A Seller’s Quarter.
If there was a three-month period in recent memory that was favorable for home sellers in San Carlos than the quarter that just completed, I certainly haven’t seen it. There are three characteristics that best describe the surreal real estate market in San Carlos right now: Low inventory, high demand, and rapidly escalating prices. If you don’t read another word in this post, that one sentence will tell you everything you need to know about the condition of our local real estate market. And if you’re a buyer who is trying to land that evasive San Carlos home, don’t hold your breath thinking that conditions are going to change anytime soon.
In this report, we’ll dig a little into a few metrics that will simply affirm those aforementioned characteristics.
Prices at an All-Time High.
The custom chart I created below shows the average sales price of single family residences in San Carlos that sold over the past 5 complete years (2008-2012), and then compares it to the same metric for the first 3 months of 2013.
The average sales price of $1,237,228 for Q1’13 is not only a whopping 15% increase over 2012, but it’s very likely the highest average sales price on record for any quarter in San Carlos….ever. It’s even higher than the crazy pre-market crash days of 2005-07, which topped out at about $1.22M in one quarter.
And the year is just getting started.
High Demand, Low Inventory.
A few weeks ago, I trotted out another custom chart that showed the number of new listings for the first two months of 2013, and compared it to the same period of time over the past 5 years. At that time of that post, the numbers weren’t as bad as they seemed — while the number of new listings were certainly low, they were on par with a few previous years for the same period. The perception that there were fewer listings was driven just as much by the fact that homes were selling far more quickly than they had in the past 5 years, thus keep the available inventory at paltry levels.
But March — normally a banner month for new listings — was an absolute disaster for new listings in 2013. The chart below tracks the number of new listings AND the number of closed home sales for the first quarter of the past 5 years in San Carlos:
The 73 new homes that were listed on the MLS in the first quarter of 2013 was down 15% from 2012 — but since we’re on the topic of extremes, it also represents the lowest level for a Q1 in the past 10 years (which is as far back as I could trace the MLS data.) So the perception that there are fewer listings this year in San Carlos is now a stone cold reality.
What made things even more difficult for sellers in this quarter is that the number of homes that sold did not suffer such a punishing drop. The 48 homes that closed escrow in the first quarter — while a drop of 21% from 2012 — was still the second highest total over the past 5 years.
So in a nutshell, there were fewer homes to choose from, but still a healthy number of homes sold. This is a lethal combination that keeps inventory at record lows.
There are a few other important factors that are tilting the market ridiculously in the favor of home sellers right now. The job market on the Peninsula is simply booming, with the high-tech and biotech industries awaking from a 3-year siesta and hiring workers at record rates. These new employees are all looking for a roof over their head.
Despite the white-hot economy that we’re experiencing in the immediate Bay Area, the rest of the country is growing at a much slower rate. Consequently, the Federal Reserve has opted to keep interest rates at rock bottom levels, thus giving buyers unprecedented buying power.
And speaking of buying power, there’s simply a ton of cash floating around in the local market. The stock market continues to hit new highs every week, and companies are finally comfortable discussing IPO plans again. So not only are prices escalating, but the ratio of down payment/loan is growing from the normal 20% to well over 50% in many offers.
Unfortunately for buyers, much of the same lies ahead for the foreseeable future. Unless something changes in the factors discussed above (hot job market, low interest rates, low inventory) there will continue to be a significant imbalance in the market in favor of sellers. That means buyers will need to dig deeper then they’re probably prepared to dig to land that elusive San Carlos home. And for those of you watching the market, brace yourself for even more shocking pricing milestones that will certainly be shattered in the coming months.
For sellers, this is without a doubt the best selling environment that we’ve seen in the past decade. If you even have an inkling that you’re going to be selling in the next couple of years, you should seriously look at accelerating that timeframe and cashing in. The difference could be significant.
For a complete list of the 48 homes that sold in San Carlos in the first quarter of 2013, click here: Q1-2013 San Carlos Home Sales
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