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Summary
Palo Alto, Los Altos, Menlo Park see housing inventory jump: At the start of August, Palo Alto noted a 16% increase in new listings, Los Altos saw a 29% rise, and Menlo Park reported an 18% boost compared to the same time last year.
Los Altos reports highest number of new listings sold: Los Altos led the way with the highest percent of new listings sold (76%), while Menlo Park showed the most substantial improvement, with its ratio of home sales climbing to 73% compared to 66% last year. In Palo Alto, approximately 70% of new listings sold.
Atherton sees demand for luxury homes increase: The average number of days homes have stayed on the market in Atherton, where the median sales price is $7.9 million, has dramatically decreased to 31 this year compared to 69 last year.
Midtown Palo Alto home sells for $700K over asking-price: A home in Palo Alto’s Midtown neighborhood received over 30 offers and sold for more than $700,000 above its $2.9 million listing price.
While home prices steadily recovered in 2023, the early frenzy at the start of this year caught both sellers and buyers off guard. And it didn’t stop there. The market’s fervor has continued through the summer with a high level of activity that has defied seasonal norms.
Along the Midpeninsula, the real estate market has been characterized by increased inventory, brisk sales, rapid turnover – and rising prices.
Palo Alto, Los Altos and Menlo Park, in particular, are starting to see even more homes hit the market as the busier-than-normal summer winds down. As of Aug. 15, the three Midpeninsula cities reported an uptick in new listings compared to the same time last year: Palo Alto noted a 16% increase, Los Altos saw a significant 29% rise, and Menlo Park reported an 18% boost, according to data from MLSListings.
Despite elevated mortgage rates, demand for Midpeninsula properties also has remained unwavering throughout the year. Los Altos led the way with the highest percent of new listings sold (76%), while Menlo Park showed the most substantial improvement, with its ratio of home sales climbing to 73% compared to 66% last year. In Palo Alto, approximately 70% of new listings sold.
Home prices also continued their upward trajectory. The median price for single-family homes sold in Palo Alto this year was $3.63 million, or a 7% increase compared to the previous year. In Los Altos, the median price stood firm at $4.4 million, aligning with its peak in 2022. Menlo Park’s median price was $3.65 million, a modest 5% retreat from its peak at the start of 2023.
The market remained active during the typically slow summer months. From July to August, all three Midpeninsula cities saw more inventory hit the market than a year ago. Palo Alto, in particular, witnessed a nearly 40% increase in listings compared to last summer. Properties continued to sell quickly, often within a week, with multiple offers. One notable example is a 77-year-old, three-bedroom, one-bath home in Midtown Palo Alto, which received over 30 offers and sold for more than $700,000 above its $2.9 million listing price.
Luxury homes see higher demand
The luxury real estate market has been thriving this year. A key indicator of this strength is the average days on market for properties sold in Atherton, where the median price was $7.9 million in July based on all homes sold in the last 12 months. The average days a home has stayed on the market in Atherton this year has dramatically decreased to 31 compared to 69 last year.
In Palo Alto, the high-end market also has shown considerable activity, with listings priced over $7 million increasing by 40% and actual sales rising by 38%. It’s worth noting, however, that half of these 18 sales involved properties that had been intermittently on the market for several years, some dating back as far as five years and ultimately selling at prices well below the sellers’ initial expectations. A 90-year-old home on a sprawling 20,000-square-foot lot in Professorville, for example, was originally listed for nearly $12 million in May 2019. The price was subsequently reduced to $8.8 million in 2020, reintroduced to the market at $7.8 million in April of this year, and finally sold for $7.2 million to a local family.
Prices unaffected by mortgage rates
Mortgage rates dipped to their lowest levels in over a year on Aug.8, but it likely won’t make a big difference to the Midpeninsula market — home prices in the Midpeninsula have remained largely unaffected by high interest rates since the beginning of 2023. The AI-driven recovery of tech stocks has given rise to a new generation of millionaires eager to upgrade to the Peninsula market.
If lower interest rates trigger a tech/AI market correction, similar to the 2022 pandemic bubble burst, the impact on young buyers’ down payments and the net wealth of all-cash buyers could outweigh the benefits of reduced mortgage rates. Additionally, if sellers — motivated by these lower rates — decide to list their properties, the potential increase in supply, coupled with weakening demand, could put downward pressure on home prices.
The tech boom, like those before it, could introduce a period of volatility in home prices, serving as a reminder that even the most resilient markets can experience turbulence.
Impact of commission changes
On Aug. 17, significant changes in real estate agent compensation practices were implemented. Buyers are now required to sign contracts that clearly outline their agents’ services and fees from the outset — a practice that was not previously mandatory. Additionally, sellers’ agents can no longer advertise the commission their clients are willing to offer a buyer’s agent on the Multiple Listing Service (MLS), a platform central to agents’ communication.
Despite these changes, the fundamental dynamics for both sellers and buyers remain the same. Sellers have never directly borne the cost of the buyer’s agent’s compensation, as it is the buyer who ultimately pays for the whole transaction.
While the changes have been in place for less than two weeks, making it difficult to see any immediate impact on home sales, the primary concern for both parties remains virtually unchanged: net proceeds for the seller and the total cost for the buyer.
Xin Jiang is a real estate agent with Compass in Palo Alto and a regular guest columnist. She can be emailed at xin.jiang@compass.com.
