San Mateo County Real Estate - September 2013

September 2013 - Still a Sellers Market

Our review of both the submarkets and the entire San Mateo County all suggest that it is still a sellers market in the Peninsula. Here are the highlights for the San Mateo County real estate market as of September 2013 (comparisons are made to data going back to January 2004):

• The average price per square foot was $615, the fifth straight month above $600. It has not been above $600 since late 2007/early 2008
• The average sold home was on the market for 28 days. In all of 2013, homes are selling in 27 days. In 2012 the average sold home was on the market for 45 days.
• The average sold home went for nearly 5% above the asking price. This is the 18th straight month homes sold for more than the final list price.

Prices have increased by about 20% in the past twelve months in San Mateo County. While prices cannot continue to rise 20% per year on average, the question does remain how often they can continue to rise. The true answer is that no one really knows. But, there are some pieces of information that can provide a guide.

One of the first signs that a market is slowing is a rise in inventory. Look at the chart below. Prices (measured as the 12 month moving average in average price per square foot) increased rapidly through the middle of 2006, then increased more slowly through the end of 2007 and then declined sharply starting in early 2008. While hindsight is 20-20, one of the warning signs that prices were reaching a peak was the steady growth in inventory levels. From early 2005 to late 2008, inventory levels more than doubled.

As we head to the end of 2013, inventory levels remain at historically low levels. There has been no increase in inventory this year (outside of normal seasonal patterns). If inventory levels remain low, the upward pressure on prices should remain.

While inventory is a proxy for the supply of homes, the sales price to list price ratio can provide some insight into the demand side. If the ratio exceeds 100% it means that buyers are on average paying more than asking price. While not all homes in San Mateo County are selling for more than the list price, on average they are selling for 5% more. This has been the situation for the past six months. The ratio has been above 100% for the past 18 months. This is evidence of strong and sustained buyer demand. Can it continue? While there is no way to know for sure, we should note that the ratio remained above 100% for 32 months from early 2004 to late 2006.

A ratio at or above 100% often points to rising prices. Being slightly below 100% usually points to flat prices. As the ratio gets into the 98% or below range, it is a sign that prices may be falling.

Prices have risen by 20% in the past twelve months. Since reaching bottom in mid-2012, prices have increased by 25%.

Sales Activity Down Slightly to Start the Year

After a year of high activity in 2012, when there were more than 5,000 sales for the first time since 2006, sales activity has decreased slightly in 2013. In the first nine months of the year, there have been 3,695 sales, down from 3,884 sales in the first nine months of 2012. Depending on how the last few months of the year pan out, sales should be above 4,900 and could reach 5,000. Either way, with the exception of 2012, sales will be at their highest level since 2006.

The ultimate expression of success when a homeowner lists their home is if the home ends up selling. The number of expired or cancelled listings is a proxy for unsuccessful sellers. Through the first nine months of 2013, there have been 659 listings that were cancelled or expired. While some of those are sellers that changed their mind or timing, it represents a level of unsuccessful sellers. By the end of the year, the number of expired or cancelled listings will almost certainly be below 1,000. Compare this to previous years when there were regularly above 2,000 listings that were cancelled or expired.

 

By The Numbers - San Mateo County Real Estate for 2013