Sales Up, Prices Not.
Last week, I wrote a report that showed how the rate of pending sales in San Carlos in April and May of this year spiked to levels not seen here for several years — and how this trend flew in the face of what was happening nationwide (the national average dropped over 26% during that same period.) With this significant uptick in sales, one could easily assume that home prices followed suit, right? After all, strong sales figures imply strong demand; and strong demand always pushes prices upward (at least in theory.)
But that doesn’t appear to be happening…
Average Home Price Remains Flat.
The graph below shows the average sales price and list price for all single-family homes in San Carlos over the past 15 months:
A couple of very interesting things pop out from this graph. First, in the month of April 2011 while the number of pending sales shot up by 75% compared to April 2010, the average sales price actually dropped by half a percentage point over that very same period. The month of May fared even worse, losing 1.7% from the year-ago month. Looking at the past 3 month rolling average, the average sales price was up only a tepid 1.7% over last year, despite the fact that pending sales grew by 40%.
The trend in average list price seemed to follow suit as well, dropping 5.4% from the year-ago quarter. Very interesting…
Average $/Square Foot.
There are a few things that the graph above does not account for: Size of the home, bedroom and bath count, etc.. So perhaps the flat trend in average sale price can be attributed to smaller homes selling rather than larger? If that were the case, then one would logically expect the average price per square foot to increase, since smaller homes tend to fetch higher $/sq foot than larger, more expensive homes. But take a look at the following chart:
Once again, the year-over-year metric, in this case the average price per square foot for homes sold in San Carlos, remained virtually unchanged over the past year, despite the spike in sales.
Good News for Buyers…and Most Sellers.
Despite what you may think, there’s good news in this data for both buyers and sellers (and when does that happen?) For sellers, the spike in pending sales shows that there are still plenty of buyers still out there looking for a home in San Carlos. The fact that sales prices have not mirrored the spike in pending sales is a not necessarily a bad thing for sellers. The economy is not strong enough yet to support a quantum leap in prices – and that kind of upward trend in prices would very likely kill the momentum we have enjoyed thus far this year. In other words, you have a much greater chance of selling your home with these types of market conditions. The obvious downside to stagnant pricing is that there’s no appreciation in home value — and that’s detrimental to homeowners who are teetering on the border of a short sale.
For buyers, this has to be very encouraging news as well (even if you’ve lost out on a few multiple offers.) Having prices remain flat means that you’re not losing buying power over time, which isn’t the case when prices start to rise. The longer prices remain stable, the better chance you’re going to find what you’re looking for — instead of settling for something less.
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