The debate rages on about the recession and the timing of the recovery. These are difficult times with real challenges and real opportunities. While the market is still holding it’s breath for a solid recovery there are hopeful signs all around us, and it sure beats being in Michigan. At this point in our market, we have almost twice as many sales on the books as compared with this same moment in 2007 and about ½ as many homes available. That’s a very good sign for North County Real Estate.

Residential single family real estate has had a lot of negative press. But today, there are great deals happening in every category. Today’s low interest rates and low prices are attracting multiple offers on many properties priced at or below 350K. The difficulties in this category are appraisers and lenders. Appraisal values are all over the map and lenders are skittish. Federal rules and regulations are slowing down the sales process. Deals are routinely closing late. Half of the sales are distressed properties. Buyers are no longer fearing further price erosion. Shortage of homes to sell in some categories is becoming an issue.

More residential single family homes sold in the first half of 2009 as compared to the first half of 2008 (an increase of 16%). This increase in sales was fueled by an average sales price of $290,000.    Most of the buying activity is at or below $300,000. Inventory is thin across the all categories. New construction is at a standstill. We believe foreclosure properties will continue in our market into the first part of 2010. These foreclosures are the primary source of new inventory, as many homeowners are simply unwilling to sell their property at this reduced price level, deciding to wait to sell at some golden moment in the future. Government mandates tend to interrupt the foreclosure process for periods of time. These mandates have only prolonged the foreclosure situation. There is now a competitive environment for purchasing a home in the low end market. This is a stable market with great upside in the next decade.

High end home sales have started the process of price discovery in North County. Big home sales on 1 to 5 acres have doubled over last year’s comparable period. With velocity and price discovery we are establishing a market bottom in this category. Demand is selective at the upper end and many of these homes are functionally challenged. The difficulty in obtaining jumbo loans also slows down this market. The healing process in the upper end will be longer than residential single family and more painful although the recovery process is underway in this market. It’s still all about price.

Raw acreage is just starting to show early signs of price discovery. In down cycles dirt tends to fall much lower, on a percentage bases, than improved properties. The primary reason for this discrepancy is that an improved property sells for below replacement cost so there is no appetite for buying and building. Years of acreage supply has been building up. There are some stirrings and some sellers are moving to get ahead of the curve. We are not there yet. We can see it coming.

Commercial real estate is overbuilt and oversupplied in most categories. The combination of a weak economy and many vacancies is not good for values. This market is years behind residential single family. There is no velocity or price discovery in commercial real estate today. Rents are falling and will fall further. It’s going to take a growing economy to get commercial real estate on track again. The weakest segment of commercial real estate is vacant land.

Our wine industry is surviving and actually doing fairly well with all things considered. Tasting room sales have been decent in 2009 but the summer has started out slow. Wine grapes have firmed in price and Westside fruit will command strong dollars. Big wineries, that are major buyers of fruit in North County, are tentative. The real question hanging over the industry today is wine sales. The global wineries are very cautious. Our local fruit is getting good prices but fruit buyers are very conservative. Fruit supply appears to be in balance which could bode well if wine sales improve over the next few years.

Inflation seems to be viewed as an inevitable outcome of the government monies being pumped into our economy. Real Estate has always been viewed as a strong hedge against inflation. Today most Real Estate has been beaten down in price. If you can join historic low debt cost with low real estate values the hedge position and upside for return would seem to be generous. Inflation is a sinister and covert agent of monetary erosion. Real Estate will provide a competitive edge for those folks looking to survive and prosper in an inflationary environment.

Residential single family homes have found a bottom in North County. Higher end homes are close behind with dirt and commercial real estate bringing up a distant rear. This is what bottoms feel like. Bumpy and uncomfortable. Fortunes have been lost and new fortunes will be made. We are living in an economy dominated by fear.  We believe that a strong local city government is more valuable to recovery than what federal and state problems might dictate. We have good leadership in North County and we will ride out this storm. It’s a very selective market but the longer term prospects remain bright for North County.