April Newsletter

The city council of Carmel last week voted to approve both the Sunset Center, and Vista Lobos parking lots as designated low-income housing. 349 state of California-mandated housing units are supposed to be erected in the city by the end of 2031, however these designated areas do not guarantee or even require that the units will be built in these areas- the city was simply complying with a deadline to identify usable locations- this has happened in other areas around the Monterey Peninsula. There are other ways to fulfill the housing requirements, such as with ADU’s or constructing new market rate homes or affordable unit combinations on individual lots. I think its clear that a roughly square mile city like Carmel-by-the-Sea is not a feasible location to add anywhere near that many more units, but of course in the infinite wisdom of the state of California, we are now playing their games.

What do major investors and private equity groups think about the market? Nationally, investors are continuing to buy single family homes at a record pace, indicating very bullish sentiment towards the future of the asset class. A Core-logic report says Q4 2023 investor purchases were 28% of all single-family home sales, and expected to eclipse 30% in 2024. Parallel to that, Blackstone, just last week, made a $10B bet buy acquiring AIR Communities in it’s biggest acquisition in the residential multi-family space, to date. This, amidst all the stories and reports and the multi-family family sector headed for a meltdown last year.

Locally, the The Spring selling season is gaining momentum and we are seeing an increase in listings and that is bringing the percentage of price reductions down a bit. This trend should continue into the Summer.
As far as the # of sales in Q1 – Pebble Beach is running 63% behind Q1 2023 with just 10 closings. As is typical, Carmel is faring better with just a 10% decline in the # of Q1 sales at 51 units.

So what’s happening on the ground? Mortgage rates are about 7.51% on a 30 yr Jumbo this week, up from mid 6’s sometime last month, and consumers continue to jump aggressively at attractively priced or located properties, and new construction products, as if rates were in the 5%’s. Granted that many entering the prime markets are doing so with all-cash purchases, there are still quite a few utilizing debt and taking advantage of the group of buyers waiting for rates to come down. Honing into the prime, downtown Carmel market, accepted areas of value continue to push further from the center of town and previously high-demand neighborhoods. For example, the area outside of the city limits, up closer to Highway 1, has begin breaking square foot records for new construction, only before found further inside town. The area North of Ocean, but below town, has begun functioning more and more like the Golden Rectangle, the historically highest area of value in 93921 Carmel.

We are beginning to sign up a handful of new listings for this Spring and Summer. With inventory at such low levels, in terms of quantity and even quality, I recommend beating the competition to market this season! Please ring me to chat if you or a friend want to start getting your ducks in order.

Cheers!
Ryan Melcher & Team