Cash is King Again.
Money is coursing through the veins of Silicon Valley once again, and the only group that’s more happy about this fact than the Ferrari and Tesla dealers are the designers, architects and builders of homes. Another remodeling boom is in full swing in virtually every city on the Peninsula, and San Carlos is no exception. And it couldn’t have come soon enough for those professionals in that trade, who were severely impacted by the prolonged recession that we just emerged from.
You probably can’t drive more than a few blocks on any street in San Carlos before you’ll encounter a fenced-in property that is undergoing some sort of significant alteration. There’s nothing unique about this phenomenon — it happens like clockwork every time the economy takes a sharp upturn like we’re experiencing now. I’ve lived here long enough to see several of these boom cycles take place, and the city certainly looks different afterwards.
The Perfect Storm.
Whenever there’s a surge in the economy like we’re seeing now, the key elements that are required to fuel a building boom fall neatly into place. First, a strong employment market means that homeowners feel more confident in their employment status, and consequently feel less trepidation about taking on a such a significant investment in their home. Second, a hot job market means that salaries are increasing correspondingly, and when you combine these salary increases with a stock market that has been on an absolute tear over the past 24 months, many homeowners now have the bank accounts that are flush to fund such projects.
And let’s not forget about all of those IPO’s…
The lack of available land for new development makes these market conditions prime for flippers, too. The constrained housing market has caused prices to rise so much and in such a short amount of time, that flippers are once again making tidy profits on their rehab projects. And there is no shortage of buyers out there willing to pay top dollar for a move-in condition home in San Carlos, so the market to flip homes is once again vibrant.
Without going through town and asking each and every contractor, it’s difficult to determine what percentage of these rehab projects will remain owner-occupied, and which are going to be flipped as soon as they are done. But with the absolute lack of “move-up” properties for sale in San Carlos right now, it’s a fair bet to say that many homeowners are resigned to stay put and add-on to their existing home, rather than wait for that elusive 4-5 bedroom home to magically pop up on the market.
The Good and the Bad.
All of this remodeling can be either good or bad, depending on which direction you are approaching it from. Generally speaking, it’s a good thing when the housing stock in San Carlos gets a refresh. Many of the homes in this city are anywhere from 50-75 years old, which is a LOT of years to put on a house. When old homes like these are renovated, it not only obviously increases the value of that particular home, but it also tends to bring up the value of other homes in close proximity. The nicer the curb appeal of a given block, the higher the value of the neighborhood goes. That part is obvious.
But with so much demand for “renovation projects” by investors and flippers, it puts even more pressure on entry-level buyers to up the ante to get that first home. This is especially true in those neighborhoods that have large, flat lots. Even though a home may be a total fixer, the market today is ultimately driven by the future value of the property, not the present. In other words, the dirt often becomes the prize, not the house itself. It’s these types of sales that absolutely shock the market, and defy all of the conventional sales wisdom.
Like it or not, the remodeling boom is back. And the landscape in San Carlos will like quite different when this one is over.
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