Quarterly Updates

4Q2024

The market notched a slight increase in 2024 with 583 deals closing, up about 1.5% from last year when we saw 574 deals close in Carmel, Pebble Beach, Carmel Highlands,Carmel Valley, Pacific Grove and Monterey. As buyers have undoubtedly felt, the tight inventory is keeping prices high, which has resulted in a strong total $ invested in this area this year: $1.56B in 2024, a 8% jump from the $1.44B in 2023. This is particularly noteworthy as it highlights a significant market shift in this area when you compare it to before COVID. In 2018 there were 837 deals that closed for $1.624B, which is a 27% drop in activity but the same overall investment. Most economists predict an increase in inventory in 2025 of about 11%, which at first blush will feel like a great relief to buyers, but if that does translate to our area, that would only result in about 3 new listings in the Rectangle and about 6 in all of Pebble Beach. As such, we’re predicting more of the same in this area next year, where the sales process will likely take a bit longer (than sellers hope) but prices should continue to hold steady and even climb a bit as we work our way into 2025.

Deal-flow slowed considerably this quarter, with just 139 closed escrows, down from 157 last quarter. Monterey closed the most deals this quarter, with 30 escrows closing for $33.16M. Pebble Beach had a decent quarter with 34 deals closing for just over $108.6M, which is down from last quarter but almost double over 4Q23. Pacific Grove slowed to 29 deals closing for $47M, mostly due to rising interest rates. Downtown Carmel had just 24 deals close this quarter for $108.21M, capped by an $18M deal that closed on Scenic as demand continues to be strong for the top of the market. The Carmel Highlands were a bright spot this quarter with 12 deals closing for almost $48M, more than double what we saw in the third quarter as demand remains particularly strong for ocean view properties. Quail Lodge continued its strong momentum with 5 deals closing for $19.6M. Carmel Valley Ranch had 2 sales and the Preserve had 3 deals close this quarter, totaling $3.4M and $19.43M respectively.

While prices are staying relatively high overall, sellers are having to negotiate more than in previous years. The average discount off list price was 3% this quarter, with Carmel having to come over 6% off list. Median sales prices held steady $1.8M this quarter,compared to $1.81M last quarter. This is still good news for sellers as it’s over double what we saw a decade ago. Given the tight inventory levels, we anticipate pricing holding steady and climbing a bit next year as more buyers return to the market.

3Q2024

The real estate market across the Monterey Peninsula began to shift this quarter as sales held a slow and steady pace with buyers finally able to see more inventory in their search, just in time as interest rates began to drop. There were 156 sales this quarter across Pebble Beach (23), Carmel (38), Pacific Grove (45), Monterey (31), Carmel Highlands (5), the Preserve (5), Quail Lodge/Meadows (1), Tehama (2), Monterra (3) and Carmel Valley Ranch (3). We’re pretty much on track to match last year, which had 577 deals, but that is historically low for this area as we usually see just over 800 deals per year. Much of this is due to the fact that so many people moved here over 2020-2021 that it has taken a while for the market to bring back new inventory.

We’ve seen buyers get fussier this year and start pushing back on pricing, which has brought down median sales prices a notch to $1.81M (compared to $1.85M last year). This is the first dip in prices we’ve seen since 2008. While not a significant drop, it is good to see that the market is overall holding the price appreciation we saw come with the market surge of 2021-2022. The two price brackets that had the biggest bump in activity this quarter were the $3-4M range (23 sales this quarter, up from just 8 in 1Q) and the top of the market which had 8 sales north of $8M. The bottom of the market (below $1M) slowed this quarter from the 29 sold last quarter, to 19, which is more on-pace for this area in that price bracket.

With the increased inventory, we’re starting to see sellers come off their original list prices to accommodate buyers that bring an offer. Days on market stretched back up to 54 days this quarter and sellers pulled 3% off the list price to get the deal done. We do anticipate more buyers to come off the sidelines as rates fall and inventory levels rise, so it will be increasingly important to make thoughtful negotiations on both sides over the next few quarters.

The biggest news in real estate is the de-coupling of buyer agent commissions from the listing process. Starting on August 17th, all buyers must now sign an agreement with an agent, akin to a listing agreement, in order to see a house. These agreements can either be property specific or for a specified period of time, and do include the agreed upon agent compensation. Sellers should be ready to receive a request for payment of compensation to the buyer’s broker with an offer, either through a seller concession or price reduction. So far, the market has been open to receiving these requests and Sellers are paying for them as part of fair offers.

2Q2024

The markets across the Monterey Peninsula bounced back in the second quarter with 181 deals closing for over $458M, which is up an incredible 67% from the investments that we saw last quarter. This surge in investments was consistent across all regions and particularly prevalent in the middle price brackets. This is welcome news to sellers as we see buyers start to re-enter the market after a big drop in deal-flow last year. While we’re still not at historic norms, it is good to see the momentum shift back toward a more balanced market. 

Pebble Beach surged back to life this quarter with 25 deals closing for $92M, which is over triple what we saw last quarter ($22M), a big move in an important market in this area. Carmel continued to build momentum this quarter with 39 deals closing for $165M, which is up almost 50% from this quarter last year. As a beach town, we always get a surge of investments in downtown Carmel during the summer and early fall, so we anticipate this trend continuing at least through the key selling season.  Monterey roared to life this quarter with 61 deals closing for just north of $75M – despite higher interest rates, the demand for homes in this area below $2M continues to be very strong. Pacific Grove continues to benefit from that strong demand with 32 deals closing for $53M. The Quail Lodge area posted a strong quarter with 7 sales coming in at $22M, which came from a combination of both Quail Lodge and Quail Meadows sales, which lifted the total invested this quarter. The Preserve, Carmel Highlands and Carmel Valley Ranch each had 5 deals close this quarter, which was a nice rebound for the Preserve and Highlands, while the Ranch held it’s steady pace. Monterra continued to show strength with 2 more sales this quarter, bringing the total annual home sales to 7 for this year, as that area continues to benefit from strong demand for move-in ready homes.

Buyers are needing to be more competitive and move faster to get their deals right now as days-on-market has dropped from 54 to 42 this quarter (compared to last) and there’s less negotiating room with deals closing at just 1% off list price now. Part of this new market traction is sellers recalibrating their approach to the market as prices have dipped just a bit, which is getting buyers off the sidelines. The median sales price overall this quarter was $1.688M, which is down slightly from last quarter which was $1.75M. However, this is still up considerably from pre-2019 era as tight inventory levels have continued to prop up pricing across the board.

While there continue to be headwinds in the market, including uncertainty around the election, there’s considerable momentum going into the second half of the year with softening interest rates and more demand than ever for people to live and work in this area.

1Q2024

The market continues to send mixed signals in real estate, with buyers confronting tight inventory and rising rates and sellers confronting buyers who are trying to stretch into houses or overpricing their properties sending buyers to the sidelines to wait. This resulted in another very slow quarter where some properties - that are perfectly positioned in several selling points - are selling instantly (sometimes with multiple offers and over list price) while other very nice properties are sitting for an extended period of time. The 107 deals that closed this quarter are down over 28% from this quarter last year and off over 40% from the 10 year average for this time of year. 

Somewhat surprisingly, the regions outside of the core Pebble Beach, Carmel and Pacific Grove regions had the strongest rebound this quarter, posting gains over last quarter. This is mostly due to buyers having to shift their focus away from the prime locations due to a lack of inventory. As such, we saw 7 sales in Monterra and Tehama this quarter, which was the most we’ve seen since the middle of 2022. The Preserve also posted 3 sales and Carmel Valley Ranch picked up with 5. Carmel and Pacfic Grove both had slow quarters, posting 28 and 23 deals, respectively. Pebble Beach, plagued by some of the tightest inventory we’ve ever seen, was down to just 10 deals this quarter, compared to the 39 we saw in 1Q23. There continues to be strong demand for Pebble - just not the supply to support it. Monterey has held steady with 27 sales this quarter with continued demand for homes priced below $2M.

As buyers get fussier, days on market is starting to lag from the past few years. However, when the home is priced effectively, the listing moves. For those sales this quarter that didn’t need a price adjustment, average days on market is just 19. However, those homes that have moved their price have gone into escrow in 139 days. We anticipate this trend to continue as the active inventory currently has an average days on market of 91, with listings that have already had one price adjustment stretching out to 133. 

The hottest topic in real estate is how the new regulations around buyer agent compensation will impact deal flow and pricing strategy. As of right now, we’re not seeing an immediate adjustment to practices in this area with sellers continuing to offer an incentive to buyers to cover agent compensation. The approach to conversations between the buyer and agent has already begun to evolve and it seems inevitable that the real estate buying experience will shift as buyers will need to be accountable for more costs up front. But it’s too soon to predict exactly how it will play out in this area.