With only 10 active listings by the end of Jan. 10, 2015, there's no indicator that the issue of structurally limited supply is resolving. There are no major shifts that are turning our community less attractive, either. Nonetheless, there are many moving parts of the economy that we don't have first-hand knowledge. Moreover, if cyclicality still plays a role in our property market, it won't be a surprise if the market starts to soften in 2015. Contrary to the negative impression of correction, it is beneficial to sustain an upward trend in the long run. Short-term correction could bring more potential participants, thus more energy to our property market for decades to come.
While it's very tempting to try to time the market, market timing is actually less relevant in the case of property than other capital goods, because of the former's long-term nature. As for investors, Palo Alto property has been proven to be a better long-term investment than the overall stock market. Median home price in Palo Alto has increased at a compound annual growth rate of 8.8 percent in the past 16 years ending 2014 versus the 4.8 percent increase of the S&P 500 during the same period, and with significantly lower volatility.
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