The San Carlos Blog Has A New Format!
Before getting to the post below, I wanted to point out what you may have already noticed. The San Carlos Blog has a new format. Each time I have made changes to the blog, it has been to give it a cleaner look. I believe we have done that with this new version. Additionally, this new format is optimized for tablets and all mobile devices. I believe you will find the interface much easier to use. Thanks for continuing to visit the site!
The Palo Alto Effect
Readers of this blog know that the recent surge in the San Carlos housing market is due to a variety of factors. Low inventory, historically low interest rates, an economy on the rebound, and a massive relocation effort have all combined together to create the perfect storm. However, there is one other reason that I normally point to that has been left out. I am referring to it here as the Palo Alto Effect. When I say “Palo Alto”, I am also including Menlo Park and Burlingame. On average, Palo Alto sells at about 35% more than San Carlos. Menlo Park and Burlingame sell at 20% and 21%, respectively, more than San Carlos. As competitive as our market has become, these markets are even more so. I started to notice a slight change in home cities of agents showing up at my homes on Brokers Tour starting last year. We started to pull in agents from these three towns at a much higher rate than we normally would for showings and our tour. Many buyers in these towns who have lost out on several offers have turned their focus to San Carlos. The prices aren’t quite as high and they feel that they can get close to what they are looking for and can be more competitive in offer situations.
I decided to put that theory to the test. I researched all of the homes to sell and close escrow in San Carlos over the last two months. Sure enough, over half of all closed transactions during this time period were with agents from Burlingame, Menlo Park and Palo Alto. This would have been an incomprehensible number even as recent as two years ago. I looked at all of the agents involved from those particular towns and I was not surprised. All are very good, top-notch agents who are capable of succeeding in a market that is not necessarily their home market. The real winners in this scenario are San Carlos sellers. Not only are they getting higher offers, but they are getting offers whose terms are simply outstanding. As all of our markets continue to tighten, expect the Palo Alto Effect to strengthen.
For Many San Carlos Buyers, Spring Will Be About Concessions
For many buyers who have struggled through the San Carlos market for the last six months, they are familiar with the sinking feeling that what they once thought was obtainable, may no longer be. The market has simply passed many buyer groups right on by. Start with the largest group, the 3/2s. A year ago, 1.1M would have been good enough for a 3/2 at 1,500 square feet in the flats of San Carlos. Now, that number appears to be higher than 1.3M based on several recent closings. That is simply the benchmark. It can be a tough reality for many to face. The concession for many in this group will be possibly buying at 2/1 or a 2/2, saving for a while and then adding on a master suite.
Speaking of two bedroom homes, many that have closed recently and will close toward the end of the next month will indicate a noticeable price jump as well. The new bar for two bedrooms in the flats will be right up against 1M. This will effect the next largest buyer group which is looking on the west side of San Carlos under 1M. The concession for this group may be to start a search in east San Carlos, where the prices are not quite what they are on the west side.
Finally, just as many Palo Alto, Menlo Park and Burlingame buyers have jumped to San Carlos, some San Carlos buyers may jump to Belmont. Keep in mind that the disparity between San Carlos and the aforementioned towns is much larger than the pricing service between San Carlos and Belmont. Nonetheless, there is about a 9% difference. That difference can be significant, especially for those who are floating right around the 1M mark.