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San Carlos Real Estate January 30, 2009

San Carlos home sales already falling behind 2008 pace…

by Chuck Gillooley

downward-graph.jpg

I mentioned in a previous post that the performance of the San Carlos real estate market in the first three months of the new year would likely set the tone for what is going to happen in all of 2009.  If that statement turns out to be true, then 2009 has the makings of being an ugly year.

January ’09

Since today is the final working day of the month and no escrows are scheduled to close, I figured it would be safe to take a close look at the data for January.    Ugh…  At first blush, it wasn’t too bad.  The data showed that 10 homes sold in January, and this would have been down only 2 from the 12 that sold in January of 2008.   Upon further review though, 5 of the 10 homes that show as January sales actually recorded on the last 2 days of December.  What does this mean?

Only 5 homes closed escrow in San Carlos in all of January 2009.

…or a 58% reduction from January 2008.

February ’09

One way to predict the performance of an upcoming month is to take a look at the pending sales.   This is a reasonably accurate gauge since the average escrow period is 30 days or longer;  in other words, if it’s not already pending today it won’t likely close in February.  Taking that logic into account, here’s what February looks like:

  • 5 Pending No-Show:   (Contingencies likely all removed, highest probability of closing escrow.)
  • 8 Pending with Show:  (Contingencies likely still in place, consequently lower probability of closing escrow.)
  • 1 Pending with Release:   (Home is in contract, but some sort of release clause is in place — possibly contingent on the sale of the buyer’s home.)

Assuming an 85% closing percentage (which is admittedly optimistic,) this equates to 12 home sales in February 2009 which equals the same figure of February 2008.

Summary

What does this all mean?  Well, numbers are funny — while they’re very “black and white,”  you can still look at them from an infinite number of angles.  In this case, the San Carlos real estate market is starting off the year about 30% behind  last year.    However, if you look at trends and directions, there’s growth from Jan-Feb of 2009, versus no growth in the same period of 2008.

What this really means is that March 2009 will be the month of reckoning in San Carlos.   It should spell out very clearly whether we’re starting to pull out of a funk, or if we’re destined to fall behind what was an already soft 2008.

We’ll do another analysis just like this one at the end of February.  Should be very interesting…

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Comments 4
  • Chuck
    I enjoy your blog – very well done.
    I think it is too early to tell about the market.
    As you point out, March sales figures will be telling.
    My own sense is that 2009 may end up better than 2008.
    After 31 years in the RE business, I have often noted that when the market turns – the sellers are 6 to 9 months behind the buyers – ie. the sellers still think the market is like it was “in the good ol’ days” while the buyers know that things have changed- and so when the market changes direction, sales go down because seller expectations do not meet buyer realities – after all, the BUYERS determine market value. But after time – maybe 1 year plus minus, the sellers adjust to the new reality and bring their expectations in line with the truth of the buyer perception and sales pick up. As a long-time San Carlos resident like you, we know San Carlos is a fabulous place to live and raise a family; this will not change and buyers should take advantage of lower prices to get into San Carlos NOW.

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  • Hi Arn,

    Thanks for writing in. While we’re in agreement about the importance of March ’09, I’m not as optimistic that 2009 will be surpass the 2008 numbers, even though the bar is set pretty low. Here’s why…

    In spite of low interest rates and somewhat cheaper housing (prices dropped about 8% from 07-08,) we have one element to deal with this year that wasn’t prevalent last year: rampant unemployment. Starting in Nov 08, we started to see the initial wave of cuts, and my former co-workers in Silicon Valley tell me that bigger cuts are coming.

    Unemployed people and those who are worried about becoming unemployed won’t be buying houses any time soon. They might have to sell, but that’s a whole different story. As I’ve stated several times in this blog, I believe consumer confidence is the biggest challenge facing the San Carlos real estate market. And employment status is probably the biggest single influence on consumer confidence.

    Until the employment trend is reversed, I’m afraid the dismal consumer confidence is going to cut any housing rally off right at the knees. Just my opinion though…

    Thanks for writing in,

    CG

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  • House prices are too expensive for average wages, even in the bay area. Add in people cannot qualify due to tight lending restrictions. House prices will contine to decline…I predict 10-20% more before bottom…..take another analysis…take 1997 prices and add normal appreciation, before the dot come and finance mess….so 3% inflation since 1997 is 36%. Add the 36% to the 1997 price and you have what the home is worth in todays market.

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    • TWR,

      I agree with you about the wage gap. For many years, as house prices escalated, wages increased as well…but not nearly at the same rate, and the wage increases were predominantly in the highest paying sectors. That gap continued to grow, and as soon as these high-paying jobs started to disappear, there was nothing to drive the house prices higher.

      That’s why San Carlos is in a “glide” mode right now. We didn’t drop like a rock, like other communities did, but we’re slowly gliding downward in price. And until the economy improves, it’s quite possible that another 10% could be sliced out of the average sales price.

      Thanks for your comment.

      CG

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