Palo Alto: Month in Review - May (June 5, 2010)

The only sure thing about today’s real estate market is its unpredictability.  After a 19% jump in April this year, the market retreated, and the median price in May dropped by 15%.  Median prices in 2010 are 9% lower than in May 2009.  However houses are selling more quickly than before: more houses changed hands in May 2010 than in May 2009. Despite the median price decrease, 55% of homes on the market sold at higher than the asking price.

Palo Alto has always been and still is a magnet for Silicon Valley professionals who want to send their children to the highly recognized Palo Alto schools.  I’ve occasionally heard Palo Alto residents call our housing market a “Teflon” one, meaning it does not burn.

If you add to this unstoppable demand the fact that most of the houses are pretty dated, and, in general, the supply of houses in good condition is  limited, then you get the picture of our “Teflon”  real estate market.

The biggest difference now is in the price range in which multiple offers are triggered.  3-4 years ago, the most common “entry” point to South Palo Alto real estate was $1.2M-$1.3M.  Today this range slipped to $1M-$1.1M.  Very recently two sales in South Palo Alto in this “entry price range” generated 14 and 16 offers, respectively, and were both sold at more than $200,000 over the asking price.  The conclusion is: demand is as high as ever, but the ability of the buyers to pay is lower than before.

Overall market behavior is not stable and with no consistent trend.  The current economic situation definitely contributes to this unpredictable pattern.

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