Low inventory was the main story for San Carlos real estate for 2008. Expect it again in 2009.
There are more than a handful of buyers who believe there is going to be a sudden burst of lingering inventory in San Carlos over the next two months. Don’t bet on it. While some neighboring cities are experiencing an abundance of inventory, San Carlos has remained relatively low. While our inventory levels were locked for November and December, there was noticeable movement in January. San Carlos currently has 56 Active properties and 13 Pending properties.
Here is why our inventory will remain low for 2009:
(1) Most homeowners in San Carlos do not need to sell. They do not have a sub-prime loan or a loan that has an unpredictable adjustment.
(2) Foreclosures are not a large part of our market. In fact, currently we only have two foreclosed properties and both are below $600K.
(3) Relocation should be kept to a minimum given the state of the economy. Relocations are typically incredibly expensive for companies. Costs associated include paying a relocation company, paying moving expenses, temporary housing, etc. Any relocation sales in San Carlos will most likely be entirely seller driven.
Here is why the inventory we do have, will move:
(1) There are many homeowners in San Carlos who have accumulated significant equity over the past ten years. Many are viewing this as an outstanding time to take some of that equity buy a rental property in San Carlos. I have had two clients in San Carlos complete this type of transaction over the past three months and we are getting ready to complete a third. This is a new type of San Carlos buyer for 2009.
(2) The “move-up” market is ideal for those looking to sell their entry level home and move up to something larger. Obviously, if you have a home that is 900K and selling at a 10% discount and a home that is 1.5M and selling at a 10% discount, there is a larger savings on the higher priced home. This time period represents a great opportunity for those seeking a larger home in San Carlos.
(3) Interest rates. While I don’t think they are going up any time soon, the combination of a flat market and historically low interest rates will be enough to force many sideline buyers to finally make their move.
4 Comments
Bob
I know you are major player on the San Carlos real estate scene, but I think some of the asserations above are a bit off.
A poor economy = few relocations = less inventory?
Inventory is the product of both supply AND demand. Fewer relocations means fewer people buying a house with company money in San Carlos as well.
Talking about the recession’s effect on relocations without discussing its effect on jobs is like an inspector missing a cracked foundation on his way to finding a leaky facuet in the kitchen sink.
In general, the notion that a poor economy will drive low inventory levels is misleading. I think you would be better to talk about months of inventory, which has been rising and likely will continue to rise as the recession worsens.
Hi Blago,
Thanks for the post. I went back and re-read my post and realized that I should have been more clear. When talking about relocations I was discussing people leaving San Carlos, not moving into San Carlos. Generally, most relocation companies will purchase the house without the employee having to pay the realtor fees associated with a sale, so it passes a 5% savings onto the employee and makes a flat market price easier to stomach. With fewer of these deals being offered to current San Carlos residents, some of them will decide not to sell in a flat market. Nonetheless, your point regarding a discussion on the local jobs is a fair observation and a good point. And you are correct, it is a supply and demand issue.
As far as months of rising inventory, I am not sure where you are getting that data from. Currently, we are at 57 Active SFRs, with 14 in contract and pending. This is down from a high of 77 in May. We were as low as 52 two weeks ago. Last January, we were sitting between 48-51 Active SFRs in San Carlos.
I talk with a lot of buyers and sellers San Carlos and I do my best to summarize their feelings through these posts. I take that information, supplement it with what I see as a realtor, and try to come up with the most logical conclusions. Input from blog readers such as yourself on those topics helps to make sure all aspects of certain issues are brought to the table.
I appreciate the feedback. Thanks again.
Bob
Bob
By “months inventory”,I meant inventory/sales per month. So if we have 50 houses on the market, but only 10 sales per month, thats 5 months inventory. I believe this figure has been rising.
Also, it’s more interesting to discuss inventories on a seasonally adjusted basis. I’ll bet May typically has more inventory than January. I dont know what the typical ratio between those numbers would be.
I think looking at unadjusted inventory is useful for communicating how many choices a buyer will have, but not much to how much competition he/she will face in the market
Hi Blago,
All good points. I am working on a spreadsheet to post in a few weeks that will show two items: (1) Inventory in all twelve months over the past few years and (2) a calculation that will show movement within a particular month of housing turning pending versus active. If there any specific categories that you would like to see in addition to these, please let me know and I will be happy to add it to the project.
Thanks,
Bob