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Midpeninsula real estate continues to defy expectations, with demand surging at the upper end of the market. Multiple offers and above-asking sales have become the norm, highlighting the intensity of competition in the region’s luxury segment, generally defined as homes priced $5 million and above.
In the first quarter of 2026, Palo Alto, Los Altos, and Menlo Park all saw an increase in new listings compared to last year: Menlo Park surged 34%, while Palo Alto and Los Altos rose 11% and 5%, respectively. Despite the higher supply, demand has kept pace. The absorption rate — the share of listed homes that sell in a given period — exceeds 60%, meaning more than half of all homes on the market are selling quickly. Homes are going under contract in a median of just eight days, and the region has only 1.7 months of inventory, underscoring how tight the market remains.
Pricing trends across the region have been relatively stable, though with important nuances. Median single-family home prices in Palo Alto and Menlo Park remained largely unchanged year-over-year at $4.1 million and $3.3 million, respectively. Los Altos, after experiencing a sharp 30% surge in 2025, saw a slight recalibration, with median prices declining 6% to $5.1 million. Even with this adjustment, Los Altos continues to command a meaningful price premium relative to neighboring markets.
Menlo Park: Overbidding surges
Perhaps the most notable shift in early 2026 has been the reacceleration of activity in Menlo Park. After a period of relative calm, the market has become increasingly competitive. In the first quarter, homes in Menlo Park sold for an average of 7.3% above asking price, surpassing Palo Alto’s 4% and closely matching Los Altos at 7%.
Of the 51 single-family homes sold in Menlo Park this quarter, three sold for more than $1 million above asking — a rare occurrence in the city. This suggests that Menlo Park is catching up to its neighboring markets in both the quality of homes and the level of buyer competition.
Los Altos: Fierce competition for turnkey homes, development opportunities
Los Altos continues to stand out as one of the region’s most competitive submarkets, especially for move-in-ready homes and larger parcels. About 70% of transactions are still closing above asking price, and one-third of homes in the first quarter sold more than $500,000 over list, compared with 26% in Palo Alto.
Recent sales highlight the intensity of demand in Los Altos. A 7-year-old home in North Los Altos, listed just under $8 million, received multiple offers and sold for over $9 million in just three days. The sale also reflects notable price appreciation, especially since a comparable newly built home across the street struggled to reach nearly $7 million less than 15 months ago.
Midpeninsula market at a glance
A snapshot of single-family home activity across Atherton, Los Altos, Menlo Park and Palo Alto in Q1 2026 (Jan. 1–March 31), compared with the same period in 2025, based on MLSListings data.
MEDIAN HOME SALES PRICES:
- Palo Alto: $4.1M (up 2.3% from $4M)
- Menlo Park: $3.3M (down 2% from $3.37M)
- Los Altos: $5.1M (down 5.6% from $5.4M; after a 30% surge in 2025)
SALES ACTIVITY (Single-family homes):
- Los Altos: 52 sold (+48.6% from 35)
- Menlo Park: 54 sold (+50% from 36)
- Palo Alto: 64 sold (-1.5% from 65)
- Atherton: 10 sold (-52.4% from 21)
NEW LISTINGS (single-family homes):
- Los Altos: 106 listings (+14% from 93)
- Menlo Park: 115 listings (+38.6% from 83)
- Palo Alto: 143 listings (+1.4% from 141)
- Atherton: 32 listings (-11.1% from 36)
OVERBIDDING:
Percent of single-family homes sold $500K over-asking
- Los Altos: 32.65%
- Menlo Park: 21.57%
- Palo Alto: 26.67%
ULTRA-LUXURY HOME SALES:
Homes Sold Over $10M
- Palo Alto: 4
- Menlo Park: 1
- Atherton: 6
DAYS ON MARKET:
- Los Altos: 8
- Menlo Park: 8
- Palo Alto: 8
—Information compiled by Xin Jiang
Demand for large lots remains equally strong. Parcels of 20,000 square feet or more are drawing multiple offers, often selling $1 million to $2.5 million over list.
Both homeowners and investors are active in the teardown segment. Homebuyers are snapping up properties to build long-term residences tailored to their needs, while developers are eyeing opportunities to divide lots and build additional homes under California’s SB9 law. Strong profits from recent projects are drawing even more investor interest, adding fuel to the already intense competition and driving prices higher.
Atherton, Palo Alto: High-end market strength continues
The high end of the market is showing especially strong demand. In Palo Alto, prices in Old Palo Alto have jumped, with several homes selling for record amounts. Newly built houses on modest lots are now topping $10 million, and teardown opportunities in prime locations are reaching unprecedented levels. Across the city, record-breaking luxury sales pushed the average home price nearly $1 million above the median — the largest gap ever — underscoring the outsized influence of the high-end market.
In Atherton, the ultra-luxury segment continues to move with remarkable speed. Homes priced between $20 million and $30 million are receiving multiple offers and selling quickly, often above asking price. The intensity of demand at this level mirrors conditions seen during the peak of the pandemic-era market in 2021.
Outside Influences: AI’s emerging role
Even as ultra-luxury demand shows no signs of slowing, changes in technology, particularly artificial intelligence, and the labor market may subtly reshape buyer behavior in the months ahead.
Looking ahead, the broader potential impact of AI may come through its effect on the technology labor market and the distribution of economic outcomes. As productivity grows, some buyers could benefit while others may face challenges, with mid-tier segments likely to feel these shifts more than ultra high-end buyers, who remain largely insulated.
AI is also beginning to shape the real estate market in more immediate ways, both in marketing and decision-making.
In marketing, AI-driven image editing tools are improving listing photos, but they also raise the risk of misrepresentation. To address this, local industry associations now require greater transparency, including the disclosure of edited images and, when appropriate, the presentation of original versions for comparison.
For buyers and sellers, AI is changing how decisions are made. Tools now make it easier to analyze market conditions, evaluate properties and search for potential agents quickly and efficiently. The usefulness of these AI insights, however, depends heavily on the questions asked, making independent verification essential.
The next few months will show how these macroeconomic and technological shifts affect local buyer behavior. Top properties and locations continue to attract intense competition, but the market is becoming increasingly selective.
