Whether you are a first time buyer or seller, or have been through multiple transactions, you might be surprised by how quickly the real estate market changes in Los Altos, Palo Alto and surrounding communities. You need hard-hitting historical data, current market analysis, and insider experience to stay informed and succeed in these real estate markets.
As a service to their clients, Jeff Stricker and Steve TenBroeck of Alain Pinel Realtors provide regular market analysis and commentary. You are invited to read the entries below, add your comments, ask questions or contact them directly.
SF Peninsula & Silicon Valley: How Q1-‘14 compared to: Q1-‘13, Q1-‘09, and 15yr Averages
BUYERS NERVOUSNESS INCREASES WHILE HOMES APPRECIATE RAPIDLY
Lack of homes for sale remained the greatest factor in the local housing maket in the first quarter of 2014. Warnings of an imminent “market top” and a “housing bubble” echoed throughout the various news services and media. Yet, it did little to dampen the numbers of offers on homes. Nor did it stop buyers from offering to pay greatly over the asking prices for the few homes available each week. How long will this housing market boom continue? That is now the question everyone is asking!
On average, among the cities in the charts below, during the first quarter of ’14 new listings were down by 34% from their 15 year averages. As a result, sales were down by 17%. It took half as long for a home to sell in Q1 ’14, compared to the 15 year average. Until buyers begin to balk at the asking prices – which has yet to happen with any frequency – or when a financial shock of some magnitude causes a drop in consumer confidence, we anticipate that the current “seller’s market” will continue unimpeded.
Median sales prices were up, on average, by 45% since 2009! Buyers paid 5% over asking price, on average, in 2014 compared to 5% under the asking price in 2009. The price of homes per square foot was up by 42%, on average, compared to 2009. Location, location, location: Homes that are the most volatile (that rise and fall the most in value in each cycle) are those with “unremediable issues” – negative location issues or poorly designed floor plans. There is very little discount for homes with negative attributes in today’s hot market, but they drop greatly in value in a slower market. Folks in homes with location “issues” are wise to sell now, before the market turns. Conversely, buyers must now select very carefully!
WANT MORE SPECIFIC INFORMATION?
The towns included above have diverse neighborhoods and prices. When we look at averages we get clues to the overall market, but not the details. If you would like an in-depth analysis of market trends in your particular town or neighborhood, simply call Jeff at 650/823-8057 or Steve at 650/450-0160, or email us: [email protected], or visit our website: JeffAndSteve.com. We’ll be happy to help!
Home buyers have faced a red-hot real estate market for more than two years. It has been common in past hot markets for buyers to become “fatigued” after an extended time of difficult hot market conditions (low inventory, multiple offers, and highly over-asking offers). Some Realtors have indicated to us that they are starting to experience more home buyers backing away from multiple offers and/or becoming more selective. This may indicate they are becoming cautious as a result of “market fatigue”. We will keep you apprised of whether this is a continuing trend or only a short-lived lull in the market. Meanwhile, multiple offers are still the norm due to low inventory. This is also reflected in the few closed home sales in during the month of February.
In the charts below, you’ll find 15 years of data for market activity and median sales price for the month of February for Palo Alto, Los Altos, Los Altos Hills, Menlo Park and Mountain View. You can’t find this level of historical data all in one place anywhere else, so if you have any questions or wish to get more info about your community, don’t hesitate to contact us.
Check out this chart that visualizes the inventory of single family homes that are currently on the market compared to the 15 year averages for Los Altos, Los Altos Hills, Mountain View, Palo Alto, Menlo Park, Portola Valley and Atherton.
Record low inventory is the “new normal” in Palo Alto, but check out the two communities closest to Google. There are only 7 active listings in Mountain View and 7 in Los Altos. Typically, the spring market starts sprouting after the Super Bowl. Let’s see what the rest of February brings for rainfall and homes for sale.
As you review the graphs below, you will see that you’d have to go back to 2005 or 2000 to find a market as low in supply of homes for sale as there are in the current market. The median sales price reflects what is being sold rather than how much homes are appreciating in value. A better metric is the average percentage of list price received by sellers. The current overbidding is as high, or higher, than it was in ’05 and ’00.
This market will continue as it is until the next financial shock causes homeowners and buyers to believe that home prices will fall. Meanwhile, prices will continue to rise as demand for homes is far greater than the supply.
In the charts below, you’ll find 15 years of data for market activity and median sales price for the month of January for Palo Alto, Los Altos, Los Altos Hills, Menlo Park and Mountain View. You can’t find this level of historical data all in one place anywhere else, so if you have any questions or wish to get more info about your community, don’t hesitate to contact us.
How 2013 compared to 2012, 2008, and 15-year Averages
BUYERS WRESTLE OVER FEWER HOMES FOR SALE IN 2013
Heavy demand in a recovering economy is nothing new. What was unusual in 2013 was the extremely low number of homes for sale! This is due to several factors. The greatest contributing factor is state and federal tax policy. At the state level, “Prop. 13” (passed in 1978) essentially freezes property tax rates based upon its sales price. Prior to the passage of Prop. 13, folks would often trade up or down as their circumstances changed. This occurs much less frequently now.
Today most owners will stay in their home and add on or remodel, as needed, rather than risk increasing their tax basis by buying a more expensive home. At the federal level, the IRS allows owners to leave their primary residences to their heirs at the “stepped up basis” (current market value). Thereby, both the home owner and their heirs avoid capital gains taxes on the property. These tax policies encourages the elderly to stay in their homes. Instead of moving into a senior facility many seniors are now bringing help into their homes instead. In fact, the “in-home care” industry is growing rapidly, due to this trend.
In the tables below, you’ll find 15 years of data for market activity and median sales price for the Year 2013 for Palo Alto, Los Altos, Los Altos Hills, Menlo Park and Mountain View. You can’t find this level of historical data all in one place anywhere else, so if you have any questions or wish to get more info about your community, don’t hesitate to contact us.
Homeowners tend to stay put when the value of their property is rising. Those who are thinking of moving tend to wait until signs appear that property values are starting to decline. At that point in the cycle, we typically see a terrific increase in the numbers of homes for sale. Lastly, people are simply living longer.
Adding up all of these factors, it’s easy to see why we have record low numbers of homes for sale. Demand for homes in our area will most likely continue at a heated pace and inventory of homes for sale will remain low until the next financial shock occurs.
WANT MORE SPECIFIC INFORMATION?
The towns included above have diverse neighborhoods and prices. When we look at averages we get clues to the overall market, but not the details. If you would like an in-depth analysis of market trends in your particular town or neighborhood, simply call Jeff at 650.823.8057 or Steve at 650.450.0160, or email us: [email protected]. We’ll be happy to help!