Time flies. Not long ago, most of property market participants anticipated yet another strong year. Half of 2015 has passed, and there have been some interesting developments and a few surprises.
First of all, based on both the number of listings and closed transactions, an overall strong 2014 has not been able to lift market activities so far this year. Palo Alto has experienced a 4 percent decline in the number of listings during the first six months this year, compared with the same period in 2014, and a rather significant 17 percent decline in the number of closed transactions. Menlo Park market activities have slowed down even further, with both measures declining double digits. In Cupertino, Los Altos, Mountain View and Sunnyvale, while the number of listings has increased by single digits, the number of closed transactions failed to reach the level of 2014.
Secondly, median home prices have increased by double digits in Palo Alto and all neighboring cities. In particular, Mountain View and Sunnyvale had median home price below $1 million a year ago, have had significant jumps of 37 percent and 31 percent, respectively. Buyers who could not find their desired homes and/or were priced out of Palo Alto have been driving the demand in Mountain View and Sunnyvale.
The moderate 15 percent increase in Palo Alto median home price so far this year, however, doesn't necessarily indicate price increase has slowed. Looking behind the numbers, homes sold this year are smaller in both living area and lot size compared with those sold in 2014. For instance, average lot size of sold properties in Old Palo Alto is 7,000 square feet this year versus 10,000 square feet in the previous year. From firsthand experience, cash-rich buyers who target north Palo Alto are willing to compromise on the condition of the house, but want a big lot size that offers potential. In a way, it was lack of that specific supply that limited the home price increase in Palo Alto.
Another market benchmark worth noting is sale price per square foot of living area. Palo Alto has reached an average of $1,395, and Mountain View approached $1,000 for the first time in history at $918. While most cities have consistent increases in both per-square-foot price and median home price, the increase in Mountain View and Sunnyvale of median home price is noticeably higher than the increase in per-square-foot price. A likely explanation is that initial-Palo Alto buyers who end up purchasing in Mountain View or Sunnyvale demanded relatively higher-end houses in those areas.
Overall, market activities have been slowing, especially since the start of summer. However, summer is the most active season for international buyers. Coupled with increasing uncertainties in the global economy, potential sellers have few reasons to wait on listing their home.