Idly dreaming of a Santa Barbara vacation home

Asked by Mike Stevens, 94121 Wed Sep 24, 2008

I'm working on a blog post about buying your dream vacation home, since I live in Northern California, Santa Barbara sounded very nice to me. So, what I am asking is this, what is a good price point for a family with an income of around $150k/year? Is renting the house out easy? How do lenders currently look at vacation home purchases in this area? At any rate, I would love to hear any thoughts from agents, or experienced buyers/owners.

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iNSITES, Agent, Santa Barbara, CA
Thu Sep 25, 2008
Hi Mike-

Ideally I'd like to have a lot more information about a potential buyer's situation to help establish a price point. Primary residence costs, downpayment, other investments, other debts, and other factors will come into play, and it's difficult to guess at a price without it. Many buyers I've worked with in this and higher income ranges have checked a website like Bankrate.com to get an idea of what a comfortable monthly payment for them translates to in price. Early in the process I'll refer them to a local mortgage broker who has experience working with out-of-area buyers which helps ensure we're targeting the right homes.

Suffice it to say that most buyers earning in the $150,000 a year range will probably be looking for a vacation home priced between $500,000 and $1.5 million in the Santa Barbara area. On the low end of this price range a buyer may find a smaller, older condo in a development with fewer amenities. Toward the higher end of the range, condos are usually larger and offer more luxury items (and better locations or views). Single-family homes start closer to $800,000, at least in areas where many vacation home buyers target homes. In my experience, the most requested areas are near downtown, near the beach, or in an area that offers an ocean/island view. In this price range, the greatest number of single-family home options are found near downtown where remodeled smaller bungalow prices start near $800,000. Ocean view homes in good condition can be purchased under $1.5 million, but note this is only slightly above entry-level for the ocean view market. Oceanfront starts close to $2.5 million.

For buyers that are offered a substantial raise or inheritance, the Santa Barbara, Montecito, Hope Ranch, and Carpinteria areas offer wonderful vacation home options in all price ranges. Luxury condos are priced up to $5 million, and select beachfront and inland estates exceed $50 million dollars.

Renting is a very good option in the Santa Barbara area as our vacancy rates are among the lowest in the nation. We usually hover around 2.5% for residential, long-term rental properties. Rental rates are also much higher than most other areas (due to the high cost of housing in general). That 2 bedroom, 1 bath remodeled bungalow might rent for $2,800 a month long-term. Vacation rentals are also very popular in the area. Several companies (including my own) handle vacation rentals and it's not uncommon to see weekly rates match monthly long-term rates in the high season. The trade-off is that the homes aren't usually rented ALL of the time, but this gives owners a chance to fill in time themselves.

Local lenders are used to handling vacation homes because they're quite common in the area. These days, stated income loans are much more difficult than they used to be, and 25% to 30% down is expected at minimum. Full-documentation loans are still readily available and may allow lower down payments. Rates are higher than they were a short while ago in the "jumbo loan" and vacation home arena because of the current lack of funds, but historically they're quite good.

Santa Barbara is an excellent choice for a vacation or retirement home due to its mild climate, friendly people, extensive cultural offerings (especially for a small city), excellent restaurants, and overall quality of life. It's still expensive, no doubt, but definitely worth it! With the recent dip in the real estate market and instability in the financial markets, it's not a bad time to consider investing in real estate in the Santa Barbara area because it should hold its value well over the long run.

I hope this is helpful. Please call or email with any further questions.

Best regards,

Jon Perkins
(805) 284-3660
Web Reference:  http://www.timeforsb.com
1 vote
Ron Avolio, Both Buyer And Seller, Santa Barbara Downtown, Santa Barbara, CA
Fri Sep 11, 2009
Look at Zillow.com [123 Bath St. Unit A-6]
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