The Economy of Santa Barbara

Inflation is roaring and interest rates and gas prices are increasing. What does this mean, and how are they connected?

Davis Ohanian and Aden Meisel

The median Santa Barbara house price in 2022 exploded to 2.1 million from $940,000 in 2021. This dramatic increase is due to several factors. According to local luxury properties specialist Jim Scarborough, “There is a very wealthy demographic of people who come up from LA who are able to offer and pay crazy amounts of money for properties making it into a sellers’ market.”

Such wealth can be seen in the offers these individuals from LA make on Santa Barbara homes and how they go about purchasing these properties. “We have close to 40% cash buyers,” Scarborough said. “Even though rising interest rates discourage taking out home mortgages, Santa Barbara’s real estate market remains almost completely unaffected as many buyers are simply not swayed by price tags.”

However, these rising interest rates have contributed to unprecedented changes in the stock market. According to math instructor Paul Chiment,

“Whenever the Federal Reserve pushes interest rates higher, you are going to see a downturn in stocks.”

The stock market is incredibly complex, and raising interest rates is one of the driving factors in its downturn.

According to Time writer Harlan Vaughn, the stock market is on track to have three consecutive quarters of losses, an unforeseen phenomenon that has not occurred since the 2008 financial crisis. When bleak economic outlooks are projected, investors become more reluctant to put money into the market.

In addition to the implications of rising interest rates on investors’ portfolios, rising interest rates are also negatively impacting retirement funds. “When you see that downturn in stocks, it’s going to impact people’s retirement accounts and their ability to retire,” Chiment said.

The decreasing value of retirement accounts and the stock market’s downturn are specifically impacting teachers’ pensions. Since most pensions rely heavily on stocks, many portfolios can quickly lose value and completely alter one’s outlook on retirement.

Investors are not the only ones hesitant to spend money; when it comes to California’s heavily inflated gas prices, people now think twice about where they get their gas.

According to sophomore Devin Eisman, who commutes from Malibu daily, “I think that it is getting out of hand. The U.S. federal government needs to do more to stop rising gas prices,” Devin said.

The journey from Malibu to Santa Barbara is not cheap, especially since the median price of a gallon of gas in California is approaching $7. Devin thinks the Federal Reserve should do more to curb fuel prices, and Chiment backs up this claim.

“What the Federal Reserve has done will not affect gas prices,” Chiment said. “Rising gas prices affect everything.”

In contrast to the stock market, gas prices impact all economic activity in every part of the world. When the price of gas rises, the price of goods and services rise to battle the extra cost invoked by these gas prices. These high prices do not seem to be going away soon, and it is evident that these interest rates are affecting almost every aspect of our society.