If you had asked me a year ago where most San Carlos buyers were coming from, I would have told you that San Francisco was the clear front-runner. That is no longer the case. As hot as our market has been over the first few months of 2012, Palo Alto’s market has been even hotter. The amount of money being poured into Palo Alto real estate right now is unreal. It is very close to rivaling the craziness of 2005.
Here’s the difference between the San Carlos market and the Palo Alto market:
In San Carlos, a 3/2 at 2,000 square feet comes on at $1,100,000, gets six offers and sells at $1,175,000.
In Palo Alto, a 3/2 at 2,000 square feet comes on at $1,300,000, gets twelve offers and sells at $1,600,000, all cash.
While this news is great for sellers, some Palo Alto buyers have had enough. The dream that was once Palo Alto for many, will remain just that. I have spoken to more than a handful of buyers at open houses recently who told me that they just finally had it with Palo Alto. As one buyer told me, “You can only lose so many times in a multiple offer situation before you start to feel that you have an abusive relationship with the housing market down there”. This frustrated buyer is not alone. About 50% of my current buyers looking in San Carlos originally started their search in the Palo Alto/Menlo Park area. Other San Carlos realtors have expressed similar sentiments over the last few months.
Why San Carlos?
That is really the key question. The answer is most likely a combination of (1) process of elimination; and (2) common ground between the two cities.
First, let’s look at other competing mid-peninsula towns. Menlo Park is the first obvious choice because it shares a border with Palo Alto. However, if you look closely at real estate in Menlo Park, the price difference between Palo Alto and Menlo Park isn’t as large as some may believe. The Menlo Park market is almost just as competitive as what is going on in Palo Alto. Some people like to compare Menlo Park and San Carlos, but really there is no comparison as far as real estate goes. Menlo Park homes sell at prices that are about 20% more than San Carlos. In the end, many of the frustrated buyers eliminate Menlo Park almost immediately because they feel that if they are going to give up on Palo Alto altogether, they want a clear difference in what they are getting for their money and the competition they will face. Menlo Park does not offer this type of break.
Moving up the peninsula, Atherton is the next town, which is obviously eliminated right away. Redwood City will probably get some attention, but it most likely does not have enough in common with the buyers who originally targeted Palo Alto. That leaves San Carlos and Mountain View. Both are on the receiving end of the overflow buyers from Palo Alto. San Carlos certainly does not have the downtown of Palo Alto, but it does have a legitimate downtown. It has excellent schools, a great community and has built an ever-increasing solid reputation. In other words, there is enough there to pique the interest of the frustrated Palo Alto buyer. It is a learning process for these frustrated buyers. They immediately pick up on two things: (1) their money goes a lot further; and (2) it is more competitive than they thought, but they can handle it when compared against their experience in Palo Alto.