This was written by Pete Dakin the Broker/Owner of Re/Max Parkside
North County Real Estate Review and Forecast 1st Half 2010
This report takes a look at the North County Real Estate market for the first half of 2010. We utilize past years results to frame future direction. While consumer demand does swing widely, in the long term markets are dominated by supply. The national malaise we are experiencing today does have a material impact on our Real Estate markets. By the same token our relatively healthy agritourisim has a positive impact on our Real Estate markets. We are in a very fragmented environment.
North County sales, for the first half of 2010, were virtually the same as compared to the first half of 2009. The average sales price dipped down about 2% to $282,000 for residential single family homes. We are still dealing with foreclosure properties accounting for a third or so of the sales. These distressed properties will keep a lid on any price increases throughout the next 12-18 months. New construction is still minimal. Rents for single family homes are still firm. This market is attractive to first time buyers and investors.
One of the most important trends to consider, in North County housing, is the permit fee situation. Building permit fees and the associated fees for infrastructure will likely continue to rise in the coming years. Already built homes benefit, from a value prospective, from these new fees. Replacement cost factors rise, new construction costs rise and downward pressure in value accrues to unbuilt dirt. There will be a time, in the not so distant future, where government fees will run into six figures for new home construction.
There is very little activity on larger homes on larger acreage. Buyers in this category are discretionary buyers. This is not a first time buyers market. These are second homes or retirement home buyers. Inventory is slowly building up in this category. The shadow inventory of bank owned or soon to be bank owned is building. Buyers in this category are waiting. There is significant downward pressure on values in this category.
Paso Robles is doing much better commercially than our neighbor to the south Atascadero. El Camino Real is rife with vacant storefronts. Rents are weak in both communities but vacant spaces will provide low cost housing for businesses as they eventually expand. There is no demand for commercial dirt.
Winery demand for fruit is selective and soft today. Westside fruit is in much more demand but there is Westside fruit unsold as of today. Wineries are being very cautious in committing to buying grapes in this upcoming harvest. Wine sales are down for most wineries on a year to year basis. It’s a tough business right now but most of our North County wineries are holding their own. Today it is all about selling out of your tasting room and building your wine club. Wineries are also going to be much harder and much more expensive to permit and build.
Our collective American psyche is somewhat fragile. We continue to have unpleasant economic surprises like this oil spill, Israel, Greece and immigration. There is also a growing chasm between our federal government administration and American business. These problems have kept our country from getting any traction forward. This aforementioned malaise has kept a lid on any economic growth in Real Estate or wine.
Right now fear dominates the day. Optimistically there are some things to consider in the near term. People tend to feel better with gridlock in our government. I’m talking about people that make America work. It seems we may have a shift coming in November. Historically the second half of a president’s term is better economically than the first half. Most of the time the diminution of political party power leads to the gridlock that quiets the masses. This is a best case scenario.
No one knows what will happen. We live in a desirable area that continues to attract national attention. Prices for all Real Estate categories are not going up in the near term. There are foreclosure properties across the board. If you are a seller, this is the market. If you are a buyer everything’s on sale including money.
