A year ago, the already robust Midpeninsula residential real estate market soared beyond the stratosphere. This fall, expectations have settled a bit closer to Earth.
"Today, things are not overheated like they were last year," said Michael Dreyfus, owner of Dreyfus Sotheby's International Realty, with offices in Palo Alto and Menlo Park. "We're not seeing buyers lined up out the front door like we did earlier, especially in the above-$2-million category. However, this is still a very affluent and high-end market, so things are very good. I really prefer the kind of market we have today."
It is still high end, indeed. Lest anyone think local housing prices have dropped too far with the tempered market conditions of fall 2016, the veteran Realtor offers sobering figures for any would-be bargain hunters.
"There is really nothing below $1.5 million on the Midpeninsula today," Dreyfus said. "And it's hard to go (house) shopping for less than $2 million in Menlo Park and Palo Alto."
The inventory of available homes remains low in the area, he said. Sales dropped from 600 homes in Palo Alto in 2007 to 400 last year. With a somewhat less-competitive market, selling strategies employed a year ago need to be modified. Dreyfus said sellers this fall can no longer set prices artificially low and expect hordes of eager potential buyers to show up on their doorsteps, with a resulting bidding war spiraling the eventual sale price ever higher. Sellers need to be satisfied with more realistic asking prices today in a market that shows a bit more in common with the way houses are sold elsewhere around the country.
Others local Realtors agree. Houses are staying on the market longer in 2016 as compared to the same time a year ago, about 21.6 days in the first half of 2016, up from 14.7 days during the first half of 2015, said Xin Jiang, a realtor for Alain Pinel Palo Alto.
However, no one should interpret that as representing a major shift in market conditions, according to Karen Trolan, president of the Silicon Valley Association of Realtors (SILVAR).
According to SILVAR, the median sale price for a single-family home in Palo Alto during August was about $2.4 million and just over $1.8 million in neighboring Menlo Park.
"I've been in the business over 30 years and as much as I would like to say the market stays the same here, well, honestly, it really does," said Trolan, who sells real estate for Alain Pinel Los Gatos. "I would describe this market as being really, really healthy, and I would tell sellers it is a good time to put their houses on the market."
"The reality is the market is still very, very strong," said Brian Chancellor, vice president and sales manager of the Palo Alto-based Sereno Group. However, he does see an opening for buyers.
"Homes are taking longer to sell now than in recent years, and I do expect the market to be flat (the remainder of) this year," Chancellor said. "It is an opportune time for buyers who have been priced out of the market."
One change in the market Chancellor has seen is a growing diversity of potential buyers. "This area has multinational appeal, with people coming from all corners of the globe," he said. "We have large numbers not only from Asia, but Europe, as well," and also people from technology centers around the U.S. What he sees among this diverse buyer group is a bit more caution before taking the plunge.
"Our high-end market still has many buyers from Asia, there's still plenty of tech money in the market," Chancellor said. "And there are lots of employees from Apple, Facebook and Google out buying homes this year."
While local home buyers may come from a wide array of ethnic, cultural and geographic backgrounds, one phenomenon of the red-hot Bay Area economy has given many of them a common cause in 2016: reducing time spent in the region's maddening, ever-worsening traffic congestion.
"It is having a huge impact on their buying decisions," Michael Dreyfus said. "Schools used to be the biggest factor in making deals in the past, but now the commute has eclipsed it. What five or more years ago might add another 10 to 15 minutes on the road now has changed to an extra 30 to 45 minutes on the road. So location and proximity to work has become huge. One of the reasons Palo Alto is so desirable is because residential areas are so close to employment."
SILVAR's Trolan said she expects the usual autumnal real estate "boomlet" to occur again this year.
"April and May are typically our craziest time of year, but September and October also tend to be busy," she said. "Potential buyers who didn't do anything in the spring will decide to act in the fall. And election years tend to bring really strong housing markets."
Trolan predicts the local market will remain among the strongest in the nation for the foreseeable future. The low interest rates of recent years could be raised in the near future, though she thinks that won't happen before the Nov. 8 presidential election. Perhaps early next year, she said. That increase could have a stronger impact on the medium-priced housing market.
"The market looks strong all the way through (early 2017)," Trolan said. "It's helped by our amazing Silicon Valley job market, especially in Palo Alto and Los Altos. Companies in that corridor are hiring. There is still so much job growth, but the valley is limited geographically. That means prices will remain strong."
Indeed, despite the volatile nature of this year's election and such global upheavals as the pending "Brexit" departure of the United Kingdom from the European Union and stock market drops in the United States and China earlier this year -- which did depress the real estate market in the first quarter of 2016 -- Midpeninsula housing remains an economic port in a storm.
Though the real estate industry exhortation of "location, location, location" is paramount to most buyers, Trolan and Chancellor say other factors figure prominently in buying decisions.
"Though I saw the trend first become a major factor about a decade ago, being within walking distance of urban amenities has become very important not only for younger people, but also empty-nesters," Chancellor said.
Trolan said traditional concerns such as proximity to top-notch schools, swimming pools and "fabulous family rooms" still preoccupy many buyers, but recently, one trend has become crystal clear among her clients: "They want these various features and amenities in homes to be updated and upgraded," she said. "They want homes they can move right into."
Because supply and demand of those updated houses "drives everything,"Trolan said, it is unclear if the Midpeninsula market will see prices increase over the coming months. "I do prefer a more balanced market because it is more of an even playing field for buyers and sellers," she said. "Today, this is still a seller's market when you have only a month's supply of inventory."
Dreyfus echoed Trolan's thoughts, saying the area's famously expensive housing is even proving a challenge for well-heeled buyers in 2016. "Even people in the tech industry are getting priced out of this market," he said.