The other day, I went in for a haircut. Now, hold on, I know you’re asking, “What’s a haircut got to do with real estate?” Hey – EVERYTHING has got something to do with real estate! As it happens, I went to the JiffyCutz or whatever it’s called right next door to my office. I’m a busy guy, and I just couldn’t make it over to Los Altos to my normal stylist. I got in at a good time – I only had to wait but a moment.
I like getting my haircut, it’s kind of relaxing. Many stylists are chatty folk, and the time often just seems to fly by. My stylist that day began by asking where I worked. “Oh, I work at the real estate office right next door.”
“You’re a Realtor, eh?” she asked, with a bit of suspicion in her voice – like maybe I was going to try to sell her something. So of course, I replied, “Yes, I am! Do you want to buy a house?” Snappy rejoinder, wasn’t it? “No thanks,” she replied – “I’ve already got a townhouse in San Jose. And, besides, I just can’t see paying these prices! I’ve love to live here in Capitola, but I don’t see how these prices can be sustained.”
I get that a lot. I hear it time and again. The thing is, I’ve been hearing these same things for years – all my life, it seems. It’s something I’ve thought a great deal about. “Let me ask you this,” I said. “How many new housing units do you think they’re going to build in Capitola in the next 20 years?” If you don’t know Capitola, let me tell you – it isn’t very big, it’s a very desirable place to live, and it is pretty much all built-out; there is not much room left to grow.
“Well, I don’t know,” she replied. “Not very many.” Yes, not very many – some, surely. But not many.
I continued: “And in the next 20 years, how many more millions of people are going to move to California?” She replied that she didn’t know.
The figures vary, but a conservative estimate is that in the next 20 years, California will experience a growth of 15 million people. If there are 34 million people living here now, that’s an increase of 44%.
How many of those 15 million will be moving to Capitola? Not many – because there’s nowhere to put them! How many of those 15 million would love to own even a small condo in Capitola – many, many of them! So…blow off the dust on that old law of Supply and Demand. We’ve got a relatively fixed supply of a product – housing in Capitola – and a significant increase in demand. Tell me, what’s going to happen to home prices in Capitola over the next 20 years?
I don’t know what’s going to happen in 2007 or 2008. But in 2026, I can tell you that a $500K condo in Capitola will look, in retrospect, like the deal of the century.