Much of the Same.
If you read the First Quarter 2013 Report for San Carlos on this site, then you’ll recall that we graphically demonstrated how single family home prices were on a steep rise — while the number of homes for sale and the time it took for homes to sell were definitely going the other direction. Well if you read nothing else in this post, that’s exactly the theme that has carried forward for the first half of 2013 in San Carlos. Red-hot demand coupled with limited inventory has pushed home prices in San Carlos into uncharted waters.
But there are a few things about this local market that may surprise you…
Prices Going Up.
The fact that home prices are on the rise in San Carlos shouldn’t be a surprise to anyone by now. If you follow the Week in Review posts on this site on a regular basis, then you’ve probably become numb to the eye-popping prices that homes have been fetching in San Carlos this year. 3-bedroom homes for $1.4M…. homes fetching $300,000 over the asking price….it’s almost shocking if a home doesn’t get multiple offers or doesn’t blow away it’s list price anymore.
So how far have prices risen? Let’s take a look at the following charts:
Through the first half of 2013, the average home price in San Carlos jumped 15% over the same metric for all of 2012, and a whopping 32% when compared to 2011. A 32% gain in less than two years! That’s simply mind-boggling. The story is very similar when you look at the median sales prices below:
The jump in the median sales price is even more dramatic — nearly 22% over 2012, and 31% since 2011. A quick note about these metrics: It’s important in these types of data analyses compare both the average and median prices together. The average sales price can easily be skewed upward if a few very expensive homes sell during a particular period without it having an impact on the median sales price. But if both the average AND the median are showing increases, this means that the prices of all of the homes are on the rise, regardless of the price range. And as you know, that’s exactly what’s happening in San Carlos right now.
The final pricing chart focuses on the average price per square foot for homes sold in San Carlos:
Although it’s a rather crude metric to compare dislike homes, it’s worth noting that the average price per square foot for any home in San Carlos is now closer to $700/sq foot than it is $600 mark, which just drives the point home how expensive housing has become in San Carlos.
The Culprit? Not a Lack of Listings.
We’ve discussed at length on this site a variety of factors that have contributed to the steep rise in home prices in San Carlos — low interest rates, a booming local economy, and low inventory are probably the three main driving factors. Discouraged home buyers will also cite a lack of new listings as a cause, as they continuously check on the inventory of homes for sale in San Carlos only to see it languishing below 20 — which is where it has been most of the year.
But the number of new listings is the one statistic that’s not that far off the pace from the previous year. Take a look that the following chart:
The number of new, single-family home listings to hit the market this year is only down by 5% from 2012. Certainly, it has dropped almost 23% from 2011 when inventory swelled back to it’s highest amount in years. But the commonly-held belief that we’ve had a massive shortage of new listings in San Carlos turns out to be an incorrect perception. Even the number of homes sold, while down 15% from last year, is still well ahead of the pace of 2009-2011 during the same period.
So why does it seem like there are never any homes on the market? Why can’t the inventory in San Carlos ever rise above 20, even for just a few days? A big part of your answer is below:
The answer is NOT that there aren’t any new listings. The reason that it seems like there’s never anything on the market in San Carlos is that everything is selling so quickly. This is probably the most dramatic of all of the charts in this post. The average number of days that a home sits on the market today in San Carlos is just a touch above two weeks. That’s down by 56% in just one year, and nearly 64% compared to 2011. And it’s important to note that none of these charts capture the growing number of off-market sales that are not posted on the MLS. If you factored those sales into the mix, the numbers would be even more dramatic.
So, if you had to sum up the San Carlos real estate market so far this year in one sentence, here’s what it would be: Home prices remain well above the previous year, there’s not a dearth of new listings like everyone thinks, and stuff is selling really fast. But what’s ahead for San Carlos real estate market?
As mentioned above, the 3 legs of the stool that are keeping this market at incredible heights are: Low interest rates, a booming local economy, and low inventory. As long as those three remain relatively intact, we will see more of the same when throughout the rest of this year.
But of those three, interest rates pose the biggest question mark. Rates have already risen 0.5-0.75 points in the past month, and there’s speculation that the Fed will start to extract itself from it’s bond buy-back program, which will only push rates even higher. While this won’t cripple the local real estate market, it will force some borderline buyers out of the marketplace for a while, and it may put a damper on what some perceive as runaway home prices.
One thing is for sure — the second half of 2013 should be equally as interesting as the first. Stay tuned to the White Oaks Blog as we cover it for you.
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