As we roll through the summer, many local families are finally taking their first vacation since March 2020. With less active buyers, the bidding war has cooled down quite a bit compared to the crazy spring and the market seems to be back to normal seasonality.
The first half of 2021 was the most active half of the last decade for the local real estate market with 431 new offers in the multiple listing system – an increase of 45% compared to the first half of 2020 and 30% more than the last 10 years. Annual average.
In contrast to the shortage of supply that was reported on the news in most of the nation, Palo Alto had an abundant supply of homes for sale. The neighboring Menlo Park and Los Altos also recorded their largest inventory since 2011. The increased supply was partly driven by a need to catch up due to the pandemic and the very strong price environment at the beginning of the year after more than two years of price development. There were 10 active listings in the heart of Old Palo Alto in mid-May, ranging from $ 6 million to just over $ 30 million. Higher home prices previously urged the sellers to act, which was clearly noticeable in the first-class, rarely available locations.
The backlog in connection with the strong tech economy contributed to a large and active pool of buyers. More than 74% of the new listings in Palo Alto in the first half of this year have been sold. This consumption rate was even higher in Los Altos at 83% and in Menlo Park at 78%. In Palo Alto, 312 apartments have officially changed hands – 64% more than in the first half of 2020 and the highest level since 2012.
Average home prices also rose sharply in the cities along the Midpeninsula. The average price of single-family homes sold in Palo Alto rose to a record high of $ 3.53 million – a 16% increase over the first half of 2020 and an 18% increase over 2020.
In Los Altos, the average home price rose to $ 3.9 million, or 22% year over year. Older, smaller homes (less than 2,000 square feet) on larger lots (over 10,000 square feet) listed just under $ 3 million, it’s common to get bids nearly $ 1 million above the asking price .
The pandemic has sparked a preference for larger living spaces and larger lots, which are harder to find in Palo Alto.
The market has also returned to its normal rapid turnover within seven to ten days.
With sellers experiencing fast sales and unexpectedly high prices, and buyers frustrated by fierce competition or bidding wars, it’s no wonder some of the most common questions consumers searched on Google are, “Are we in a real estate bubble?” and “When will the market collapse?”
If we look at fundamentals, the rise in home prices is not fueled by rising demand or speculation in the face of limited supply. The high price is due to a very healthy transaction volume. In the short term, the supply could increase further due to the high home price. Aging families may also choose to move out due to the high cost of living and tax rates. However, demand will remain strong due to local and foreign immigration. Young families from the southern, northern, or eastern bays continue to move to Palo Alto for schools and easy commuting. We also see overseas families immigrating as work visa issuance has resumed since the new government. Santa Clara County’s net population growth has been dependent on foreign immigrants for some time. As long as the tech economy stays solid, we may be entering another bull cycle that could last six to seven years.
While it is impossible to time the market, sellers and buyers should pursue different strategies in different market environments. It is always helpful for sellers to know your “products”. It is important for buyers to “think through the medium to long-term needs”.