2Q19 Market Update by Canning Properties Group

2Q19 Market Update

Mike Canning

Jessica Canning

Nic Canning

DRE#01004964 831.596.1171 mike@mikecanning.com

DRE# 01920034 831.238.5535 jessica@canningproperties.com

DRE# 01959355 831.241.4458 nic@canningproperties.com

Ellen Krausse

Natalie Pitschke

Brian Keck

DRE# 02046046 831.204.2204 ellen@canningproperties.com

DRE# 02041776 831.521.7363 natalie@canningproperties.com

DRE# 02070480 831.238.8730 brian@canningproperties.com

Market Overview The market in Pebble Beach, Carmel, Carmel Highlands, Quail and the Preserve surged this quarter with 93 closed escrows, up 26% over last quarter and 34% over 4Q18. We saw a strong contraction in the market in the last quarter of 2018, so even though we’re down from 2Q18 (which was a banner quarter in this area), it’s good to see such a strong rebound. Prices continue to climb across the region with $263M selling this quarter, a 49% jump over last quarter. The $1.5M-$2.5M bracket is representing 24% of the total amount invested (compared to 15% last quarter). The top of the market also bounced back this quarter with 4 deals closing over $8M, bringing in $59M. The floor of the market has clearly risen with just 4 deals closing below $1M this quarter, down from a high of 150 that closed in 2012. Of the areas we cover, the resulting median sales price for 2Q19 notched above $2M for the first time in over a decade. Carmel led the pack this quarter with 43 closed escrows, followed with Pebble at 38, the Highlands at 7, Quail with 4 and another sale in the Preserve, continuing it’s 7 consecutive quarters of sales. Dealflow above $6M showed good momentum again with Carmel closing two deals between $6-8M and Pebble booking 4 deals north of $8M. The middle of the market was strong across all regions with 17 sales between $3-6M and each region closing at least one deal between $4-6M. With more sales below $1.5M than any other region, Pebble is particularly well positioned to meet the current market demand, with buyers snapping up well-priced homes in an average of just 56 days in Pebble - the lowest days on market of any other region this quarter. The combined average days on market for all of the regions was just 62 days, the fastest absorption rate in over a decade. As we enter our peak selling season, we anticipate the market to remain competitive increase through 2019 but not reach the peak levels seen last year and most likely come in below the 399 deals seen in all of 2018.

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Featured Cover Photo: 164 Corona Road, Carmel Highlands

Market Insights

All Regions

Quarterly Sales by Region

Carmel

Sales Price Range

Carmel Highlands

Pebble Beach

Preserve

Quail

2Q18 Sales

2Q19 Sales

1H18 Sales

1H19 Sales

<$1.0M

$1.0M-$1.5M

$1.5M-$2.0M

$2.0M-$2.5M

$2.5M-$3.0M

$3.0M-$4.0M

$4.0M-$6.0M

$6.0M-$8.0M

$8M+

131

232

167

171

Total Sales

Q: Quarter | H: 1st Half of the Year

Market Overview

10 Year Ave. 10 Year Ave. 2Q Sales 1H Sales

2Q19 Update All Regions

2Q19 Sales by Price Range

Median Sales Price ($M) 2Q19

Area

YoY% Change

$2.05

Carmel

$2.23

Carmel Highlands

$2.02

Pebble Beach

39%

$2.30

Quail/Preserve

17%

$2.07

Overall

14%

$8M+

$6M - $8M

$4M - $6M

$3M - $4M

$2.5M - $3M

$2M - $2.5M

$1.5M - $2M

$1M - $1.5M

<$1M

Total Annual Sales

Average Sales Price ($M) 2Q19

Area

YoY % Change

$2.34

Carmel

$2.56

Carmel Highlands

$3.44

Pebble Beach

48%

*Indicates sales for first half of 2019

$2.79

Quail/Preserve

25%

$2.83

Overall

23%

Information believed to be reliable as obtained from the Monterey County Association of Realtors database and known off market transactions.

Market Overview

Pebble Beach Market Overview

Pebble Beach’s market sprung into the summer selling season with strong gains over 1Q19 with 38 sales totaling $130.79M (up 27% and 79%, respectively from 1Q). Although a slower pace for transactions than last year’s 2Q (down 32%), the total dollar volume rose slightly over 2Q18 (up 2%) as the apex of Pebble’s market outpaced last year’s 2Q results. Overall inventory has risen 12.5% since last quarter and 22% versus 2Q18, offering Buyer’s more opportunities in the mid-to-upper price brackets in what has been a long-running seller’s market for most of Pebble Beach. Of the various price ranges, the $1M-$1.5M price range remains hottest - already eclipsing annual transaction averages (28.8 sales/year) with 30 sales halfway through the year. Followed closely were the $2M-$2.5M and $2.5M-$3M price brackets that collectively improved over Q1 – posting their highest quarterly sales totals each since 3Q17.

2Q19 Sales by Price Range $8M+

$6M - $8M $4M - $6M $3M - $4M $2.5M - $3M $2M - $2.5M $1.5M - $2M $1M - $1.5M <$1M Total Sales

0 3 4 4 4 3 14 2 38

$130.79M Total Dollar Volume

Units Sold in 2Q19

Average Days on Market

$1.98M increase $57.7M increase over 2Q18 over 1Q19

32% decrease from 2Q18

27% increase over 1Q19

39% decrease from 2Q18

50% decrease from 1Q19

The Central Pebble area posted mixed results in 2Q with a spike in Total Dollar Volume (up 26% from 2Q18 and 52% over 1Q19) and a mild slowdown in Total Closed Sales (down 18% from 2Q18 and 10% from 1Q19). Demand remained strong atop of this sub-market (4 sales above $8M in 2Q) while activity in the price ranges just below ($4M-$6M and $6-$8M) stalled with 3 sales in 2Q – ballooning those price ranges’ inventory levels to a projected 2-year supply (based on recent trends). With Pebble Beach’s fastest absorption rate (Ave DOM=40 days) and tightest negotiations relative to value on sales (Ave Discount=-2.9%), Buyers searching in the MPCC area can anticipate a competitive marketplace for the remainder ’19 as demand for the ever-popular ‘Country Club continues to grow. The Upper Forest’s sub-market carried its upward momentum through 2Q with 6 closed escrows, making it 13 sales by the midway point and well ahead of annual averages (19.09 sales/year). Median sales prices also rose to $1.29M in 2Q, extending the streak above the $1M threshold for the 4th quarter in a row.

Median Sales Price ($M)

Average Sales Price ($M)

Quarter

Median

YoY % Change

Quarter

Average

YoY % Change

2Q19

$2.02

39%

2Q19

$3.44

48%

1Q19

$1.22

-22%

1Q19

$2.42

-11%

4Q18

$1.58

-6%

4Q18

$2.17

-14%

3Q18

$1.88

3Q18

$4.09

77%

2Q18

$1.45

-13%

2Q18

$2.32

2Q19 Update

Pebble Beach

2Q19 Top Pebble Beach Sales 1536 Cypress Drive $24,000,000 1658 Crespi Lane $ 1 4,7 3 5 ,0 0 0 * 3908 Ronda Road $ 1 1 , 4 4 6 , 0 0 0 1487 Padre Lane $ 8 , 8 5 0 , 0 0 0 929 Coral Drive $ 5 , 2 0 0 , 0 0 0 3301 17 Mile Drive #13 $4,500,000 1278 Padre Lane $ 4 , 0 0 0 , 0 0 0 74 Spanish Bay Circle $3,750,000 3028 Valdez Road $ 3 , 6 0 0 , 0 0 0 58 Spanish Bay Circle $3,450,000 *Represents a Canning Properties Group Sale

4.4%

Average % off list price 2Q19 Sales

3% increase over 2Q18

20% decrease from 1Q19

Quarterly Sales by Region Central Pebble Beach

MPCC

Upper Forest

and m e d C MPC t spot in e hits swe 19 2Q

Pebble Beach

Carmel

Market Overview

Carmel continued to build momentum this quarter with 43 sales, up from the 39 sales last quarter and up 39% from 4Q18. Although this is still down from the 54 deals that closed in 2Q18, it does appear that the market is rebounding from the correction in late 2018. Northeast Carmel led the way this quarter with 11 deals closed, which is up from last quarter (9) and 2Q18 (7). Tight inventory levels continue to constrict activity in Carmel with the Golden Rectangle closing just 9 deals this quarter, down from last quarter and 2Q18 (9 and 14, respectively). Carmel Point closed 6 sales this quarter, matching the 10 year seasonal average, which is up slightly from last quarter (4) but down from last year (8).

$100.73M

2Q19 Sales by Price Range $6M - $8M $4M - $6M $3M - $4M $2.5M - $3M $2M - $2.5M $1.5M - $2M $1M - $1.5M <$1M Total Sales

2 3 4 5 9 7 11 2 43

Total Dollar Volume

Units Sold in 2Q19

Average Days on Market

$23M decrease $8.46M increase from 2Q18 over 1Q19

20% decrease from 2Q18

10% increase over 1Q19

34% increase over 2Q18

32% decrease from 1Q19

The most active price brackets are between $1M-2.5M right now, representing 63% of total activity, up from 46% last quarter. Strong demand for downtown Carmel, combined with tight inventory levels has pushed the median sales price to $2.06M, which is up 3% from last year and up 76% from the lows on 2010. The larger home sizes on Carmel Point have had a big impact on sales prices with the median price jumping to $3.08M this year, representing the highest sales prices in Carmel and almost double from the $1.61M in 2010. As we enter the peak summer months, with we anticipate prices holding steady through the end of this year.

Median Sales Price ($M)

Average Sales Price ($M)

Quarter

Median

YoY % Change

Quarter

Average

YoY % Change

2Q19

$2.05

2Q19

$2.34

1Q19

$2.08

1Q19

$2.36

4Q18

$1.83

10%

4Q18

$2.22

11%

3Q18

$2.21

24%

3Q18

$2.49

18%

2Q18

$1.90

2Q18

$2.27

-3%

2Q19 Update

Carmel

2Q19 Top Carmel Sales 26314 Ocean View Avenue $6,400,000 2417 Bay View Avenue $6,200,000 2337 Stewart Way $ 4 , 7 0 0 , 0 0 0 Camino Real 2NW of 4th $4,195,000* Santa Rita 2NW of 6th $4,050,000 Camino Real 2NE of 8th $3,580,000 Monte Verde 3SE of 2nd $3,430,000 Casanova 3SE of 10th $3,295,000 2444 Bay View Avenue $3,266,250 Lincoln 4NE of Santa Lucia Avenue $2,930,000 *Represents a Canning Properties Group Sale

4.3%

Average % off list price 2Q19 Sales

16% increase over 2Q18

23% decrease from 1Q19

Quarterly Sales by Region Carmel Point

Golden Rectangle

Hatton Fields

Northeast Carmel

ing l l i f l arme C t s a y in e r h o t t r n o e N w inv o l f o le & g n a v o id t c e n Re int d l o G Po l e m r Ca

Northwest Carmel

Southeast Carmel

Carmel

Carmel Highlands Market Overview

The Carmel Highlands and Meadows regions have made a comeback in 2Q19 propelled by an oceanfront sale in Carmel Meadows and steady activity across the board. The Highlands continues to regain momentum toward a recovery after a stagnant 1Q, climbing to a total dollar volume of $17.95M and 7 units sold in 2Q19. The $17.95M in 2Q total sales is down less than 1% from the Highlands 10 year 2Q rolling average of $18.01M. The 7 sales in 2Q matches itâ&#x20AC;&#x2122;s 2Q average, providing further support that the region is back on track. In 2Q19, median sale price also made a near full correction and bounced back to $2.23M, which is less than 5% below the Highlandâ&#x20AC;&#x2122;s overall 2Q median sale price of $2.34M. Days on market in the Highlands continues to shrink with sold homes on the market for an average of just 88 days this quarter - down almost 15% from this point last year, and a 48% decrease from the seasonally adjusted 2Q average DOM of 169 days. We are seeing this movement as result of well-priced inventory in the <$2.5M price bracket.

$17.95M

2Q19 Sales by Price Range

Total Dollar Volume

$4M - $6M $2.5M - $3M $2M - $2.5M $1.5M - $2M Total Sales

1 1 2 3 7

Units Sold in 2Q19

Average Days on Market

$7.6M decrease $14.2M increase from 2Q18 over 1Q19

30% decrease from 2Q18

250% increase over 1Q19

15% decrease from 2Q18

62% decrease from 1Q19

As predicted last quarter, the rains subsided and weather patterns improved in the Highlands which opened up opportunity for quality oceanfront product to come to the market. There are currently 25 homes and 7 lots on the market in the region (7 oceanfront), which is a 25% increase from inventory levels at this point last year (20 homes). We anticipate the momentum will keep moving in a positive direction as our Mediterranean climate in the late summer through fall offers a moderate oceanic climate with clearer skies, warmer temperatures, and stunning panoramic sunsets.

Median Sales Price ($M)

Average Sales Price ($M)

Quarter

Median

YoY % Change

Quarter

Average

YoY % Change

2Q19

$2.23

2Q19

$2.56

1Q19

$1.85

-38%

1Q19

$1.85

-45%

4Q18

$1.60

-35%

4Q18

$3.04

-5%

3Q18

$4.94

110%

3Q18

$6.42

193%

2Q18

$2.21

-25%

2Q18

$2.56

-17%

2Q19 Update Carmel Highlands

2Q19 Carmel Highlands Sales 2715 Ribera Road $ 5 , 2 0 0 , 0 0 0 153 San Remo Road $2,700,000 101 Yankee Point Drive $2,495,000 27030 Meadow Drive $2,225,000 120 Yankee Point Drive $1,945,000 30774 San Remo Road $1,775,000 31 Mentone Drive $ 1 , 6 1 0 , 0 0 0

5.2%

Average % off list price 2Q19 Sales

4% increase over 2Q18

61% decrease from 1Q19

Quarterly Sales by Region Carmel Highlands

Carmel Meadows

to d e n r Retu averages al seas on

Carmel Highlands

Quail / Preserve Market Overview

After a usual slow start to the year, 2Q picked up the pace with 5 total transactions, ahead of 1Q19 (3 sales) but down from the 2Q average of 8.6 sales. It is encouraging to see strong price momentum continue to climb at a 25% increase year over year and a 10% increase from the previous quarter. With inventory levels remaining about the same and increased demand for high-quality products on the market, we anticipate a continued upward trend in sales prices. For the first time, we are also analyzing vacant land and lots as they make up a significant portion of this market. The first half of 2019 has seen a 40% slowdown in vacant land transactions and 74% decrease in total sales from the prior record-setting year 1Q2Q18. Inventory continues to creep higher, weighing on prices near the bottom, but the more desirably located lots with views are trending higher.

$13.96M

2Q19 Sales by Price Range

Total Dollar Volume

$4M - $6M $2M - $2.5M $1.5M - $2M Total Sales

2 1 2 5

Units Sold in 2Q19

Average Days on Market (sold)

$8.3M decrease $6.33M increase from 2Q18 over 1Q19

50% decrease from 2Q18

67% increase over 1Q19

35 day increase 74 day increase over 2Q18 over 1Q19

With thinning inventory, the pace of sales in Quail Lodge continues to slow as itâ&#x20AC;&#x2122;s 3 transactions fell below the second quarterly average of 5; however, the average price ticked up by 8% from the 2018 average to $1.91 in 2Q19. The three sales averaged only 31 days on the market, which is lower than the rest of the Lodge inventory (67 average days on the market). The single Quail Meadows transaction in Q2 also trailed its average of just over $2.5M and the sales price was 5% lower than its 2018 average. With inventory low and remaining flat, buyers may be pushed into the Preserve or elsewhere to look for alternatives. The Preserve was on par with its average Q2 sales at 1 unit and the record-setting consecutive quarter with at least one sale continues on to 7 quarters, which is lifting prices 50% in price per square foot year over year. After a robust Q1-Q2 2018 with 4 land sales, the first half of 2019 has kept pace with 3 sales, averaging $740K per transaction (56% decrease YoY). A wide variety of options are on the market, varying in size, location, views and price but it remains a strong buyersâ&#x20AC;&#x2122; market with elevated inventories and building costs.

Median Sales Price ($M)

Average Sales Price ($M)

Quarter

Median

YoY % Change

Quarter

Average

YoY % Change

2Q19

$2.30

17%

2Q19

$2.79

25%

1Q19

$2.28

-32%

1Q19

$2.54

-25%

4Q18

$1.75

-4%

4Q18

$1.78

-16%

3Q18

$1.79

-22%

3Q18

$2.18

-5%

2Q18

$1.97

-25%

2Q18

$2.23

-22%

2Q19 Update

Quail / Preserve

2Q19 Quail / Preserve Sales 5482 Quail Meadows Drive $4,1 87, 5 0 0 * 7 Corral Run $ 4 , 0 4 5 , 0 0 0 * 7054 Valley Greens Circle $2,300,000* 7027 Valley Greens Circle $1,725,000 8081 Lake Place $ 1 , 7 0 0 , 0 0 0 *Represents a Canning Properties Group Sale

5.9%

Average % off list price 2Q19 Sales

209% increase over 2Q18

151% increase over 1Q19

Quarterly Sales by Region Preserve

Quail Lodge

Quail Meadows

for d n a m De operties pr y . e w l o l r a g v o es t u n i t n co

Quail / Preserve