State of San Diego Real Estate

THE STATE OF SAN DIEGO LUXURY REAL ESTATE – July 2009

With all that is written about the condition of the real estate market, whether it be nationwide, statewide or San Diego County, it is important to recognize that what is published is a very broad view of the market, and this view may or may not apply to a specific area.

With all that is written about the condition of the real estate market, whether it be nationwide, statewide or San Diego County, it is important to recognize that what is published is a very broad view of the market, and this view may or may not apply to a specific area. Just as weather patterns differ by location, the real estate market can dramatically differ from neighborhood to neighborhood. In this edition, we are looking at the communities of Carmel Valley, Del Mar, and Coronado, as well as updating the information presented last month on Rancho Santa Fe and La Jolla. Next month we will add Encinitas and Solana Beach and continue to update the 5 areas presented here so that San Diegans will know what is happening in the real estate market in their neighborhoods.

The Approach: As with any detailed market analysis, it is essential that we look at past sales activity by price categories in order to understand how the current sales compare to the past sales activity. Additionally, it is important to compare the number of most recent sales to the number of properties on the market. This assists in understanding how the supply/demand ratio has impacted and will continue to impact values, and helps forecast the number of sales that may occur in the future. This information is vital for the development and implementation of marketing and pricing strategies for both sellers and buyers.

Carmel Valley Luxury Real Estate

The above information shows the number of home sales each year by price range going back to 2002. The number of sales that have closed thus far this year (through June 15, 2009) is also shown as well as the number of open escrows and the number of homes currently listed for sale in each of the identified price ranges (Active). A review of this information reveals that Carmel Valley (92130) has just under a six-month supply of listed inventory (current number of listings divided by the total number of sales in 2008). The year-to-date 2009 sales volume seems to be on par with the sales volume of 2008 signaling a consistent supply/ demand ratio when compared to the previous year. When looking at specific price ranges, Carmel Valley has a very active market in attached and detached homes priced below $1 million. 71% of all sales in 2008 occurred below $1 million and thus far this year 78.5% of all sales have closed below that price. The inventory levels below $1 million represent a four-month supply of inventory based on 2008 sales volume. Sellers, therefore, have the real opportunity to sell their homes relatively quickly. Buyers, on the other hand, have the comfort of purchasing under relatively stable market conditions. In the $1 million to $2 million price range, there is approximately a 7.5 month supply of inventory, and in the price ranges above $2 million, there is a supply of inventory of approximately 20 months.

What does this mean?
Carmel Valley has the most favorable balance between supply and demand of all its surrounding communities. While the number of sales has declined since its peak in 2003, the favorable balance of supply and demand should provide both sellers and buyers a level of comfort in making their selling and buying decisions.

The Silver Lining:
With an aggregate of less than six months supply of inventory on the market, Carmel Valley is poised to remain a stable community for both buyers and sellers. There is sufficient inventory to provide buyers a well-rounded selection of homes to consider, yet not enough that sellers need to wonder whether their homes will sell within a reasonable period of time.

Carmel Valley Chart – click here

Carmel Valley Graph- click here

Coronado Chart- click here

Coronado Graph – click here

Del Mar Chart- click here

Del Mar Graph – click here

La Jolla Chart- click here

La Jolla Graph – click here

Rancho Sante Fe Chart- click here

Rancho Sante Fe Graph – click here

Del Mar Luxury Real Estate

Like Carmel Valley (see previous page), the above information compares, by price range, the number of homes sold each year going back to 2002. It also references the number of sales that have closed thus far this year through June 15, the number of homes currently in escrow and the number of homes currently listed for sale (Active). This information shows that Del Mar (92014) has just under a 1.4-year supply of listed inventory (current number of listings divided by total sales in 2008). Sales volume through the first 5 1/2 months of this year are relatively consistent with what we experienced in 2008.The most active price range currently is between $500,000 thousand and $2 million with 68% of all sales falling within this range. There is just over a 12-month supply of inventory below 2 million and a 6 1/2 year supply of inventory of homes priced above 8 million 13 divided by 2).

What Does this Mean?
Since the peak in 2004, the $500,000 to $2 million price range has experienced the largest decline in sales. The number of sales above $4 million has actually risen since 2004. There were 5 in 2004, 6 in 2005, 5 in 2006, 12 in 2007, 7 in 2008 and 5 through June 15, 2009. There are currently 30 homes on the market priced above $4 million. Sellers owning properties above $4 million will most likely do one of two things: Those who want to improve their chances of being one of the homes to sell within a reasonable period of time will reduce their price in order to capture a buyer. Those deciding not to become more competitive will eventually take their homes off the market. As these two events occur, given time, we will return to a more balanced ratio between supply and demand, resulting in a more stable market.

The Silver Lining
Buyers have an amazing variety of homes to select from and recognize the values today’s market presents. This, combined with many of the sellers realizing the necessity to be competitive with their pricing, will accelerate sales activity.

Coronado Luxury Real Estate

The annual number of home sales going back to 2002 is referenced above. This information shows the number of sales which have closed year- to- date (through June 15, 2009), the number of open escrows and the number of homes actively listed in each of the identified price ranges. A review of this information reveals that Coronado (92118) has just over an 18-month supply of listed inventory (current number of listings divided by 2008’s total number of sales). Sales volumes remained relatively constant from the peak of the market in 2003 through 2008. This year 2009 sales volume is off as are all luxury communities. When looking at specific price ranges, Coronado currently has a very active market in both attached and detached homes priced below $2.5 million with 86.5% of all sales in 2008 falling into this range. Thus far this year 91% of all sales have closed below $2.5 million. The inventory levels below $2.5 million represent about a 16.5 month supply based on 2008 sales volume. Above $2.5 million there is currently a 40 month supply of inventory.

What does this mean?
Since 2004, the biggest decline in sales has occurred in the $500,000 to $2 million price range. The number of sales above $2.5 million has actually remained remarkably consistent since 2004. There were 23 in 2004, 27 in 2005, 24 in 2006, 31 in 2007 and 23 in 2008. Thus far in 2009, there have been only three sales above $2.5 million, and there are two properties in escrow. Based on the sales during the first 5.5 months, it would appear the number of sales above $2.5 million will be much lower than Coronado has experienced since 2004. It appears that the recession has dramatically reduced the number of second-home buyers that have historically gravitated to Coronado.

The Silver Lining:
Buyers currently have a wider variety of homes to select from and recognize the excellent buying opportunity this highly-competitive market offers. This, combined with sellers’ awareness of the benefits and necessity to be competitive with their pricing, should result in accelerated sales.

Rancho Santa Fe Luxury Real Estate Update:

Sales Activity: Over the past month, the total number of closed sales in 2009 jumped from 47 to 59, an increase of 12 closed sales. The number of homes in escrow as of June 15, 2009 decreased from 23 to 21. However, when factoring in the 12 properties which have closed escrow, there were 10 escrows opened since May 18, 2009.

Inventory levels: The number of homes listed for sale remains consistent with a month ago, 364. The current listing inventory equates to a 26.5-month supply, the highest level of inventory when compared to other San Diego County luxury home communities.

The Silver Lining: There continues to be a wide variety of homes that buyers can choose from. Sellers willing to become more competitive with their pricing will still have an opportunity to find the right buyer.

La Jolla Luxury Real Estate Update:

Sales Activity: Sales activity in La Jolla has picked up nicely. There were 49 closed sales during the past month, raising the total number of closings year-to-date from 125 a month ago to 174. The number of homes in escrow rose from 89 to 114. Factoring in the number of closed transactions, there were 74 new sales.

Inventory levels: During the last month, the total number of homes listed decreased from 508 to 478. The inventory level is down slightly to an 11 month supply compared to a 12 month supply a month ago.

The Silver Lining: As we reported in the last issue, La Jolla’s supply / demand ratio is moving in the right direction for market stabilization. This is good news for both the buyers and sellers. Buyers still have a variety of homes to consider, and sellers are finding that with competitive pricing they have the opportunity to sell their home within a reasonable marketing period.

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