Local real estate update: Single-family home sales drop almost 50%
This report is a look back at 2022 and a projection of what may come in 2023 North County real estate.
– North County single-family real estate sales dropped almost 50% in the 4th quarter of 2022 as compared to the 4th quarter of 2021. New listings dropped 32% over the same aforementioned quarters. The median sales price increased by 3% to $682,500 during the comparative periods.
For the first time in history mortgage rates doubled during the calendar year. New construction is picking up but will not materially impact the supply deficit in 2023. Interest rates will be in the 5%-7% range. Going into the 1st quarter of 2023 expect low inventory, moderate demand, and stable pricing. We do not see any material erosion in values.
Paso Robles is a dynamic force in the California wine industry. Major American and international companies are taking large long-term positions in local vineyards and wineries. The pandemic hastened the growth of the direct-to-consumer (DTC) business model for wineries. Agriculture tourism has exploded on the Central Coast which fuels the hospitality industry. Vineyard and winery sales have been steady throughout the last year with strong pricing. Fruit seems to be in a balanced economic position despite last year’s short crop. Vineyard replanting costs and farming costs have significantly increased.
Commercial real estate in North County will hold its own in the face of higher interest rates and economic uncertainties. Multi-family product will continue to be in strong demand for investors. Warehouse and industrial product should be stable. Retail is recovering and office product will still be tepid from a demand standpoint.
The local city government has done a good job managing the chaos over the past few years. There are local issues, but leaders have treated one another with respect regardless of ideology. Real estate values reflect the success or failure of government policies.
What’s in store for 2023? Supply and demand will rule the day. During the past two years quality of life overtook housing affordability as buyers’ main reason for relocating. California urban areas continue to deteriorate in living conditions. Urban refugees view the Central Coast as higher in quality with pricing well below urban values. The Central Coast will be the strongest market in California.
Supply will be sparse going into the first part of the year. New construction is erratic. Homeowners with ultra-low mortgage rates are seemingly locked into their existing homes despite generous equity cushions. Structural life events such as death, divorce, job relocation, work from home, and retirement will provide supply, decent demand, and strong pricing. It’s a remarkable time to be a seller in North County.
Not all real estate is created equal. Many regions in the country may see double-digit percentage value drops. COVID-19 and cheap money created booming markets that will fall back to the norm. Media headlines, meant to terrify not clarify, will showcase dramatic market conditions. We do not see material increases or decreases in values moving forward into 2023.
It’s good to remember that all real estate is local, and the city’s leadership is more important than who is in the White House. This economy will showcase the resiliency of North County.
–By Pete Dakin and Fred Bruen
RE/MAX Parkside Real Estate