Dear Big Sur Friends and Clients:
I felt it important to update you with the latest data available concerning the changes taking place in the Big Sur markets. It is imperative that you have good and reliable information and analysis for your own planning purposes.
After over a decade of rapid appreciation, the Big Sur residential marketplace is experiencing a correction and pull back in values. Due to a lack of sales and thin markets in Big Sur it is difficult to track the actual percentage decrease in residential values. However it is clear from our surveys that buyers are waiting till they see the declines in values that have taken place in Carmel, Pebble Beach and other high end market areas of California.
As a guidepost, we have previously documented that the upward markets in Carmel, Pebble Beach and the South Coast 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 home 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 30-35% area. That same home today would be valued in the $2,000,000+/- range representing a more sustainable 7.2% annual increase in appreciation over the 10 years.
Buyers are resisting the current levels of pricing in Big Sur as shown by the lack of sales over the last two years and the increasing inventory of homes. There were 3 sales in 2007, 1 sale in 2008, and no sales over the last six months. We are also beginning to see an attempt by many Big Sur sellers to make the necessary price concessions required by the marketplace. Many of these homes have been on the market for over two years.
In summary, there are in reality three different markets for homes in Big Sur. The first market represents sellers who are currently listing their homes and have the benefit of pricing at today’s values. The second market consists of homes that are unrealistically priced far above today’s values and are for all purposes not in the market. The third market 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 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.