Fewer Homes, Higher Prices.
If you read nothing else in this post, those four words above succinctly describe the state of the San Carlos residential real estate as we close the books on the first quarter of 2016. As you will see from the charts and tables below, the market for single-family homes in San Carlos continues to ride a multi-year trend of declining listings, which is one of the primary factors behind the other multi-year trend – double digit increases in the price of these homes.
Ironically, the townhouse and condo market in San Carlos is having its most robust listing performance in the past 5 years.
Everyone seems to have an opinion as to why there are fewer homes going up for sale every year. Some feel that the hot tech economy has many homeowners gainfully employed, so they’re simply staying put. Others point to the fact that move-up buyers can’t move up in this hotly contested market, so they are remodeling instead of changing addresses. And finally, some sellers may be timing their exit from the area to coincide with the “top” of the real estate market.
If you have that crystal ball handy, please pass it around.
For the third straight year, the number of single family home listings has declined significantly in the first quarter. The 57 listings that registered in Q1 represent a 16% drop from just last year, and a 25% decline from just two years ago. That hurts.
As I mentioned above, condos and townhouses managed to buck the trend, registering a 28% gain in listings since last year. For those of us who are big-picture people, here’s a look at those numbers:
With fewer homes to choose from, the psyche (and the pocketbook) of potential home buyers has taken a serious hit. Just like this time last year, buyers are being forced to be less patient with their decision to buy, and more aggressive with their offers.
Prices Still Going Up.
As we have discussed numerous times before, the net effect of having fewer homes to choose from is that prices go up, and that trend continued in the first quarter of this year. Interestingly though, the rate of increase for the price single family homes in San Carlos was far outpaced by the hike in prices for townhouses and condos.
The median sales price for a single-family home in San Carlos increased by a modest 7.7% in Q1, compared to the same period in 2015. The average sales price increased by only 11%, which is slightly below the year-to-year comparisons that we’ve been tracking.
Condos and townhouses are seeing much more robust growth, with the median price growing by a whopping 22% compared to Q1 of last year.
Here is a look at the median price performance for both market segments in Q1:
Breaking $2M Taboo.
I could probably spend an entire post talking about just this subject… but it was only a year ago that it was a almost a newsworthy event when a home in San Carlos was listed above the $2,000,000 mark. In a market where buyers were conditioned to expect that list prices were merely a “suggested” starting point that was usually 20% below the value of a home, starting a home at above $2M was still very much uncharted territory, and a house starting in that range really had to have the goods.
The numbers proved this out – in Q1 of 2015, there were 68 single family listings that hit the market. Care to guess how many started at a list price at $2,000,000 or more? There were only three… or merely 4% of all listings during that period.
When you fast forward to the same period this year, the overall number of listings dropped to 57, as we showed above — but 15 of those listed above $2M, or a whopping 26% of the total.
The same disparity holds true when we also look at the closed sales. In Q1 of 2015, 56 single family homes sold in San Carlos, but only 7 of them (13%) fetched over $2M. In 2016, the number of home sales plummeted to 41, but 11 (27%) cleared the $2,000,000 mark.
And what about the current inventory? Over 50% of the 17 homes that are currently for sale in San Carlos are listed at over $2,000,000.
So clearly, the $2,000,000 ceiling has been sufficiently smashed in San Carlos. Some day in the not too distant future I will look back at that sentence and wonder why I thought it was such a big deal in the first place.
What Lies Ahead for Q2?
As quarters go, the months of April, May, and June usually see the biggest surge of new listings (and sales) of any quarter in the year. It’s what really defines the “Spring” real estate market. In 2015, we simply could not get enough inventory to satisfy the appetite of the market. It seemed that if we had even four times the number of listings, the market would have devoured that inventory like a great white shark attacks a sea lion.
It will be interesting to see what kind of inventory surge that we get in Q2 of 2016, and more important, how the market absorbs it. There are already some signs of market indigestion appearing in the past few weeks. Maybe it’s because of the disproportionate number of listings that are listed at over $2,000,000, but the average days on the market (DOM) of all homes listed today in San Carlos sits at an unimpressive 27 days. The median is 20 days. Homes that sold in the first quarter of this year took were only on the market for an average of 16 days.
When we look at these numbers again at the end of Q2, it will tell us quite a bit about the state of the market, and what may be in store for the rest of the year — a year that will see a change in President, and possibly some additional interest rate hikes.
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