The North County Real Estate market is a billion dollar market. Record sales and record prices were achieved in 2005. In the Fall we saw a significant change in the residential single-family market. This report will look at homes, land, ranches and vineyards in 2005 and beyond.

Over a thousand residential single-family homes sold in 2005 with a median price of $506,000. In the Fall the supply of homes priced between $550,000 and $675,000 increased substantially in relation to demand. Price reductions were quick to follow but supply is still long. Competitively priced new homes, in these price ranges, will get the majority of buyers. This market segment will remain completive certainly for at least 6 months. We do not see double-digit price increases for homes in 2006.

The average home on acreage sale price is $750,000. This number is very strong and supply is about equal to demand. Resale ranchette properties are not facing great competition from new ranchette construction. Westside ranches are in strong demand.

Dirt is still the strongest product category in the North County. Parcels up to 100 acres are short in supply and Westside acreage is in demand. There are not many larger parcels available but the demand is spottier. No one is yet looking to plant hundreds of acres in new wine grapes.

Vineyards are selling again after a lull period induced by an over supply of wine grapes. Prices are still on the softer side, for most wine grape varietals, but wine sales are strong and fruit is being sold for 700-1100 a ton on the eastside. Westside fruit is in strong demand but yields are restricted. There are a lot more high quality wines coming out of North County, which will continue to push our appellation forward. 2005 was a big crop and bulk wine sales in the coming months should be monitored for market strength. Wineries may wait a little longer before committing to fruit this year because of last years bumper crop.

The million-dollar estate market exploded in 2005. Over 50 significant homes sold for over 1 million dollars. This sale pace, of over 4 estates per month, compares to 1 per month million dollar homes in 2004. Currently there are only 58 million dollar estates listed for sale, which would equal to a years supply. Listed million dollar properties, for sale, will probably double in the first quarter as sellers hit the market. Buyers will pay a million dollars, or more, as long as the value is in place.

We believe the national media fueled bubble hype has done a disservice to our buying and selling Clients. The insatiable urge to promulgate fear and manufacture crisis spilled over into the housing arena. It's been three years of non-stop blabber about a much-anticipated burst of home prices. These fear mongers try to broad-brush local Real Estate markets with a national red pen of crisis. The only link between Atascadero property values and Atlanta property values is mortgage rates. Chicken Little experts use stock market analogy to try and predict calamity. Stock market values and Real Estate values do not perform with the same velocity. Every market is unique. Let's take a detailed look at the North County.

A vacant residential lot in East Paso Robles sold for about $100,000 in 1990. The median tract Paso Robles home was $150,000 in 1990. Today that vacant lot is $275,000 and that home is around $500,000. Doing the math we notice this 16 year increase average a little more than 7.5% annually on a compound basis. Since when did a 7% increase become bubbly? The fact that most of the increase came in the last five years is being distorted to promote these fallacious bubble theories. Do not hold your breath if you are waiting for prices to drop this year. We had an extended period of retardation in the nineties that obfuscated actual price increases. We are where we should be, in pricing, given low interest rates coupled with a quality area. In fact, our cost value relationship is cheap compared to other quality areas.

Everyone talks about what we have in the North County but we would like to examine what we do not have today. Do we have commercial air service to Paso Robles? No. Will we have air service someday? Probably. The airport is built and waiting. Do we have a destination resort in North County? No. Will this destination resort be a reality one day? Probably. There are a couple entitled properties and the Hot Springs are already under way. What happens to our property demand with air service and a destination resort? More exposure will yield more demand. Long term our future is strong unless we prostitute our resources.

North County is becoming a known candidate area for people looking for second homes, retirement and relocation. All of our local communities are investing significant dollars in infrastructure that will promote quality growth. Tourism, via the wine industry, will continue strong growth. If you want to feel bad you can always follow the national media. For the time being we have a great year in the horizon.

Pete Dakin
RE/MAX Parkside Real Estate

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