here hasn’t been such an opportune time, it seems
to us, to buy real estate in Montecito in at least two
decades. When the boom of the late 1980s turned into
the 1987 stock market crash, property prices were one
of the few things that continued to hold value, at least for a couple
more years. But, by 1991, the market had sagged and the slogan “Stay
alive through ‘95” became a way of life for Realtors and real estate
agents. The market stayed in its slump for a good five years, finally
coming “alive” in 1997. By the time Oprah Winfrey bought her $50
million estate in 2001, the market had been barreling upward for
nearly five years.
That trajectory stayed on course until 2006 – a nearly decade-long
run-up. Over the past four years, prices – at least,
prices – have
dropped 35-40%. Many call it a “correction”; others call it something
worse, but anyone who purchased before 2004 is probably still healthy.
Today, with the many credit options available – most of which
did not exist in the late 1990s and early 2000s – one can purchase a
$3.5-million home in Montecito that two years ago would have sold
for over $5 million. And, with a less-than-4% interest-only mortgage
stretching out into 7 if not 10 years readily accessible for those with
the right kind of credit, buying makes a lot of sense... again.
For example: with a million-dollar down payment and
$2,500,000 in financing at today’s rates, one can purchase and occupy
a beautiful home – a mini-estate really – in one of the most desirable
areas of the world for a monthly payment of just over $7,900. Add real
estate taxes of somewhere around $2,900 and one is still in at $11,000
a month. While not “bargain basement” time, these numbers indicate
that prices have reached a healthy plateau.
More to the point, there are scores of attractive and substantial
properties in Montecito on the market for less than $2,500,000, and
many of them are homes that would still befit a family of means. With
the same million-dollar down payment, one would now be looking at
mortgage payments of $4,750 ($1.5 million at 3.8% interest), and taxes
of $2,291 for a monthly nut of $7,041 on a $2.5 million home. That is
smack dab in the middle of the rental market.
To paraphrase Winston Churchill: this may not be the end of the
downturn; it may not even be the beginning of the end, but it almost
surely is the beginning of the beginning of the end of the downturn in
Welcome to Montecito!
A Time, Perhaps, To Buy