Third quarter real estate market huge — all records smashed

By PAUL & NELLIE BROCCHINI

Published: August 13, 2004

WE CONCLUDED our First Quarter Report with these words: “The Monterey Peninsula is back in a strong sellers’ market. The first half of the year looks like it will break all previous records.”

It is so nice to quote oneself when the predictions are right (When wrong, just hide!) The Market Barometer — the ratio of listings to properties in escrow for each local market — told us April 1 that the second quarter would be excellent, but we had no way to foresee the level of success. The quarter was huge, absolutely pulverizing previous highs.

Dollar volume and sales volume

The amount of money that changes hands is, in our view, the most important market indicator. Hold onto your hat before reading the following numbers. Total dollar volume in the 10 Peninsula markets for the quarter was $526,393,000. Think of that: more than half-a-billion dollars of sales in just one quarter. The total volume in the second quarter of last year was $259,868,000, making this year’s gain $266,525,000, — more than a 100 percent increase. The three highest quarters on record prior to this record-smashing three months were: third quarter 2003, $359,426,000; second quarter of 2000, $328,687,000, and the fourth quarter of 2003, $327,734.

We have never reached $400 million in a quarter. The jump to more than $500 million approaches the incredible. Also impressive is the fact that it was the high-priced markets of Carmel, Carmel Valley, Pebble Beach and South Coast that provided the major thrust for the huge increase in dollar volume.

As we discussed in our last report, the high end had been lagging when, out of the blue, activity perked up in late January. Carmel, all by its lonesome, logged $160,602,000 in sales on 99 transactions in the second quarter. We dislike superlatives, but how else than “incredible” do you describe results like these?

This situation is just the opposite of what we described in our last year-end report. Although 2003 was another billion-dollar year, the makeup of the sales had changed dramatically from what we saw in the billion-dollar year of 2000. Here is what we reported at the end of last year: “Digging into the numbers, one finds that the make-up of the gross dollar figure has changed dramatically. The big-money markets of Carmel, Pebble Beach and South Coast are all substantially off their 2000 numbers. The other high-end market, Carmel Valley, posted a small gain.”

What happened in 2003 was that the high-end markets saw substantial declines in dollar volume and the low-end areas had large gains. So far in 2004 this situation has reversed.

The main reason the more affordable end of the market has not been as spectacular as the high-end this year is the lack of inventory. Low interest rates have created almost panic buying, and there just has not been a lot to sell. Hence the dollar volume, although up, has not shown the spectacular gains of the rich markets.

The increase in the number of transactions in the quarter was equally impressive. An incredible 477 escrows closed during the quarter, 160 more deals than the second quarter of last year, and the highest number of transactions we have ever seen. The third quarter of last year held the previous record of 415 transactions.

Prices

Prices, of course, continued to soar: In comparison to the second quarter of last year, Carmel was up 31 percent; Carmel Valley up 35 percent; Del Rey Oaks up 45 percent; Marina up 37 percent; Monterey up 28 percent; Pacific Grove up 31 percent; Pebble Beach up 61 percent (beware of drawing too many conclusions here, as Pebble Beach had an abnormally low median sales price in that quarter, and Seaside up 51 percent.

The median sales prices in our “affordable areas” were incredible: Del Rey Oaks $749,000; Marina $535,537; Seaside $530,000.

The Distribution of Sales chart is another revelation: 34 percent of the 477 sales on the Peninsula were for more than $1 million; Carmel, Pebble Beach and Del Rey Oaks had no sales under $600,000 — indeed, the three sales in Del Rey Oaks were all in the $700,000 range — Seaside had 28 sales over $500,000, Marina had 26 and 67 of the 99 sales in Carmel were more than $1 million.

Market Barometer

The Market Barometer is a handy predictor of things to come. All of the towns had strong readings led by Marina’s 62 percent. Even the South Coast, normally our Barometer laggard, had 23 percent of its listings in escrow at the end of June.

Prospects for the third quarter continue to be good, though it is doubtful the second-quarter pace can be maintained.