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Fourth Quarter 2003
Total North County Real Estate sales finished off close to 700 million dollars for 2003. North County sales will continue to grow throughout 2004. Pricing will be mixed in areas and product categories. There were some really significant trends that occurred throughout 2003. The average value of a single-family home increased 20% to $324,000. Over the last few years North County homes have jumped over 50% in value. Price increases, such as these, are not sustainable. Low interest rates have been the dominant factor in this rapid home price escalation. Homes are taking a little longer to sell and pricing is firm. Most forecasts predict price increases below double digits in 2004. Supply is still thin today but there are plenty of new homes coming on line in 2004. Properly priced homes, between $350,000 and $400,000, have the greatest demand. Homes on acreage sale prices and sales volume were strong in 2003. The average price for a home on acreage jumped up 16% to $530,000. There has been a great deal of construction in the homes on acreage category. Homes on acreage sales will increase steadily throughout the decade due to the increase in supply. A higher average sales price limits the pool of buyers. More inventory in the resale of homes on acreage will put competitive pressure on sales prices. Eastside homes on acreage sales, above one million dollars, will be extremely competitive. Westside ranch properties remain in high demand with much shorter marketing times than east side properties. Buyers of high-end properties are very selective. Ranch properties, at the average sales price point, will remain very active and very much in demand. Raw acreage is in short supply but this category is the most price sensitive. With eastside 10 acre parcels pushing $300,000, and beyond, the pool of legitimate buyers gets shallow. Larger parcels can still be sold but marketing periods can extend beyond 12 to 18 months. There is no demand for large parcels to plant vineyards. There are some very attractive large eastside parcels available from a price point perspective. Westside parcels remain in strong demand at all sizes and prices. Buyers are willing to pay a fair price but buyers are not willing to overpay or set new price levels. Going into last year we had the war, a weak economy, and a disastrous state deficit. None of the aforementioned problems mattered to the Real Estate market because we had low interest rates. Even places like Bakersfield and Fresno are seeing price jumps because of interest rates. Without these low interest rates we have a weak Real Estate market. The earthquake has had no effect on the demand for residential properties. Sales and activity have been brisk since the holidays. Buyers are taking a closer look at properties during their inspection period. Detailed property inspections will now include chimneys and structural engineers in some cases. The North County will rebuild. The demand for our area will not cease. Most economists are predicting a full point increase in interest rates in the New Year. Two things will happen as a result of this rate increase. At the first hint of a rate increase we will see a bump in sales. Buyers will rush to beat the increase. As the rates go up, sale prices will stabilize. Higher interest rates will not allow for double digit price increases. Since it is an election year we should not see rates go too high. Any significant rate increase will have a material impact on home sale prices. Just imagine what an 8% or 9% interest rate would do to affordability. No one is predicting jumps up to these numbers but the buyer perception would take some time to overcome. Many new homes are coming on line in 2004. The residential single-family market will be the most competitive it's been in the last few years. New homes will keep a lid on used home pricing. Properties priced above a million dollars will also be very price sensitive. The perceived difference between a $900,000 ranch and a $1,100,000 ranch remains big. There will be more seller focus on establishing a realistic and competitive listed price. Competition and higher rates will be sale price factors. The battle for the direction of North County has been initiated. Outside government forces continue to promulgate the affordable housing crisis argument while our crowded streets and schools go begging. Our local city government has done a good job of identifying local issues. The cost of living here and building in North County is going to rise as dramatically in the coming years as has the cost of housing. Our future is in our hands. We control our own destiny. It's ironic that our state government, 40 billion in debt, continues to intrude on our affairs and foist their ill-fated programs on struggling communities. Take the time to be involved with our local government. We can make a difference. Pete Dakin |