Tracking Home Prices Versus Home Size in San Carlos.
October 23, 2018
A Surprising Difference.
Last night, I had the honor of presenting an overview of the San Carlos real estate market to the San Carlos City Council. This was part of their due diligence as they were facing decision time on the recommendation that was placed in front of them for reducing house sizes for future construction in San Carlos.
As part of this presentation, I created a slide that casts an interesting light on home prices in San Carlos. First of all, we all know that home prices have been on a rocket ride upward since the end of the recession. That much has been well documented on this site. But there's a common misconception that home prices are rising in San Carlos because the size of homes being sold is also dramatically increasing. Surprisingly, that's not the case.
Take a look at the chart that I created for the Council last night:
This chart shows two different metrics that are tracked from 2009 to present. The lower data is the average price per square foot of all single-family homes sold in San Carlos (as reported on the MLS.) This number has more than doubled since 2009, growing at a stunning 111% over that period of time.
In stark contrast, the average size of all homes sold in San Carlos hasn't increased nearly as quickly. In fact, as you can see from the top line chart, it hasn't changed much at all. The average size of all homes sold in San Carlos has only increased by 7.5% since 2009, and seems to constantly hover around 2,000 square feet.
What this means is that the dramatic increase in home prices in San Carlos is not a function of the increase in home size. It's pretty clear from this overlay that the absolute value of home prices have increased almost solely as a function of market dynamics.
It's important to note that this doesn‘t imply that homes aren't getting larger in San Carlos. Some of the slides that were presented last night showed some dramatic square footage increases of home plans that have been approved by the City. Obviously, the stark increase in home sizes in San Carlos is the catalyst for the entire discussion in front of the Council.
But it won't be until when (or if) some of these larger homes hit the market will you start to see the average size of home sales start to increase with any significance.