We periodically analyze how our various luxury home markets (sale prices greater than $2M) in Carmel, Pebble Beach, and Monterey perform in terms of median home price .
With the exception of the Country Club area, Pebble Beach has been the clear leader with steady gains in median home prices over a five-year period beginning third quarter 2013 ending second quarter 2019. The Golden Rectangle neighborhood in Carmel-By-The-Sea and the Monterra and Pasadera communities of Monterey had modest gains during this same period. Prices have been declining for the rest of Carmel-by-the-Sea.
Since December 31, 2018 the trailing 12-month median home price in unincorporated Carmel excluding the Carmel Highlands area have increased. However this is driven by a higher percentage of homes sold over $4M in the second quarter compared to the first quarter in 2019. Camel Highlands median sales price appears to be leveling however given the wide variety of home size and quality along with the low sales rate in this area makes it difficult to assess median price performance.
It’s important to note the decline in the number of homes sold over a twelve-month period in most areas that we analyze seems to be leveling off over the last three quarters ending June 30, 2019 with a corresponding leveling off for the trailing 12-month median home sales price over this same period. This leveling of sales volume along with a leveling of median home sales price in most areas indicates that we have entered a neutral market favoring neither the buyer or seller. The Fed’s cut in the prime rate on July 31 will keep mortgage interest rates low may help to offset recession fears and keep home sales at current levels.
To understand how our local luxury home markets perform, analyzing home sale price trends and volume over an extended period is the best approach. For this analysis we collected sales data from the third quarter of 2013 through the end of the second quarter 2019. We then calculated the trailing twelve-month median home price and number of homes sold during the same twelve-month period each quarter for the select areas we follow. Using a trailing twelve-month calculation smooths out seasonal variations and using a median instead of average sales price ensures the results are not skewed by the sales of a few top luxury homes.
The linear trend line for median sales price over the five-year time frame was analyzed to determine the compound annual growth rate (CAGR). This provides the historical market direction and growth rate which is shown in the figures that follow. We compare this to the overall California home market compound annual growth rate of 4.8% over this same time frame to assess how each market performs.
We divided Pebble Beach into three areas: Country Club, Central, and Lodge as shown in the map below.
Figure 1. Areas Analyzed in Pebble Beach
The trailing 12-month median sales price in all areas in Pebble Beach seems to have leveled in the period ending June 30 compared to the period ending March 31. Our five-year trend line analysis indicates median luxury home sales prices increased in all areas with Lodge having a compound annual growth rate of 19.3%, followed by Central with 4.8% and then Country Club at .7%. We saw a leveling in sales rate in all areas. Median home prices have peaked in Country Club and Central. The Lodge area does not appear to have peaked however its compound annual growth rate of 19.3% is unsustainable and has been driven by the sales of ultra-luxury homes over the past six quarters ending June 30, 2019.
Figure 2. Trend analysis and Compound Annual Growth Rate. This chart covers the Central and Country Club areas of Pebble Beach.
Figure 3. Trend analysis and Compound Annual Growth Rate. This chart covers the Lodge area of Pebble Beach.
We divided Carmel-by-the-Sea into two areas: The Golden Rectangle and the rest of Carmel-by-the-Sea as shown in the map below.
Figure 4. The Golden Rectangle and other neighborhoods of Carmel-by-the-Sea.
Our trend line analysis indicates while median luxury home sales prices increased in the Golden Rectangle with a five year compound annual growth rate of 1.8% while median home prices have leveled over the past 12 months ending June 30, 2019. The rest of Carmel-by-the-Sea median home prices have leveled with a negative compound annual growth rate of 3.0% compared to the prior five-year period which was a negative 3.5%. Median home prices peaked during the 2015 – 2017 time frame.
Figure 5. Trend analysis and Compound Annual Growth Rate. This chart covers the Golden Rectangle neighborhood and the rest of Carmel-By-The-Sea.
We divided unincorporated Carmel into two areas: Carmel Highlands and the rest of Carmel (excluding the Tehama community) as shown in the map in the figure below.
The median sales price continues to fluctuate widely in the Carmel Highlands area due to the small number of homes sold and the variety of home sizes and quality. Our trend line analysis indicates median luxury home sales prices may have increased with Carmel Highlands having a compound annual growth rate that jumped to 7.6% from 4.1% over the previous five-year window followed by the rest of Carmel with a negative compound annual growth rate of 1.0% which is relatively the same from the prior period. In both areas we see a deceleration in sales rate over the past three quarters ending June 30, 2019. Median home prices have peaked in Carmel but it is less clear for the Carmel Highlands due to the small number of homes sold and wide variety of product type.
Figure 7. Trend analysis and Compound Annual Growth Rate. This chart covers the Carmel Highlands area and the rest of unincorporated Carmel excluding the Tehama community
We looked at the Monterra and Pasadera communities of unincorporated Monterey as shown in the map below.
8. The Monterra and Pasadera Communities of unincorporated Monterey
The median sales price peaked in 2018. Our trend line analysis indicates trailing 12-month median luxury home sales prices increased with the compound annual growth rate at 3.9% Although there was a slight increase in the number of homes sold in the period ending June 30, 2019 as compared to the period ending March 31, 2019, the sales volume is down when compared to the peak at the end of March 31, 2018.
Figure 9. Trend analysis and Compound Annual Growth Rate. This chart covers the Monterra and Pasadera communities of Monterey
Our trend analysis of select areas in Pebble Beach, Carmel, and Monterey show median home prices in general have had modest increases but with the exception of the Lodge and Central areas of Pebble Beach, and Carmel Highlands, all have underperformed when compared to the overall California real estate market.
Home prices have peaked in most areas and sales rate is leveling.
While the median sales price and sales rate show a general leveling which is indicative of a neutral market, other external factors such as the national economy, mortgage interest rates, and recessionary fears should be considered especially for sellers setting home prices when they list their home for sale.