My Recent Blog Posts

Here are a few important trends that emerged in the Carmel / Pebble Beach market last year that are setting the stage for 2015:

I was reading the debut issue of San Francisco Cottage and Garden’s article by Lydia Lee, “Wonderfully Walkable,” which emphasizes a growing trend from buyers wanting properties walking distance to down town’s shops and restaurants. It struck me how this is particularly true in coastal Carmel-by-the-Sea. The number one request I get from vacation home buyers is the ability to walk to Ocean Avenue and Carmel Beach. Buyers will consistently pay a premium for “walkability.” Let’s admit it, a walk along Carmel Beach is priceless – no matter how many times you do it! But what struck me as I was reading this article is the dichotomy between vacation home and primary home values in Carmel.

Last year our market was beginning to make a turn around, yet much of the year felt like a roller coaster ride. Although we aren’t yet experiencing the ultra competitive scenarios as they are in the San Francisco Bay Area, inventory levels are shrinking and buyer demand is on the rise. Stephen Vagnini, the Monterey County Assessor, expects to see a modest rise of 2% in property values throughout the county this year. Monterey County is diverse and it is important to take a close look at each city, or better yet each neighborhood. Below is a snap shot of the markets I cover.

What a difference a month makes! January was our typically slow winter month, as I reported in my recent blog post, "Where is 2013 Headed?".  February has painted quite a different picture. Suddenly, there appear to be more buyers competing over limited inventory and a feeling as if this is really the last chance to "get in" before our market heats up. The San Francisco Bay Area is practically overheating with in some cases 30 offers, over asking, etc. We typically lag behind that market and I would not characterize any of our neighborhoods as overactive. With that said, there is a sense of urgency that is beginning to brew among buyers.

These first few weeks in January have been sluggish with only 3 sales to date in Carmel-by-the-Sea. Looking back, 2012 was overall a very strong year. When you dissect the data further, the first 9 months were strong, with an especially healthy April through September, but we did see a slow down in the last quarter. With that said, the Monterey Peninsula market is a seasonal one.  Typically, activity slows in the fall and winter months and our busy season runs May through October.  This fall and winter season were certainly no exception. But are we seeing more than just a seaonsal slowdown? Many buyers moved to the sidelines in the fall with the election, new taxes proposed for 2013, the fiscal cliff and of course the holiday hustle and bustle. The new year has continued this slow pace as wealthy buyers appear reluctant and wonder how new tax laws will affect them. And now talk of another fiscal cliff doesn't help the uncertain environment. The lower end market (especially $1M and less) led the charge. Properties under $2M in Carmel, Carmel Valley and Pebble Beach sold in 4 months on average; whereas properties over $3M took at least 6 or 7 months to sell. In Pebble Beach, the first half of 2012 saw 7 closed sales over $4M. The last half - only 4 in that price category. And currently there is only one home in escrow in Pebble over $4M. Carmel has 116 properties currently "for sale" with an average marketing period of 193 days. Even though there are a number of "For Sales" signs up, much of the inventory is stale. The sellers that have been sitting on the market a while refuse to reduce their prices to meet the market - and it's hurting them. Unless of course they decide to hold it for a year - then I think it will be a different story! The good news is that volume is picking up while buyers take advantage of our lower prices. Eventually, the dust will settle from the economic uncertainty and we'll get back to business as usual. The San Francisco markets are "hot" and as corporate profits increase up there, the demand for vacation homes will increase down here. Come summer, sellers should find themselves in a stronger negiotating postion since quality inventory is low. The highest demand remains in the Golden Rectangle of Carmel-by-the-Sea (Ocean Avenue to Santa Lucia and San Carlos down to Scenic) at $2M or less, and inventory is highly competitive in this category.  Although it appears Q1 won't be too impressive, our selling season should be strong. Buyers and Sellers are on the sidelines now, either preparing their homes for market or educating themselves on current conditions. Even with the optimism, I warn sellers that now is not the time to be greedy. All offers should be taken seriously. Sellers need to come to market with a home that presents itself well (i.e. fresh paint, carpet, landscaping, etc) and is priced at market. If they do, they will find themselves in a stronger negiotating position than in years past.

Two perfect storms in the California real estate market have collided – low inventory and high demand – creating an environment where six in 10 home sales received multiple offers in 2012, according to the California Association of Realtors’ (C.A.R.) “2012 Annual Housing Market Survey.” Fueling the storm – historically low interest rates! And here locally, a sizeable buyer pool with the ability to pay all cash.

Our official selling season is here and along with it an unusually warm and sunny start to summer. The San Francisco Bay Area is in the midst of huge buyer demand coupled with low inventory, resulting in a steady increase in sales prices. The Monterey Peninsula typically lags behind the Bay Area by 6-9 months and we are slowly seeing that energy trickle down this way. This is felt strongest in Carmel-by-the-Sea, where activity is fueled by demand from vacation home buyers. In general, we’ve seen a pick-up from the doldrums of the downturn. Prices may not be on a rapid rise, but it’s refreshing to say activity has picked up. While every neighborhood does act differently, it is important to dissect the three market segments I cover.

It is important for all active buyers and sellers to be aware of the approaching loan limit change as of October 1st. Currently, buyers can borrow up to $729,500 in Monterey County at conforming loan rates, which is called the High Balance Conforming Loan. This loan amount is decreasing in Monterey County to $483,000 on October 1st. Different counties have different loan limits, but because Monterey County not only includes higher priced areas such as Carmel and Pebble Beach, but areas in Salinas that have been greatly affected by distressed properties, our conforming loan limits are dropping to one of the lowest levels at $483K. Essentially, the cost of a jumbo loan, anything over $483,000, is going up. And some buyers who qualify for today's High Balance Conforming Loan won't qualify for what will be a Jumbo loan in a few short months.

The past 6-8 weeks has witnessed a drop in buyer activity here on the Monterey Peninsula. For the most part, we believe that prices have bottomed in our market, although our recovery has been stop-and go. And the word “recovery” is really not the right word to use, as projections show prices to remain flat this year, and well into 2013 and  possibly 2014.  For those deciding whether to sell now or hold on for a few years, I would consider your carrying costs as your home will most likely be worth the same today as it will in 1-3 years. Not an uplifting picture from a seller’s perspective I know. From a buyer’s perspective, however, now is the time. I would act now, before our conforming loan limits are set to change in the fall. Essentially as it is today, you can borrow up to $729,500 at a conforming rate and come this fall you will only be able to borrow up to $483,000 or $625,500 at that rate, anything in excess will cost you more.

When I talk to buyers there is a clear divide between those that believe 2011 is the year of opportunity and those that believe the market will continue to decline. Yes, the media paints a gloomy picture of a “double dip,” a flood of new foreclosures are expected to hit the market and yes, unemployment is still dismal. Only time will tell which path we are on, but I argue that this year will be flat and IS the year to buy. Here’s why: