2005 First Quarter Real Estate Review

           The first quarter Real Estate sales numbers exceeded 220 million dollars and set yet another record for first quarter volume. These sales figures reflect a 22% increase in dollar volume over last year. Ranches, acreage, vineyards, homes, and commercial properties are all in strong demand and limited supply. Homes in excess of one million dollars are still in limited demand and deep supply. Buyers receive extraordinary value for their dollar in the million dollar plus category. This report examines individual categories and economic factors that influence our North County Market.

           Residential single-family home sales are the strongest component of our market. The average North County home price is $478,000 and supply is limited. Home sales above $500,000 were once spotty but now routine. The $600,000 home price level is the new high end with surprisingly robust activity. It seems like the prices are up $100,000 across the board from last year. There are not many new homes coming on line so we do not expect this supply situation to change this year.

           Homes on acreage now average slightly over $700,000. There is pretty strong demand and activity all the way up to $900,000 in this ranchette category. Entry-level ranchettes are now in the $500,000 range. Almost anything on the Westside, on acreage, will be above the $700,000 number with prices pushing upward towards the seven figure mark. West Templeton and West Atascadero still set the upper limits in pricing.

           Extraordinary demand for raw land is pushing these price barriers. City lots are above $200,000 steadily heading upward. Westside small acreage is a half a million dollars for just about anything of quality. Larger parcels, up to 40 acres, are strong up to a million dollars. Properties in the Williamson Act are receiving increased scrutiny because of questions surrounding recent new state law concerning building on Ag Preserve properties. There is very little supply of acreage for sale.

           Wine grapes are in moderate demand with prices in the $600-$1000 per ton range on the eastside. If one believes fruit prices will continue to firm up, the existing vineyards for sale are a relative bargain. A quality eastside vineyard can fetch $28,000-$30,000 on a planted acre. High raw land prices coupled with high planting costs make these aforementioned prices at or below replacement value. We could easily see a spike in grape prices before planting mania begins again. Indeed it will probably be that fruit spike that triggers a new round of planting. Quality Westside fruit can easily command twice the price of eastside fruit, but the yields are often lower. The wine industry is healthy. In fact one national study has the U.S. becoming the leading consuming wine country by 2008.

           Rising interest rates have been advertised for so long and in so many places that this fact is built into our current market. A strong spike in rates, not likely, would push a brief buying surge followed by a longer slower period. Rates are likely to continue a more predictable upward rise with minimal market impact this year. Today the overall economy has more impact on our market than does interest rates.

           A recent survey revealed that 40 percent of boomers plan to retire in rural areas and 37% of boomers plan to retire in warm climates. North County is warm and rural. If we can maintain a high quality of life today's pricing will seem cheap. Everyone bad mouths our state but the problem with moving to Nevada or Arizona is that you actually have to live there. We have something special in the North County. Look for an active Spring buying season.

Pete Dakin
RE/MAX Parkside Real Estate

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