A Growing Pool.
A few months back, I wrote a post about the growing number of home sales in San Carlos that were breaking the $2,000,000 mark. What was once a rare and newsworthy milestone only a few short years ago is now becoming almost the norm for newer, larger homes in the more desirable neighborhoods of San Carlos. This stands to reason, as the booming Bay Area economy of 2014 has given home buyers unprecedented buying power, which in turn has driven home prices all along the Peninsula to stratospheric heights.
In this post, we’ll take another look at the number of $2,000,000+ home sales that have closed so far this year, but this time we’ll dive down a little deeper into the numbers to get a better understanding of how this new and growing segment of the market in San Carlos operates. Some of the trends that emerge from the numbers below are to be expected, while some of the numbers may surprise you.
When I first touched on the topic earlier this year, the number of homes that had already sold for $2,000,000 or more in San Carlos, along with those that were pending, had already nearly equaled the total for all of 2013. And that was only in April. It was easy to see back then that we were on track to eclipse last year’s mark of 13 homes well before this year finished up.
Not only did we pass last year’s mark, but 2014 will finish at nearly double the number of high-end sales. That is probably not too surprising, given the circus what was our real estate market this year.
Click here for a complete list of the homes that sold for over $2M in San Carlos: $2M Home Summary – San Carlos
Digging deeper into the numbers, a clear dividing line appears in the market performance of this elite group of homes, and that inflection point is linked to the original list price of the home — more specifically, whether it was listed above $2M, or below $2M. The difference in the two segments is pretty remarkable. The table below looks at some key metrics for the entire group, and then breaks it down into these two key segments:
|Key Housing Metrics
||All $2M+ Homes||List Price Below $2M||List Price Above $2M|
|# of Closed Sales:||24||14||10|
|Average Sold Price:||$2,279,958||$2,176,071||$2,425,400|
|Average $/Sq Foot:||$782||$818||$733|
|Average Percentage of List Price:||109%||115%||99%|
|Average Days to Sell:
|Average Structure Size (sq ft):||3,015||2,699||3,456|
|Average Lot Size (sq ft):||10,393||8,700||12,764|
There are a few interesting nuggets that can be pulled from this data, some of which I highlighted in red above:
- Of the 24 homes in this group, only 10 of them (or 42%) had original list prices of $2,000,000 or higher, while the other 14 homes (or 58%) actually started below the $2,000,000 mark and were bid up into this range.
- The homes that originally listed below $2M fetched a whopping premium of 15% on average above the asking price, while the homes that listed above $2M “only” got 99% of the asking price. In fact, when you look at the individual home sales, there’s a very clear pattern that shows that the higher the list price, the bigger the discount required to sell it. The largest percentage of the asking price paid for the group was 134% — the lowest percent was 87%.
- Do schools matter? Of the 24 homes that sold for over $2M, the ones that were located within the San Carlos School District boundary fetched 101% of their asking price. The homes within the Redwood City School landed only 94%.
- There was a huge disparity in the amount of time it took to sell homes in the two groups. For homes in the less expensive groups, they were only on the market for an average of 2 weeks. For the latter group, it took 1.5 months to get into contract.
- The average price-per-square foot dropped significantly in the more expensive segment — but that is to be expected since the average house size was 28% larger in this group, and price-per-square foot is not a linear relationship with the size of the house, as you already know.
The Bottom Line.
What does this data tell us? First of all, the legitimacy, accuracy, and relevance of any conclusions that one can draw solely from this data must be appropriately tempered by the sample size that’s being observed. While the number of $2M home sales has jumped 69% from the previous year, this elite segment of the San Carlos market still only represents 8.8% of the total number of homes sold so far this year in San Carlos. In other words, 24 datapoints does not a trend make…
But taking this data in combination with the knowledge of the psyche of the typical San Carlos home buyer, there are certain conclusions that can safely be made:
- San Carlos home buyers have no problem chasing a home price upward into the $2M range. But there still seems to be some market reluctance for homes that start above $2M. This result makes sense because the higher the price, the fewer qualified buyers there will be. But also when asking prices push in excess of $2M, these homes are now competing in the range of other communities such as Burlingame, Menlo Park, Baywood/Aragon in San Mateo, and parts of Los Altos — regions that you would not normally assimilate with the San Carlos real estate market. In other words, there are simply more options outside of San Carlos that are competing for buyers in this price range.
- Seasoned home buyers in the San Carlos market almost have a pre-programmed understanding that they’re going to pay 10-15% on average above the asking price to be competitive in this market. The weekly data that’s published on the blog certainly backs that up. But that mindset seems to change drastically for homes that are listed above $2M. I can tell you with complete certainty that this is not the case in those aforementioned communities where the $2M-$3M price range is just as hotly contested as the $1.5M- $2M range in San Carlos. San Carlos will get there eventually, but there’s simply not a comfort factor in spending that kind of money here just yet.
- As the Bay Area economy continues to strengthen, and more technology companies look to expand northward from their traditional Silicon Valley haunts, look for more larger, spectacular homes to be built in San Carlos that should easily fetch a price tag of over $2M.
At that point, we’ll be having this same discussion — except it will be about $3M homes in San Carlos…
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