North County Real Estate Review

            All Real Estate is local. The dynamics in Stockton are markedly different then North County fundamentals. Vineyard Drive is significantly different then Geneseo. Acreage is performing different then residential single family. Commercial properties differ from residential counterparts. Vineyards are a different story. The media has attempted to commoditize and homogenize Real Estate into 30-second sound bytes. It just doesn’t work. Our local market is as complex and interesting as our fine local wines. This is what’s happening today and will happen in the coming months.

            North County residential singe family homes have averaged about 50 sales per month. This number includes all sales north of the grade, Shandon and San Miguel. The average sales price is approximately $470,000. This average price reflects a drop of 15% from the high point in late 2005. The average list price today is $494,000. Sellers are getting more aggressive in their price points.

            In the next few quarters there are four significant facts that will create a very favorable buying situation. The number one issue is the supply of foreclosed properties coming into our market. There are forty North County homes that are bank owned and listed for sale today. This number will probably increase to fifty plus and remain constant throughout the next few quarters. A good ten to fifteen percent of sales will be foreclosure product. These institutions are real sellers. Vacant homes, currently for sale, are another significant buying opportunity. The supply of vacant homes for sale are at their highest historical level. Deals will be made. Nobody sits on vacant homes for a long time. A third buying opportunity is the new homes “closeout” deals from developers. Some of these homes have had their first (or second?) birthdays and developers, or their partners, are getting very aggressive. The fourth buying opportunity is the equity rich seller looking to move. If you bought your home prior to 2004 you still have significant equity. Prices are double plus 2000. These equity rich sellers will make deals if a lifestyle change is in order.

            Buyers are already starting to come out of the bunker. People are much smarter then the media gives them credit for in talent. All of the four buying opportunities will be with us at some level throughout 2008 and even in 2009. The problem buyers will face in later 2008 is competition from other buyers. Even today buyers are competing for deals. The supply of product is enviable and generous today in residential single family. This situation will not last. The building costs and mandated infrastructure fees will further restrict supply. In the long term all markets bow to supply.

            High-end million dollar west side buyers never left the market. There is so little supply that prices remain strong. Westside grapes are in huge demand. Big money will still pay the price for trophy properties. This will continue unabated.

            The spec home and used home million dollar properties are an interesting study. Buyers are very knowledgeable, discriminating and will pay for quality. Sellers are usually well healed and willing to sit tight. This market is actually more fluid and stronger then residential single family. There is great value for the buyers of these properties when one considers the cost of dirt, building, hassle factor and time. This is not a deep market but it is a growing market segment. People will pay the price if it’s nice. There are some pretty neat homes being built in this area. One should never sell the upper end short.

            Homes on acreage is a split market. The higher end, 5 acres on up, is selling at a
moderate pace with ample supply. Quality is king with newer and nicer selling first. It’s still very competitive for sellers. The smaller homes on one and two acres are in the same position as residential single family. A number of foreclosures, short sales, vacant homes and spec homes. It’s a buyer’s market with great supply in this market today. There are some great buys being made today.

            Most grape pricing is a little stronger this year. A lighter crop with increased
consumption is helping fruit prices. Paso Robles continues its march forward in the
consciousness of wine consumers throughout the world. Wine is a luxury item that attracts people with money. We get nationwide press about North County constantly. People want to be a part of this thing and owning a small vineyard is all part of the cache. Paso Robles wines are some of the best in the world. That’s not hype that’s fact. Look it up.

            Commercial building has been robust in North County. This building will continue but not at as robust pace. The lodging business is well supplied with rooms. This is great for our community. Tourists will feel very comfortable staying in our community and spending money on recreation and wine. A new destination resort, the next leap forward, may very well begin construction in the next year. A destination resort is a change maker for North County. Tourism is big. Office rents are soft. Plenty of office supply. Cap rates are moving up. Buyers are willing to pay less for rented property. With appreciation on hold, buyers are looking at actual cash on cash returns. No more frenzy. Demand for income producing product is good.

            Residential prices got way ahead of the curve because of loose money and demand frenzy. The loose money stopped flowing this year and demand has weakened over the past two years. Seller pricing remained very sticky. That’s all changing now in residential single family. Buyers will soon be boasting about their great acquisitions. It’s a slow process but we see it in play already. Money is still cheap but one actually has to qualify for the loans today. Our area is more desirable then ever. Buyers are smarter then the media gives them credit for in knowledge. Buyers are coming out of hiding in North County, because of the perception of value. Sales are not going to be robust but there are deals being made. With the exception of residential single family, it’s an ok time to be a seller. If you do not have to sell a residential single family home, in the next couple of years, it is best to stay on the sidelines. No doubt it’s a good time to buy but that fact is getting around.

Pete Dakin
RE/MAX Parkside Real Estate

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