The San Carlos Mid-Year 2024 Recap

The Slump Continues.

As I have mentioned in several previous market recaps, 2024 is not shaping up to be anything like what the experts predicted at the beginning of the year. The anticipated decline in inflation stalled out in the first quarter of the year which in turn forced the Federal Reserve to hold their interest rates steady. While home mortgage interest rates are not directly connected to the Federal Reserve, they tend to mirror its behavior. So as you've undoubtedly seen if you've been shopping for a home, home mortgage interest rates have also leveled off.

The general consensus at the beginning of the year was that a gradual but significant drop in home mortgage interest rates over the course of 2024 would spark a sharp rebound from the dismal real estate market in 2023 — which saw the lowest number of existing home sales in 30 years.

That's just not happening.

Most communities along the Peninsula are seeing very slight increases in the number of new listings and the number of homes sold compared to 2023. But San Carlos holds the dubious distinction of being one of the only communities that is seeing a further decline in listings and unit sales from last year, not a rebound.

Let's look at some data below:

The Numbers.

The graph below shows the total sales revenue for the first six months of each of the last 5 years. This is the only chart in this report that will contain data for condos and townhouses.

As I mentioned above, while most communities along the Peninsula saw incremental gains in overall sales revenue from 2023, the San Carlos real estate market actually trailed 2023 and isn't that far above 2020 when the pandemic shut the market down for most of the first half of the year. Taking the pandemic year aside, the first half of 2024 was the lowest first-half revenue total in eight years.

If we take a deeper dive into the single-family market statistics, the reason why this is happening becomes very evident. The chart below shows both the number of new listings and the number of closed sales for the first six months of each of the last 5 years:

When you consider that about 85% of the residential real estate market in San Carlos is attributed to single-family home sales, the chart above becomes very telling:

• The 127 new single-family home listings registered over the past six months is lowest total for the first half of any year that the MLS has recorded, which dates back to 2000.
• The 107 closed sales is the second-lowest total over the same period, only topping 99 sales that closed in 2009 in the thick of the Recession.

One other not-so-obvious statistic from this chart is the ratio of closed sales to new listings, which gives you an indication of how hungry the market is. The higher the ratio, the higher percentage of listings are actually selling. For YTD 2024, that ratio is 84% – only surpassed by 86% during the white-hot market of 2021.

In other words, it's a very good indicator of a very inventory-constrained market when nearly 85% of all listings are selling.

And what does an inventory constrained market do to home sales prices? They should go up, per the laws of supply and demand – and that is clearly happening in San Carlos.

This chart compares both the average and median sales prices of all single-family homes sold in the first half of the year. The figures for both metrics in 2024 are the second highest on record, only behind the peak of the market in 2022.

What Lies Ahead?

If the first half of this year taught us anything, it's that predictions are often meaningless, even if they come from experts and economists who study this stuff in way more detail than I do. Some of these experts are predicting a strong rebound in sales in the second half of this year, while others are saying it will be more of the same thing.

It's a safe bet to say that if mortgage interest rates don't decrease by at least 0.5% or more in the second half, we're probably in for more of the same as what we saw in the first half because rates are simply not compelling enough to get sellers out of their homes.

One thing is for sure — there will be a Presidential election in the second half of this year, and election years often shake up real estate market, especially if one party yields power to another. As parties change, so do policies, and those change can definitely have an impact on buyers and sellers in this market.

Stay tuned!