2011 North County Real Estate Review

                Our tepid North County Real Estate Market continued to hang around like a bad cold throughout 2010.  The general prognosis for the patient, in 2011, is more of the same.   There is no traction forward but the downward spiral has grudgingly begun to abate.  A closer look at our market segments will give us some insight into 2011.

                There were approximately 1100 North County homes sold in 2010.  This annual figure compares to 1088 homes sold in 2009 and 859 homes sold in 2008.  The average home sale price dropped 24% from 2008 to 2010.  Last year’s average home sale price was $277,000 down from $363,000 in 2008.  In 2009 the average sale price was $301,000.  One can see the easing of price deterioration in the past year.

                With the vast majority of homes being sold at the lower end, this average sales price could dip a few more percentage points downward in the coming quarter.  We don’t see double digit dips on the horizon.  When activity increases, in the 400k-500k range, we will see price stability.  Until that time, of sales increase, we will have a squishy market.  There is no horizon for the end of short sales or foreclosures.  Banks are not giving away these properties.  It’s a target rich environment for investors and first time home buyers.  It’s a painful reality check for sellers.   There is complete clarity in this market segment.

                Bigger homes on larger acreage have been dormant throughout the last few years.  Foreclosure ranches have slowly crept into our marketplace and sale prices are being adjusted downward.  This market is very challenging for sellers because sales are weak and property comparisons are more complex.  Financing is also tough for these properties.  At out current sales rate there is years of supply of homes on acreage for sale.  This is a very price sensitive market with price weakness for the foreseeable future.  Deals are being made.  More aggressive sellers should yield more sales in 2011.  There is an appetite for these ranches but its price driven.

                Demand for commercial space is weak but not absent.  Foreclosure properties are present throughout North County.  Many new office buildings remain vacant.  Raw commercial dirt is very weak except below 100K.  Occupancy in downtown Paso Robles is fairly robust for a recessionary economy.  Atascadero is loaded with vacancies.  There are enough sales and leases to give some clarity to the overall market.

                Demand to purchase vineyards is soft due to the uneven demand for wine grapes.  Agriculture values swing much greater than real estate values.  Grapes are being sold and prices are moderate or below.  The strength of our winery industry is helping to keep demand flowing for Paso Robles fruit.  A number of wineries are currently for sale and winery sales are grudgingly happening.  It’s a super competitive environment for selling wine,  grapes and winery related real estate.

                Demand for raw acreage is weak.  Prices for eastside acreage have dropped 50% or more in the past five years.  Demand for quality Westside acreage remains firm.  There is so little activity in this category that trends are non-existent.  There are some really good buys starting to emerge in this category.

                Stability in pricing will occur when transactional sales stabilize.  It may very well be that 2008 was the low point in the sale of homes.  We had similar sales volume numbers in 2009 and 2010.  Our current sales activity is consistent with the past two years.  What we have learned in the past five years is that instability is the new norm.  Trends are not necessarily consistent one way or another.  We are in a fog of malaise.  We just deal with it.

                A few parting thoughts.  North County has an exceptional future ahead for our community.  The wine industry is an awesome asset that is a difference maker in our drive for prosperity.  We have good local community leadership.  People want to live in our community.  Distressed properties will be with us for the next few years.  Banks will not ride the market down to the bottom.  If you are a seller you must compete mightily for the foreseeable future.  If you are a buyer it’s a good day to be you!