Despite What it May Seem…
Without a doubt, 2014 will be a year that goes down in the record books for San Carlos real estate. It seemed like every other day there was a home sale that set some sort of pricing milestone, or there was a story about the incomprehensible number of offers a listing fetched… or both. The market kicked into a gear that has never been seen in this town.
But after four of months of breakneck price appreciation and ridiculously low inventory, the vibe of the market took a noticeable change in the month of May and has carried over into June. If you asked agents, buyers and sellers what there opinion of the market is right now, you’d probably hear that it seems that maybe homes are taking a little longer to sell? And perhaps with fewer offers? And there are more homes to choose from now than there has been at any time in the entire year? If these perceptions were true, it would seem to point to a downward trend in the San Carlos real estate market.
So is the real estate market slowing down in San Carlos? The answer is no. At least not yet.
Blame it on the Inventory.
Your gut may tell you that the market is slowing down, but the numbers tell an entirely different story. So, what’s the culprit? The answer lies in the inventory — especially in the month of May. Take a look at the graph below:
This graph points tells a very interesting story. The red line shows the number of homes that went into contract, and the blue line designates the number of new listings that debuted each month. So in May, the month that seemed to hit a slow down, there were still more homes to go into contract (32) than in any other month this year. Not only did the consumption rate not decrease, it actually grew slightly. Go figure…
But the telltale statistic is the blue line. In May, there were 47 new single-family listings to hit the market in San Carlos. That may not seem like a big number, but to put it into proper perspective for this market, that’s the highest number of new listings for any month in San Carlos since April 2011. So the gap between supply and consumption (15) was the biggest number that we experienced all year, and it hit all at once.
Because of this gap, there are indeed more homes on the market right now than there has been at any other time this year. What effect has this increase in inventory had on home prices and time on the market? Not much.
Consider the graph below:
This graph is a combination of two metrics: Average Continuous Days on the Market (CDOM) in the yellow bars, and the ever-popular Sales Price/Original List Price ratio that I track every week on the blog is the purple line. Lo and behold, the average time for a home to sell in May (despite the uptick in inventory) was 10 days — the shortest average this entire year. And buyers did not hold back their checkbooks in May either. Homes continued to sell at an average of 111% of the list price, virtually unchanged from the past past few months.
What about relative pricing? Let’s look at the price-per-square foot trend for the year:
In May, the average price per square foot level remained unchanged from April and was at its highest level this year. Home prices are simply showing no signs of a downturn.
What Lies Ahead?
Unfortunately for home buyers in San Carlos, it appears that the market is neither slowing down nor getting to be more affordable. If there’s a glimmer of hope here, it’s that you now have more inventory to choose from, and perhaps that alone may help reduce the number of offers that you may be competing with. You might even be lucky enough to find a straggler that the market has forgotten, and be able to scoop it up. Even though it’s a statistic that is very difficult to track, I think most listing agents will tell you that the increase in inventory has certainly had an effect on the number of offers they are receiving on their listings.
We’re now in mid-June, and heading into what are traditionally two of the slower months of the real estate year — July and August. What has happened so far in 2014 was virtually impossible to predict, so predicting what’s going to happen over the summer months is anybody’s guess.
For those buyers who choose to stay on task while other buyers are vacationing, this may be the period of time that you score your dream San Carlos home without as much daunting competition. But don’t expect bargain prices, and don’t expect the competition to be gone for long. The Fall market kicks back up in late-August and runs until Thanksgiving weekend, and unless there’s a huge downturn in the local economy, I expect the Fall market to be every bit as scorching as the 5 months we just witnessed.
(Editors note: If you are viewing this post via email or a feed reader, the graphs that are referenced in the post may not appear because of how they are formatted. To see this marvelous post in all of its glory, just click through to the site and the graphs will be there. Sorry about the inconvenience.)
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