Another year has drawn to a close in the San Carlos residential real estate market, and like every year in the past decade, there are lots of numbers to look at and lots of stories to tell. In this multi-part series on the White Oaks Blog, we’ll take an in-depth look at some of those numbers and stories that drove our local market in 2015.
In Part I yesterday, we took a close look at the record-shattering average sales prices that were achieved in 2015. In Part II below, we’ll investigate one of the key factors behind this continued meteoric climb in home prices.
If there was one pervasive characteristic to the real estate market in San Carlos last year (aside from high prices) it was that there never seemed to be that much inventory to choose from, and whatever inventory there was sure didn’t seem to stay on the market very long. That wasn’t just your imagination – the numbers definitely back up that perception.
The first chart below shows a side-by-side view of the number of new listings for all units (single family residences and condos/townhomes) that were put on the market San Carlos in 2015, and compares it to the past 7 years:
Despite a steadily improving economy, the number of single-family residence listings to hit the market in San Carlos has dropped every year since the Great Recession. In 2015, there were only 256 new single-family listings in San Carlos, or just over 20 per month on average. This is a drop of 17% from just 2014 – which was also considered to be a light inventory year – and an incredible plunge of nearly 39% from 2008.
Townhouses and condos fared little better. 2015 was also the lowest total tallied in years, with only 81 total units testing the market. (Bear in mind that these statistics are for those homes that were listed on the MLS or reported afterward as comps. Private and unreported sales are not accounted for in these totals.)
Was this just a San Carlos phenomena, or did other communities along the Peninsula suffer through the same dearth of inventory? The table below compares the number of listings in 2014 and 2015 for single-family residences in some of the adjacent communities that are comparable to San Carlos:
|City||2015 New Listings
||2014 New Listings
|San Carlos||256||310|| -17.4%
|San Mateo||681||651|| +4.6%
|Redwood City||665||649|| +2.5%
So inventory was a bit of a mixed bag on the Peninsula. A few communities showed moderate growth in the number of homes listed on the MLS, while San Carlos, Belmont, and Burlingame suffered significant drops from 2014.
There are a lot of theories why this is happening. One factor that we’ve discussed numerous times on the blog is the disappearance of the “move-up” buyer. Because of the fierce competition in the San Carlos housing market, it’s extremely difficult for the average San Carlos family to purchase a larger home in town without having to sell their current home first. In a normal, balanced market they might get that kind of conditional offer accepted. But in a market where no contingencies and no conditions are now the norm, these homeowners looking for more space are forced to stay put and add on to their existing homes.
Another theory is that many residents who are close to retirement age are holding out to sell until they think the market has hit its absolute top. Like any investment strategy, this is a dangerous game to play simply because it’s impossible to dictate the top of the market until it’s already started to drop and the “top” of the market has already passed.
Total Sales Volume.
The precipitous drop in the number of homes listed on the market last year completely offset the record average sales prices that were achieved. The graph below shows the total sales volume by year for all homes sold in San Carlos — single family residences, condos, and townhomes:
The total sales volume in 2015, while still quite an astonishing number at over $450M, actually dropped by nearly 7% from 2014, and barely eeked out a gain from 2013.
This is Econ 101 at it’s most basic: High demand coupled with limited supply means higher prices. But The very same constraints which are driving prices upward are also limiting the overall growth of the market.
What’s Up Next
Tomorrow in Part III of this series, we will dive in to what you might expect to see in 2016 in the San Carlos real estate market. Interest rates are rising, it’s an election year — what effect is that going to have on the market?
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