A Precipitous Drop in New Listings Squeezes the Mid-Peninsula.

August 11, 2015

The Market is Tight Everywhere.

As I have written about numerous times on the blog, San Carlos is in the midst of an extremely tight real estate market in 2015 that is characterized by paltry inventory levels and the lowest number of new listings of any year in the past decade. So far this year, the number of new single-family residence listings in San Carlos has dropped a whopping 21% from just last year.

It's no wonder it seems like there are never any houses on the market to choose from, right?

But if you're shopping for a home anywhere else on the mid-Peninsula, chances are that you're experiencing the very same tight market conditions. Nearly every community on the mid-Peninsula has seen the number of new listings drop in 2015 compared to last year, with San Mateo being the lone exception. That phenomenon is playing a huge role in driving up home prices to all-time highs on the mid-Peninsula.

How much has the listing pipeline dried up this year? The table below compares the number of new single-family residence listings so far this year compared to the same 7-month period last year in the communities on the mid-Peninsula:

Community Listings YTD 2015
Listings YTD 2014 Difference
Burlingame 135 180 -25.0%
San Carlos 167 210 -20.5%
Belmont 143 168 -14.9%
Foster City 65 74 -12.2%
Menlo Park 242 259 -6.6%
Redwood City 420 444 -5.4%
San Mateo 410 428 +4.4%

Source: Multiple Listing Service (MLS).

Now since this data is pulled directly from the MLS, it is not taking into account any homes that were sold off-market and not recorded later on the MLS for comparable purposes. So it's quite possible that the data for some of the higher-end markets of the mid-Peninsula like Menlo Park and Burlingame might not be as accurate as other communities, simply because they tend to have more off-market sales.

But if one assumes that the percentage of those non-reported sales remained relatively constant over the past few years, then the general assumption should bear out that there are simply fewer homes for sale this year on the mid-Peninsula.  Regardless, it's an undeniable fact that there are fewer homes being marketed on the MLS this year than there were last year.

It's the Economy.

What's the reason behind this? Quite simply, it's the economy. We are in the midst of the strongest job market the Bay Area has seen in decades. People simply aren't moving out at the rate they normally do because all of the high-paying jobs are right here. Even many retirees are choosing to stay put on the Peninsula to be closer to their grandkids, or because they prefer the weather and lifestyle here.

Many “move-up” buyers are also being forced out of this market, too. These are people who already own a home in the area who would traditionally move up to a larger home as they outgrow the starter home that they're in. But many of those homeowners are finding it impossible to compete against strong, non-contingent offers — especially if they have to sell their home first before purchasing their next home. So many move-up buyers are forced to stay put and expand their existing home, which has resulted in a remodeling boom on virtually every block on the Peninsula. That's great for housing contractors, but not so good for home buyers because each one of these would have been a new listing in a less heated market.

On top of all that the Peninsula is almost 100% built out, meaning there is no room for any significant new housing.  There is no land on which to build large housing developments like you have in the East Bay, so the only option left is to go vertical, which a number of communities like Redwood City are aggressively pursuing.  That means the total stock for single-family residences on the Peninsula will remain essentially unchanged going forward.

So until something significantly changes in the local economy, get used to the housing market being extremely tight. When we revisit these stats at the end of the year, it's very likely that 2015 will go down in the records books as the lowest number of new listings for many communities on the Peninsula.

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