Factor Out the Size.
There are a variety of ways to analyze the relative value of a real estate market. The most commonly used metrics are average sales price and median sales price. Those metrics are certainly good indicators of what’s happening, but they can be skewed up or down artificially simply by the proportion of larger or smaller homes that sell during a given period. In other words, if in a given period of time you have an abnormally high number of smaller homes that sell, that’s going to pull the average and median prices down. But does that necessarily mean the market is getting cheaper? Absolutely not.
One metric that helps negate this effect is the price per square foot ratio. This is achieved simply by dividing the final sales price by the square footage of the house. It’s not a perfect measure because it’s not linear across home sizes. The price per square foot of a smaller home is usually higher than that of a much larger home, simply because the lot value of a smaller home plays a much greater influence on the value of the house. Conversely, a larger home has a higher percentage of “low value” square footage.. e.e. family rooms, living rooms — so its price per square foot is a little lower. But it’s one of the few metrics that can generally be applied across the board to all homes in a given area.
And it’s also the metric that appraisers use for establishing a baseline for assigning a value to a home, before they start to factor in the condition and amenities of the home, so it’s important to understand.
Going Up, Up, Up…
Below are two charts that show the price per square foot of homes sold in San Carlos over the past 10 year (the 2013 data is year to date.) The first chart shows the price per square foot for ALL single-family residences sold in San Carlos since 2004:
To put things in perspective, only a few years ago the $600/square foot threshold in San Carlos was an exclusive club that was reserved for new construction, or a nicely remodeled house. Now, it’s simply the average for all homes, with some easily shattering the $800 and $900/sq foot levels (see below.)
From the chart above, the average price per square foot for a single family residence in San Carlos grew by 6% from 2012, and is at the highest level for the past 5 years. In fact, it is only barely inched out by the boom year of 2007 for the entire span of 10 years.
And 2013 isn’t even 1/3 complete yet.
3 Bedroom Home Prices.
I though it would be interesting extract the 3-bedroom home data from the chart above, since 3 bedroom homes are essentially the “bread and butter” of the San Carlos housing stock. As you might have suspected, the uptick in price is even more dramatic:
If you’re in the market for a 3 BR home, this simply confirms what you probably already felt in your gut – not only are prices for 3BR homes in San Carlos climbing at a rate faster than the rest of the market, but they ‘re also at an all-time high.
To give you an idea of just how high prices are being pushed for 3-bedroom homes, below is a list of the five most expensive 3-bedroom homes to sell in San Carlos since the beginning of 2013, as measured by $/sq foot. As always, you can click on the addresses to see more details on each home:
|Address||Sold Price||Size (sq ft)
|1021 Elm Street||$1,800,000||1,800||$1,000
|1311 Geneva Avenue
|2096 Birch Avenue
|124 Chestnut Street
|148 Chestnut Street
The bottom line is that no matter how you slice it — average sales price, median sales price, or price-per-square foot — home prices are on a steep rise in San Carlos.
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