The San Marino Real Estate Report, as seen weekly in the San Marino Tribune
Just a few weeks ago, I presented sales data for the City of San Marino that showed a sharp spike in average price per square foot for homes sold during 2013. San Marino is known for having a solid and reliable real estate market. It is the last to get hit in a downturn and the first to make a rebound. During the financial crisis of the late 2000’s, San Marino performed beautifully. The market was not immune to losses, but the magnitude of the downturn was small compared to many luxury areas in Southern California.
My contention is that the large influx of foreign, all-cash buyers is leading to the sharply accelerating San Marino prices. When an individual is paying cash for a property, the transaction is not subject to the strict appraisal process used by most banks. Eager to invest money in San Marino real estate, an all-cash buyer might be willing to engage in a bidding war and pay over market to acquire a property. Once the all-cash deal closes, there is now a comparable sale to be used for an ensuing buyer needing a loan. Without the price ceiling that the customary appraisal process brings, prices are allowed to quickly accelerate.
In the course of this San Marino market update, I mentioned the fact that Arcadia is seeing similar conditions. Arcadia is known for its outstanding school district and consistently high property values, so foreign all-cash buyers are investing heavily in this neighboring community. With a much more lenient building code, Arcadia homeowners are finding it profitable to tear down the original house and build a much larger custom home on the property. Anyone driving the streets of Arcadia can see many of these homes in the midst of construction.
My intuition told me that if I did a similar study of average price per square foot of sold homes in Arcadia as I did in San Marino, I would find very similar results. Because Arcadia is a much larger city than San Marino and has some neighborhoods that are more prestigious than others, I chose to study three Arcadia areas – Highland Oaks, Upper Rancho, and Lower Rancho. The boundaries I used for these areas were my own design and did not correspond to an official city map. The results were stunning.
The attached chart shows that each of the three Arcadia neighborhoods and the city of San Marino experienced very similar percentage increases in price per square foot from the year ended 12/31/12 compared to the year ended 5/21/13. The chart beautifully illustrates this fact by showing four line segments at the far right of the graph with a similar slant.
Digging into the data, the three Arcadia neighborhoods actually experienced larger percentage increases in average price per square foot during that period than San Marino. Highland Oaks showed a 19.4% increase, Upper Rancho a 20% increase, and Lower Rancho a 22% increase. On their own, these figures are impressive, but compared to percentage increases/losses for previous years, they are astounding. The city has not seen gains of this magnitude going back before the previous market high.
It is unclear to me what will happen with prices in the next few months in these highly sought after areas. The only summary that I can make is that it is a great time to sell a home in Arcadia or San Marino!
For information about real estate in Pasadena, San Marino’s next door neighbor, go to Everything’s Coming Up Roses