2013: A Space Odyssey Part II
It was just about fourteen months ago that the San Carlos real estate market shed its rocket boosters and started heading out of the atmosphere and it now appears as a fading black dot that you need a telescope to see more clearly. The 3/2 in White Oaks that was 1M two years ago, is now apparently 1.4M, and in some cases, higher. 2013 was a steady game of “one-up” and a constant re-setting of never-before-seen-highs for all segments of the market. Now, as we start to wind down the year and the market becomes noticeably slower for the holidays, it’s not a bad time to assess the the craziness of 2013 and look ahead to see if our real estate market may return to earth.
“It’s the Economy, Stupid”
Bill Clinton had this right in 1992. The economy is also where an evaluation of the current San Carlos market should start. Real estate is local, and in the case of the Bay Area, real estate is hyper-local. What I mean by that is even though Fremont is only 15 miles away from us, you are talking about two very different markets. The economy on the peninsula is moving right along. Anchored by massive relocation efforts by some of the larger bio-tech companies, a resurgence of the startup and consistently fueled by more established tech giants, the influx month over month of well educated, well compensated individuals to the mid-peninsula area has put a massive strain on already limited housing.
Education is the Clear Number One
San Carlos has many wonderful qualities. However, make no mistake about it, our schools are why people move here. You can compile all of the other things you love about San Carlos, combine them, and they will not equal the strength of the pull of the schools for people moving to San Carlos. Clear San Carlos of its outstanding schools and you would watch your property value drop by 25%. That’s how critical the schools are to San Carlos property values.
Take all of those folks relocating to the mid-peninsula area mentioned above and try and understand their predicament. They are being relocated from another part of the country where their current home is probably much more affordable than what they will find in the mid-peninsula area. Also understand that these people who are being relocated are most likely highly educated. It’s not a stretch to put forth the notion that people who are highly educated are going to put an emphasis on education for their own families. Let’s look at some realistic options for towns with highly respected school districts on the mid-peninsula: Palo Alto, Menlo Park, Atherton, small parts of San Mateo, Burlingame, San Carlos and Belmont-Redwood Shores. All of the towns mentioned, with the exception of Belmont are selling at a minimum of 20% more than San Carlos. San Carlos and Belmont instantly go to the top of the wish-list of many relocating employees because of the combination of the schools and being most affordable when compared against some of the other mid-peninsula towns.
You’re no Longer “Slumming It” in San Carlos
This one still makes me laugh. I meet with many prospective buyers in an average year who are considering San Carlos. Some meet with me after giving up on a search in Palo Alto or Menlo Park. A few have come in, almost ashamed that they were consistently outbid in these towns and almost in a hushed tone state that they now have to consider San Carlos. Their body language says it all. In this situation I assure them that we do have indoor plumbing and running water in San Carlos. The bars on all of the windows in White Oaks are just for show. Anyway, after more carefully explaining what San Carlos is all about they start to feel better about the town. The funny thing is that I have run into a few of these buyers a year or two after we found them a home in San Carlos and they could not be happier. The good news is that enough of the Menlo Park, Burlingame and Palo Alto would-be-buyers have settled in San Carlos and it is now widely viewed as an acceptable final destination.
Combine the top three factors with the sobering numbers of obnoxiously low inventory and the market is likely to see even more upward pressure on prices, absent a sudden burst of new inventory in 2014. We’ve dealt with it all year: inventory frustration on behalf of prospective buyers. There just is not enough inventory to even come close to satisfying the demand in San Carlos. San Carlos now has the economy, the schools and the “acceptable” name. As long as none of the three of those suddenly change in the foreseeable future, combined with a noticeable supply and demand disparity, the San Carlos real estate market appears content to continue it journey into space for 2014.