Inside Carmel-by-the-Sea, Where Small Homes Sell for Big Money

On California’s Central Coast, along the Monterey Peninsula, is Carmel-by-the-Sea, an approximately one-square-mile city with a European village feel. Anchored by the white sand, crescent-shaped Carmel Beach, Carmel, as the city is colloquially called, is a walkable community with roughly 60 restaurants, 40 hotels, 100 art galleries and antique shops and 20 wine tasting rooms. It has a vibrant golf culture, too, as Pebble Beach is just a stone’s throw northwest. But what Carmel is particularly known for is its distinctive 1920s cottages that have fairy-tale features: rolled eaves, rounded doors and stone chimneys. With a median price of $2,015 per square foot, its residential real estate is also some of the priciest in the U.S. as ranked by price per square foot, according to Realtor.com. (News Corp, owner of The Wall Street Journal, also operates Realtor.com.) 

The Draw

A Chill Vibe

It’s a beach community with a bohemian spirit, as Carmel became popular with creative types in the early 1900s and has stayed true to its artsy roots.

It’s Quirky

There are no addresses; people name their houses. Technically, permits are required to wear high-heeled shoes due to a 1960s law instituted to protect the city from lawsuits involving people tripping. (Local police officers don’t enforce this.) It’s dog-friendly: Some restaurants have canine menus; many shops offer dog biscuits; and Carmel Plaza has a dogs-only drinking fountain called the Fountain of Woof.  

There’s Fun Stuff Going On

In the winter, the AT&T Pebble Beach Pro-Am golf tournament fills up the town. In the summer, the area’s Monterey Car Week celebrates automotive artistry and innovation. There are also many culinary and art festivals throughout the year.  

The Big Numbers

$8.2 million

The priciest listing in Carmel’s 93921 ZIP Code is a new build with 2,020 square feet.

Who is buying

Roughly 30% of buyers are from California’s Bay Area; 30% are from Texas; 30% are locals shifting around; and 10% is everyone else, says Jessica Canning, managing partner of Canning Properties Group with Sotheby’s International Realty – Carmel Brokerage. She says the different sides of Carmel typically have varying buyer profiles: The east side attracts more families; the west side attracts more second homeowners. About 75% of Carmel houses are second homes. 

What they’re buying

Lot sizes have been intentionally kept small to maintain Carmel’s artistic spirit. The standard lot size is 4,000 square feet, or 0.09 acres. The typical house is two levels and 1,600 square feet with three bedrooms and 2½ baths. “It’s like an apartment with a little bit of a garden,” Canning says. Bigger houses, oversize lots and single-level houses are more rare. 

Streets buyers covet

The Golden Rectangle—an area outlined by Ocean Avenue, Scenic Road, Santa Lucia Avenue and San Carlos Street—encompasses Carmel’s prime residential real estate. Here, the dirt value, meaning a typical tear-down, is about $2.5 million; the average price for a house in a good location is around $4.5 million; and houses go as high as $25 million or higher. For an ocean view, houses usually have to be on Scenic Road—the first street off the Pacific Ocean—or possibly one or two streets back. For walkability, buyers generally start their search wanting to be three blocks from Carmel Beach and three blocks to Ocean Avenue.

What about home insurance?

Carmel’s risk factors include wildfire, says Janet Ruiz, a spokeswoman for the Insurance Information Institute, a national trade group. In addition to managing risk with fire mitigation, Ruiz says homeowners should understand rebuilding costs. She recommends comparing the area’s average cost to build per square foot to how much a homeowner has their own home insured for. “Do you have an older home that would require building code upgrades?” Ruiz says. “Is your home built with materials that are expensive to replace?” Ruiz also notes that since Carmel is a hub for art, homeowners should know how to insure a home art collection.

Advice for the buyer

“New inventory typically comes online in January and runs through February, coinciding with the AT&T Pebble Beach Pro-Am,” Canning says. “The market picks back up Memorial Day and runs pretty hard throughout the summer given that it’s a beach destination.” 

On the Market

Mission 3 NW of Santa Lucia Street

$5.45 Million

5 bedrooms | 3 bathrooms

2,667 sq. ft. | 0.16 acres

This house, built in 1940, has been extensively renovated. It has five bedrooms, including primary suites on the first and second floors. The kitchen is new. There is a charming Dutch-door entry. Agent: Tim Allen Properties, Coldwell Banker.   

Forest 5 SW of 7th avenue

$4.195 Million

4 bedrooms | 3 bathrooms

2,404 sq. ft. | 0.13 acres

The house was built in 1992. The living room has a notable high ceiling. The large primary suite has a fireplace. There is a separate guest unit. Outside, there is a beautiful garden. There is also a two-car garage. Agent: Judith Profeta, Carmel Realty Company.