More Santa Barbara homes hit the market as mortgage rates rise

SANTA BARBARA, Calif. — More homes are hitting the market in Santa Barbara, giving buyers more options and potentially more room to negotiate — but rising mortgage rates are adding pressure to an already expensive housing market.

Dan Johnson, a Berkshire Hathaway realtor, says inventory has increased noticeably on Santa Barbara's Mesa in recent weeks.

“When I started listing on the Mesa back in mid-August, there were two listings for sale in the Mesa, and now there's 13,” Johnson said.

For buyers, more inventory can mean more homes to choose from and potentially more negotiating power.

But higher mortgage rates are making it more expensive to finance those homes.

“We are now at the highest rates that we've seen in several years,” Johnson said.

The average 30-year fixed mortgage rate is now around 7.5%, according to current national mortgage-rate data.

Realtor Yawar Charlie said the increase can significantly affect how much a buyer can afford each month.

“Buyers who were qualified for a certain amount a month ago have to redo their math because essentially on a $1 million mortgage, the difference between the interest rate now and what it was five weeks ago is about $5,000 a year that someone's spending on their mortgage,” Charlie said.

Buyers looking for ways to lower payments

Mortgage professionals say buyers have options that may reduce their monthly payments, including negotiating with sellers to contribute toward a mortgage rate buydown.

Jon McCuskey, a mortgage consultant with Prosperity Home Mortgage, said some buyers may also consider adjustable-rate mortgages.

“If we can get the seller to help by buying down points to lower the interest rate and maybe do a seven-year adjustable as well, we can save most buyers a couple hundred dollars a month, if not more, depending on how much you're borrowing,” McCuskey said.

Buying down points generally involves paying upfront costs in exchange for a lower mortgage interest rate. Seller contributions may sometimes be negotiated as part of a home purchase.

Adjustable-rate mortgages can also have lower initial rates than fixed-rate loans, but the rate can change after the initial fixed period. Buyers should consider the potential long-term costs and risks before choosing a loan.

Should buyers wait?

With rates rising, some prospective buyers may be tempted to hold off on purchasing in hopes that mortgage rates will fall.

McCuskey said he believes buyers shouldn't necessarily wait, particularly in a market where inventory remains limited.

“I wouldn't wait,” McCuskey said. “The cost of waiting, especially in Santa Barbara where inventory is limited, usually it doesn't work out so well.”

For buyers, the decision ultimately depends on their financial circumstances, how long they plan to own the home and the terms of the loan they can qualify for.

Meanwhile, the increase in listings on the Mesa could give some buyers more choices as they weigh whether now is the right time to enter the market.