2013 North County Real Estate Review
2013 ended on a very positive note, with all of us looking to 2014 for more of the same positive market growth. Home sales in 2013 were similar in volume to sales in 2012. The average sales price jumped up 14% to $333,000. By the end of 2013 prices had stabilized in most categories. Selling homes in the $300k – $500k range became more competitive again. As prices peaked, sales leveled off. Inventory is still way down and so is new home construction. Any further price movement, assuming slightly higher interest rates, is going to be linked to economic improvement. Prices should remain firm. At this moment in time it’s actually a somewhat balanced market.
Perhaps the most significant North County event is 2013 was the Emergency Water Ordinance. The immediate impact of the ordinance was confusion. As the ordinance plays out, there are some longer range impacts. It will be more difficult and more expensive to develop vineyards, wineries and homes. Raw land, with no entitlements, becomes tougher to sell. The Cities of Atascadero and Paso Robles should benefit from the lack of restrictions which only apply outside their limits. Existing homes, vineyards and wineries are more valuable when compared to replacement costs.
A number of smaller wineries and vineyards exchanged hands in 2013. That trend should continue into 2014. Grape pricing is solid and clearly the Paso Robles Appellation is growing in stature. The price for developed vineyard property will be strong. There remains a decent inventory of existing wineries for sale at very reasonable price points. Development restrictions are not going away any time soon, so these existing properties are very attractive.
North County real estate is an inbound market strongly influenced by urban refugees from the Bay Area and So Cal. The Bay Area is the strongest economy in our state and So Cal is really improving as well. Higher end properties will be the biggest beneficiary of this urban resurgence. Million dollar homes increased significantly in sales numbers this past year. There was ample inventory and prices were very attractive for Buyers. At this point, inventory has stabilized and pricing is clearly defined. We are still a great value in the eyes of the million dollar buyers.
Commercial properties are also included in this real estate review and improving as our economy grudgingly improves. Prime retail properties are leasing but secondary locations are still soft. Small office space is absorbing as rents have met the demand. Industrial property is getting more user activity. Apartments are stable. Overall commercial rents are still below peak numbers.
Interest rates will rise in 2014. Home building will be limited by the lack of buildable lots and the water situation. Everything points to firm prices in the $400 -$$700 range. More sellers will be able to sell their homes which will help increase inventory. It is doubtful that we will see the double digit percentage increases in prices we have seen in the last couple of years. Stability in prices is more likely in 2014.
Economically North County is well positioned. The wine industry has spawned quality restaurants and hotels throughout Paso Robles. Small higher end retail businesses are popping up. The Wine Enthusiast magazine named Paso Robles the Wine Region of The Year. Our Paso Robles city bonds were raised to AAA status. We are becoming a legitimate tourism destination which is great for business. Success is a function of a number of little things leading to something big. Those little things are in place.