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.

As we move into March there are 240 homesfor sale in the greater Carmel area (Carmel-by-the-Sea and the surrounding area), with properties taking about 180 days to sell…. These days, the number of sellers that “give up” is well above past years. This is reflected in the higher number of expired and canceled listings.

As the Carmel real estate market has softened I have seen buyers shift their attention from areas such as Carmel Woods or south east neighborhoods of Carmel-by-the-Sea to closer to town and into the “golden rectangle.” Properties are still selling in all neighborhoods but buyers are looking for the perfect home or the near perfect deal.

This Week’s SnapShot

 

Market Profile

Carmel remains firmly at the “buyer’s market” end of the spectrum. Since January first I have seen an uptick in buyer activity. The median list price has fallen $100,000 since the first of the year.  Successful sellers are those that adjust to the changing market by pricing their homes to differentiate themselves from the competition. If a home meets a buyer’s needs, they should submit a well prepared offer with supporting comparables.

The Market Action Index

The Market Action Index (MAI) measures available supply relative to the current level of demand. Index values above 30 indicate conditions favor sellers, below 30 favors buyers.

Median Price Per Square Foot

Homes in Carmel are not typically priced by “square foot” as there can be a 1,600 square foot home worth $900,000 a block from a home exactly the same size that might be worth $1,800,000. Nevertheless, median and average price per square foot are useful for tracking trends.

Looking at the market by Quartiles

To more accurately describe the sub-markets within Carmel, I report the median price in quartiles. The most expensive 25% of homes make up the first quartile, the next 25% the third quartile, the next 25% the third, and the least expensive 25% are the fourth quartile.

While the upper quartile is well off of what we saw in 2005, at the end of 2008 it was these higher priced properties that lifted the overall market.

Recent Sales

There were 25 closed escrows in Carmel in the last 3 months. They ranged in price from a low of $575,000 for the house on the corner of Highway 1 and Ocean Avenue to a high of $5,433,863 for a 3,100 square foot home on San Antonio Blvd and 8th Avenue. (Carmel Home Sales in the last 3 months) There are 20 Carmel properties currently in escrow. (Carmel Pending Home Sales)

Tracking Sales and Comparables

The easiest way to track comparables and properties of interest, is to use the Private Client MLS System to identify favorite properties. Once identified, the system will track and report on price changes, status changes, and the ultimate sale price when the property sells. You can also take a quick look at MLS listings for Carmel.

Market Profile

There are currently 5 Pebble Beach properties in escrow ranging in list price from $1,745,000 to a vacant lot listed for $300,000. (Current Pebble Beach Pending Sales) There have been 13 closed sales in Pebble Beach since October 1, 2008, ranging in sale price from $3,150,000 to $675,000 (Pebble Beach Sales since 10/1/2008).

As with other Peninsula markets, Pebble Beach remains firmly at the “buyer’s” end of the spectrum with 207 average days on market.

While Pebble Beach is certainly healthier than many other high end markets, a telling statistic is the percent of listed properties that have seen a price decrease, discussed below.

Pebble Beach Market Action Index

The market remains firmly at the “Buyer’s end” of the Market Action Index (MAI). An MAI above 30 typically indicates a Seller’s market with prices tending to rise. An MAI below 30 implies a buyer’s market with a great deal of inventory, increased days on the market and weakening prices. 

Pebble Beach Median Price

Pebble Beach has a range of housing stock (the lowest priced listing at the moment is a lot at $470,000  while the highest is a front line estate at $35,000,000). This fact makes Median price of limited value. One high end listing coming on, or going off, the market skews the numbers. 

By breaking the market into quartiles the data is a little more enlightening.

Most of the large fluctuations in list price occur in the upper quartile. However, if you look only at the bottom half (quartile three and four) you see that the lowest priced homes have trended downward since 2007.

As properties come and go the characteristics of these four quartiles changes. Each quartile represents 25% of the market, so Quartile 1 and 2 combined is the upper half, while Quartile 3 and 4 is the lower half.

Tracking Pebble Beach Properties

The easiest way to track properties of interest is to use the Private Client MLS tool which lets you select properties of interest and track them through the sales cycle, including their final sales price.  You can take a Quick Look at Pebble Beach listings on the MLS.

Insights

Buyers remain mostly on the sidelines. While many are concerned that the market may continue to settle, others are willing buyers  but unable to secure credit. There has been a decided uptick in showings and interest since the first of January.

There is a sense in our markets that we will settle into the bottom of the value curve over the next few months and then remain relatively flat for some time.

Buyers who find the home that fits their needs should act, and present a well supported clean offer. 
Sellers must do everything they can to make their home the “exceptional deal” for an “exceptional home.” Proper pricing, home staging, quality photography, and a strong internet presence are all imperative.

 The Pebble Beach housing market has softened somewhat, more so at the highest price point.  The Carmel housing market is holding its own with a bit of strengthening at the upper end. First, a look at our markets, then some national numbers. 

 To more accurately describe the real estate sub-markets, I report the median price in Carmel and Pebble Beach in quartiles. The most expensive 25% of homes make up the first quartile, the next 25% the third quartile, the next 25% the third, and the least expensive 25% are the fourth quartile. 

The data supports my feeling that home buyers are opting to move towards the “golden rectangle” and higher value locations as the market has softened.

Buyers with money, and liquidity, remain active in the upper end. Having said that, buyers are in “deal mode” recognizing that they have the upper hand in this market.

     Pebble Beach remains relatively flat. It is important to remember that there are not that many homes at the high end so the sale of a single home, or the addition of one especially high priced listing can skew the numbers.

In the case of both Carmel and Pebble Beach, traditionally many sellers “don’t have to sell.” These sellers will often try the market for 6 months to a year and then withdraw to wait for a better opportunity.

As the economy remains weak, some of these sellers are going to find that their ability/desire to continue to hold weakening. 

That fact is reflected in the numbers. Half of the homes currently listed have undergone a price reduction.

Nationwide Luxury Home Market Trends

Luxury home asking prices have fallen just over 5% so far in 2008. Average days on market, in high end markets, has stretched from 125 to 148 days. The “high end” is defined as the top 10 wealthiest zipcodes in 30 large metro areas across the country.

Nationwide agents are seeing the same growing concern amongst high end clients about the length and depth of the current financial crisis.

The collapse of Lehman Brothers and the credit freeze on September 15th signaled a change in attitude across the top end.  

Short sales and even foreclosures are occuring at these higher prices, a  rare occurance only a 18 months ago.

Insights

Price is becoming ever more important. Buyers are deal hunting and negotiating hard. Succesful sellers are pricing with that in mind.

The houses that are selling, are selling for prices set for today’s market-not the market of last year, last summer or even last month. That being said, there is still a market out there-people are still buying and selling homes. And there are a lot of investers looking for good investor opportuntities.

If you would like to discuss a specific neighborhood, or house, give me a call on my cell phone at 831-601-4740 or send an email to malone@malonehodges.com

There are 150 properties for sale in Carmel, with properties taking over 180 days to sell….when they sell. These days, the number of sellers that “give up” is well above past years. This is reflected in the higher number of expired and canceled listings.

As the market has softened I have seen buyers shift their attention from areas such as Carmel Woods or south east neighborhoods of Carmel-by-the-Sea to closer to town and into the “golden rectangle.” Properties are still selling in all neighborhoods but buyers are looking for the perfect home or the near perfect deal. There is no particular sense of urgency on the part of buyers.

Market Profile

Carmel remains firmly at the “buyer’s market” end of the spectrum. We had an uptick in activity in late August and early September, unfortunately that has cooled with the ongoing economic crisis. There has been some indication as we move into mid November that buyers are returning to the market. (See the Market Action Index below)

The Market Action Index

The Market Action Index (MAI) measures available supply relative to the current level of demand. Index values above 30 indicate conditions favor sellers, below 30 favors buyers.

I predict we will see an improvement in the Market Action Index, and a reduction in inventory as we move towards the holidays. While I hope to see an increase in sales, much of the improvement will be a result of sellers pulling their homes off the market before the holidays.

Median Price Per Square Foot

Homes in Carmel are not generally priced by square foot, but it can be informative to track the square foot price as an indicator of the market’s trend.

Median Price by Quartile

To more accurately describe the sub-markets within Carmel, I report the median price in quartiles. The most expensive 25% of homes make up the first quartile, the next 25% the third quartile, the next 25% the third, and the least expensive 25% are the fourth quartile.

While the upper quartile is well off of what we saw in 2005, in the last few months it was these higher priced properties that have been lifting the overall market.

Recent Sales

There were seven properties that closed escrow in Carmel since the 10th of October ranging in sale price from a low of $815,000 on Upper Trail to a high of $2,700,000 on Camino Real. A PDf of Carmel Solds is here:

Carmel Solds.

Carmel Solds from July through October.

Tracking Sales and Comparables

The easiest way to track comparables and properties of interest, is to use the Private Client MLS System to identify favorite properties. Once identified, the system will track and report on price changes, status changes, and the ultimate sale price when the property sells.

The median price in Seaside is down 50% since late 2006.  Prices have dropped to levels that investors see an opportunity to cover much of the annual cost of the home through rents while betting that the properties will appreciate substantially in the coming years. Some of my clients have bought multiple properties and hired property management firms to manage their holdings.

I have helped first time home buyers purchase homes when 24 months ago they thought they would be renters forever.

Most of the sales are bank owned properties. To successfully close escrow on a bank owned property, you have to be well prepared before making the offer and understand what the bank wants and expects. Without an experienced agent, these transactions can be frustrating.

The number of REO (bank owned) properties in Seaside is well above Monterey, Pebble Beach, Carmel, Carmel Valley, or Pacific Grove. Along with Salinas and Marina, Seaside has been hard hit by the subprime mortgage meltdown.

Inventory in Seaside climbed dramatically as banks took back properties beginning in early 2007. Inventory has been declining in recent weeks. Seaside is still very much a buyer’s market but the decrease in inventory may help support a gradual leveling off of median price.

I recently had discussion with several clients about how the market “feels” compared to last year.

I decided to run some comparisons and see what the numbers say about the Carmel real estate market:

Pretty clear that this year is quite a bit different from last. The orange bar is the 90 day median price trend line from a year ago. The black line is this year. It is interesting to see the inflection of the black line over the last few months.

Let’s explore that for a minute. If we look at the median price in Carmel by quartile (that is, divide the entire population of sold properties into 4 equal parts. It appears that the inflection is do to movement in the upper end of the market.

Back to the year to year comparison.

If we crunch the data for median price per square foot we would expect to see a similar curve, and here it is:

And finally, again as one would expect inventory for the greater Carmel area is well above levels seen a year ago. The rate of increase has declined and there has even been a bit of leveling in the last could of weeks. I, and many of my colleagues, have put more properties in escrow and entertained more offers in the last couple of weeks than in the previous month.

The 83 homes on the market in Carmel Valley have been on for an average of 175 days.  Half the listings are new on the market in the last 126 days. The valley remains firmly at the “buyer’s market” end of the spectrum with a Market Action Index of 7. The median price is just under $1,295,000 where it has been for several weeks.

While the median price has leveled off, the price per square foot has been trending downward. This is consistent with larger homes trending down at a faster rate than less costly homes. Buyers are getting more home for their money.

The most expensive homes (the first quartile) have seen the most dramatic drop in median price over the last 9 months. (The Black line is the first quartile, or most expensive 1/4 of homes. The median price for homes in that quartile is $2,546,500.)

If you would like to track the Carmel Valley market on a weekly basis, subscribe to my Weekly Market Update.

If you would like to track new listings as the come on the market and follow specific properties through the listing and sales cycle, subscribe to my Private Client MLS service , by sending me an email at malone@malonehodges.com.