Midpeninsula luxury market sees record-breaking year in 2025

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Houses in a hillside neighborhood in San Mateo County overlook the San Francisco Bay. Photo courtesy Getty Images. Credit: Getty Images/iStockphoto

In 2025, luxury home sales defined the Midpeninsula housing market. Palo Alto, Los Altos and Menlo Park each posted record numbers of high-end transactions, surpassing their previous peaks set just a year earlier in 2024.

Strong buyer demand that built late last year carried into an unusually active early spring. That momentum briefly stalled after “Liberation Day,” when tariff-related shocks rattled the financial markets and triggered a short-term pullback in home prices. As uncertainty eased, confidence returned through late spring and summer. By September, luxury demand surged, kicking off a particularly strong stretch for high-end real estate across the Midpeninsula.

In Palo Alto, 28% of all homes sold in 2025 closed above $5 million. Los Altos followed closely, with nearly half of its sales — 46% — exceeding that mark, while Menlo Park recorded 21% in the category.

A typical ranch home from the 1950s-60s is shown here in Palo Alto. Photo by Veronica Weber.

$5M no longer luxury threshold

Notably, the $5-million threshold is no longer viewed as “luxury” so much as a high-activity price range. A 60-year-old original home on an 8,000-square-foot lot in North Palo Alto now commands close to $6 million, highlighting how elevated baseline values have become.

Sales above $8 million also reached new highs across all three cities. In 2025, 25 Palo Alto homes sold above that level through the multiple listing service, accounting for 6.4% of all transactions — five more than in an already strong 2024, nine more than the pandemic-era peak in 2021, and more than double the 10-year average.

Los Altos recorded 16 sales above $8 million, accounting for 5.9% of total transactions, seven more than its previous peak. Menlo Park followed with 18 sales, or 6.2% of total volume, eight more than in 2024.

This home in Woodside was among several Midpeninsula properties listed on the market for more than $25 million in 2025. Photo courtesy Open Homes Photography.

Ultra-luxury demand surges after September

Luxury demand picked up sharply after September. For example, a 17-year-old home in Central Menlo Park that failed to attract a buyer in the spring at just under $8 million sold within one week in October. In Palo Alto, a 19-year-old home on a 15,000-square-foot lot in the Professorville neighborhood that had been on and off the market since spring 2023 finally sold at $12 million. Even in ultra-luxury segment in Atherton, a newly constructed home priced near $50 million sold after being intermittently listed for 18 months.

Day light shines on a tree lined street in Atherton. Photo courtesy Getty Images.

Atherton land values see a sharp reset

Another remarkable development in 2025 was the sharp upward reset in Atherton land values. Two older homes on approximately 1-acre lots located between El Camino Real and Alameda in West Atherton were marketed primarily for land value at prices below $8 million. Each property received more than 10 offers. One, at a less ideal location, sold over $1.5 million above asking, while the other sold for $2.8 million above list.

Comparable 1-acre lots in the area were selling for about $8 million last spring. These recent sales point to a 20% to 30% increase in land values, driven by strong buyer demand and extremely limited inventory.

Palo Alto’s median single-family home price rose 5% to $3.8 million, marking a new annual record. Photo courtesy Getty Images.

Inventory, sales and prices climb across Peninsula

All three Midpeninsula cities posted gains in inventory, closed sales and year-over-year prices in 2025. While listings and total transaction volume remained below the unusually elevated levels of 2021, when pent-up pandemic supply briefly flooded the market, median home prices still climbed to all-time highs across the region.

Palo Alto saw listings rise 13% year over year, with the sale of 407 single-family homes, an 8% increase from 2024. The median single-family home price rose 5% to $3.8 million, marking a new annual record. Los Altos posted 10% more listings, 4% higher sales volume and a 9% increase in its median price to $4.8 million. Menlo Park posted a more modest 4% increase in inventory, but sales rose 11%, while the median price edged up 1.4% to $3.3 million.

Well-priced, well-marketed homes typically sold within eight to 10 days, reflecting the fastest possible pace given standard marketing cycles that include broker tours and open houses.

The entrance to downtown Los Altos on Main Street. Photo by Magali Gauthier

Los Altos trails in ultra-luxury sales

Despite posting the strongest median price growth in 2025, Los Altos continues to lag behind Palo Alto and Menlo Park in the $8-million-plus market. In Palo Alto and Menlo Park, neighborhoods such as Old Palo Alto, Crescent Park and Central Menlo draw a concentrated pool of ultra-high-end buyers. Los Altos, by contrast, shows less distinction between its northern and southern neighborhoods when it comes to luxury pricing and buyer demand.

That concentration has helped push prices higher in Palo Alto. In 2025, the median sales price in both Old Palo Alto and Crescent Park reached $6 million for the first time, driven by strong demand and a growing share of high-end inventory.

Higher price points also align with a greater share of all-cash buyers. In 2025, 35% of Palo Alto buyers paid all cash, compared with 33% in Menlo Park and 31% in Los Altos.

An aerial view of Apple’s Silicon Valley headquarters. Photo courtesy Getty Images.

Looking ahead to 2026

Artificial intelligence has moved beyond speculation and is now reshaping industries, labor markets and capital flows in real time. While the Midpeninsula housing market is not immune to policy shifts or broader economic shocks, it continues to benefit directly from the concentrated wealth generated by the AI ecosystem. The biggest risk to this dynamic would be a significant correction in the AI sector itself, which could quickly dampen buyer confidence and high-end demand.

Absent that, the luxury segment is likely to continue outperforming the broader housing market in 2026. Recent activity — including teardown properties drawing more than 10 offers and move-in-ready homes priced above $20 million attracting multiple bidders — suggest that demand remains exceptionally strong. The key question is whether sellers will respond by releasing more inventory. If they do, the market is likely to see higher transaction volume and continued upward pressure on median prices.

While the Federal Reserve may continue lowering interest rates, mortgage rates in our local market influence supply more than demand. Many homeowners remain locked into historically low mortgage rates, discouraging them from moving. Lower rates could incentivize more homeowners to sell, gradually unlocking inventory. Meanwhile, tech-driven buyers continue to build wealth faster than home prices are rising, providing long-term support for values across the Midpeninsula.