The Spring Market Will Continue to get Hotter

The Spring Market Will Continue to get Hotter

Ken DeLeon and Mei LiangMarch 28, 2014
Palo Alto Daily Post

The Palo Alto market has consistently been strong and hot over the past couple of years, and as we enter spring 2014, the temperature is only expected to continue rising. The Palo Alto market, in general, is very much a seller’s market, which simply means a market with more buyers than sellers.  This type of market usually yields an excess of demand over supply, resulting in competitive high prices. A seller’s market makes it more difficult for buyers to purchase a home below or at its listing price because usually there are multiple offers, many all-cash, competing against one another in every transaction. The market statistics from 2011 to today show just that. Each year, inventory and the number of days-on-market are declining while prices are climbing. This indicates that in order to successfully win bid to a Palo Alto home, a buyer must act fast and smart. Otherwise, many may be priced out of their desired location and unable to secure a home.

The sizzling Palo Alto market applies not only to single family residential (“SFR”), but also condos and townhouses. Over the past two years, from the periods of January 1st to March 25th, Palo Alto SFR’s sale price has been appreciating while the number of homes sold and days on the market have been decreasing (see chart below).

DateNumber of SFR SoldAverage Days On MarketAverage Sale Price
01/01/2012-03/25/20127731$1,872,258
01/01/2013-03/25/20135524$2,424,833
01/01/2014-03/25/20144815$2,572,335

Similar to the single family residential trends, Palo Alto condos/townhouses’ sale price has increased while the number of condos/townhouses sold and days on the market have been decreasing (see chart below).

DateNumber of Condo/Townhouse SoldAverage Days on Market

Average Sale Price

01/01/2012-03/25/20122353$826,049
01/01/2013-03/25/20132034$938,050
01/01/2014-03/25/20141714$1,131,501

The bottom line, buying a condo or single family home in Palo Alto is a good investment because either property is an appreciating asset -- an increase of about 37% when comparing the average sale price between January 1, 2012-March 25, 2012 and the same period in 2014.

Due to the continued high demand, low supply, and competitive high prices for homes and condos in Palo Alto, many home buyers have begun to consider surrounding neighborhoods.  To date, cities like Los Altos and Menlo Park have seen great appreciation this spring, e.g., Los Altos’ appreciation for this spring is at a strong 18.5% while Menlo Park hits a striking 25%. These statistics, however, should not dissuade the Palo Alto buyers as there are those who only want to purchase in Palo Alto. While they may be priced out of single family homes, condo appreciation gives these very same buyers another option to remain in their desired city of Palo Alto.

There are several big drivers for such a hot market in Palo Alto and its surrounding cities. One being that inventory has been at an all-time low, since the stock market crashed in 2008, and the demand is still very high. Second, interest rates are remarkably low, making the time to buy more desirable now. Third, overseas buyers are coming in with all-cash offers and driving up the prices and demand. Lastly, the growth in the heart of Silicon Valley, with the increased number of jobs, have led many local techies and entrepreneurs, with their solid incomes, to easily and comfortably purchase a home here.

This hot market is not expected to cool off any time soon, more so with the upcoming busy spring season. Spring is one of the hottest times of the year for buying because many buyers want to purchase a home in order to secure their children into good school districts. Palo Alto, known for its impeccable public school system, sits top of that buying list.