Facts Fly in Face of Conventional S.C. Real Estate Wisdom

(Reprinted from Mike Cotter's San Clemente Real Estate Blog 12/17/11)

Pop Quiz!

Only two questions:

1.  Which area of San Clemente has suffered the most from declining real estate market prices since the peak in 2007?

2.  Which area has suffered the least?

Choose from the nine areas of San Clemente:

• Coast District
• Forster Ranch
• Marblehead inland
• Rancho San Clemente
• Central
• North
• Southeast
• Southwest
• Talega

Before you answer, keep in mind that San Clemente conventional
wisdom maintains at least two unalienable truths:

1. The closer to the ocean, the more expensive the real estate.

2. The closer to the ocean, the higher the expected appreciation rate over time.

I can tell you that most active local real estate agents have stories to support these views, including myself.  I have helped to perpetuate notions that seemed pretty obvious -- namely that inland Talega developments have experienced worse price performance since 2007 than the seaside neighborhoods of, let's say, Southwest San Clemente. I should have checked the numbers more carefully.

So, here are the correct Pop Quiz answers, according to data gathered from the California Regional Multiple Listing Service:

1. The area that has suffered the most since the 2007 peak is not Talega, but North San Clemente (with a 33.4 percent price drop.) This area is north of Avenida Pico, has substantial ocean views and frontage, straddles both sides of the Interstate 5 Freeway, and includes such diverse neighborhoods as Shorecliffs, Seascape Village, Ocean Hills and Seapoint Estates.
2. The area that has suffered the least since 2007 is not Southwest San Clemente, but unbelievably...Talega! (with a 24.9 percent price drop.)

It's true that the Southwest currently has the most expensive home median price in all of San Clemente (about $725,000 versus the citywide average of about $593,000.) But it doesn't automatically follow that the Southwest's appreciation rate always has or always will outperform other areas of the city.

In a market like San Clemente, buyers as a group are drawn to certain areas, often because other areas have become relatively more expensive. This will tend to even out neighborhood appreciation rates over time.

In this case, since the peak in 2007, Southwest home sellers held out for a couple of years, refusing to discount their selling prices. (They even remarkably managed to increase their market value by five percent in 2008.) Finally, however, they capitulated in 2010 and lowered their prices dramatically.

At the same time, Talega home sellers started discounting early in 2008 and even more in 2009. By 2010, Talega was considered an excellent bargain by buyers, who flocked to its neighborhoods, resulting in firmer selling prices.  By 2011, Talega's overall price performance since 2007 ended up edging out all other areas of town. What a delightful surprise.

Since the peak in 2007, here are market price drops taken by each of the nine areas of San Clemente:

• Talega                              24.9 percent
• Coast District                    25.7 percent
• Southwest                        26.1 percent
• Marblehead                       27.0 percent
• Forster Ranch                   28.0 percent
• Southeast                         28.5 percent
• Rancho San Clemente       30.2 percent
• Central San Clemente       32.7 percent          
• North San Clemente          33.4 percent

For more on the San Clemente housing market, check out MCotter.com, especially latest market statistics and neighborhood stats.