December 2025 Market Report
- Jan 24
- 4 min read
Updated: Feb 2
Thank you for your interest in reading our Fourth Quarter 2025 Market Report.
Throughout the year, we closely tracked the broader economic landscape and its impact on our local real estate market, with particular attention to interest rates and tariff-related pressures. While the national narrative closed 2025 focused on a “frozen” housing market and continued policy uncertainty, South Santa Barbara County told a notably different story.
Our local market effectively decoupled from broader U.S. stagnation. While national sales volumes declined, South County finished the year with strong momentum, posting a 14% increase in closed sales compared to Q4 2024. This resilience reflects the distinct dynamics of our micro-markets. Luxury enclaves such as Montecito and Hope Ranch, often insulated from rate volatility due to significant cash activity, experienced robust demand, while Santa Barbara and Goleta continued to attract steady buyer interest despite the “lock-in” effect limiting available inventory.
At the same time, while national home prices reached new record highs driven by scarcity, our local median price demonstrated healthy stability, settling at $1.8M. We view this stabilization as a constructive step toward a more balanced market, setting our region apart from the volatility seen elsewhere. That said, local challenges remain nuanced and complex, ranging from insurance considerations to tariff-driven construction cost pressures affecting renovations and new projects.
Sales & Inventory
There were 345 closed sales in the fourth quarter, representing a 14% increase over Q4 2024 and matching Q3 activity. Historically, over the past five years, sales have declined by an average of 14% from Q3 to Q4 on a seasonal basis, making the flat quarter-over-quarter performance particularly noteworthy. The last time the market experienced a flat-to-positive seasonal change between Q3 and Q4 was in Q4 2020, during a period of exceptionally elevated activity that carried into 2021—the peak year for sales volume over the past decade, with approximately 700 quarterly closings.
It is also notable that the distribution of sales by submarket remained largely unchanged from Q3 and Q4 2024, indicating there was no material shift in market mix that would distort overall sales or pricing comparisons.
Inventory levels and Months of Supply (MoS) continued to move gradually toward a more balanced supply-demand environment throughout the quarter. The year began with 2.6 months of supply, briefly approaching four months during the spring, summer, and fall before retreating seasonally. December closed with 2.6 months of supply, consistent with typical year-end listing pullbacks.
A neutral market is generally defined as four to six months of supply. Prior to the pandemic, in 2018 and 2019, MoS averaged approximately 4.5 months before declining sharply into a period of severe undersupply, reaching a trough of roughly 1.1–1.2 months in 2021 and 2022. Since then, inventory and months of supply have increased steadily each year, averaging 3.2 months in 2025. While the market remains technically undersupplied, this trend represents a constructive shift toward a healthier, more stable long-term market.
Pricing
Overall, the median price in South Santa Barbara County has remained notably stable. In the fourth quarter, the median price was $1.8M, down 4% from Q3 and essentially flat compared to Q4 2024. Since Q2 2024, pricing has remained rangebound between approximately $1.8M and $2.0M, varying modestly by quarter.
We view this price stability as a positive long-term development for the market. The sustained double-digit price appreciation experienced in 2021 and 2022, driven by severe inventory constraints, was neither sustainable nor indicative of a balanced market. As supply gradually returned beginning in 2023, price growth moderated, with increases generally settling into a more sustainable single-digit range.
As always, overall market metrics provide helpful context, but pricing trends should be evaluated at the submarket level, where performance can vary meaningfully by neighborhood, property type, and price segment.
What This Means For Buyers
Buyers are operating in a more balanced and predictable market than in recent years. Pricing has stabilized, inventory has gradually increased, and bidding wars are less frenzied than during the peak years of 2021–2022. While well-located, move-in-ready homes still attract strong interest, particularly in desirable neighborhoods, buyers generally have more time to evaluate options, conduct due diligence, and negotiate thoughtfully.
That said, the market is not oversupplied. With months of supply still below neutral levels, quality properties remain competitive. Buyers who are prepared, well-advised, and realistic about pricing continue to find opportunities, especially as sellers show greater flexibility on terms such as closing timelines, credits, or minor concessions.
What This Means For Sellers
For sellers, the era of automatic appreciation and rapid, above-ask sales has passed, but demand remains solid for homes that are priced correctly and well-presented. Price stability benefits sellers by reducing volatility and helping values hold rather than fluctuate sharply. However, pricing strategy matters more than it has in years.
Homes that align with current market conditions and buyer expectations continue to sell efficiently. Overpriced or under-prepared properties may experience longer time on market or require adjustments. Sellers who invest in presentation, understand their specific submarket, and work with a knowledgeable local advisor are best positioned to maximize value in this more normalized environment.
Bottom Line
South Santa Barbara County has transitioned into a healthier, more sustainable market—one that rewards preparation, pricing accuracy, and local expertise. Buyers benefit from greater choice and negotiating power, while sellers benefit from steady demand and price stability. Success on either side depends less on timing the market and more on understanding the nuances of the specific neighborhood, property type, and price segment.
We hope this report provides valuable context for understanding current market conditions. As always, each submarket, neighborhood, and property presents its own unique considerations. My team is well-positioned to navigate these nuances and help you capitalize on opportunities as they arise. Should you have questions about a specific area or property, we welcome the conversation. The Spann & Associates team remains committed to delivering tailored insights and exceptional, consistent service. Click the button below for a full market report with graphs and more details.
Alyson Spann
805.637.2884
All information provided is deemed reliable, but has not been verified & we do not guarantee it.
We recommend that buyers and sellers make their own inquiries. DRE #01206734.
Data Source: Fidelity National Title & Chicago Title: INdata Market Reporting through OCTOBER 2025.
