The strength of our
local housing market for the first half of this year continued to be
unprecedented, with new record sale prices.
The median sales
price for a single family home in Palo Alto increased to a new
record high of $2,320,000 (compared to $2,100,000 for the first half of
2013), an increase of 10.5% and 75% since 2009. The sale to list price ratio
was 114.7% and average days on the market was 13 days.
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For Menlo Park the median sales price increased 22% (from
$1,510,000 to $1,845,000) and 69% since 2009. The sale to list price ratio was
107.7% and average days on the market was 20 days.
For Atherton the median sales price increased 15% (from
$3,575,000 to $4,100,000) and 47% since 2009. The sale to list price ratio was
102.7% and average days on the market was 56 days. It is important to note that
Atherton is having more private sales than any other town in the area.
As of July 1, 2014 the listing inventory was low with only
32 active listings of single family homes in Palo Alto, 29 in Menlo Park and 25
in Atherton.
During the first half of 2014 we sold 177 houses in Palo
Alto (compared to 181 in 2013), 188 houses in Menlo Park (compared to 151
houses in 2013) and 59 houses in Atherton in 2014 (compared to 54 houses in
2013). The number of houses sold in Palo Alto and Menlo Park continue to
decline because of the low inventory and that in part explains the number of
multiple offers on almost every property and the significant increases in home
prices.
Looking Forward
The question on everybody’s mind is: are we going to hit
another bubble soon?
According to Ken Rosen, UC Berkeley’s Chair of the Fisher
Center for Real Estate and Urban Economics department, we are not having a
bubble anytime soon. He mentioned that he might be concerned with asset
evaluation more than 3 years down the road.
The U.S. budget deficit is coming down dramatically, energy production
in U.S. is soaring and year over year employment growth is strong.
The US is
experiencing the biggest boom in the economy since the late 90’s. The federal reserve bank likely will have to
start raising interest rates sometimes in the near future.
If you plan to stay in your house more than 5 years, the
best time to buy is now, using at least a 7 year loan or longer.
If you are planning to sell your home in 5 to 7 years you may want to think about
selling it soon so you are not selling in a down cycle.
Sellers are ecstatic. They know that as long as they do not
overprice their homes, the homes will sell with multiple offers as soon as the
sellers are willing to listen to offers.
Asian investing
trends
Chinese interest in
our local real estate market has grown exponentially in recent years and
represent 35% of the total transactions.
This interest is due to multiple factors: the proximity of
the region to China, the local Chinese community, pristine environment, the
sought-after schools and colleges, the political stability and the immigration
laws.
The US had an estimated international real estate sales of
$68.2 billion for the period from April
2012 to March 2013. The Asian share of this market was 54%. Canada notably Vancouver along with New York,
Los Angeles, Philadelphia, Detroit and Houston by far attract the most Chinese
buyers.
What is the reason
for the recent surge in Chinese investments?
The recent Chinese
surge in investing in real estate is the product of political and economic
policy changes in China. In 1980 Chairman Deng Xiaoping opened China to foreign
investment in the global market and limited private competition, which spurred
China's economic transformation and modernization and raised the standard of
living for millions of Chinese.
In 1998 the Chinese government changed allowed the purchase
of homes for cash. Previously the government allowed like kind exchanges. This
fundamental changes allowed market forces to drive the price of homes. China
real estate market became one of the fastest growing market in the world.
Then, in 2011, concerned about a housing bubble, the Chinese
government began tightening home buying rules. In certain cities, locals could
only buy one home. Unmarried nonresidents could not buy property in some
cities, like Shanghai.
In March 14, 2013
President Xi Jinping coined the "China Dream" as a renewal of the
Chinese nation, with greater emphasis on collectivism and refraining from
showing excess of consumption. His campaign against corruption and petty
officialdom has resulted in 40,000 officials being disciplined and 10,000
officials fired. This sudden shift is one of the main reasons more Chinese are
buying property abroad. They want to retain their lifestyles and keep their
money safe.
A final note: on May
8, 2014 the Chinese government passed the Outbound Direct Investment Rule that allows
projects abroad below $1 billion in non-restricted areas (the Bay Area is one
of them) without the approval of the National Development and Reform Commission
and up to $2 billion would only need the approval of the state council. This
new rule will encourage capital investment abroad and consequently will impact
the demand in our residential area.
The Asian American Market represents a huge growth
opportunity and is expected to reach $1 trillion in just five years.
Palo Alto Median Home Price For
the Last Five Years (Increase of 75%)
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