2017 was another record year in all aspects for the San Carlos real estate market, as you will see from the charts and graphs below. If you’ve been following the White Oaks Blog with any regularity over the past year, this should not come as a surprise to you. You’ve seen some pretty outrageous price points achieved this year that made everything that happened in 2016 seem mundane.
But what made 2017 such a remarkable year was the fact that very few people (myself included) believed at the outset of the year that the market would hit such stratospheric heights. To understand this perspective, you have to go back to 2016 and recall the market dynamics of that year. The San Carlos real estate market absorbed a surge of listings in April of 2016 that essentially took much of the urgency and momentum away from the buying process. After years of razor-thin inventory and double-digit escalation in home prices, buyers suddenly felt as if the tables were finally turning in their direction, and the market certainly reflected this.
For the latter 2/3 of 2016, the market essentially “bumped” along at a very tentative pace. For the first time in years, buyers were finding properties where they were the only ones writing offers — in some cases, they were able to get contingencies written into contracts, and could actually negotiate the price… Whoa, stop the clock! So it’s easy to understand why many of us in the industry felt that this lack of momentum and direction would carry over into 2017, particularly with the uncertainty following the Presidential election.
We could not have been more wrong.
From the opening days of 2017, the market was absolutely on fire. My first inkling of what was in store for the year happened during my first listing in 2017, which was a 2-bedroom home on busy Alameda. Despite a torrential downpour all weekend, the open house was absolutely packed with over 300 people in two days, and it sold with multiple offers nearly $100,000 above the asking price. Game on! And the pace never relented throughout the year. September of 2017 set a record for the number of new listings in any September for the past 17 years, and sellers had no qualms about listing their homes in the month of December — something that was traditionally unheard of.
So here is a look back at some of the more meaningful statistics from the San Carlos real estate market in 2017:
Prices for both single-family homes and condos in San Carlos hit record highs in 2017, as you can see from the chart below:
The average price of all single family homes sold in 2017 in San Carlos is now just shy of $1,900,000, which is easily an all-time high. And for the first time in history, the average price of a condo or townhouse eclipsed the $1,000,000 mark. Both of these figures are simply mind-blowing to anyone who has lived in San Carlos for the past decade or longer.
But if you put aside the eye-popping prices for a second and look more closely at the data, there is an interesting trend that is developing with these home prices. While prices continue to hit record heights, the rate at which they are increasing continues to decline. Here is a table that I posted earlier in 2017 about this trend, which shows the change in the average sales price each year:
|Year||% Change – SFR||% Change – Condos|
|2012 -> 2013||+17.6%||+34.2%|
|2013 -> 2014||+15.8%||+12.9%|
|2014 -> 2015||+14.1%||+13.2%|
|2015 -> 2016||+7.6%||+4.9%|
|2016 -> 2017||+5.8%||+4.7%|
So while housing prices are at their highest levels over the past decade, the rate of growth of housing prices is at its lowest level over the same period of time. Or in other words, home prices are starting to level off from the breathtaking leaps and bounds that we saw back in 2012-2015. This stands to reason, since no asset can maintain double-digit growth indefinitely, and the housing market is no different. Home prices can simply not grow at a rate that far exceeds the increase in income of the very people who are buying homes, and we’ve started to see the market push back just a little bit in 2016 and 2017.
That’s not to imply that home prices won’t continue to appreciate, nor will San Carlos become “affordable” any time soon. But it’s a dramatic example of how supply and demand battles against the actual buying power of the pool of buyers that are in the market.
Another metric that we often track to assess the relative value of properties is the price per square foot. Below is the average price per square foot for all properties sold in San Carlos over the past 5 years:
For the first time in history, San Carlos surpassed the $1,000/sq foot mark as the average for all homes sold in a given year.
Speaking of supply and demand, one of the primary catalysts behind the rise in pricing in San Carlos has been the lack of inventory. Below is another chart that you’ve seen numerous times on the site:
While there were slightly more single-family residence listings in 2017 than the previous year, the number of new listings for townhouses and condos hit an all time low. Both of these figures are a primary reason why house prices remain so high in San Carlos, since the supply is not close to keeping up with the demand.
What’s Ahead for 2018?
Unfortunately for home buyers, it appears to be more of the same in 2018. As I write this post, the Dow Jones Industrial Average surpassed the 25,000 mark for the first time in history. The tech companies that are fueling the current job market show no signs of weakening, and there are a new crop of companies that are set to hold their initial public offerings in 2018. Even the new tax law that was just passed by Congress, which removes several key tax shelters from home ownership, will likely have a negligible effect on the local real estate market. As long as home prices continue to appreciate, owning a home is still better than renting — regardless of the tax implications.
So brace yourself for what will be another eventful year in the world of San Carlos real estate, and there’s no better place to watch it unfold than right here on the White Oaks Blog.
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