State of San Diego Real Estate

THE STATE OF SAN DIEGO LUXURY REAL ESTATE – May 2009

With all that is written about the condition of the luxury 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.

THE STATE OF SAN DIEGO REAL ESTATE

With all that is written about the condition of the luxury 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 Rancho Santa Fe’s Luxury Real Estate and La Jolla’s Luxury Real Estate. Next month we will update those two areas and also add 3 more (Del Mar, Coronado, and Carmel Valley) and by the August we will have the top six (Encinitas and Solana Beach) every month so that San Diegians 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.
La Jolla Chart – click here

La Jolla Graph- click here

Rancho Sante Fe Chart- click here

Rancho Sante Fe Graph – click here
LA JOLLA :
The chart and graph show the number of home sales each year by price range and are compared with this year’s sales through May 18th (when this issue of PREMIER went to press). They also outline the number of open escrows as well as currently listed properties. A review of the chart and graph indicates La Jolla has slightly less than a year’s listing inventory (current number of listings divided by the total number of sales in 2008). In 2005, La Jolla enjoyed the highest number of sales–960. There were 513 sales last year, representing a 46.5 percent reduction from the peak in 2005. When looking at specific price ranges, La Jolla has a very active market in attached and detached homes under $1 million. The inventory level in this price range is slightly more than a six month’s supply, providing both buyers and sellers the comfort of the most balanced ratio of supply and demand in La Jolla. When reviewing the sales activity as shown below, several relevant factors are evident. For example, there were 10 sales over $6 million in 2008 compared to 7 in 2007. 2004 provided the greatest number of sales within this range with 12 homes selling above $6 million. This indicates the market above $6 million was somewhat stable from the 2004 peak through 2008. It does appear, however, that the level of sales above $6 million is currently dropping. Through May 18th, there have been only two sales reported through the MLS and there are no open escrows. With 40 active listings, there is a four year supply of homes currently listed in this price range (active listings divided by the total sales in 2008).

What does this mean: Through 2008, the total number of sales above $6 million did not decline significantly. However, with only two properties having closed through May 18th, with no open escrows and with 40 properties currently on the market, the sellers are now faced with significant competition and are vying for fewer buyers. A better balance between supply and demand within this price range will depend on the sellers doing one of two things. Sellers who want to compete for one of the few buyers will reduce their prices and those who decide not to will take their homes off the market. As these two things occur, over time we will achieve a balanced ratio between supply and demand and our market will stabilize.

The Silver lining: With less than a year’s supply of inventory across the broad market, La Jolla is positioned to lead the luxury market back to stabilization. There are always buyers who want to buy and in today’s market they have the opportunity to select from a larger number of homes. This selection, combined with the values our competitive market affords them, makes it a great time to purchase.

Rancho Santa Fe:
A review of the above chart and graph show in 2004 there were 352 sales compared to 166 in 2008, a 53 percent reduction. When reviewing this information, several interesting facts become clear. For example, in 2004 13 homes sold for over 6 million dollars in comparison to 14 homes in 2008. Within this price range, 2006 won the race with 22 sales. This equates to a 38 percent decline from 2006 to 2008. Thus far in 2009, 5 sales have recorded over $6 million. If this number of sales is extrapolated through the end of the year, it suggests the year could end with only 11 sales. To understand how this price range will perform in the future, the most important factor is how many homes are listed within this range. As of May 18th, there were 65. Based on the 14 sales in 2008, this would equate to a supply of 4.64 years (65 divided by 14).

What does this mean: Through 2008, the number of sales above $6 million has not been hit as hard as the number of sales below. However, with 65 properties listed for sale above $6 million, the sellers of these listings are facing significant competition. When comparing the historical number of homes sold above $6 million and comparing it to the number of listings in this same price range, sellers owning such a property will most likely do one of two things. Sellers who want to improve their chances of being one of the homes to sell will reduce their prices to capture a buyer. Those who decide not to become more competitive will eventually take their homes off the market. As these two events occur, over time we will achieve a balanced ratio between supply and demand and our market will stabilize.

The Silver lining: Today buyers very much appreciate the wide variety of homes to choose from and recognize the buying opportunity this highly competitive market affords them. The combination of the buying opportunities available and the sellers’ recognition of the benefits and the necessity to be competitive with their pricing, sales activity will begin to accelerate.

More Information: Next month we will update these two areas, we will also add Del Mar, Coronado, and Carmel Valley and by August we will have Encinitas, and Solana Beach. These areas will be updated through the end of 2009. If you would like a more detailed breakdown please feel free to contact Andrea Dougherty and Michael Taylor.

Written by
Michael Taylor and Andrea Dougherty
Prudential California Realty
858-759-5950
www.RsfRealEstate.com

Data represents the activity of various brokers. Data does not represent the sale activity of non-listed properties. The data might not be completely accurate.
Source: SD MLS/Sandicor, Inc. Andrea Dougherty & Michael Taylor do not represent, nor warrant the accuracy of this data. If you have any questions regarding the above information or any real estate matters, please
do not hesitate to call. Information subject to change.

 

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