Fewer Listings, Higher Prices.
If you had to capture the essence of the San Carlos residential real estate market for the first half of 2015 in as few words as possible, then that header above pretty much does it. So far, 2015 has clearly been a seller’s market, just as 2014 was. We have witnessed home prices rising to breathtaking heights all along the Peninsula as even more extremely well qualified buyers entered the market and competed for fewer available listings.
The net result of these conditions is a perfect case study in economics: High demand coupled with low supply means that prices are going to go up. And they have certainly been going up here in San Carlos.
The first chart below shows that the average and median prices for all residential properties sold in San Carlos (single-family residences, townhomes, and condos) have hit an all time high for the first half of this year. Even though the data only shows the past 8 years, you can safely assume that these are the all-time high points for either one of these metrics.
To put this growth into perspective, the average cost of a residential property in San Carlos has risen by 12% since just last year, and a mind-blowing 73% since the depth of the recession in 2009:
When the data is normalized on a price per square foot basis, the results are essentially the same. This means that prices are high across the board for all homes in San Carlos, regardless of the size. And remember, this data is for all residential properties – homes, townhomes, and condos:
What’s the catalyst behind these staggering prices? Aside from the booming local economy, the lack of available homes for sale has resulted in bidding wars for virtually every home that hit the market this year. This is a trend that I have been tracking closely all year, and it has been evident that 2015 is on pace to have the lowest number of new listings in a very long time.
With half of the year in now the books, this trend has held true. The chart below shows the number of new listings in the first 6 months of 2015, and compares it to the same 6-month time period over the past 10 years. The 189 new residential listings recorded in San Carlos during the first six months of 2015 is down 19% from the same period last year, and represents the lowest total for that period of time for any year this past decade.
So if you’ve felt in your gut that there have been fewer homes to choose from this year in San Carlos, you can rest assured that your intuition was statistically correct.
What Lies Ahead?
That seems to be the question that is on everyone’s mind who follows the local real estate market. After 3-4 years of unabated growth, everyone is wondering whether prices are going to continue to rise, or if the market is on the verge of pricing itself out of the affordability range of most buyers. Here are my observations on what’s happening right now in the market, and what the impact on the real estate market may be in the second half of 2015:
- Current Market Conditions. The market right now in San Carlos has slowed perceptibly from the breakneck pace that we witnessed in the Spring market. Part of this is to be expected, since the market always takes a breather from mid-June until mid-August. But every year when we feel the foot come off the gas, that nagging question creeps back in — is the market changing? The events in Greece and the recent volatility in the stock market are raising more than a few eyebrows, and there have been some widely publicized predictions that both the stock market and real estate market are prime for a correction.
- Interest Rates. For the first time since the Recession ended, we can say with certainty that mortgage interest rates are indeed going to rise. It’s no longer a matter of “if”, but of “when”. And based on the latest Federal Reserve meetings, it could happen as early as this Fall. Although rates have crept upward slightly over the past few weeks in anticipation of such a move, look for the market to react more visibly when the Fed formally announces its move.
- Local Job Market. There’s no indication that I’ve seen that the local high-tech fueled economy is slowing down, which should mean that more buyers will be back in the market this Fall. But if the technology job hiring slows down, look for that to have a negative impact on the market.
- Stock Market. The fact that the major stock indices are sitting at or near all-time high levels is great news for home buyers, since much of their purchasing power is directly related to their equity positions. If something in the local or worldwide economy triggers a pull-back in the stock market, though, this would certainly curtail the buying power of many active home buyers. The market has shown in recent weeks to be a little twitchy with the ongoing Greece and European financial issues, so there is some understandable uneasiness with the current stock market heights.
The first few weeks of the Fall market will be a telltale indication of the health of the local real estate market. That period historically started after the Labor Day weekend, but with school starting seemingly earlier every year, the Fall real estate market will start organize itself in mid-late August when vacations have ended and school has started up again.
Stay tuned to the blog in the coming months. I’ll be watching the market very closely to look for signs of changes. It’s going to be a very interesting Summer!
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