2011 First Half Review and Forecast

            A Real Estate Market cannot have a recovery without a period of stability.  The term recovery presupposes a return to the values of 2005.  That return is not going to happen any time soon.  Buyers are looking for stability.  Buyers need to feel the worst is over for price deterioration.  Many North County Buyers have been slowly inching back into the market.  Activity is painfully uneven but there is activity.  The report will look at North County Real Estate sales for the first half of 2011.

            There were 470 single family homes sold in the first half of 2011 compared to 374 single family homes in the first half of 2010.  An increase of 96 units is a strong 25% year to year increase in sales.  Almost half of the home sales are distressed properties but sales are happening.  The average sale price dropped 4%, on a year to year basis, to $267,000. Most investors and first time buyers are quite satisfied with the deals being done in the past year. There were also 139 homes in escrow at the end of the second quarter.

            High End Westside properties had a solid surge in closed sales this past quarter.  The premier areas are always the first areas to experience renewed buyer interest.  Many of these big Westside Buyers are voting with their pocketbooks.  Stable real estate markets start to look attractive compared to other shaky financial investments.  Our wine industry continues to draw Buyer interest to the Westside.  High end properties on the Eastside have yet to gain any traction.  Deals are being done on the Eastside ranches but demand is sporadic at best.

            Gallo purchased Edna Valley Vineyards which continues a trend in Buyer demand for quality Brands.  As our area grows in quality more major dollar deals will follow.  Grape pricing will be interesting this year.  The frost and now mildew could significantly shrink the crop.  Prices are definitely firm in the fruit and bulk wine markets.

            Homes on acreage sales increased from 147 units in 2010 to 169 units in 2011.  Sale prices were stable at $489,000.  Pending sales were also solid at 43 units.

            A great deal of the angst surrounding real estate has been promulgated by the media.  Real estate is a local business but most media is national.  In an effort to provide content to their customers the media has been reporting on real estate in a generic manner supposedly relevant to all viewers/markets.  Let me just say there is light years between real estate markets in Santa Barbara and Santa Maria.  Within one three day span the Wall Street Journal had headlines that read “Housing Imperials Recovery” and “Why It’s Time to Buy.” It’s no wonder people are spooked.

            We live in an area that is desired by the urban refugee.  The Bay Area and the L.A. Basin real estate markets feed the North County.  The health of these aforementioned markets is a good indicator of the status of our markets stability.  A headline in USA Today June 24 states “Silicon Valley Housing Market Is Heating Up Fast”.  The tech industry is churning out money and these folks want to buy real estate.  The median price of single family homes in Palo Alto rose 20% on a year to year basis.  Now that doesn’t mean much if you live in Boise but it does mean something to San Luis Obispo County.  A major housing analyst has four of the top 15 national 2012 markets for pricing located in California for 2012.  The average projected price change is right around zero. So we have that going for us which is Nice!

            There are enough recent sales to get a handle on current property values in almost all categories.  The supply of distressed properties and real sellers will keep a lid on values for some time to come.  Waiting for price recovery is great as long as a Seller can afford their property and they enjoy ownership.  As the days go by more and more sellers are making deals happen and getting on with their lives.  In an economy devoid of trends, this trend of Sellers getting competitive is not going to stop.  Reality is here now.

            One fact helping home sales is the improvement in short sales.  Slowly many lenders are making short sales happen in a much more expeditious manner.  This short sale activity is helpful in cleaning up our market.  All the wasteful government “assistance” programs pale in comparison to a simple easing of the short sale deal.

            Many of the non distressed Buyers and Sellers are very satisfied with their trades.  The First Time Buyers and Investors are really excited.  Much like the late seventies we are laboring under an economic malaise with seemingly no end in sight.  America can dominate if we just get out of our own way.  As stability gets some legs we will have a change in perception.  That change in perception is going to take some time.  Price recovery, at any level, needs perception to change.  In this environment reality leads perception.