Rancho Santa Fe:
Lack Of Land Fuels Demand
by Ryan Thomas
photography by Vincent Knakal

Composed of a mere 20 square miles of land, Rancho Santa Fe is one of the most sought after residential locations in all of California. A name that’s synonymous with wealth, luxury, prestige, and privacy, the land itself is lush, open, and panoramic, with rolling golf courses and winding horse trails, a village center that resists commercial sprawl, and tree-lined residential neighborhoods ensconcing some of the most jaw-dropping estates in San Diego.

But 20 square miles is a small amount of land to accommodate the number of people who want to reside within it. As a result, lots, the handful that are left, have become commodities, and homes prices continue to soar. According to Ken Crosby of Prudential California Realty, just last year the average lot in the Covenant sold for about $2.4 million. This year, the same lot would sell for around $3 million.

“There’re literally no lots available in the Covenant,” says Crosby, pointing out that even the outlying communities, such as The Bridges and Cielo, that have only been around for a few years, are nearing capacity. What homeowners could get for around $600,000 or $700,000 five years ago has appreciated well past the $1 million mark.

“It depends on the community,” says Crosby, “but for instance, The Bridges is almost sold out of lots. Because of that, the average price now is around $3 to $4 million. Their lowest lot price is still considerable, around $1.7 million.”

According to Jason Barry of Barry Estates, when demand outpaces supply to this extent, all available lots sell at premiums. Many homebuyers who want a new home in the Ranch are simply buying older homes for the land and tearing down whatever resides on it to build their own house.

“You’re seeing what’s occurred in Los Angeles, Brentwood, even San Francisco,” he says. “People have to either renovate what’s already there or do teardowns. That has been the case in Rancho Santa Fe for a little while now, and now we’re even seeing it in places like Fairbanks Ranch.”

This movement of tearing down existing homes has brought out two types of buyers: users, who want to build their ideal residence, and speculators, who build for investment purposes only. “The speculator goes after what they think the market will bear,” says Barry, “they have a sought-after end goal.”

Whether bought for new construction or renovations, average prices are, according to Barry, around $800 per square foot. Compare that to other high-end areas like Carmel Valley, where buyers are paying around $400 per square foot.

According to Crosby, the typical entry-level home in the Ranch will have an average 9,500 square feet, composed of an average of four to five bedrooms, three to four bathrooms, and several additional rooms for relaxing and entertaining.

“There are a lot of younger couples in the Ranch now who have kids,” he says. “They want homes that have bonus rooms for the children and rooms for entertaining. You’ll usually find a dedicated theater room in there for the family as well.”

Teardowns and low supply also mean that commercial development in the Ranch is extremely difficult. Not only does the Covenant’s Association of Homeowners have to agree to new construction, but there are already so many residential properties abutting the village, that any new commercial development would encroach on these nearby properties. “Development in and around the Ranch is scarce,” says Barry. “There aren’t going to be any more situations like in the ’80s, when developers came in and bought up the land.”

Perhaps ironically, this lack of congestion is a primary lure to new buyers. Open space, distant proximity to neighbors, and generous use of land for amenities, not to mention one of
the highest-ranked school districts in San Diego, underscore demand.

“The nice thing about the Covenant,” says Barry, “is that you’ve got a minimum residential lot acreage of 2.8 acres. That’s a generous size. Even communities like Santaluz were developed with generous lot sizes in mind. As a result, it maintains the luxury of the land. Add that to the amenities like the schools and golf courses, and the demand is still high despite there being no more vacancies. People say that the prices are high, but where else can you find that kind of luxurious, open land?”

“Because of the space,” agrees Crosby, “you’ve got new families willing to pay top dollar for available properties. Many of the new homebuyers are in their 30s and 40s, and have children. It’s easier to make money these days with the Internet and other available resources, and these young people want to live in areas like the Ranch, areas that won’t overdevelop.”

Aside from young families, Crosby mentions that a trend for many homeowners is to have a second or third home in the Ranch for retirement purposes. “Within the last few years, we’ve had a significant number of second home buyers. A good part of them are buying even a third or fourth home, and planning to sell off their other homes over time and make the Ranch their home base. They may have a home in the desert or the mountains, but never in an area that has such an ideal climate with amenities. The other side is that people want a second home on the coast, and this is the perfect place for a home on the coast.”

Where does all this leave future home prices in the Ranch? Arguably they will continue to rise, and both Barry and Crosby think that redevelopment will push prices up more drastically. The lack of supply in such a coveted area will keep demand high. “In my opinion,” says Crosby “when you run out of land, you run out of opportunity to build homes. Therefore, you have to go back into a community and rebuild it. In that case, the price of the underlying land goes up significantly.”

Barry points out that there are variables to consider when talking about the future of the Ranch, and that areas will rise at rates relative to their locations. “I hear people say the Ranch is up 35 percent. What does that mean? To me, the Ranch areas are not up the same amounts. The different developments have risen, but not like the Covenant. I think some areas will soften for a bit, maybe for construction of roads and such, and then start increasing again. It will always be the most sought-after area in Southern California. Five years from now, all other [suburban areas] will be congested. The Ranch won’t.”