North County first quarter real estate review
All real estate activity is local as compared to a national market, such as stocks and bonds. North County remains an inbound market for urban refugees so we do evaluate economic activity in our prime feeder markets of the Bay Area and L.A. Real estate activity tends to reflect economic conditions. Residential single family home sales are almost identical, in number, to the 1st quarter of 2014 and the 1st quarter of 2013. A reported 258 homes sold in 2015 1st quarter, 255 homes sold in 1st quarter of 2014. The average market price actually dropped a bit to $362,000 in the 1st quarter. In Paso Robles the market is brisk up to $400,000 and much quieter above $600,000. Templeton properties are strong up to $500,000 and Atascadero is pretty active up to $600,000. Lack of inventory is not a factor in our market. New home construction is spotty and should increase in the coming years.
Higher-end homes, in the million dollar range, are active but a large overhang of inventory is keeping a lid on any upward price push. We see a number of high dollar buyers in our office and they are very selective with regards to location and quality. Price is also a factor at this upper end. Small business has struggled in the past 6 years and empty office, retail, and industrial spaces attest to that aforementioned weakness.
Vacancies are certainly less than they were four years ago, but commercial demand remains weaker than expected. Commercial rents have stabilized. Despite the persistent drought, agriculture has held on nicely. Grape prices look to be solid for this year. Cattle prices are off the charts. The top tier wineries, in quality and production, are doing well. Tourism, spurred on by agriculture, is strong. The drought is continuing to drive up farming costs and squeeze yields.
Finding trends in our market is as difficult as finding yields on your dollars. Our economy has become somewhat bifurcated with corporations and high dollar people doing well while a large section of the population struggles to move up. This is not a new normal, but until small business is able to compete, we will have this division. That being said, North County is attractive to wealth, so we have that going for us which is nice.
Here are some facts about real estate today:
Interest rates are less than four percent. Rates have gone down this year. Most of the properties that sell are selling below replacement cost. New building costs and government fees are higher than ever before. The drought will only make building more restricted and expensive. Rental rates for residential properties are strong.
Our communities have financial strength in government operations. We are not in an over-cooked or frothy market. Paso Robles is known world wide for wines. One could argue the product, that is North County, has an excellent cost value relationship.
Certainly we have challenges ahead; however, we have a track record of quality local leadership. Our wine industry has created a sustainable hospitality and entertainment industry. It’s hard to point to any community and say their future is brighter than our future. Our best days are well ahead of us.