SANTA BARBARA REAL ESTATE MARKET CONDITIONS

March 28, 2006

Real Estate Priced at $5million and Above Leads in Sales Activity!

While we hear of a softening real estate market in almost every newspaper and news program lately, it is important to look inside the numbers.

In Santa Barbara , property priced at $5 million and above is leading the sales activity. In first quarter 2005 property priced at $5 million and above totaled $87,825,000. First quarter 2006, totalled $126,555,000., an increase of 44.1%

The obvious question is why. As in every transaction, there is a buyer and a seller. It is important to look at each of these seperately:

The buyer is typically a cash buyer, or may take advantage of a good mortgage program to provide some tax benefits. These are not the leveraged buyers who are spending 50% or more of their disposable income on housing costs. The leveraged buyers, those at the lowest end of the price range, typically requiring a mortgage to make the purchase, are those the analysts use to make their arguments about the market softening as interest rates tick upward.

The seller was most likely a cash buyer of the property, and who has realized a significant gain in that real estate. They are typically not motivated sellers as they don't have mortgage financing pressures, nor job transfer pressures that many sellers at the lowest end of the price range may experience. In short, this seller recognizes the inventory for estate properties is low, and are willing to wait for the right buyer at the right price.

The Santa Barbara real estate market is healthy. Economist, Mark Schneipp of the California Forecast estimates continued appreciation for years into the future.