A Tale of Two Different Markets
It’s a frustrating time for many condominium and town home owners in San Carlos. Many single family residences (SFRs) are flying off the market as fast as they come on, while many condos and town homes sit. There is a clear dichotomy between the two markets. To understand why this is happening, let’s first look at how we got here:
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The most interesting statistic above is the following: From their high in 2007, to their current average sales price today, condos have lost a net 18.9% off their average sales price. During that same time period SFRs have only lost 7.6% off their high in 2007, thanks in part to a surging 2011 market. Expect the 7.6% figure to drop even further when many of our pending properties over the last 30 days, close escrow.
There are a variety of reasons for the SFR market pulling significantly ahead of the condo market:
1. Short Sales/Foreclosures. While the condo market may be stabilizing, it is being held down by an inordinate supply of short sales and foreclosures. Currently, 25% of the active condo market is either a short sale or foreclosure. Compare that to short sales and foreclosures making up only 10% of the active single family residence market.
2. Sub-Prime Lending. For the most part, San Carlos did stay away from much of the sub prime lending that happened 2003-2007. However, the one part of the market that did see some sub-prime lending was the condo market. With massive adjustments in payments, many were forced into a short sale, foreclosure, or needing to off-load the property at a significant loss. All of these contributed to lower valuations.
3. Target Buyer Is More Definitive. The target buyer for San Carlos is now clearly focused on SFRs. I don’t know that I would say that San Carlos has attracted a different type of buyer, but the overwhelming demand is coming from twenty and thirty year olds who are just starting a family. The preference for this group is a SFR, for all of the obvious reasons.
4. Preference for SFR. If affordable, the preference will almost always be for a SFR. Judging by what I have seen lately, affordability is not an issue. For example, when I took offers on my Rosewood listing last week we had nine offers. All nine prospective buyers were very well financed. Down payments ranged from 20% on the low end, to double that, and more.
5. The Palo Alto & Menlo Park Effect. As mentioned in last week’s post, there is a reason for the sudden influx of Palo Alto and Menlo Park agents into our market…..it’s because their buyers have started to look at San Carlos as a less expensive alternative to Menlo Park and Palo Alto. They are not coming up here for condos, it’s the SFRs that are in demand for their clients.