January through August, the median price hit nearly $2.5 million -- a gain of only 2 percent from the same period a year ago. During the same time frame in 2004, the Montecito market had gained nearly 23 percent.

For the full year in 2004, the area posted a median price gain of close to 33 percent, compared with 13 percent in 2003 and 3 percent in 2002, the California Economic Forecast reported.

Mr. Schniepp said the cooling of Montecito's median reflects Sellers lowering their asking prices to speed up sales.

Dan Encell of Prudential California Realty said Montecito has more room for increases in the median.

"As for the rest of the market, I would agree that we're near the peak," Mr. Encell said. "But I think Montecito still has plenty of upside growth.

"It's a very small market with a lot of Buyers who want to live there," he said. Baby boomers are just hitting their chief retirement years, and they can live anywhere they want. Many people want to live in Montecito, but the supply of homes is low and demand is constant."

Far north of Montecito, where the supply of homes has steadily grown, there are signs of a flattening market.

Price gains in Santa Maria and Lompoc -- which boasted median increases in the 30 percent range for most of last year and through the recent spring, have dipped into gains of about 20 percent in recent months.

"The North County," Mr. Schniepp said, "looks like it's reaching a plateau."

mzate@newspress.com

MARKET INFO > ARTICLES HOME PAGE

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Los Angeles Times, 1/2/2011)

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PGA pro Fred Couples Lists Montecito Home at $12.5 million
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The Road to Recovery
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S.B. listed as one of U.S.'s most distinctive destinations
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South Coast economy resolute, expert says: Forecast: Santa Barbara's situation "boringly steady"
(Santa Barbara News-Press, 4/18/2008)

South Coast office space remains at a premium
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(CASA, 3/2/2007)

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Home Sellers Find Buyers are Standing Tough
(Santa Barbara News-Press, 11/10/2006)

Future Trends will Reshape Real Estate Industry
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Number of Homes Sold in County Drops
(Santa Barbara News-Press 10/25/2005)

Housing Market Shows Signs of Flattening
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Home prices hot, but buyers cool
(Santa Barbara News-Press 3/24/2005)

Casa de Maria puts price tag on Montecito Property
(Santa Barbara News-Press 1/25/2005)

Helping buyers find their "Home Safe Home"
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