When comparing 2011 to 2012, Rancho Santa Fe real estate (defined for the purpose of this analysis as all attached and detached residential properties listed with the San Diego Multiple Listing Service for the 92067 and 92091 zip codes) continues to improve. Actually, the pace of improvement continues to accelerate. 2012 was the strongest recovery year to date.
Rancho Santa Fe Real Estate: 2012 Performance Summary
Inventory declined to record lows creating an environment for higher values. Specifically, in 2012, the average number of properties available for sale was 250 versus 311 in 2011. This 19.8% decline in inventory created a supply shortage which helped to increase the overall median value 13.1%. However, it was not just a decline in supply that boosted median value. Overall demand rose in 2012, as well. The number of properties sold rose 23.1% with 261 properties sold in 2012 compared to 212 properties in 2011.
2012 sellers were very aware of this improved market strength. Witnessing the shortage in supply and increased demand, the majority of sellers refused to budge as much from their original listing prices as they did in 2011. In 2011, the median discount sellers gave buyers off the original listing price was 19.7%. In 2012, that declined to 15.0%, equating to a 23.8% decline. Despite firmer pricing, however, fewer sellers listed their property for sale. There was a 6.2% decline in new listings in 2012, suggesting that many sellers believe current valuations will continue to rise.
Original Listing Price: less than $3 million
Of all the price groups, properties with an original listing price less than $3 million had the largest percentage median value increase and inventory decline. Between 2011 and 2012, median value increased 15%. Specifically, median value rose from $1,500,000 in 2011 to $1,725,250 in 2012. Clearly, much of this increase stemmed from a 28.4% decline in year-over-year inventory. Average daily inventory in 2011 was 164 properties, whereas in 2012 it dropped to only 117 properties.
An important ratio when analyzing inventory or supply is the following: (average daily inventory) / (number of sold properties). As this ratio increases, more relative supply is available, thus typically pushing prices downward. Contrarily, as this ratio approaches zero, relative supply contracts, typically pushing prices higher. Generally, this ratio is greater than one, even multiples of one. In 2012, this ratio went below one, i.e. 164 / 173 = 0.95. Of all the price groups, this was the only one to fall below one, suggesting a strong seller’s market. This was further supported by a 17.4% decline in marketing time and a 25.2% decline in median discount from original listing price.
Original Listing Price: $3 million - $5 million
While this price group not only strongly improved compared to 2011, in some respects, one could assess this price group as the strongest of the price groups, because it showed more consistency of strength across the various performance metrics. For example, the lowest price group, properties with an original list price less than $3 million, had the highest median price appreciation but the lowest percentage increase in sales; whereas, the highest price group had the highest percentage increase in sales, but the lowest median value appreciation. Each of the other price groups had their weakness of strength. This price group cut through the middle, showing balanced strength in sales and valuation.
This is a key feature when assessing a price group. Not only are we looking for its strengths relative to the other price groups, but we are also looking for cracks in the foundation that we need to keep an eye on. Sometimes the strongest price group is the one not jettisoning ahead in a particular performance metric, but the one that is evenly rising across all its health checks. This price group exemplified that by showing a 10.7% increase in median value while the number of properties sold increased 31.7%, all while inventory was declining and marketing time shortening.
Original Listing Price: $5 million or more
Of all the price groups, properties with an original listing price equal to or greater than $5 million is the biggest turnaround story of 2012. For some time, this price group has struggled in relative performance to the other groups…sometimes statistically even looking like it was going to stumble backward. Nevertheless, in 2012, much of that changed. Specifically, the number of properties sold increased over 40% with 34 properties sold in 2012 compared to 24 in 2011. Moreover, not only did significantly more properties sell in 2012, but median value increased nearly 9% with the median sold price going from $4,375,000 in 2011 to $4,750,000 in 2012. However, while inventory and discounts off of list price remained flat, average marketing time dramatically increased from 12 months to 18 months in 2012. Obviously, as has been the course for this price group, buyers are still being patient and committed to price. Yet, with a 40% increase in the number of properties sold and an increase in median value, it appears more buyers are agreeing with sellers’ valuations.