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San Carlos Real Estate March 7, 2012

The Tight Real Estate Market in San Carlos: Hype or Reality?

by Chuck Gillooley

A Picture is Worth a 1000 Listings.

Much has been discussed on this site and others about the tight real estate market that we’re currently experiencing in San Carlos. While the market in adjacent communities such as Redwood City and Belmont seems to have gotten off to a robust start in 2012, buyers and agents alike are complaining about the lack of any decent inventory of homes to choose from in the City of Good Living.

Aside from the fact that this type of situation tends to create an imbalance in the number of buyers and sellers and thus increases the likelihood of multiple offers,  there seems to be a general perception that this lack of inventory has dragged the market in San Carlos down to a crawl so far in 2012.

How true are these perceptions?  Is there truly a housing shortage in San Carlos in 2012?  And has this shortage caused the market to grind to a halt in the new year?    Take a look at the graph below, which shows the number of pending sales and the average inventory in San Carlos over the past 15 months.   The areas that are circled in red are the current 3-month period that we’re in (Dec. 2011 through February 2012), and the identical time period of a year ago.   The picture tells quite an interesting story:

 

Pending Sales and Average Inventory: San Carlos

By the Numbers.

What does this graph tell us?   Quite a bit, as it turns out.  Let’s look at the two key components on the graph:

  • Inventory:  To the surprise of absolutely nobody, the inventory of new listings over the past 3 months is indeed down compared to the same period of a year ago.  How far down you ask?   How about 40%?  Yep.  According to this graph, there are nearly 40% fewer homes to choose from than there were a year ago.
  • Pending Sales:   In a market that has experienced a huge drop in inventory, one would logically expect the number of sales to drop as well.   But that isn’t happening in San Carlos.    Despite the precipitous drop in new listings, the number of pending sales (which are the precursor of closed sales) actually rose by nearly 47% over the past 3 months.   In fact, the monthly total of 32 pending sales in February was the second highest total in the past 15 months.

We’re Not Balanced.

Economics 101 tells us that in order to sustain a healthy growth market, there needs to be a healthy balance struck between supply and demand, regardless of what’s being sold.  When the pendulum swings too far in either direction, you either end up with a down, saturated market — or a tight, inventory constrained market.  Clearly, San Carlos is in the latter category right now.

And while the lack of inventory doesn’t appear to have significantly affected the performance of the market so far this year, the growth tear that it’s on right now will not be sustainable without a significant increase in supply over the coming months.
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