Exactly nine years ago, on October 3, 2008, I was preparing my clients for a multiple offer situation surrounding a property in San Carlos. While there were clear signs of a mortgage meltdown in other areas of the country, we were yet to feel anything in San Carlos. It was business as usual. Three days later, the stock market and other markets across the world started dropping at an alarming pace. The faucet suddenly turned off and you could not sell a property in San Carlos if your life depended on it. Sub-prime lending, zero down purchases, negative amortization loans, credit lines, stated income loans, loans for purchasers who were self employed were all eviscerated overnight. The Great Recession made landfall in San Carlos. It hit our market hard over the next two years, causing losses of 12-20%, depending on the property. Now imagine you left San Carlos in 2010 without looking back. If I then told you what buyers were currently paying for homes just a short time later, you may be tempted to call me insane. However, the real truth about insanity in the San Carlos market is that it may be tied to irony, more than anything else.
The Key Year
2010 is the key year in this venture. Somewhere between the end of 2010 and the start of 2011, the San Carlos real estate market bottomed out and prices began stabilizing prior to heading north again. Some of the best values ever struck in San Carlos real estate would be from buyers purchasing in 2010. Many of these 2010 buyers who are now selling, are demanding every last penny, as they should. I had a buyer at a recent open house reference the price the sellers had paid in 2010, and intimated that they were being a bit greedy considering the deal they got. I countered, telling her that these particular sellers and anyone else who bought in 2010, did so under heavy pressure not to. The economy was terrible and there was talk of the housing market slipping even further into a recession that would turn into a depression. I had many writing in on this blog that said San Carlos prices were about to take another tumble and that anyone buying property in San Carlos in 2010 was a fool for doing so. The 2010 and 2011 buyers took a calculated risk and they should be rewarded for doing so.
2012 is a key year because it represents the first time since 2008, that San Carlos properties recaptured their 2008 value and had made it successfully through the Great Recession. By September of 2012, multiple offers were back and we were off and running. Aided primarily by the influx of employees from Facebook, Google, LinkedIn, Twitter, Box and many others, the mid-peninsula was once again a haven for buyers. If the local re-emerging tech economy wasn’t enough, historic interest rates managed to nudge the most reluctant buyers off the bench and into the market. 2013 and 2014 were set to be epic, and they were.
2013 & 2014
2013 and 2014 represent the busiest years I have ever had. It seemed like everyone wanted a home in San Carlos and they were prepared to do whatever they had to in order to secure it. Nearly every home was a multiple offer situation. 2013 and 2014, represent an unfortunate time period for some San Carlos buyers who tried to get a little to cute with playing the market. In 2013, you could still get a smaller 3/2 in the flats of San Carlos for 1.3M. Many buyers who did not want to spend more than 1.3M and wanted to wait for the market to come down, were sadly passed by. I look back and think of all the buyer groups that we just got in under the wire with the market quickly escalating. Many of the 2013 buyers would tell you today that if prices were where they are now, they would not be living in San Carlos.
2015-2017 represent the years that we left planet earth, headed for planet Insanity. Just how far have we come? Take a look at this real example below. It is an average home in terms of specs for the flats of San Carlos: 1,700 square feet, 3/2, 5,500 square foot lot, one car garage, average location. Here is how it was valued/sold:
If you did nothing but pay your mortgage and property taxes in 2010, you would have more than doubled your value with 1M in equity in just seven years. This type of example is replicated all over San Carlos. There were several instances where I had a seller have to wait an additional month to get to their two year mark for ownership, in order to claim their advantage of the full 500K exemption on increased value for those owning their home for at least two years….truly mesmerizing statistics.
After writing posts such as these I usually get a handful of very angry people who want to announce we are in a bubble, the market will crash and everyone in San Carlos needs to have their head examined for paying these prices, etc. On some level, these people are correct. The market will have a correction at some point and I am sure at some point we will experience another crash. However, what these onlookers do not understand and everyone else who is buying property in San Carlos does understand, is that the San Carlos real estate is a big picture proposition. It has an 80-year track record of incredible, mind-boggling gains and the ability to rebound almost immediately from any correction.
I will also tell you there has never been a buyer that I have placed in San Carlos that didn’t feel that maybe they had to pay a premium and maybe the market was going to crash shortly after their escrow was closed. It’s human nature. However, everyone who owns property in San Carlos now, or is trying to acquire it, understands that San Carlos, the peninsula and the Bay Area in general, is only going to become more populated and housing more desirable over the next 20 years. San Carlos pulled itself out of the Great Recession in under 4 years to new pricing highs. It is a continual max performer in decade after decade growth. If you think our recent growth is significant, it pales in comparison to what happened here in some of the earlier decades. So if a buyer is able to afford the San Carlos market (and I realize it’s quite challenging), and given its longstanding, robust performance, perhaps the real question is whether the insanity is found not with its buyers, but with those who refuse to participate in it.