At a time when the top of the real estate market in Silicon Valley usually ramps up, in Palo Alto it seems like the brakes may be engaged. Median days on the market for homes priced above $5 million increased to 16 in April from 11 in March. Either of those numbers are enough to seriously thrill Realtors in other U.S. regions, but around here it represents a change worth watching. A Boomberg.com report released last month points out a recent sluggish trend in the speed of home sales in Palo Alto and notes also that agents here are seeing some high-end owners dropping their prices – a very uncommon move, at least in recent years. In fact, for the last several years, sellers of top-bracket homes routinely enjoyed fielding offers from large numbers of buyers and reaping 10-percent profits or more upon the sale of their properties.
A decrease in wealthy buyers – not in the least those from China – along with other factors may be setting up in a way that will shift the four-year real estate boom Palo Alto and other Silicon Valley communities have experienced. Fewer wealthy buyers means fewer offers, which means less competition for the most expensive homes, and that has already started to result in some sellers reducing a half million dollars or more off their prices.
Along with a drop in foreign investors, Bloomberg notes a slowdown among some tech companies, number of IPO's and stock market uncertainty as triggers that have caused an overall drop in the movement of single-family homes in the top price ranges.
No serious effects in lower-priced homes
While the upper echelon experiences growing pains – or maybe reducing pains might be a better term – the Palo Alto real estate market as a whole seems to be moving along at a consistent pace, and even growing in some categories, mainly driven by continued low levels of housing inventory.
- 44 single-family homes sold in May 2016, up from 31 in April and up from 36 in May 2015
- The median sold price of all single-family homes hit $2,757,687 in May, the highest figure in the last eight months
- Days on the market for homes in all price ranges in May was 22. The average for the last 12 months was 20.25.
- 95 single-family homes were on the Palo Alto market in May, down from 110 and 103 in April and March, respectively, but higher than any other month in more than two years
So, where are we going?
Trends need more than a month or two to develop, but Bloomberg.com and its sources believe that the “peak” in the market – at least in the highest-priced homes – is behind us.
Even still, current home prices in the San Jose metropolitan area are the highest in the United States, with a median of $970,000. For the first quarter of 2016 in Palo Alto, the median was $2.5 million, more than double the $1.1 million in San Francisco and more than four times New York’s $616,100.
It will be interesting to see what summer brings and how interest rates, uncertainty in select segments of the tech industry and a decrease in foreign and venture-capitalist investments come to play during what is traditionally the hottest selling season.