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Merritt’s Market Update Monterey Peninsula April, 2012

Š2012 Merritt Ringer


Read & Heard

It is better to suffer wrong than to do it, and happier to be sometimes cheated than not to trust. ~ Samuel Johnson

Rough work, iconoclasm, but the only way to get at the truth. ~ Oliver Wendell Holmes


Table of Contents

The Big Picture…………………….…….………... 3-4 Distressed Properties……………….…….………... 5 Financing………………………………….……….. 6 Carmel………………………………...….….…… 7-8 Carmel Valley…………………………..….……… 9-10 Pebble Beach………………………...……….…… 10-11 Pacific Grove…………………………….…….…..12-13 Monterey…………………………………....….…..14-15 Monterey-Salinas Corridor………………...……. 16-17 Seaside & Marina ………………………...……… 18-19 An Agents Life …………………...….…...…….…..20 End Note …………………………………………....21

Caveat: I’m no economist (despite the performance of most, this is not a boast). I also lack the gift of prophecy; from the evidence, I’m not alone. But our real estate market is buffeted and buoyed by all manner of larger forces, so I do watch the horizons. I also dig into our local market. The information here is as reliable as I can make it, but nothing like comprehensive.


THE BIG PICTURE

The American housing market is becoming two separate worlds. A few markets are brisk. Much of the Bay Area, for example, is hot right now with fast sales and multiple offers common. Most of the country remains troubled, though. Prices are still falling nationally. Many first-time buyers, the market’s foundation, are burdened by student debt; and we all know about the job market. There may be a second wave of foreclosures in the wake of the settlement with the 5 big banks. Investors are sopping up more inventory, buying 1.23 million homes in 2011, a 65% increase over the previous year. Some big funds aim to purchase thousands of homes. These investors seem to be channeling Warren Buffett, who recently said, “If I had a way of buying a couple hundred thousand single-family homes, I would load up on them.” These houses offer good current yields, bets on rising rents and eventually appreciation; mortgage financing offers a low risk way to short the dollar.


Despite the problems, on which these updates have been insisting for years now, the mainsprings of recovery are coiling ever tighter. Consider: •

America’s population has grown by about 3 million a year since the crisis began in 2008. We’ll add 15 million more over the next five years.

Such growth normally creates demand for 1.2 million additional housing units. But household formation has been running half that.. Much of this pent up demand will be expressed in the rental market. But the numbers also hold promise for sales and prices.

Despite the recent job numbers, many indicators show continuing slow improvement.

We are just about back to pre-boom price-to-rent ratios.

Household mortgage debt is down $1 trillion from its peak (of course, home equity is also way down - in real terms, we’re back to 1968 [sic] levels).

Financing is gradually becoming easier.


DISTRESSED PROPERTIES Lender Processing Services just released its February Report: 2,059,000 loans less than 90 days delinquent. (some of these will be cured) 1,722,000 loans 90+ days delinquent. 2,065,000 loans in foreclosure process. For a total of 5,846,000 loans delinquent or in foreclosure in February.

The numbers above don’t include the roughly 11.1 million homes under water (more debt than the house is worth) but still current on payments.


FINANCING

Rates Rates fluctuate by the second and different lenders offer various packages, so the numbers below are just a snapshot.

The rates below are for loans without points.

Up to $417,000 30 year fixed: 4% 5/1 ARM: 3%

Jumbo (over $483,000 here) 30 year fixed: 4.875% 5/1 ARM: 3.875%

The addition of a point reduces the rate .125-.250%.


CARMEL 22 homes and 5 condos entered escrow in March, a bit slower than February but still higher than all but the best month last year. Two years ago about half of our sales were distressed; this March, 5 homes were bank-owned while one house & two condos were short sales. The graph below shows the volume of house (not condo) escrows opening in Carmel each month.

Inventory is also a bit lower, as the next chart shows. For comparison, though, our inventory is up 37% from the good market of March, 2003. As the green columns show, the volume of closings is still bouncing around in a modest range.


CARMEL CLOSED HIGH & LOW

On the corner of Santa Lucia & San Antonio (a block to the beach), this 2900 sf remodeled 1921 home started by asking $5.299M; 302 days & two price changes later, it closed for $4.1M.

On Carmel Hills Drive, just east of Hwy 1, this 3/2 with 1500 sf was on 他 acre. In 2005, it was offered for $2.1M (yes, really); the owners experimented with 13 other prices & 3 realtors before losing it to foreclosure. The bank just sold it for $393.5K. (yes, really).


CARMEL VALLEY 13 houses and 9 condos went into escrow in the Valley last month. The action was at the lower end, with 82% asking less than a million. The highest asking price to succeed was $1.499M. 3 properties were bank-owned & 5 were short sales. The chart below shows house, not condo, escrow by month.

As the chart below shows, house inventory has been trending down. The green columns are closed sales, which have remained modest.


CARMEL VALLEY CLOSED HIGH & LOW

On El Caminto Road, in the Village, this 25 year old 4/3 had 2,919 sf & was on a half acre with a lap pool. It closed for $957K.

This 2/1 828 sf home on Wawona, past the Village, was a bank sale. It closed for $325K ($30K over the list price). The previous owners bought it in 2006 for $800K & lost it to foreclosure.


PEBBLE BEACH 13 homes (& zero condos) went into escrow in March. 3 of the homes were short sales and one was bank-owned. There has also been a shift toward the higher end pricewise: 70% of the new escrows were listed at $995K up to $5.5M. The chart below shows monthly new escrows for detached homes.

Inventory, as the next chart shows, has been trending down. But sales are getting stronger.


PEBBLE BEACH CLOSED HIGH & LOW

On Rodeo Road, this 3/3 2714 sf home enjoyed good golf course & ocean views. It sold for $4.250M in just 10 days.

A short-sale on Crest, this 3/2 had 2,347 sf on about 1/3 acre. The owners bought it in 2007 for $1.080M. It closed for $575K., a 47% decline.


PACIFIC GROVE 27 houses & 3 condos entered escrow last month. 3 houses were bank sales and 8 were short sales. The median asking price was $525K and 5 were asking over a million. The chart below, hitherto reliable, understates by 2 the number of new house escrows and I can’t tell you why.

The next graph shows PG’s modest inventory decline and the rise in closed sales. Right now, PG enjoys a better sale/inventory ratio than other local markets.


PACIFIC GROVE CLOSED HIGH & LOW

This remodeled 4/3 on Crocker, near Asilomar, had almost 3100 sf, a landscaped front yard & a barren backyard. It closed for $1.2M.

On Buena Vista, in Del Monte Park, this partly remodeled 3/1 cottage closed for $350K.


MONTEREY 18 houses & 8 condos made it into escrow last month. Only one was north of a million; the median was $522K. 3 were bank sales and 5 were short sales. The chart below shows new escrows for houses (not condos) by the month.

The next graph illustrates both Monterey’s declining inventory and the way sales have held up.


MONTEREY CLOSED HIGH & LOW

High on Carmel Hill, this Cielo Vista home, with ocean views, was a 5 year-old, 4/5 with over 3100 sf. It sold for $1.050M.

Near Laguna Grande, on English Ave, this 2/1 bungalow closed at $240K.


MONTEREY-SALINAS CORRIDOR (east to San Benancio) 13 houses entered escrow last month. The median price was $649.5 and only two were over a million, with the highest being a $3.499M home in Pasadera. Almost half the sales were distressed: 2 bank sales and 4 short sales.


MONTEREY-SALINAS CLOSED HIGH & LOW

Pasadera had the highest sale with this 5 bedroom, 4 1/2 bath 5,453 sf single level home overlooking the 15th green. In 2006, it sold for $5.995M. This time it fetched $2.7M, a 55% drop.

In the Pastures of Heaven east of Corral de Tierra, this 2900 sf 3/3 on just over an acre needed some updating. The previous owners tried to sell in 2009-10 for $775K and $699K, but lost it to foreclosure. The bank sold it for $411K.


SEASIDE & MARINA Seaside and Marina are, of course, very different cities. But buyers for one always look at the other, as well. So, I’ll combine them here and offer varied snapshots each month. Because Seaside Highlands will normally have the high sale, I’ll usually focus on the next highest areas for greater variety. Marina: 14 houses & 1 condo entered escrow last month; 1 was a bank sale & 7 short sales. The median house asking price was $355K. The chart below shows house escrows by month.

Seaside: 29 houses & 1 condo made escrow in March: 4 were bank sales & 17 were short sales. The median house asking price was $372.9. The graph below shows new escrows for houses each month.


MARINA CLOSED HIGH & LOW

In Marina’s Monterey Bay Estates, this 3/2.5 1799 sf home sold for $689K in 2007. The bank got it and it just resold for $370K.

A short sale on Noche Buena in Seaside fetched $186K. It was a 2/1 under 1000 sf.


An Agent’s Life

. . . then, in March, the rains came.

View from an open house by Carmel’s bird sanctuary.


Thank your for taking a few minutes with my e-magazine. Your comments & questions are welcome. Let me know about issues you’d like to see addressed here or stories and facts you’d like others to know.

Know anyone thinking of buying or selling, someone who would benefit from informed & straight counsel? Please keep me in mind. Referrals like yours are the heart of my practice.

© Merritt Ringer 2012


Merritt’s Market Update April, 2012

Š2012 Merritt Ringer


Merritt's Monterey Peninsula Market Update