Last week we examined the low inventory in the $1,400,000-$1,800,000 price range. This price range has been the source of a tremendous amount of frustration for buyers looking to obtain a home in San Carlos. I believe there are three primary factors that have contributed to the low inventory in this price range:
(1) Perception of a Bleak San Carlos Market. It has been stated countless times on the blog over the past few months: San Carlos properties have actually increased in price over the last three and six month periods. We do not live in Stockton, Fresno or even the East Bay or San Jose. San Carlos has firmly secured its place as a niche market on the peninsula. Too many prospective sellers in the $1,400,000 – $1,800,000 range have been bombarded with news over the last 8 months relating to sub-prime mortgages, a credit crisis, foreclosures, short sales and the notion that we are in a buyers market. Try telling this to the many, many buyers who have lost out on multiple bid situations since the first of the year in San Carlos. The single largest mistake prospective buyers and sellers in San Carlos make when trying to judge the housing market is that they give too much emphasis to the overall national market. Further, the mid-peninsula, especially the niche markets, have always played by their own rules. This does not mean that our market is always up. However, it is a mistake to judge our market by comparing it against all others. Unfortunately, many sellers have fallen victim to this perception of a bleak San Carlos market. The truth is almost the exact opposite…..just ask the numerous buyers looking to move up in to this elusive price range in San Carlos. No matter how many times they hit the refresh button on the MLS page….new properties simply have not been popping up.
(2) Prop 13. Many buyers who bought in San Carlos over the last 5-10 years have homes which are currently valued in the $1,400,000 – $1,800,000 price range. These homeowners have relatively low property taxes when compared against the future taxes of those prospective buyers looking to buy into this price range. The seller of a $1,500,000 million dollar home may very well be paying taxes on an $800,000 property, thanks to Prop 13. If they were to move up to the next level, $1,800,000 – $2,000,000, they would essentially be more than doubling their current property taxes. This chilling reality has led many in this price range to hold onto their current home, rather than trade up.
(3) Move? Where? Even if you have a seller who understands that the San Carlos market is still very good and can afford the Prop 13 increase when moving to the next price range, the prospective inventory is problematic. In 2007, only 13 homes in San Carlos sold within range of $2,000,000 or higher. Many people in the $1,400,000 – $1,800,000 price range are only moving if they are able to secure their new home prior to selling their current home…thus further limiting the availability in this price range.
The three reasons listed above have all contributed to a severely limited inventory for San Carlos homes in the $1,400,000 – $1,800,000 price range. For those buyers looking to move into this elusive range, be patient, and be aggressive when the right property becomes available.