Paso Robles Area Real Estate Blog

              Fear is rapidly leaving the North County Real Estate scene. The number of real estate transactions topped 1200 sales in 2009 with over 800 residential single-family home sales. Total sales volume was close to 500 million dollars. This sale increase equates to a 25% bump over 2008 numbers. There was a lot happening in 2009 and more to come in 2010.

              The average sale price of a residential single family home today, in North County, is $301,000. This number represents a nearly 40% drop from the brief average pricing slightly above $500,000. First time homebuyers and investors are very active in this market. Apartment and home rents are not cheap in North County. With the combination of low interest rates and low home prices the monthly payments are very attractive. This price point of $300,000 is very competitive for buyers. We could very well see close to 1,000 homes sell in 2010. This activity is remarkable when one considers the almost complete absence of new construction.

              Home pricing is a lagging indicator. The first step in a recovery is transactional velocity or the number of sales. With this current sales velocity we have already seen a floor established in pricing with periodic slight bumps upward.  Pricing should be relatively stable but there is more chance of price increases, albeit slight, then price decreases in the core residential market. That's a huge change from the last few years.

              Estate homes on small acreage are moving very briskly. These McMansions are selling for well below replacement cost. The values are stunning and the buyers are stepping up and buying. This trend will continue on into 2010 but the supply of these

Big Beautiful homes is much more finite than core residential properties. Today there is still great supply and pricing is very well established. This is a healthy market. There has been no upward price pressure in this market. We see no upward pressure in 2010.

              There is a decoupling of vineyards and wineries in relationship to values. Vineyard values on the eastside are soft and Westside values are stable. The major international wineries, big buyers of our local fruit, are cautious. Everything seems tentative but this could change quickly. Today the wine grape market is unclear. The time and effort to get a permit for a winery and tasting room has become a two-year process. Buyers are starting to see the value in the entitlement for the winery. More important than anything is the health of the brand and wine sales. There are lenders for this category of established wineries. Values are well established. Sales are happening in wineries. Given the past economic shocks, our tasting room traffic is relatively good. There is no area, in California, that has more upside in the direct wine sales arena then North County.

              The biggest change in North County sales for 2010 will be homes on acreage. Foreclosures have begun to hit the market in this category and this process then creates a floor in pricing. Buyers, sellers, lenders and appraisers all get clarity in values. This market segment is not a big part of our market but there are deals being made today.

              Much has been written about the coming implosion of the commercial real estate market. Vacancy equals uncertainty. We do have vacancy in North County and we do have uncertainty. This market will probably bump around for another year or so before velocity picks up. Smaller tenants are doing deals and smaller buildings are being sold to users and investors. It's a very price sensitive market. The commercial market will be the last category to exit the doldrums.

              New construction supply has been replaced by foreclosures and short sales. These distressed properties are fueling the market and creating a whole new class of homeowners. There will be more liquidity in distressed properties in 2010. After a few years banks are getting better at the process. Distressed properties will not be around forever. The opportunity is today.

              Given the option of not losing money or risking making money, most people will opt for not losing money. The big fear in real estate, for the past few years, is that values had more room to fall. This fear of value erosion has left the building for the most part. It's still about getting a good deal but there is comfort that a bottom is in place. Now the hurdles are lenders and appraisers. This return in confidence could bode well for North County beyond anyone's expectations. Most probably foreclosures and short sales will not be around in a couple of years. The wine business has room to improve as well. There is still a lid on pricing but more importantly there is also a floor. It wasn't that long ago that North County was a billion dollar market! 2010 should be a positive year for North County.

            This report details North County Real Estate throughout the first three quarters of 2008.  Various segments of the market are performing at different levels of activity and price strength.

            Just under 500 residential single family homes have sold throughout 2008.  Approximately 40% of these sales have been foreclosed properties.  The average sales price has hit $375,000 and there appears to be a bottom in pricing for properties valued below $400,000.  First time buyers and investors are actively seeking single family properties priced below $400,000.  There are multiple offer situations.  Inventory is in balance at these price points.  Pricing is defined.  Buyers are very educated and will respond only if the price is right.  There is no upward movement in price today.  Residential single family homes priced at $500,000 and up are languishing on the market and pricing is not clearly defined.  There is more supply then demand.  The bottom, in pricing, is near and will probably be realized within the next two quarters.  Sellers need to be aggressive in competing for buyers.  Waiting for a market to turn is a doomed strategy.

            Homes on acreage is also a two tiered market.  Smaller homes on smaller acreage, priced below $500,000, are getting decent activity.  Supply still outstrips demand but there is a bottom being established at these lower price points.  The million dollar category of homes on acreage is an altogether different story.  We have moved the price point for the analysis down to $800,000 since this is representative of the floor in higher end estate type properties today.  There are over 100 estate caliber homes listed for sale today and there will be 20 or so that sell in 2008.  Almost one fifth of the higher end listings are distressed which means either bank owned or soon to be bank owned.  The price reductions have been dramatic in this category.  Supply overwhelms demand. It is the ultimate buyers market. There are some great values in this category and buyers are slowly beginning to re-enter this market segment. There will probably be twice as many of these homes that sell in 2009 and the values will be extraordinary.

            Vineyard oriented properties are experiencing more buyer activity. Grape pricing has firmed at a reasonable level and wineries are signing multi-year contracts to purchase fruit. There is clarity and definition in the wine grape and bulk juice market. We may even see vineyards being planted in 2009. Existing vineyards are reasonable values when one considers the replacement costs.

            Commercial real estate lags behind residential real estate. After a couple of weak residential years the commercial market is softening. Office space is overbuilt, industrial dirt is overbuilt and rents are weakening. Big rental users and some niche smaller retailers are surviving.  Retailers are surviving but prosperity is relatively absent throughout the commercial environment. Sales of commercial property are weak because buyers see the supply situation and buyers are demanding good deals. This market is stagnant and rents are dropping. Weak rents will attract tenants throughout 2009 and 2010.

            The best buys in the market are finished lots and acreage. Pricing has to be right but as our market recovers dirt always jumps in value. Our residential market is in the early stages of recovery. There are very few lots for sale and the cost to create new subdivisions is enormous. Dirt is finite.

The single most significant situation in our market today is the short-sale listing category.  A short-sale listing is a property offered for sale at a price below what the seller owes the bank or banks on the home.  The lenders must approve the sale and the red tape involved makes these transactions long, frustrating and unpredictable.  That's the good news.  Many of these short sales never happen.  The illiquidity of these properties creates a false illusion of an inventory situation that really does not exist.  The media always focuses on inventory, or homes for sale, when commenting on the market, but most of these short sales are fake inventory.  How many people do you know that would like to spend six months getting jerked around by a lender?  Buyers have this figured out.  Our inventory level is much lower in North County when one subtracts short-sales.  There's a reason there are multiple offers on many residential properties even thought the inventory appears bloated.  People want to buy properties that are deliverable.  Short-sales do happen.  The fact is that the number of short-sales as compared to the number of short-sale listed inventory is dramatically lower then the ratio of other sales to listing deliverable properties.  Short- sales cast a shadow over the entire market.  

            The local economies of Paso Robles, Templeton and even San Miguel are holding up pretty well in this environment. Tourism and hotel occupancy are remarkably strong.  Wineries are selling wine but it is competitive. Existing businesses are holding on throughout the malaise.   It's unfortunate to watch the debacle in Atascadero and we certainly hope that the community pulls it together soon. Overall the Central Coast is poised for greatness and prosperity in the coming years.

           If you want to see the future of the housing inventory just drive by the car dealer sales lots. Looks a little lean. Manufactures have cut back on car production dramatically. More used cars are being handled by the dealers. The selection of new vehicles is shrinking and will continue to shrink into next year. The same thing is going to happen to with housing. Inventory is being absorbed and the only new inventory for sale is used foreclosures. Foreclosure property is going to peak in the next couple of quarters. Now is the time to be buying. Today there are choices. This will not last. The next crisis is shortage.

            Look for short sales to become more prevalent and easier to accomplish. After a few years lenders are starting to adjust. It's still a dice roll, for a buyer, but listing short sales is something to do if you want business now.

            This is about helping your buyers understand the opportunity. Have them drive by Reneau and Imagine that is the future of housing inventory. There is no new construction and all new homes should be bought as soon as possible. New homes are generally great deals compared to foreclosures product. The only entity slower then national lenders is hard money. The hard money inventory will continue to sit into 2009. Someday there will be deals to be done. Relationships should be built now. Today there is restricted product and ample inventory. Soon there will be ample credit and restricted inventory. If your buyer can buy today, get it done.

            Have you noticed smaller caravans?

I got a new lisitng today and I just started using virtual tours for my listings.  So I just added the listing to our central coast Multiple Lisitng Service, created and added a virtual tour for the home, added the home to PostLets.com which creates a flyer and puts the home on multiple web sites, and put the home on our new website.  Let me know what you guys think and what else I can do track down some of these internet leads without spending a ton of money. 

Listing:

http://ccrmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Centralcoast&PRGNAME=MLSLogin&ARGUMENT=3lq%2Fn4REnL1y0NvKg7Wy9%2BT%2B2DmF3wNlDJUdZZeDqxw%3D&KeyRid=1

Website:

www.SynergyAtThePark.com

PostLets

http://www.postlets.com/res/1159388

As long as there are business and demographic cycles there will be real estate cycles. It's not "Different this time." North County is in the middle of a nasty down cycle. While we are better off then many areas within California, the pain is present. Cycles don't end on cue, they just fade away. There is a lot happening today in North County.
The average price of a North County residential single family home has dropped to $330,000. Looking back to the peak we see a price dip of almost 30%. That's a big haircut. There is a vibrant demand for homes in the 250k to 350k range. Very active. Almost 40% of that category are foreclosures. A phenomenal opportunity for the first time buyers and investors. Rents are strong and money is cheap. These properties will not be here forever. Most buyers know these are great deals. Above $500,000 demand is tepid and buyers are skittish. Inventory is not deep. New home building is almost non-existent. In fact residential inventory has stabilized. If we did not have a steady flow of foreclosures, It would be a lean supply market.
Homes on acreage pricing seems to be stabilizing near $600,000. This category is so broad and sales so weak that averages are marginal in judging actual conditions. What is clear, in this market, is that new construction is at a standstill. Hard money lenders have a number of lots and half built homes in this category. It will take years for a lot of the hard money product to trickle into the market. Bank owned foreclosures are popping up with more regularity in this market. Foreclosures ‘equal' sales. Buyers are seizing these opportunities with the zeal of buyers in the residential category. Inventory is stabilizing.
The million dollar home category is deep with supply. There are over 100  properties listed above a million dollars in the North County and we project 20 or so sales in 2008. That's a five year supply as compared to a one year supply in residential homes. Sellers and buyers in this category usually don't have to move. Foreclosure product has been almost non-existent. We have had a standoff in this category the past few years. That's all starting to change. Foreclosure product, in the million dollar market, is on its way. There is going to be double digit million dollar foreclosure properties on the market. All the buyers that have been on the sidelines will slowly circle this foreclosure product for clues on pricing. No quick movement here by sellers or buyers but there will be movement. Forclosures equal sales. Well priced quality million dollar properties are selling.
Lots and acreage are soft in pricing because of weak demand. Supply is moderate. Since existing homes for sale are plentiful, end-users have enough inventory to select for purchase. Construction costs are down and construction loans are cheap. Permit fees are going to significantly rise in the coming years. It is a great time to build.
Vineyard demand and sales are going forward. The grape cycle is in a rebound stage. The wine industry is healthy. People are looking for wineries; existing wineries are a great opportunity because of the hurdles in obtaining permits for new winery construction. Our wine community has a brilliant future.
Vacancies in the commercial sectors of retail, office and industrial properties are prevalent throughout North County. Demand for the space is very weak. Vacancies will increase slowly. Commercial sellers tend to be strong enough to wait out the weakness. Rents will soften at some point. There will be some opportunities as sellers look to move on. It's going to be all about price.
Here are some important concepts to grasp regarding North County. Forclosures are selling as fast as they come on the market. North County has an abundantly low supply of approved residential building lots. Total building permit fees on new developments will probably exceed six figures in the future. In a few years a water meter alone is going to be $30,000 on new construction. Fees in the cities will dramatically outpace fees in the county. Existing properties, at today's prices, are cheap. Demand is abnormally low because of the national angst over sub prime, gasoline, Iran, etc. This angst will not last. Americans figure it out. That's what we do. Look out when it goes the other way. It's not a question of if, just when.
Our market is diverse. Home buyers are moving forward in the entry level price category and great opportunities exist in the mid range. The high end market will show some life in the next few quarters as foreclosures start to bring out the buyers. We have so little creation of new product. That's good for the moment and a positive factor for values in the next few years. The bell has rung at the entry level. The rest of the market is dormant. Opportunities abound.

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