In the middle of the 19th century the area was known as a haven for bandits and highway robbers, who hid in the oak groves and verdant canyons, preying on traffic on the coast route between the towns that developed around the missions. By the end of the 1860s the bandit gangs were gone, and Italian settlers arrived. Finding an area reminiscent of their homes in Italy, they built farms and gardens similar to those which they had left behind in Italy. Around the end of the 19th century, rich tourists from the eastern United States began to buy land in the area: it was near enough to Santa Barbara for essential services, but was beautiful, secluded, boasted perfect weather, had several nearby hot springs for health ailments – and at the time, land was cheap.
The Montecito Hot Springs Hotel was built at the largest of the springs, in a canyon north of the town center and directly south of Montecito Peak, in Hot Springs Canyon. The exclusive hotel, which required guests to be worth at least a million dollars to be allowed to stay, burned down in 1920; it was replaced a few years later by the smaller Hot Springs Club.
Montecito has retained the character it acquired early in the 20th century, of an area of exclusive estates and second homes, to the present day.
There were 3,686 households out of which 25.7% had children under the age of 18 living with them, 57.1% were married couples living together, 7.2% had a female householder with no husband present, and 33.4% were non-families. 27.0% of all households were made up of individuals and 14.0% had someone living alone who was 65 years of age or older. The average household size was 2.41 and the average family size was 2.85.
In the CDP the population was spread out with 18.4% under the age of 18, 13.5% from 18 to 24, 16.6% from 25 to 44, 30.0% from 45 to 64, and 21.5% who were 65 years of age or older. The median age was 46 years. For every 100 females there were 84.7 males. For every 100 females age 18 and over, there were 82.1 males.
The median income for a household in the CDP was $110,669, and the median income for a family was $130,123. Males had a median income of $81,719 versus $42,182 for females. The per capita income for the CDP was $70,077. About 2.3% of families and 3.8% of the population were below the poverty line, including 2.6% of those under age 18 and 2.2% of those age 65 or over.