The strength of our
local housing market for the first half of this year continued to be
unprecedented, with prices reaching stratospheric valuations.
The
median sales price for a single family home in Palo
Alto increased to a new record high of $2,667,000 (compared to
$2,320,000 for the first half of 2014), an increase of 15%.The sale to list
price ratio was 113.8% in 2015 as opposed to 114.7% in 2014 and average days
on the market was 18 days as opposed to 13 days in the first half of
2014.
For
Menlo Park the median sales price increased 9.5% (to $2,020,000 from
$1,845,000). The sale to list price ratio was 110.2% as opposed to
107.7% in 2014 and average days on the market was 15 days as opposed to
20 days in 2014.
For
Atherton the median sales price increased an incredible 58.55% (from
$4,100,000 to $6,500,000). The sale to list price ratio was 100.6% for
2015 as opposed to 102.7% in 2014 and average days on the market was 57
days in 2015 as opposed to 56 days in 2014.
The
townhouse and condo market also set new records. The median sale price in
Palo Alto for 2015 is $1,542,000 as opposed to $1,265,001 in 2014 (a
surge of 22%) and in Menlo Park the median sale
price increased 11% from $1,212,500 in 2014 to $1,343,000 in 2015.
As
of July 8, 2015 the listing inventory was low with only 29 active listings of single family
homes in Palo Alto (as opposed to 32 in 2014), 21 in Menlo Park (as
opposed to 29 in 2014) and 17 in Atherton (as opposed to 25 in in 2014).
During
the first half of 2015 we sold 165 houses in Palo Alto (compared to 177 in
2014), 150 houses in Menlo Park (compared to 188 houses in 2014) and 39
houses in Atherton (compared to 59 houses in 2014). The number of houses
sold continues 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.
The
demand for housing reached an unpresented high due to the following reasons:
1-
Chinese
interest in our local real estate market continues to grow.
2-
Abundance
of liquidity in the market from IPOs and mergers and acquisitions.
3-
A steady
3% annual increase in the number of new jobs.
4-
Rising
consumer confidence and spending.
5-
The
demand for housing outstrips supply: inventory is at a new low.
6-
Lower
homeowner turnover to upgrade.
7- Institutional investors continue to invest in
real estate as returns are better than from other investments.
8- The improving economy is drawing buyers back to
the housing market. 54 percent of American adults living with friends or
relatives plan to move out within a year.
Looking
Forward
The
Bay Area has the strongest economy in the entire country, and nearly in the
entire world, said Kenneth
Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at
the University of California, Berkeley. Job growth, spurred by the incredible
resurgence of the technology sector in the Bay Area continues to drive
up the values of real estate assets across the region.
The
Federal Reserve has kept interest rates at rock bottom for several years as a
way to pull the economy out of the Great Recession. But that has created an
“easy money” environment in which people are looking to stash their dough
somewhere with more than a zero percent return, whether in the stock market,
real estate, or in tech companies with skyrocketing — perhaps excessive —
valuations.
Short-term
interest rates currently sit at zero, but the Fed has said that they will go
up to 3 or 3.5 percent over the next decade. The question is when
will they start raising the interest rates? It could be in September, or
perhaps sooner.
The
question on everybody’s mind is: are we going to hit another bubble soon?
In
our local market real estate and tech rise and decline together, but I doubt
that this time we will witness a bubble. A price correction is
likely in a couple of years. The more stringent lending criteria
and the fact that the majority of our sales are cash sales reduce the
likelihood of a bubble.
Should
I buy a house now?
With
prices reaching new highs the question I hear often from my clients is should
I buy a house now or wait?
In
the past the local market has experienced an adjustment of up
to 20% from the absolute high, and greater adjustments for
upper-end properties. It is hard to guess when that kind
of adjustment might happen. The real estate market
goes through cycles. Buyers who try to wait for prices to reach the
bottom before buying run the risk that prices go up even further.
In addition desirable houses in prime locations tend to change much
less in value when the market goes down. If you are flexible about the
location and condition of a house it could make sense to wait for a market
adjustment but if you are looking for a prime property in a great
location, waiting may not get you the best outcome.
My
recommendation therefore is to think strategically about when you want
to buy and what kind of house you would like to buy and decide the risks
that you are willing to take.
For sellers it is a great time to sell. It is hard to
catch the market at its absolute peak. It is better to sell now before the
interest rates go higher and before the fundamentals in the economy change.
Menlo Park Price Per Square Foot
Price Per Square Foot in Different Areas in Atherton
|
12 July, 2015
Semi-Annual Local Real Estate Market Report For Palo Alto, Menlo Park and Atherton
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