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It’s now midsummer, and the frenzy of Palo Alto’s spring residential market seems to have cooled down quite a bit. Even though home prices have not fallen yet, the number of offers on a single property has generally declined, and homes tend to stay on market longer.
For the first half of 2018, the median price of sold homes in Palo Alto was $3.1 million, a 19 percent increase from the first half of 2017. Supply has been on the steady rise with 321 new listings, or an 11 percent increase from the same period of 2017. Homes stayed on market on average for 14 days, compared to 20 days during the first half of 2017.
Among 222 homes sold in the first six months of this year, 142 of them, or 64 percent, closed at prices below $3.5 million, which is the price zone in most demand right now. Home prices shifted up in all price segments.
Competition among buyers was intense, especially at the beginning of spring. Eleven homes sold at more than $1 million over their asking prices. Those final sales prices ranged from $3.86 million to $18 million. Since a low asking price is often used as a marketing strategy, the gap between listing and sold price is not a meaningful indicator of the listing agent’s capability, nor the “hotness” of the market. Rather, a large gap reflects strong demand on certain properties, such as those that are perhaps move-in ready, or at entry level or on a large lot in the best neighborhood offering a lot of potential.
The high-end market was more active this year, with four homes closing at $10 million or higher in the Palo Alto area. Eight homes sold above $8 million in the first six months. Old Palo Alto, with a median home price of $5 million, has remained the most expensive neighborhood in Palo Alto. There is a decent number of buyers, both locally and internationally, willing to pay a premium on large lots in good locations of Old Palo Alto, but such opportunities are rare. In fact, the most expensive home sold in the first half of this year was a moderate older home on a 30,000-square-foot lot (about 2/3 of an acre) in Old Palo Alto. It sold for $18 million.
So far the summer market is slower than spring, partially because the Fourth of July holiday fell in the middle of the week, which resulted in a very limited number of new listings for two weeks. While any federal interest-rate hikes may be on hold for now, uncertainties about the overall economy are rising. The biggest uncertainty that may significantly change our local economy and property market is the trade war between the U.S. and China.
The Bay Area’s high-tech industry has tight links with China. According to Rhodium Group’s 2017 report (rhg.com/research/4213), California topped the list of states that received Chinese investments, and most of those went to technology and real estate. Chinese investments in Silicon Valley innovation have created demand on both office space and residential homes. Buyers directly from China also have become steady participants in Palo Alto’s property market.
Xin Jiang is a real estate agent at Alain Pinel Realtors in Palo Alto. She can be emailed at xjiang@apr.com.
