2013 North County Third Quarter Real Estate Market Review
North County is a vibrant real estate market with a diverse array of real estate properties. But in California, it’s always been about the water. And as we have seen these past few weeks, it still holds true.
It remains to be seen what impact the new County emergency water ordinance will have on local real estate values, but in all battles and government mandates, there will be winners and losers. There is no totally equitable solution when it comes to resource management. But all of us realize a solution is needed. From a real estate perspective this much is certain; development costs for homes and vineyards will continue to rise over the coming years.
Single family home sales, the bulk of our market sales, have remained consistent with 2012 sale numbers. The pricing of residential homes has reached a $333,000 average sale value which correlates to a 22% increase over 2012. This price increase is typical for most of California in general. Inventory of available homes has increased by 5%.
We are now seeing a tapering of any price increases in this real estate market and demand is much more selective. And each day numerous listed properties are advertising a decrease in listed price. These events are not a backup in prices, but represent a plateau in pricing. Foreclosures and short sale properties have decreased in supply and are being replaced by standard home sales. Interest rates ticked up which appears to have had a cooling on the overall market.
There are many reasons we have reached this plateau today. Number one, the job market is weak statewide. Two, investors backed away from the market as cheap properties disappeared. Three, interest rates hurt the entry level property buyers. And four, the uncertainty of our National Economy is of real concern to both buyers and sellers. I think we can hold the current market values of today, baring any cataclysmic national or worldwide event.
Luxury million dollar properties have picked up steam this year. Property sale numbers have gone up 40% over last year and the inventory has been fairly stable. The sale numbers are still below replacement value costs in most cases, but we do have many more clients looking for luxury properties. We still have at least a 2 year supply of this product for sale. A bright spot in this million dollar market is sales in Orange County, LA County and the Bay Area. Activity is decent in these areas and this activity should trickle down into the North County.
Our local wine industry is still strong. Grape prices are at equilibrium right now with ample supply. A number of distressed winery properties have sold as this market cleans up. Buyers are very interested in vineyards. This interest is being fueled by decent fruit prices but most of all the realization that planting will most surely be curtailed and planting costs will rise with the current water management solution in place.
Commercially you can look around and see vacant properties for sale and lease. Tenants continue to come and go. Apartment rents are strong and should be stable throughout the coming year. Economically there are far too many unknowns to allow any momentum for further recovery in this market. The “recovery” has been largely fueled by the wealth effect of a rising stock market and rising real estate sales. Cheap money fueled this. Until we have a climate conductive to real economic growth we will tread water as a County.
The City of Paso Robles and the City of Atascadero have solid water programs and ample water supply. This situation should help these communities continue to attract quality business and development in the coming decades. Tourism and agriculture are the foundation of the North County Economy. For the moment these industries appear strong and their future looks bright. Good news for any economy and especially for our local real estate market.