I have been asked to give a brief talk regarding the trends in San Diego backcountry real estate. The first topic that occurred to me was the recent rise in demand for all property types from investment properties to orchards for sale. As I thought more about it, I began to question what might be driving this recent rise in demand. What are the reasons people want to buy backcountry real estate?
Exploring the answers to this question reveals a common theme; diversity.
For many people, building or re-building their connection to nature fuels a strong motivation to seek out their own personal sanctuary. Featuring nearly every major biotic community within a 50 mile radius, San Diego County’s varied backcountry offers a wide range of climate, botanical, and zoological environments to attract the preferences of a diverse population of people. It is feasible – and, in fact, has been done – to surf and snowboard or ski within an hour’s drive. Earthquake faults, gold veins and tourmaline, beautiful streams and lakes, Golden eagles and Peregrine falcons, mountain lions and an occasional bear – all here.
San Diego County’s storied backcountry human history reflects the diversity seen in the natural history. Native people, missionaries, caballeros to cowboys, miners and midnight ladies, land surveyors and speculators, famous soldiers and criminals alike have in the past called San Diego County’s backcountry “home.” Today, the descendants of many native and early pioneer families have been joined by a new wave of backcountry denizens, like me, who seek a slower pace and quieter lifestyle. Technologically enabled professionals, blue-collar workers with rural roots, and people requiring affordable and safe housing are among the many different types of people who have settled into the desert, oak woodland and pine communities of San Diego’s backcountry.
Recreational hotspots are another huge draw bringing people to the backcountry. The desert dunes attract a weekend parade through the various mountain routes during the winter months. Thousands of acres of public land offers a variety of recreational opportunities, including hiking and climbing, hunting and fishing, horseback riding and camping. You can gamble, wine and beer taste, golf, or just sit and watch the world spin. Access for all of this potential fun is along several scenic and lightly traveled county and state highway routes.
San Diego’s backcountry diversity also shows up in real estate; there is a special place for everyone. With the growing disparity in wealth, technology allowing people to be productive from remote locations, and the fact that people are living longer and more active lives, backcountry real estate offers an environment for everyone. Large picturesque ranches, ranchettes for the weekend residents, retail shops, wineries and breweries, top-shelf restaurants, recreational facilities, affordable weekend retreats and senior living communities offering a quality lifestyle, and just plain affordable housing. You can buy a Julian home for under $100,000 or purchase an estate for several million dollars minutes or miles from each other.
To the point of what I have been asked to talk about – current real estate trends in San Diego backcountry real estate – can also be framed in the context of diversity. The affluent still purchased relatively expensive properties throughout the recent real estate recession. Special use properties – recreational, limited commercial sites, and agricultural offerings – still received attention during the past 7 years. The lower value bracket of the market never rested while the values receded by around 55%.
As we have all probably heard more than once, it is a known fact that real estate demand, and consequently value, is predictably cyclic. An important fact to take into consideration when evaluating San Diego’s backcountry real estate trends is that real estate demand and value rise later and fall earlier here than in the coastal and foothill communities to the west. The beginning of the Great Recession can be seen in our backcountry real estate numbers as early as July 2005. However, the coastal and suburban communities of San Diego County don’t show this decline for another 18 months or later. Conversely, while emerging communities, like Scripps Ranch and Santaluz, and affluent communities, such as Coronado and Del Mar have been thriving for more than a year, the real estate activity in San Diego’s backcountry has noticeably gathered momentum only during the past few months. Moreover, a full range of property types have been seeing action lately, which is a sign that the market is clearly moving away and up from the bottom of the Great Recession.
A good example illustrating both, diversity and a rising market trend, can be found in the 2012 sales numbers for the communities of Julian and Santa Ysabel. These communities are contiguous. Santa Ysabel is primarily a ranching community and Julian a tourist destination, situated about 1000 feet in elevation higher than the Santa Ysabel valley.
In 2012, Julian experienced the third highest sales volume since 2000; Santa Ysabel the fourth highest volume of sales transactions during the same period. Both communities have seen a rise in the average sales price of a single family residential property to 2002 levels. A look at the average sales numbers illustrates the diversity these neighboring communities offer.
Since 2000, the sale of an average single family residential home in Julian has averaged $315,961.61 with 107 days of market time. This buys you an average of 1459 square feet of living space on 2.96 acres of land. In Santa Ysabel, the average single family residential home over the same period will cost you $509,346.31 after 91 days on the market – a seemingly smoking deal if you presently reside in Coronado, Del Mar, La Jolla, or The Covenant. For this price, you get 2324 square feet of living space situated on 18.6 acres.
With respect to the current trend in backcountry real estate in San Diego County, we can look at the peak and present values of these two communities to understand where values have come from and to where they might be headed. The peak value for an average single family residential home in Julian occurred in 2005, which was $459,169.00. In Santa Ysabel, 2006 was the calendar year for peak value, an eye-popping $1,250,000.00. The low point for each community over the past 13 years was 2009 for Julian, $210,187.52, and 2010 in Santa Ysabel, at $264,450.00. Presently, an average single family residential home in Julian sells for $261,539.71 and $302,000.00 in Santa Ysabel. This represents a 25% increase over the low point for Julian and 14% for Santa Ysabel.
Into the future, I look for these numbers to rise significantly, and for these reasons. Although the values remain 45% or more off of their respective peak values, the number of sales transactions for each community is on par with historic highest levels for each community. Due to the limited available inventory, the recent rise in demand will quickly consume the available inventory which, in turn, will drive prices upward.
Another dynamic which will surely impact values in the future is the diminishing supply and availability of large and unique properties found in the San Diego backcountry. Moreover, the number of nouveau riche entrepreneurs who can purchase these unique and increasingly rare properties is rapidly growing. As such, I see the next rise in the cycle of real estate value as already emerging with peak values headed for historic highs at some time during the next 10 years. In the words of my friend, Jim Brown, “We shall see!”