That powerful storm of impossible lending guidelines, a poor economy and buyer uncertainty which was parked over the City of San Carlos for the past 12 months did do damage to San Carlos property values. The good news is that the storm seems to have moved on. Now comes the unenviable task of assessing the damage.
What Started the Downturn for San Carlos?
Let’s start with the basics. First, many parts of the country have been suffering through the housing downturn for quite some time, much longer than our 12 month battle. In June of 2007, two Bear Stearns hedge funds which were heavily loaded with subprime mortgage investments collapsed. Next came Countrywide, Indy Mac and a whole host of others. While this started the housing downturn for most of the country, San Carlos would not see any part of the downturn until October of 2008. In fact, our 2007 market and most of 2008 was very competitive. I remember being in a few multiple offer situations in October of 2008 and then all activity suddenly dropped off the map. Not coincidentally, this time period corresponds to the same time the stock market fell apart. The NYSE dropped over 2,000 points in record time. The stock market, more than any other single indicator or occurrence, tends to mirror our local market.
How Did San Carlos Avoid the Downturn for so Long?
So how did San Carlos avoid the downturn for so long? There are a variety of reasons. First, the majority of trouble in the mortgage and housing meltdown centered on the subprime loan market. Thankfully, San Carlos was not a hotbed of activity for these types of loans. This limited our number of foreclosure and short sales, both of which have the ability to cut the average sales prices in neighborhoods by drastic percentages. Second, San Carlos still had enough appeal to lure in those buyers who decided to buy during this time period. More specifically, if you look at those areas outside of San Carlos on the peninsula that held up fairly well against the housing downturn they all have one thing in common: great public schools. San Carlos, most of Belmont, the Highlands, Baywood, Foothill Terrace areas of San Mateo and Menlo Park, all were hit, but not devastated. Just by our geographical location (Silicon Valley, SSF Bio Tech, SF), education will always have a priority in the mid-peninsula area….with priority, comes demand.
So just how much of a hit did San Carlos take? Judging by what I have seen in terms of home selling now and what they were selling at prior to October of 2008, I would make the following assessments:
Homes valued between $750,000-$999,000 in October of 2008 have taken a loss of between 10-12%
Homes valued between $1,000,000-$1,300,000 in October of 2008 have taken a loss of between 12-15%
Homes valued over $1,300,000 in October of 2008 have taken a loss between 12-17%
* The Clearfield Park Area of San Carlos is not included in the above assessment.
Where do we go from here?
The storm clouds have certainly cleared, the question is whether the storm may return to do more damage. To say there has been a run on San Carlos properties over the past two months would be an understatement. San Carlos has 34 pending homes, with a mere 35 Active homes. The frenzy really picked up steam about three weeks ago when we had 54 Active properties. The demand has not been completely spent, either. I am working with several buyers who can probably name every Active property on the MLS and are frustrated with the lack of inventory. Other realtors have expressed very similar frustrations on behalf of their buyers. I feel very confident in saying that this relatively new found demand is still very powerful.
If you were to drill down even further, you would see that the majority of the demand and properties moving to Sale Pending are in the $700,000-$1,000,000 range. This sudden demand comes from a variety of sources including the overriding feeling that “it’s time to get in” for many buyers who have been on the sidelines for the past 12 months.
I do not believe that anyone is ready to declare the storm clouds gone for good, but it is seeming more and more likely that the San Carlos housing market has found a bottom.