Overall North County Real Estate sales dropped 6 percent as compared to First Quarter
2005 sales. Sales activity remains brisk but buyers are more selective and sellers face growing
inventory. As bubble mania fades from the headlines it’s important to examine specific product
categories to understand new market realities.

The average sales price for a single family residential home in North County dropped to
$453,000 from $478,000 in First Quarter 2005. This price change does not reflect price
decreases but rather a significant softening in single family home sales in the $600,000 range.
Sales activity is still brisk from $550,000 on down but between $550,000 and $650,000 it’s real
tentative. One of the best buyer opportunities exists in the aforementioned range but for sellers
this price range will remain hyper competitive all Spring. Investment buying of single family
homes, for flipping or rental, has stopped. Nationally 28% of all homes purchased in 2005 were
for the purpose of investment. Demand will be decent but supply is way long. Waiting for the
market to rise is a recipe for failure. Price is king in this category.

Homes on acreage prices have jumped 11%, over 2005 First Quarter numbers, to
$780,000. Supply in this category is growing but the absence of new product, being built on
acreage parcels, gives a stronger base for seller pricing. The westside of Paso Robles and
Templeton continue to lead in price strength in this category. As prices have escalated over the
past few years more buyers are staying away from older and smaller homes on acreage while
searching out quality newer properties. Home on acreage buyers are more affluent, selective and
discretionary. This is a very competitive market for sellers and a good one for buyers. Price is
huge but home quality is big as well.

Acreage parcels are still super strong in price and low in supply. Williamson Act
properties are viewed very favorably by buyers because of the tax ramifications. We have not
seen the top of this market. It’s taking longer to sell dirt but quality again is key. It’s a good
time to be a seller and a frustrating time to be a buyer. Buyers are going to have to start looking
at older homes on acreage for tear down opportunities. It’s just the way it is.

North County commercial activity is robust. New retail and office space is being built all
over Paso Robles and Atascadero. In Southern California and the Bay Area office vacancies are
falling and rents are firm. Commercial activity is a key indicator for general economic health. A
good economy is good for Real Estate. Rising interest rates have been offset by the strong
economy. Even $3 gasoline is no longer a shock. The Spring Real Estate market should be
positive.

The wine industry is very strong. Retail sales are at record levels and North County
continues to garner national accolades. Grape prices are generally soft with some firm pricing on
the Westside. Last year’s huge harvest slowed the grape pricing recovery. One of the best
buying opportunities, on a cost value basis, is purchasing an existing vineyard. Most vineyard
sales are happening at below replacement costs. Buyers are getting vineyard property at what the
land costs plus the price of extensive landscaping. If one believes grape prices will rise,
purchasing vineyards is a buying opportunity.

Our market has materially changed in the last six months. It’s a much more complicated
and competitive environment. Information and exposure are key ingredients in the selling
proposition. Buyers, with good agent representation, can successfully navigate a much more
turbulent market. This is still a very good market in comparison to most historical indicators.
The Spring/Summer market should be active.

Pete Dakin
RE/MAX Parkside Real Estate

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