Third Quarter Review 2004

           This past quarter the buzzword pertaining to Real Estate was "Bubble". One report states our greatest housing problem is affordability and the next report claims imminent economic pain in the coming collapse of housing prices. The market is changing throughout California. Price increases are flattening out and it is taking longer to sell certain properties. This report covers the North County Real Estate market throughout this year.
Total sales for the first three quarters totaled seven hundred million dollars. Single family home prices are nearing $400,000 on average. Properly priced homes below $500,000 tend to sell within 60-90 days. Homes on acreage parcels are also strong up to one million dollars. Well priced ranchette properties below one million dollars will sell within six months. Properties above a million dollars are much slower in sales time with time on market exceeding 12 months. Prime West Templeton properties will sell quickly at most any price level as long as the pricing is in line with the market.

           Residential single family home prices remained strong. People want to live in North County and building homes is a challenging endeavor because our County is committed to quality controlled growth. Demand is strong and supply is restricted. That situation does not sound bubblish to us. Continued low interest rates and aggressive lending policies have kept housing marching forward. A newly married couple I know is purchasing their first home for $500,000. They both work and their loan is basically 100% financing. These are young people willing to work hard and pay the price to live in this County. This trend will continue as long as the cost of money remains low.

           Raw acreage is very strong up to $500,000 in price. Bare land parcels are diminishing rapidly as people seek to control land for building their dream home. The quality of the building site within the parcel is of more importance, in value, than the total acreage of the land. Grape prices are stronger this year but not strong enough to fuel a surge in new planting. Some small Westside wineries are garnering national attention from their exceptional Rhone offerings. More quality wines will come from this area and more fruit will be planted in the Westside area. Water quality and quantity will become more of an issue in farming operations.
Commercial and income properties remain in strong demand. Capitalization rates are very low. Rental rates are static across the board with the exception of higher rates for new small retail users.

           Mortgage rates remain low. It's hard to envision much upward movement in the coming months. Both the Bay Area and Southern California expect steady upward job growth. More sellers are putting their homes up for sale, in the urban areas, to catch this perceived top of the market. This increase in supply should moderate prices all the way up to the Central Coast. It will take longer to sell property.

           People want to live in the Central Coast and it is hard to build homes on the Central Coast. The aforementioned fact is not a crisis or a bubble. It's a fact of life. Today our market is relatively in balance between real buyers and real sellers. Pricing will be firm below a million dollars with actual price increases much more moderate than the past year.

Pete Dakin
RE/MAX Parkside Real Estate

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