In August of 2011 we updated our Big Sur clientele in reference to the lack of buyers and the continuing declines in values throughout the South Coast areas. During the first 11 months of 2011, we continue to see small changes in the Big Sur markets. The outlook is still for a protracted recovery over several years yet several signs point to the beginnings of a more positive process.
First is the anecdotal evidence of more prospective buyers now looking in Big Sur. In the years 2009 and 2010 the market was characterized by a lack of buyers even taking a look. This has clearly changed in 2011. The buyers are being tough negotiators but the fact that they are back in the marketplace is a first step towards a better and more balanced market.
After a decade of rapid appreciation, the Big Sur residential marketplace continues to experience a correction and pull back in prices although at a slower pace in 2011. We define the Big Sur area to be Andrew Molera Park south down the coast well past Esalen. Due to a lack of sales and thin markets in Big Sur it is difficult to track the actual percentage decrease in value. However, it is clear from our surveys that most buyers are waiting until they see the declines that have taken place in Carmel, Pebble Beach and other high end market areas of California. Many more buyers, however, are visiting Big Sur, well above previous years.
We have previously documented that the upward markets in Carmel and Pebble Beach peaked in August – September of 2005. Since that time our economy has witnessed the worst economic downturn since the Great Depression. There has also been a severe worldwide recession which has affected the many international buyers that have historically been a part of Big Sur.
To place this current decline in a larger perspective, a Big Sur residence that sold for $1,000,000 in August of 1995 had increased in value to approximately $3,000,000 by August of 2005. This represented an unsustainable rate of appreciation of approximately 12% annually. From the highs in 2005, our judgment and market surveys tell us we have seen decreases in value in the 45-50% area. That same home today would be valued in the $1,500,000+/- range.
Buyers are resisting the current levels of pricing in Big Sur as shown by the lack of sales over the last six years and the increasing inventory of homes. There were 4 sales in 2006, 3 sales in 2007, 1 sale in 2008, 1 sale in 2009, 2 sales in 2010 and 3 sales YTD in 2011 ( 1 single family and 2 land sales). Of these 14 sales, 5 were unimproved parcels. We are also seeing a continuing attempt by many sellers to make necessary price concessions required by the marketplace. Many of these homes have been on the market for over two years.
To sumerize, 2011 has been a very quiet year in Big Sur. There continues to be three different markets for homes in Big Sur. The first represents sellers who are currently listing their property on the market and have the benefit of pricing at today’s values. The second market consists of homes that are unrealistically priced too far above today’s values and are for all purposes not in the market. The third represents sellers who are making attempts to find the current market by making price adjustments.
As with all marketplaces, time will eventually bring buyers and sellers back into a balance. We are still a long way from a market in equilibrium. Sellers were in control for over a decade, and it remains to be seen how much longer buyers will be in charge.