Market Casualties.

March 12, 2013

Passed By.

Any time you have a market run up as fast as the San Carlos real estate market has in the past few months, there are going to be some casualties in the buyer ranks.  This recent market swing is no different in that respect.  In the past couple of weeks, I have had two different buyers tell me that they're “throwing in the towel” and pulling out of the market to wait for a more favorable conditions before they will consider buying a home on the Peninsula.  I've had several other agents share similar stories, too.

The sentiment that seems to emanate from all of these now-former buyers is that the market has simply passed them by.  While they were patiently waiting for right house to come up in this inventory-depleted market, prices just rocketed out of their range.   After all, the price you would have paid 6 months ago for a 3-bedroom house in San Carlos will  only get you a nice 2-bedroom one now.  And that's if you can even find it in the first place.  That kind of compromise simply doesn't work for many buyers.

The Numbers are Numbing.

There's one certainty in a market like this:  Just when you think you've seen it all, something else comes along and knocks your frame of reference completely out of whack again.   Just two weeks ago, we were stunned by the shockwaves of the $1.3M sale on the 3-bedroom home on Chestnut Street.    It was very difficult to wrap our heads around a 3BR home pulling down $1.3M.  Fast forward to today, and there were two 3BR sales on Orange Avenue  that make the Chestnut sale seem like old news.  999 Orange Avenue ( at $1,378,000), and 1124 Orange Avenue ($1,360,000) both raised the distinct possibility that the $1.3M mark was not just an anomaly, but may indeed have become the barrier to entry for a decent sized 3-bedroom homes in San Carlos.    That's pretty mind-numbing.  At least for this week, it is.  Who knows what next week will bring.

This reality has sent many first-time home buyers reeling.   Compared to places like Menlo Park and Palo Alto, San Carlos has always been considered a relative bargain. But many of the things that make those other cities attractive also exist in San Carlos – location, schools, downtown, etc..  So we're starting to see buyers who pulled the rip-cord from these escalating markets parachuting into San Carlos.

It's probably not a coincidence that in both Orange Avenue transactions above, the buyer's agents were from Palo Alto.

Play or Sit?

For every buyer that has made the decision to sit this market out, I can guarantee you that many more are thinking about it.  There are several key questions that they have to consider — Will the market continue on a tear like this, or will it eventually settle down?  When it does settle, where and when will it be?  And finally, is there a risk that pulling out of the market now means they're out of the market for good?

I certainly don't have a crystal ball, but based on the conditions of the economy and the San Carlos real estate market, combined with the recent behavior of buyers, there's nothing to indicate that this freight train is going to lose steam any time soon.

After all we're probably only a week or so away from yet another sale that will make the Orange Avenue shockers seem like old news.

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  1. Matt on March 12, 2013 at 2:22 pm

    Do you see the same issues in Belmont? 1513 Williams was off the market in 3 days and sold for $200k over list!!

  2. Chuck Gillooley on March 12, 2013 at 3:51 pm

    Hi Matt,

    Thanks for your comment. In a word, yes, the same thing is happening in Belmont. In fact, one of the buyers that I refer to in this post was looking in Belmont primarily because San Carlos prices jumped completely out of his budget. And Belmont prices are only a few percentage points behind San Carlos.

    Just like MP and Palo Alto buyers are now pushing northward into San Carlos, frustrated San Carlos buyers are cranking up the heat on Belmont.


  3. Helen on March 12, 2013 at 9:24 pm

    Chuck, I’m assuming these astronomical winning bids are all cash type. If so, what is the typical buyer’s profile? Where is all this cash coming from?

  4. Chuck Gillooley on March 13, 2013 at 4:25 am

    Hi Helen,

    A few of these have been all-cash, but not all. The homes at 148 Chestnut and 999 Orange both closed escrow within a week of going into contract, so that means there was no institutional lending involved. But others deals have been won with conventional funding, although most winning offers with loans also have huge down payments. So in a nutshell, yes, there’s quite a bit of cash flowing around the Peninsula right now. But there always has been — I just think you’re seeing people parting with it now that the stock market is up along with consumer confidence.

    Much of the wealth comes from stock in the tech and biotech industries. Either IPO’s with new companies, or established companies like Google and Apple that are experiencing huge appreciation with their stock. And if the economy and the stock market remain strong, expect this behavior to continue.

    Thanks for your comment.


  5. Michael on March 14, 2013 at 3:48 pm

    I think many of those who are surrendering are not committed to buying a home. Yes, the competition is historically intense, but you must have or have had clients that are not ready to jump on a new listing and instead saying, oh, we can’t see it today, maybe tomorrow…

    Shopping for a home is and has been an exhausting job for many years on the peninsula. Those who have taken it seriously get a home. Those who don’t remain on the sidelines.

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