Carmel has a surprisingly long list of restrictions for a town of only one square mile. Of course, it is that same list of restrictions that assures that Carmel remains a quaint village of small homes with more trees than full time residents.

Most lots in Carmel are 4,000 square feet. Not the house, the lot. These 40X100 lots are sometimes combined into 1 and half lots or double lots and in a couple of rare cases even triple size lots. City zoning does not allow for a guest house or “subordinate unit” on a 4,000 lot. If you are looking for a detached guest house you are going to be looking at larger lots….and with the larger lots comes more total square footage and a big step up in price.

In the 1980s it became clear to city hall that there were a great number of “duplex” homes that were in fact single family homes that had surreptitiously had second kitchens added. Some of these “subordinate units” had been added years before and some were being added as the topic was under discussion at city hall. The city was most concerned about the quality of these remodels as most were being done without permits.

The city elected to offer an amnesty. If residence would inform the city they had a subordinate unit and agree to bring it up to code, the city would allow them to keep the subordinate unit with a few restrictions.

In some cases, as with the house described below, a permitted addition was added to a home and a “utility area” would be transformed into a kitchen sometime months or years after the final inspection. These homes didn’t require any work to bring them up to code. At the other extreme were converted bedrooms with hotplates and overloaded circuits that needed quite a bit of work.

The primary restriction on these units is that only one unit can be rented at any time. As an owner you can live in one part of the home and rent the other. You can lend the “owner’s area” to friends, you can use it as a second home, but you cannot rent it if the remainder of the home is occupied by a tenant.

This property is located in the golden rectangle at 7th Avenue and Casanova. A couple of short blocks to restaurants and coffee shops and a few short blocks to the beach as well.

The east unit is two small bedrooms, a bath, a small office, and kitchen/livingroom. The newer portion of the home, to the west is a one bedroom, one bath, with its own kitchen. Both units have fireplaces and the west unit has a deck.

The property is listed for $1,295,000 and is easy to see. The owner lives in one unit and a tenant in the other. The tenant would love to stay. Give me a call if you would like more information or to arrange for a tour. Malone 831-601-4740

Rates for prime borrowers with 20 percent down were down again last week.

The 30-year fixed averaged 4.71 percent with an average 0.7 point for the week ending 3 December compared to 5.53 percent a year ago.  The 15 year fixed rate averaged 4.27 percent with an averate 0.6 point compared to 5.77 a year ago.  The 15 year rate has never been lower in the years since Freddie Mac started tracking them in 1991.

I believe a key component of these low rates has been the Federal Reserve program to purchase up to $1.25 trillion in mortgage backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. It is important to note that the program is winding down towards the end of March 2010. The Fed is gently reminding all of us that the program is going away, information we would be wise to keep in mind.

The Mortgage Bankers Association projects 30 year fixed mortgages will hit 5.4 percent in 2010, 6 percent in 2011, and 6.3 percent in 2012.

Headline writers will have to come up with something other than “historic lows” to describe interest rates over the next few years.

Although FHA loans aren’t that common in Carmel and Pebble Beach, they are playing a role in other lower priced areas such as Seaside, Marina, and Salinas. Having said that, two of my recent transactions in Carmel-by-the-Sea have included FHA loans because the “cost of money” under the FHA loan was such that the buyer’s opted for the loan even though they could have paid cash.

While the exact changes that will be coming are still being debated, it is likely that the minimum down payment for FHA loans will increase, the minimum FICO scores for new borrowers will go up, and probably the maximum seller concessions will be reduced from 6 percent to 3 percent.

The minimum FICO score for FHA backed loans was raised from 500 to 580 earlier this year although most lenders actually set their minimums at higher levels usually around 620.

FHA’s move to tighten requirements is partly in response to the continued tightening of guidelines by Fannie Mae and Freddie Mac. Fannie Maie will implement a minimum 620 FICO score along with other tightening requirements next week.

Last week Forbes published their “by zip code” analysis of the most expensive zip codes. As expected, the median price of homes for sale in most zip codes fell over the last year.

A year ago California accounted for 96% of the top zip codes, this year…less than 50%. Of the California zip codes still on the 500 most expensive zip codes, 83% had median prices that stayed the same or declined.

Pebble Beach

Pebble Beach experienced an 8% decline in median price from the previous year with a ranking of 42 on the most expensive zip codes list. While this number gives a general idea of the health of the Pebble Beach market digging a bit deeper offers more insights.

First, Pebble Beach is a relatively small market, with properties of drastically different size, location (views and proximity to golf courses etc,) and list prices, that the addition or removal of a couple of homes can skew statistics dramatically. Nevertheless, one can see the trends. The graph below compares the last 12 months with the previous 12 months.

Even more dramatic than the recent trends in pricing is the continuing increase in average days on the market for Pebble Beach homes.

If you break down the average days on market, not surprisingly, you see that the higher end homes are taking the longest to sell. The average days on market for the most expensive quartile (the top 25% of homes by price) is just under 300 days. The lowest quartile of Pebble Beach homes (the least expensive) is averaging 220 days on the market.

Percent with a Price Decrease

Pebble Beach, and markets like it, tend to have more sellers that are able to withdraw from the market and “wait for a better day” or hold more firmly to a list price than other markets where seller’s are running out of resources to hold on.  The graph below shows the percentage of homes on the market, at each point in time, that have experienced a price reduction from their initial list price. It is interesting to note that the lowest percentage of price reductions is among the highest priced homes.

Forbes observed in the article,

“Potential buyers increasingly fall into one of two categories: Those who have seen their net worths damaged by the financial crisis and those who realize they could probably get a better deal in a year’s time.”

I concur with their opinion. I also believe, as do they, that the lack of liquidity in the credit market for the high value mortgages that are often needed to buy these homes has had a huge impact. I have clients that are supremely qualified that have gone through loan processes that required hours of document collection and multiple appriasals and reviews. It is clear that lenders would much prefer to make 5 smaller loans than 1 large one.

We need credit to flow again to bridge the gap between ready and willing buyers and sellers.

Years ago, when I first became a Realtor, I considered all of the real estate brands in Carmel and Pebble Beach. I ultimately joined The Mitchell Group, a locally owned brokerage that defined the high end market in terms of the properties they represented and the level of service they provided to their clients.

The Mitchell Group was purchased by Sotheby’s International, a Realogy and NRT brand. NRT is the nation’s largest residential real estate brokerage firm. Realogy (the parent of NRT) owns Coldwell Banker, Century 21, Better Homes and Gardens, ERA, and Sotheby’s as well as a few others.

I was very successful at Sotheby’s, ultimately becoming one of the top 5 Sotheby’s agents on the Monterey Peninsula and in the top 2% of all NRT agents, everywhere. I enjoyed working with my colleagues at Sotheby’s, most of whom like me were former Mitchell Group agents. There are certain upsides to being part of a large organization, but I believe real estate is ultimately a service provided person to person, and that highly personalized service is the key to my success.

When the opportunity came up to join, and help build, an organization that shares my philosophy I took it. I have joined Carmel Realty Company.

Carmel Realty has been selling real estate in Carmel, Pebble Beach and on the Monterey Peninsula since 1913. When the Mitchell family sold the Mitchell Group to Sotheby’s, the family retained ownership of Carmel Realty and focused the Carmel Realty brand on property management. Carmel Realty manages the highest end vacation rental homes on the Peninsula, including more estate homes in Pebble Beach and Scenic Avenue homes in Carmel than any other agency. Carmel Realty places visitors from all over the world in our area’s most prestigious properties.

The owners of Carmel Realty and a group of like minded highly successful agents, including myself, believe our clients deserve highly personalized service from a company that is collaborative. A company that utilizes the best technology, understands the importance of effective marketing in print and on-line, and is able to move quickly and respond to the new market realities.

We are a group of successful and committed agents with a shared vision of quality service that, honestly, our clients deserve and should expect.

Building on that shared vision, Carmel Realty is again a full service Real Estate Brokerage.

If you would like to learn a bit more about Carmel Realty and how we represent our clients, give me a call on my cell phone at 831-601-4740 or send an email to malone@malonehodges.com

I took some clients to the Santa Lucia Preserve this weekend to look at both lots and finished homes for sale. It is a truly beautiful place. To most folks “The Preserve” brings to mind the award winning Tom Fazio golf course and the exceptional homes that are found behind the Preserve gate. However, for those with homes and lots within the 20,000 acres “The Preserve” describes much more.

A Bit of History

Before the arrival of the Spanish missionaries, the area served as grazing grounds for the Ohlone Indians of the Monterey Bay area. What would become the Santa Lucia Preserve was formed as the San Carlos Ranch through Mexican land grants in the 1830s. The original ranch worked thousands of cattle and was home to hundreds of horses, the vaqueros (cowboys), and Native Americans that herded and tended the cattle.

In the mid 1920s George Gordon became the owner and began its transformation into a destination for the more affluent members of his generation. He constructed polo fields and created a lake for his guest’s enjoyment.

Although prohibition was in full swing, Mr. Gordon felt obliged to provide his guests with only the finest liquor, most extravagant entertainment, and even Russian boars for the hunting inclined. It is said that Mr. Gordon entertained the rich and powerful, and their hangers on, because he loved to do so, and it was an effective way of collecting new investors into his various endeavors, and keeping his current ones happy.

Writing in 1963 to Stuyvesant Fish, proprietor of the neighboring ranch, Mr. Gordon explained the long route by which he introduced Russian Boar to the Monterey Peninsula in the early 1920s. The swine had originally been brought by Mr. Gordon to the United States to be hunted in Graham County, North Carolina before World War I. When he bought the San Carlos Ranch he imported nine sows and three boar to California and established the population that mated with feral pigs and has descendants today that range throughout central California.

As the decade wound down and Moore’s financial dealings faltered he was forced to sell the ranch to Arthur C. Oppenheimer of Salinas. Mr. Oppenheimer returned the property to cattle ranching and owned it until its sale to the Rancho San Carlos Partnership in 1990 and the beginning of its transformation into the Santa Lucia Preserve.

While the Santa Lucia Preserve, known locally as The Preserve, is a place apart from the rest of the
world, it has not escaped the recent downturn in the economy. Unlike many developments across the
country, and the world, The Preserve was well beyond its infancy when global financial uncertainty would have affected its operations and growth. There is over $200,000,000 worth of infrastructure paid for and in place within the 20,000 acres of The Preserve including a nationally ranked golf course, equestrian facilities, trails, and club buildings. The 73 completed homes have a conservative value of $400,000,000 with 20 additional homes under construction and 17 properties moving through the design review process.

Looking Forward

Since January of this year one property in the Preserve has entered escrow, lot 175 (11 Vasquez Trail).

In the same period last year, five parcels and one home sold in the Preserve. My colleagues and I  continue to field inquires from new clients about the Preserve as well as questions from our clients that have been considering the Preserve for some time. We believe that, as with other high end golf and amenities properties, buyers recognize there are value priced properties but are holding off in hopes of selecting the perfect property for their needs, at the near perfect price. In all of these communities, the purchase decision is elective. None of us are lucky enough to have an employer who transfers you to a place as beautiful as the Preserve.

My grandfather was a thoroughbred race horse trainer and obsessive trader. There were times he would head off to the track in a given truck and return later that night having traded it for an older model truck…and a colt. (As in horse, not beer or gun.)

Trading is back in style in the current real estate market. A colleague of mine recently completed a trade of a large lot for a house. Another client considered a trade for a home in Pebble Beach. I have clients who own two homes in Carmel and we have begun a search for a home in Carmel Valley or along the highway 68 corridor. Our intention is to approach selected sellers and offer the possibility of a trade.

While a trade transaction can be complex, it can often be rewarding for both parties. For example, someone downsizing a home might find someone interested in moving into a larger home. Or, as is the case with my clients, two households who are combining into one.

Often one of the parties will take the property they have received in trade, discount it, and offer it for sale. They may opt to do this if the property they are taking in trade is in higher demand, a better location, or has other qualities that will make it easier to sell then the original property they were offering.

Rarely are trades “apples for apples” and often one party or the other will have to bring cash into the transaction. I am sometimes asked if it is possible to insert a loan into a trade deal. The answer is yes, but it is important to work with a mortgage broker that can help explain the deal to the lender.

In this market don’t discount creative thinking. Seller financing, long escrows, and trades are all possible ways to move a property you need to sell or move into the property you would love to own.

By the way, if you happen to own a home in Carmel Valley, Pasadera or Monterra and have dreamed of owning a home in Carmel…..give me a call.

As most of my clients know I drive a Toyota Prius. I enjoy new technology and over the last couple of years have especially enjoyed the gas mileage. As a Carmel and Pebble Beach Realtor and with the number of miles I put on the car, a Prius is a nearly perfect vehicle for showing my clients homes and land for sale on the Monterey Peninsula.

Of course, there are limitations. I also represent properties in Carmel Valley and have several clients that are interested in “horse properties.”

I recently spent six hours with a client and his son touring Carmel Valley and introducing them to properties with horse facilities or vacant land upon which they could build a home, barn, and arena. They are from the Galveston area of Texas and it was important that they left after the six hours with a good feel of the various areas of the Valley and an understanding of relative value depending on property location, size, condition, view, and slope. My goal wasn’t to find them a property but to send them home with enough knowledge so that we can discuss properties over the next six months with a shared vocabulary.

Too often I met people who bought a home in a given area after only a couple of weekends of visiting open houses and now wish they had opted for a home in another Peninsula area. The difference between Carmel, the Carmel Highlands, The Santa Lucia Preserve, Pacific Grove and Pebble Beach is dramatic but not immediately obvious without reflection and research.

All are wonderful places to live but are dramatically different from each other in terms of weather, demographics, lot size, zoning, distance from grocery stores and restaurants and school systems.

Take the time to explore each before narrowing your search.

Fair warning: This post may not be of interest unless you have kids at River Elementary School or are thinking of buying or renting a home in Carmel to send your kids to our exceptional public school system.

Last night the Carmel School District held a board meeting at the Carmel River School with  Jay Marden, the principal, presenting performance numbers and goals for the school. There were several excellent presentations.

The board also heard from the district’s administration on their strategy for the unexpected increase in the number of students registered at River school.

As I have said in earlier posts, the school system here is incredible and to some extent a victim of its own success. Along with the beach, the beauty, and quality of life–the schools are big part of why families buy or rent homes in Carmel.

The Issue

The number of students enrolled at River Elementary is approaching a critical number. I covered the issue and options presented at the board meeting in an earlier post, Carmel River School Boundary Issues.

The Several Steps in the Short Term Solution

The administration recommended a series of steps, some already underway, to address the problem in the near term.

• Residence Survey

Conduct a survey to confirm that the students that are enrolled, should be enrolled. This is already underway. As of last night, 92% of River School families have provided the administration with the documents required to prove residency.

As a result, three families have come forward and confirmed that they have moved out of the district and will not be returning in September.

• Establish a Tip line for anonymous reporting of possible residency violations

Four tips have been received and are being investigated.

• Quantify the number of Inter (from other districts) and Intra (from other elementary schools within the district) transfers

There are 17 students at the school from outside the district. There are 6 students from Tularcitos elementary school, some at the request of parents, others at the request of the district.

The highest concentration of these is 6 at one grade level.

• Acknowledge that if the critical number is reached in a given class, some of these non-resident students may loose their place

The administration has structured a prioritization list for the transfer students to determine in what order they would loose their “seat.” It is important to note, and there was some confusion at the meeting, under this solution every child living within the River School footprint maintains their right to attend River School ahead of all of the transfer students. These transfer students are only entitled to attend the school if the number of students in their grade is under the “caps.”

• Establish a strategy for dealing with increased class size.

As class size increases in each grade, the administration proposes to add resources to the class.

For example, in first through third grades for classes with up to 22 students, the lead teacher is supported with 90 minutes of an instructional assistants time in the classroom.  For classes with 23-25 students that time allocation increases to 120 minutes. In the event there are 26 or more students in a class, the administration either creates a combination class (a smaller class of approximately 18 students made up of kids from two grades) or frees up a classroom by instituting AM/PM kindergarten.

Similar guidelines exist for each grade level.

• Modifying kindergarten to release the pressure

There are currently 4 classroom dedicated to Kindergarten. In the event a classroom needs to be “freed up” to address overcrowding the most likely way to do so is to modify the kindergarten schedule so the same number of students are served by 3 (or 2) classrooms versus the current 4.

Option 1) Split the day into AM and PM Kindergarten classes. Unfortunately with AM/PM Kindergarten resources such as Spanish and computers become a problem and the schedule can be a problem for parents. Teachers are not supported of this approach as the teaching day is shorter for each group of kids.

Option 2) Establish staggered day Kindergarten. One half of the class would arrive at 8:30 and depart at 1:50 while the second half would arrive at 9:30 and depart at 3:00pm. This would give the teachers and additional hour a day focused on 1/2 the class at a time.

Conclusion

At the moment there are still spaces available in each grade before the “cap” requiring the Kindergarten change is reached. [In grade 1 there are 13 spaces; grade 2, 5 spaces; grade 3, 8 spaces; grade 4, 19 spaces; and grade 5, 11 spaces.]

Again, as of today we have not reached the point where modified kindergarten or combination classes will be required.

The School board will be reviewing the numbers periodically and at the end of June will structure the classes and allocate the additional resources according to the guidelines. In the event a “cap” is reached they will take the steps necessary to reduce transfer students and consider adopting the options related to Kindergarten and combination classes.

As I learn more, I will post updates here. If you would like to hear from me by email when I post something on the topic, send me an email or give me a call.