This report details North County Real Estate throughout the first three quarters of 2008. Various segments of the market are performing at different levels of activity and price strength.
Just under 500 residential single family homes have sold throughout 2008. Approximately 40% of these sales have been foreclosed properties. The average sales price has hit $375,000 and there appears to be a bottom in pricing for properties valued below $400,000. First time buyers and investors are actively seeking single family properties priced below $400,000. There are multiple offer situations. Inventory is in balance at these price points. Pricing is defined. Buyers are very educated and will respond only if the price is right. There is no upward movement in price today. Residential single family homes priced at $500,000 and up are languishing on the market and pricing is not clearly defined. There is more supply then demand. The bottom, in pricing, is near and will probably be realized within the next two quarters. Sellers need to be aggressive in competing for buyers. Waiting for a market to turn is a doomed strategy.
Homes on acreage is also a two tiered market. Smaller homes on smaller acreage, priced below $500,000, are getting decent activity. Supply still outstrips demand but there is a bottom being established at these lower price points. The million dollar category of homes on acreage is an altogether different story. We have moved the price point for the analysis down to $800,000 since this is representative of the floor in higher end estate type properties today. There are over 100 estate caliber homes listed for sale today and there will be 20 or so that sell in 2008. Almost one fifth of the higher end listings are distressed which means either bank owned or soon to be bank owned. The price reductions have been dramatic in this category. Supply overwhelms demand. It is the ultimate buyers market. There are some great values in this category and buyers are slowly beginning to re-enter this market segment. There will probably be twice as many of these homes that sell in 2009 and the values will be extraordinary.
Vineyard oriented properties are experiencing more buyer activity. Grape pricing has firmed at a reasonable level and wineries are signing multi-year contracts to purchase fruit. There is clarity and definition in the wine grape and bulk juice market. We may even see vineyards being planted in 2009. Existing vineyards are reasonable values when one considers the replacement costs.
Commercial real estate lags behind residential real estate. After a couple of weak residential years the commercial market is softening. Office space is overbuilt, industrial dirt is overbuilt and rents are weakening. Big rental users and some niche smaller retailers are surviving. Retailers are surviving but prosperity is relatively absent throughout the commercial environment. Sales of commercial property are weak because buyers see the supply situation and buyers are demanding good deals. This market is stagnant and rents are dropping. Weak rents will attract tenants throughout 2009 and 2010.
The best buys in the market are finished lots and acreage. Pricing has to be right but as our market recovers dirt always jumps in value. Our residential market is in the early stages of recovery. There are very few lots for sale and the cost to create new subdivisions is enormous. Dirt is finite.
The single most significant situation in our market today is the short-sale listing category. A short-sale listing is a property offered for sale at a price below what the seller owes the bank or banks on the home. The lenders must approve the sale and the red tape involved makes these transactions long, frustrating and unpredictable. That's the good news. Many of these short sales never happen. The illiquidity of these properties creates a false illusion of an inventory situation that really does not exist. The media always focuses on inventory, or homes for sale, when commenting on the market, but most of these short sales are fake inventory. How many people do you know that would like to spend six months getting jerked around by a lender? Buyers have this figured out. Our inventory level is much lower in North County when one subtracts short-sales. There's a reason there are multiple offers on many residential properties even thought the inventory appears bloated. People want to buy properties that are deliverable. Short-sales do happen. The fact is that the number of short-sales as compared to the number of short-sale listed inventory is dramatically lower then the ratio of other sales to listing deliverable properties. Short- sales cast a shadow over the entire market.
The local economies of Paso Robles, Templeton and even San Miguel are holding up pretty well in this environment. Tourism and hotel occupancy are remarkably strong. Wineries are selling wine but it is competitive. Existing businesses are holding on throughout the malaise. It's unfortunate to watch the debacle in Atascadero and we certainly hope that the community pulls it together soon. Overall the Central Coast is poised for greatness and prosperity in the coming years.
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