Reasons behind limited inventory
To answer this question I analyzed prices of numerous Burlingame homes that sold in 2012 and most that sold in 2013. My analysis of these listings showed that clients are quicker to spend significant funds for perfect properties. However, they still bargain very hard while buying older, less desirable properties. While doing that they often submit low ball offers not afraid to lose a deal if a Seller does not respond to their offers. This might be one reason for the small amount of listings on the market as owners of older properties still have little incentive to put their properties for sale at a low price.
I have recently asked several potential clients in Burlingame how much they would pay for the house at 1417 Vancouver if it was sold today, assuming that it is in exactly the same condition as it was when it was sold at the end of December, 2011. This property was originally listed in August 2011 for $1,328,000. Sellers lowered the price first to $1,258,000 then to $1,185,000 and then to $1,090,000. The house sold finally for $1,070,000 on Dec 29, 2011 after 5 months on the market. My clients answer might (or might not) surprise you. Most of my responders felt that $1,090,000 listing price correct and in a competitive situation they would offer $20k or $30k over the listing price, but not more. This confirmed our market read that prices for older houses (even well prepared for sale and staged, but not significantly improved or modernized) are still close to their historic lows despite the perceived recent market boom. This of course will change sooner or later if supply of properties continues to be very low.
Let’s quickly look on what is happening on the Peninsula real estate market since the beginning of 2012. The market picked up around March 2012, initially for the very low end ($300k) properties in places like Daly City and San Francisco as buyers realized that it might be cheaper to buy again instead renting. By mid of summer all Peninsula, including Burlingame was on fire, but mainly below $800k with as many as 50 simultaneous offers per listing. Overall, 269 single family homes sold in Burlingame in 2012 with the 5 La Strada Ct being the most expensive for $3.1 M or $400k below asking and 128 days on the market (DOM). As the year progressed, the DOM number kept falling down and by end of the 2012, 70 homes (or 26% of all homes sold) sold in 10 days or less.
So, how are things looking for 2013? 36 houses sold in Burlingame by March 22nd (for 16 out of them the escrow closed during first 3 weeks of March). 13 of those sold in March (81%!) were sold at or above the listing price. 10 of houses sold in March (or 63%) were sold in less than 10 days on the market. The 2517 Valdivia Wy house in Ray Park sold in 9 days for $2,410,000 or $460,000 above the asking price! The only reason that more homes have not sold is the small supply - there are simply not enough homes on the market. We see a very clear acceleration in sales (fewer days on the market and more sales above the listing price). So what makes the market in Burlingame so special? For quite some time Burlingame has been considered to be the 3rd most livable City in Northern California following only San Francisco and Palo Alto (Why is Burlingame so Desirable? and Why is Burlingame So Desirable? More Reasons and More Facts). Burlingame is close to San Francisco (20 min ride to the downtown SF) and very close from the San Francisco Airport. It always had good schools that are getting even better. The API scores for its five elementary schools in Burlingame oscillate between 954 (Franklin) and 883 (McKinley). Burlingame Intermediate School (BIS) has a score of 903 and Burlingame High School (BHS) - 869. Demand for these schools is so high that Burlingame Elementary School District just repurchased the Hoover school that was closed many years ago and is planning to open it soon. There is no doubt that good schools are behind the recent climb in demand for real estate in Burlingame. It is clearly on every prospective buyer mind when searching for a new home.
So what lies ahead for Burlingame's real estate market? For now demand will be growing as demand simply exceeds supply. Opening of the Hoover Elementary might bring even more families with children to Burlingame and reflects increasing demand for Burlingame’s schools. If the low house supply continues even prices for older, less perfect properties will start climbing again. This should encourage more sellers to list their properties. The price increases might slow down for a bit, but probably not for very long. This analysis assumes no major changes in global economy, as in the case of significant economic downturn, all these predictions might be entirely off. My analysis applies to the Burlingame houses priced between $1 to $ 3M. Please note that houses priced below $1M are already selling at premium independent of their conditions. A “tear down” property at 2415 Hillside sold on March 14 for $1,175,000 or $276,000 over asking (31%!) For properties priced between $1 and $3 M there is a clear separation in demand and sellability of new and perfect properties versus the older ones. The Burlingame market for this price range is very different than it was before. The current “real estate boom” is a market in transition. By summer 2013 we will know if it is transition to a fully fledged boom or something else…