Every sector of the Silicon Valley real estate market continues to perform exceptionally well. From starter homes to the luxury market, every sub-market ended the first quarter of 2018 with median home prices at historic highs and inventory at historic lows.
However, nothing happened this past quarter that hasn’t been happening since 2012. This is simply the evolution of a competitive real estate market, booming economy and constrained inventory all colliding in a highly desirable place to live.
Median Home Prices
In the first quarter of 2018, median single family home prices continued to rise in both San Mateo and Santa Clara counties and across all major submarkets. The median home price in San Mateo was $1.56 million, representing a 21% increase, year-over-year, from 1Q17, and Santa Clara saw a 29% year-over-year gain with a median home price of $1.37 million.
Atherton was a standout among the submarkets with its median home price rising 100% from last quarter and 90% year-over-year from 1Q17, to $8.5 million. Atherton typically has low inventory and one large sale can skew this number, but the takeaway is that the luxury market is back. This is primarily due to the rise in high-tech stocks, the continued creation of well-paying jobs and lack of inventory.
Homeowners in Menlo Park also saw significant appreciation in their property values as median home prices rose 30% from last quarter and 50% year-over-year from 1Q17, to $3 million. Median home prices in Palo Alto were $3.3 million, up just 3% from last quarter but 20% year-over year from 1Q17. Los Altos experienced a 17% year-over-year gain in property values (8% over last quarter) with a median home price of $3,462,000.
Another part of this story is the rise in price per square foot we’ve seen all over Silicon Valley. The average price per square foot in San Mateo County increased by 18% year-over-year from 1Q17 to $983 per square foot. Santa Clara County measured an even more impressive 25% increase over 1Q17 with sale prices at $874 per square foot.
Low inventory is the story of Silicon Valley real estate right now. We had less than one-month of inventory in November and December 2017 and then again in March of this year. If you’re unfamiliar with the metric, an MOI or month’s supply of inventory measures how many homes are on the market and how fast those homes are selling. So if you see a measurement of 1, that means, given current buyer demand, it would take one month to sell every home that’s currently for sale, provided no new inventory gets added to the market. In March, we saw an MOI of 0.7, i.e. 21 days. This is compared to the March MOI for Los Angeles County, which was 1.9 months, or 57 days.
Another constraint on inventory is the inability of builders to create more housing supply at a speed needed to offset the level of demand. The Mid-Peninsula is hemmed in by the San Francisco Bay to the east and Santa Cruz Mountains to the west, making land hard to come by, and even if builders can find it, the cost of skilled labor and materials has increased by 50% in the last five years, which severely cuts into the profitability of development, even at today’s sale prices.
Average Days on the Market (DOM)
As the pool of ready buyers grows and inventory continues to shrink, homes are selling faster. In 1Q18, the average days on the market for homes in San Mateo and Santa Clara counties were 19 and 16. That means homes in San Mateo sold, on average, eight days quicker than they did in 1Q17, and homes in Santa Clara sold 13 days quicker.
In Palo Alto, homes spent just 12 days on the market on average, and in Mountain View and Los Altos, the average home DOM was 9 days.
What This Means for Buyers
To be a homebuyer in Silicon Valley means getting comfortable with a market that behaves like no other in the nation. Buyers’ offers need to be strong and aggressive out of the gate because the competition can be fierce and there will likely be multiple offers on most properties that are well located, turn-key and priced to sell.
It’s important to partner with someone who is an expert in the local market, has inside knowledge of the different submarkets and can position you to be successful.
What This Means for Sellers
The numbers show we are still in a strong seller’s market. If you’re thinking about making a move you’ll need an agent who can prepare you to sell your home quickly and seamlessly, negotiate the highest possible price for you, and help you plan your next step.
A market as dynamic and competitive as Silicon Valley requires a real estate agent who understands the nuances of each submarket and is also a fierce negotiator who can best position you to get the home you want.