It’s One of America’s Most Expensive Cities, and Home Buyers Can’t Get Enough - Kanebridge News
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It’s One of America’s Most Expensive Cities, and Home Buyers Can’t Get Enough

A metro area on California’s central coast ranked No. 1 in the latest WSJ/Realtor.com Emerging Housing Markets Index

By LIZ LUCKING
Thu, Feb 1, 2024 8:58amGrey Clock 4 min

It’s an area already popular with the likes of Oprah Winfrey, Ellen DeGeneres, Prince Harry and Meghan Markle.

But now the affluent Santa Maria-Santa Barbara metropolitan area on the Central Coast of California nestled between the Santa Ynez Mountains and the Pacific Ocean has ranked as the top housing market in the latest Wall Street Journal/Realtor.com Emerging Housing Markets Index, released Wednesday.

It’s a surprise result for the quarterly index, which has, until now, typically seen more affordable cities rank at the top—Topeka, Kansas, took first place in the prior iteration of the report, released in fall, and Lafayette, Indiana, in the summer ranking.

“Santa Maria-Santa Barbara topping the list serves to highlight the division in today’s housing market,” said Danielle Hale, chief economist at Realtor.com. It’s the one and only West Coast market in the top 20, and, with a median listing price of $1.795 million in December, the highest-priced market by more than $1 million.

The top five cities in the index were rounded out by Jefferson City, Missouri, where the median listing price was $302,000 in December; the Canton-Massillon metro area in Ohio ($230,000); Racine, Wisconsin ($334,000); and the Oshkosh-Neenah metro area in Wisconsin ($295,000).

“Many housing markets cooled off after the pandemic’s run-up in prices and inventory-depleting demand,” Hale explained. “The markets that have continued to chug along, and even gain steam, are either priced low enough that buyers can compete, or priced high enough that the typical affordability constraints are not of concern to the market’s buyers.”

The latter is the scenario that’s playing out in Santa Barbara.

The index analyses key housing market data, as well as economic vitality and lifestyle metrics for the largest 300 metropolitan areas in the country to highlight emerging housing markets that offer a high quality of life and are expected to see future home price appreciation. It identifies markets that those considering a home purchase should add to their shortlist—whether the goal is to live in it or rent.

Santa Barbara “offers perhaps the finest lifestyle in the U.S.,” said local agent Luke Ebbin of The Ebbin Group at Compass. “Three-hundred days of sunshine and warm weather, a relaxed pace of living, proximity to uncrowded beaches, mountain hikes, fine food and wine, and incredible cultural offerings more often found in major metropolitan areas.”

However, with that median listing price of $1.79 million—more than four times the national median—the price tag attached to the idyllic locale is well out of range for many would-be buyers.

“Though Santa Barbara is among the highest-priced large housing markets in the U.S., buyers in the area have seen similar trends to buyers in other more affordable markets,” Hale said. “For-sale inventory fell rapidly during the early days of the pandemic, and has not recovered much as demand waned in the area and homeowners chose not to sell.”

As a result, “buyers hoping to snag a median-priced home are facing more competition, which has driven prices higher,” she said.

In December, 71% of homes on the market in the metro were priced at $1 million or higher, up from the same time in 2019, when the metric stood at 62%.

“Buyers who have been eager to purchase here and have been on the sidelines due to low inventory and high interest rates are entering the market as rates decline and more inventory becomes available,” Ebbin said. That “low inventory and high demand are keeping prices elevated.”

It should come as no surprise then that Santa Barbara boasts an affluent population who “are drawn to the area’s lifestyle, amenities and upscale housing options,” said Santa Barbara-based agent Jason Streatfeild of Douglas Elliman.

Santa Barbara has “long been a popular destination for retirees, especially those seeking a mild climate, beautiful scenery and a relaxed coastal lifestyle,” Streatfeild said, noting that many migrate from colder regions of the country, as well as from other parts of California.

Not only charmed by the balmy wealth, individuals from far and wide are equally wooed to the area by its thriving entrepreneurial community, and Santa Barbara’s “robust job market, including opportunities in technology, healthcare, finance and education, attracts professionals from various parts of the country,” Streatfeild said. “Some may relocate from major metropolitan areas like Los Angeles, San Francisco or New York in search of a more balanced and less crowded lifestyle.”

Indeed, out-of-towners appear to be driving demand in the coastal enclave, according to search data from Realtor.com. More than three-quarters (79.5%) of views to Santa Barbara home listings on the site came from outside of the metro in the fourth quarter, with a notable amount of attention coming from the Los Angeles (32.8%) area, according to the index. House hunters from Silicon Valley, Atlanta and New York City were also shopping in the area, according to Realtor.com data.

Meanwhile, Prince Harry and Megan Markle are prime examples that “Santa Barbara’s appeal extends beyond U.S. borders,” Streatfeild said.

The University of California, Santa Barbara, also attracts a global cohort—along with plenty of domestic new residents—who move to the area to pursue higher education.

The Santa Barbara metro area “attracted a sizeable 3.3% of its listing viewership from shoppers outside of the U.S.,” Hale said in the report. “Suggesting that international demand is applying pressure to already high prices.”

For comparison, “the average international viewership share across the 300 ranked markets was less than half (1.4%) the viewership share in Santa Barbara,” she added.



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China’s economic slowdown is wreaking havoc on Hong Kong’s luxury property market .

The most expensive homes in the city are changing hands at steep discounts to what they were worth just a few years ago. Chinese property tycoons, struggling to contain the fallout of their collapsing business empires, have become forced sellers. Bank lenders are seizing properties after luxury homeowners miss loan payments.

The average selling price of superluxury homes, defined as those worth more than the equivalent of $38 million, has fallen by more than a quarter since the middle of 2022, said Cherrie Lai, senior director and head of residential sales in Hong Kong at Savills . It will fall further this year as sellers accept reduced prices to cash out quickly, she said.

The slide in prices shows the fallout of China’s sputtering economy, which is suffering from deflation , slowing exports and moribund consumer confidence. A continuing real-estate slowdown in China is proving particularly painful, since the country’s big-spending property magnates were behind some of Hong Kong’s biggest luxury-property deals in recent years.

Hong Kong’s property market has also been squeezed by rising interest rates in the U.S. The Hong Kong dollar is pegged to the U.S. dollar, and the city’s de facto central bank matches Federal Reserve interest-rate increases. But the U.S. market has held up much better: Nine-figure home sales in places such as California and Florida have skyrocketed , and luxury-home prices in the top 5% of the U.S. market have soared over the past decade.

The luxury homes up for grabs in Hong Kong include three mansions linked to collapsed real-estate company   China Evergrande , said Victoria Allan, founder of Habitat Property. Local media reported they were ultimately owned by Hui Ka Yan , the company’s founder.

The three properties, which are adjacent mansions on a hillside road known as Black’s Link, have been seized by creditors. House 10B was sold for about $115 million in 2019 but it is now valued by banks at roughly $55 million, said Allan. It has yet to find a buyer. The other two properties could be put on the market next month, she said.

Chen Hongtian, the mainland-Chinese founder of property-investment firm Cheung Kei Group, bought a luxury high-rise apartment occupying an entire floor in a building designed by architect Frank Gehry in 2015, paying about $49.5 million. It was later seized by a creditor, according to official records. In September, shipping magnate Kwai Sze Hoi bought the property for $53.4 million, records show, below what property agents said was a market valuation of about $87 million at the time.

Homes seized by creditors usually sell at a discount to market prices, property agents say.

A waterfront house at Residence Bel-Air, a luxury residential development, belonged to Mai Fan , the chief executive of Kaisa Group —another developer that defaulted as China’s property crisis widened in recent years. He acquired the house through a company called Million Link Development in 2017, corporate and land records show, at a time when property prices were still climbing. Receivers were appointed to handle the property in 2021 and sold the house the following year for about $46 million, according to the land registry.

In one of Hong Kong’s top sales in recent years, a local businessman sold his house for the equivalent of about $107 million last month, well below the initial asking price of $166 million, according to Savills. It is located on Hong Kong’s Victoria Peak, a mountaintop neighbourhood that is home to business moguls and celebrities living in some of the city’s most expensive properties.

“China still has very wealthy people, but they’re a different group now,” said Victor Cheng, a realtor in Hong Kong. “They’re not the highflying property moguls but those who may not have made as much when China grew rapidly but whose businesses grew steadily.”

He said the new breed of luxury-home buyer in Hong Kong is cash-rich and less likely to load up on debt.

Some mainland Chinese homeowners have been forced or pressured to sell—often at around 20% below market prices—because they need cash to pay off debt, said Cheng. Some top executives from the mainland previously bought trophy homes and only used them occasionally without renting them out, he said.

Data analysed by online real-estate marketplace Spacious.hk suggest a tougher time ahead for luxury homes. The number of sale inquiries on the platform for homes priced at the equivalent of $10 million or above fell 45% in the past 12 months, said Spacious.hk Chief Operating Officer James Fisher. Inquiries for homes under $1.3 million and for those priced between that and $3.2 million fell by 8% and 25%, respectively.

The price index for private homes slumped to a seven-year low by the end of 2023, according to Hong Kong’s Rating and Valuation Department.