We write this North County Real Estate Report to help our Clients compete in the Real Estate market.  Though we live in an information overload society, this report will focus on North County today.  Our region is unique.  Singe family homes comprise the bulk of our market but we offer ranches, acreage, vineyards and estate caliber homes throughout the county.  This report covers the first half of 2007.
           
Perhaps the biggest surprise this year is that the traditional spring up-tick in sales never happened.  May residential home sales were the weakest in a decade.  Year to year sales were down 25%. There were 120 homes that sold in the first quarter and 178 homes sold in the second quarter.  Despite this weakness in velocity, the average sales price of single-family homes dropped just 5% to $455,000 on a basis of year to year.  Pricing will continue to dominate the discussion surrounding the residential single-family homes market throughout this year.  Weak demand and high supply continue today. 
           
Statistically the average price of homes on acreage remained constant at $849,000 from 2006 to 2007.  This does not tell the whole story.  Homes on acreage priced between $400,000 and $750,000 are very price sensitive and absorption has been so weak that higher priced sales have skewed the overall average sales price.  It’s not that higher priced homes on acreage are strong in velocity; it’s just that velocity is low throughout the category.  Many of you may have noticed that the median sales price has not deviated too much in the discussion of real estate in this cycle.   This aforementioned fact illustrates a problem when dealing with statistics.  The high-end market for homes on acreage is not strong.  The lower priced homes on acreage are very weak.  The supply of lower priced homes on acreage dwarfs higher priced product.  A handful of sales does not give a clear picture in pricing.  It is very important to have your agent categorically define price points in relationship to specific product.
           
Acreage is another category that is getting really skewed because of parcel size and location.  A Westside prime parcel can sell for twice the price of a comparable Eastside parcel.  Some small Eastside parcels have dropped 30% in value over the last two years while some larger parcels on the Westside have almost doubled in value over the past four years.  Prime large acreage parcels are in demand but velocity is slowing as prices escalate.  Buyers are picky but inventory remains lean in large acreage.  Smaller acreage parcels will sell if the price is right.
           
These are some interesting facts about the past six months in North County.  Some large new homebuilders slashed prices and aggressively sold inventory.  Some new homebuilders continue to sit on inventory that is over a year old.  There are not a lot of new homes being built but the existing new homes on the market apparently will last into 2008.  This means pricing will be weak on homes into at least 2008.  Longer term this lack of new construction is positive for sellers and negative for buyers.  Remember the past does not equal the future.
            The high water mark for pricing did not have a lot of depth.  Velocity had already dropped, precipitously, as the last few big numbers hit the board.  Sellers tend to hold on to these last big numbers, no matter how old, like a precious ring.  Buyers have a much shorter memory and tend to live in the present.
           
Our area is long in structural sellers and sellers with large equity positions.  A structural seller is defined by a “have to” situation like health, foreclosure, spec homes, death, divorce, etc.  Most sellers, unless they bought in the past few years, have rich equity positions.  As our market adjusted over the past couple of years these sellers built up in numbers.  Now these “have to” sellers will define the market as they aggressively capture buyers.  Conversely we are not an area that has a large structural buyer supply.  A structural buyer being someone that “has to” buy for job purposes.  We are an “optional” area for most buyers.  This combination of “have to sellers” and “optional” buyers will create price weakness in most product categories throughout 2008.  
           
It takes sellers a year or two to adjust to down cycles but sellers are adjusting today.  Buyers feel no sense of urgency and buyers still fear continuing price erosion.  Prices will remain weak but the deals being made today are neither give away or rich in pricing.  The combination of interest rates and aggressive sales pricing are yielding positive results for the buyer of today.  There won’t be appreciation overnight.  The value in North County is present.  There will be over 1000 sales this year in North County.  The market is defined.  It will remain a buyers market well in to 2008.

Pete Dakin
RE/MAX Parkside Real Estate

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