Local real estate update: Home prices up, inventory down
Market conditions are changing
– The annual spring Real Estate season has begun in North County. We are still saddled with a historically low supply of product for sale and strong buyer demand. Market conditions are changing.
In Quarter 1 of 2022, 256 homes were sold which reflects a drop of 32-percent in unit sales from Quarter 1 of 2021. The median Q1 2022 sales price was $678,350 compared to $575,000 in Q1 2021. That’s an 18-percent year-over-year increase in pricing. Even more extraordinary is the current median listed price of $724,000 on new listings coming to market today. Sellers are bullish and buyers continue to accept the price increases. New listings are off 22-percent year over year which adds to the pricing strength today. Rents are very strong.
Commercial property remains a mixed bag. Multi-family product is in demand due to the strength in rental demand and pricing. Retail is still choppy as is office product. Industrial warehouse demand is strong. Changing patterns of consumer consumption are reflected in the commercial demand equation.
Ag properties, in North County, are in demand primarily in the wine grape category. Grape pricing has stabilized at a manageable level for both growers and wineries over the past couple years. Escalating costs in the labor and materials category, pertaining to farming, are squeezing margins. Demand for Paso Robles fruit is solid. Water is and will remain the number one long-term concern.
Higher-end homes are enjoying their finest moment. Large Ranch properties, 200 acres and above, are also receiving more interest than ever before. In chaotic environments, wealth seeks safety. People don’t like to lose money and high-quality luxury and ranch product tends to be a preferred alternative to owning riskier assets.
The pandemic shook the confidence of many people and created a feeling of unease and angst. A constipated supply chain, raging inflation, a divided country, crime, and war have only added fuel to the emotional fire. These aforementioned facts have been the primary drivers in the Real Estate surge in America. COVID put everyone on notice and on the clock. COVID created clarity. When in doubt, do something.
As long as pricing is strong in the urban areas, North County pricing will remain strong. Supply of homes for sale in North County depends on new homes being built locally and in areas such as Texas, Arizona, Nevada, and Idaho. The supply situation will not change anytime soon.
What is changing is the inflationary surge throughout our economy. Rising interest rates create increased demand to beat the increase but also knock many buyers out of the market. Instead of ten Buyers for each home, we are seeing half as many buyers. Cash is king. It’s important to understand that rising rates create an exponential effect on the buying population. Things change quickly.
We live in the most prosperous country in the history of the world but it seems like we can’t get out of our own way. North County is blessed with natural resources and a political/government that seems to reflect our communities’ ideals. Our community is inclusive and welcoming. It’s the absence of energy vampires that creates a platform for innovation. Private and public leaders create the moral and ethical tone for success. Greatness is citizen-generated. Urban refugees feel this vibe which is why our ceiling remains high. Thank you for all of your help on this, Fred Bruen.
– By Pete Dakin and Fred Bruen, RE/MAX Parkside Real Estate