The $1.3M Bombshell.
February 26, 2013
A couple of weeks ago, the sale of the 3BR/2BA home at 148 Chestnut Street in San Carlos closed escrow. It was a hotly contested listing that generated 22 offers, so everyone was naturally expecting that it would fetch significantly higher than the $999,000 asking price. And why not? The house itself was quite charming — nicely updated with a spacious, remodeled master suite and located on a quiet stretch of Chestnut Street. And at the time the home hit the market, there were no other “entry-level” 3-bedroom homes on the market in San Carlos. The only other 3BR home on the active list was the much more expensive home at 1364 Crestview Drive — different house, different part of the city.
As the days clicked by after the home went into contract, many eyes were anxiously watching to see what the final sales price would be. I certainly was, because I was preparing to bring my listing at 278 Vine Street on the market just two blocks away, and I was anxious to see how the closing price of 148 Chestnut might affect our entry to the market for Vine. And many others watched it as well, because it would serve as a pretty good measure of where the bar would be set for the entry level, 3-bedroom housing market in 2013.
So when the escrow closed and the final sales price of $1,301,000 was posted for the public to see, it hit the local market like a bombshell, sending shock waves rippling throughout the real estate universe of San Carlos.
The New Bar?
The fact that a 3 bedroom home sold for $1.3M wasn't what shocked the market. Recent sales at 2055 Belle Avenue ($1.350M), 112 Devonshire Boulevard ($1.285M), and 853 Cordilleras Avenue ($1.280M) already showed that the market could absorb $1.3M for a medium-sized 3BR house in San Carlos, at least for the right house. No, what sent reverberations through the market had far more to do with the address of 148 Chestnut Street rather than the house itself.
148 Chestnut is located in the northern section of San Carlos known as Cordes, which is the hilly terrain that stretches from San Carlos Avenue up to the border between San Carlos and Belmont. As I've written before on the blog, Cordes often falls outside of the spotlight of its much better known brethren neighborhoods of White Oaks and Howard Park. So despite its outstanding location close to downtown, great views, and top school track, Cordes has never pulled the kind of prices for equivalent homes in the aforementioned neighborhoods…. that is, until 148 Chestnut.
So when the results of this sale were posted, it hit prospective buyers right in the solar plexus. After all, it wasn't too long ago that something in the $900K range would have landed you a nice 3-bedroom home anywhere in the flats of San Carlos. Now, buyers are having to wrap their heads around the fact that it took $1.3M to get into Cordes. What does that mean for the rest of the market in San Carlos? What does that do to the price of 3BR houses in White Oaks and Howard Park?
In the days following the close of this sale, I fielded a number of phone calls and emails from my clients and other market-watchers asking that very question.
The significance of the sale at 148 Chestnut will not be felt right away. It will be measured in the coming weeks as the sale prices of homes that sold after Chestnut become public knowledge. You can bet that Chestnut was squarely in the minds of buyers when they competed for the listings at 1124 Orange Avenue, and 147 Leslie Drive, both of which are pending now after receiving multiple offers.
The sale of 148 Chestnut Street was propelled by outstanding preparation and marketing of the home, along with some impeccable timing of the market. As I mentioned earlier in the post, this home was the only 3-bedroom house for sale anywhere remotely close to downtown San Carlos for the short time that it was on the market. When you combine that with the anxiety buyers in a market of rapidly declining inventory in San Carlos, you had the perfect storm for a bombshell like this.
As of the time of this post, there were 11 single family homes for sale in the entire city of San Carlos, regardless of the price range. Facing this, as well as knowledge of the Chestnut sale, some buyers may opt to take themselves out of the market for a while and wait for things to become more balanced and less super-heated. Conversely, some home owners may finally get the message that these are probably the best possible market conditions that they will see for years, and decide to put their houses on the market.
Until either (or both) of these things happen, don't expect market conditions to change much. That's not to say that the going rate for every 3BR home in San Carlos will now be $1.3M. But don't expect the market to come down off this cloud until balance of power swings more back toward the center.
The sales prices that you'll see posted in the coming weeks will prove just that…