Presently from a national perspective the housing market in general is being driven by investor demand in lower cost markets, particularly where certain market areas have reached a point of perceived opportunity incentivizing buyer behavior.  I think that this is indicative of a stabilizing bottom up recovery.  After all unemployment is declining, mortgage defaults decreasing and housing affordability is improving.  Other indicators such as price declines are slowing which in turn has shown the improvement of demand.  While the Federal Reserve is more optimistic on the economic growth of 2012 although they feel that the weakness in the housing market will continue to be challenging.  No doubt from their perspective there is some truth to this statement; however for every real estate market the housing recovery will be local.

Negative equity is having most significant impact on the housing market but recently short sales have surpassed defaults.  A majority of metropolitan residential areas showed price increases last month as referenced by the Case-Shiller index.  On a national average there was a small gain in the first quarter of the year but down a little more than 3% from last year at this time.  California defaults are at their lowest levels in five years according to Data Quick a real estate data company and there has been a statewide increase in the median price of home sales in March.  With record low inventories of new homes, builders are showing more confidence as new home building starts are improving.  Financing which has recently been a significant challenge in home sales is also showing improvement as well with lenders becoming more available to the process.  Recently Lenders have been cleared by the Federal Housing Finance Agency to fast track the process of liquidating foreclosed properties which will be starting in June.

Over time as the market adjustment stabilizes more and more markets will be seen as investment opportunities.  Like so many studies done over a specific period, the actual defining moment when there was a turning point or an optimum time for action will come six to twelve months after that benchmark appeared.  The housing recovery will no doubt be modest in the short run, and will remain affected by the economic challenges that will impact lending institutions and equity markets.  But like a thaw after a long cold winter, the dismal negativity that has overcast the real estate market is clearly changing for improved stability and investor confidence.  This trend has been in evidence in the luxury real estate market as well.

There seems to be a growing confidence among buyers in the luxury home markets where not long ago sales were practically nonexistent, now are improving.  Prices have declined since market highs of a few years ago and since many of these properties have a unique appeal as far as design and location are concerned there is a developing trend of acting now rather than waiting and missing an opportunity. The first quarter in the Santa Barbara real estate market has shown a noticeable increase of purchases in the top market segments.  While these sale prices are down from previous market highs, these recent sales and renewed buyer interest are indicative of a trend that is now changing for the better.  I will predict that 2012 will be the best sales year since the market’s downturn.

Let’s take a look at a market comparison for the first quarter of 2012.  There were 373 sales, with an average price of $985,509 and a median price of $621,334 with 84 sales closing at over $1m.  This was a considerable improvement over 2011 in regards to the number of sales when there were 278 sales with an average price of $1,124,029 and a median price of $673,500 with 81 sales closing at over $1m.  Almost 100 more sales for the same quarter, there’s something to be said about investor confidence.  No doubt the evolution of price adjustments were a contributing factor as evidenced in the average and median sale price for the two years as more properties are being perceived as good buys.