A recent Bloomberg report reveals some shifts in the real estate market for higher-end homes in Palo Alto, pointing to an increase in days on the market for properties priced at $5 million and above. The article discusses how some sellers are making half-million-dollar price reductions to get these homes sold and notes that "stock-market turmoil, a drop in foreign investors and concerns of a technology industry slowdown are cooling demand at the high end."
The fact is, the speed at which homes are selling across all price ranges here has slowed a bit; however, the pace is still fast compared to other U.S. markets. From May 2015 through May 2016, the average number of days a home stayed on the market was 20.25. That's up from 18.75 compared to the same period from the previous year and up from 15.9 for the same period a year before that. For the last three months, the average number of days hasn't dropped below 20.
Look at days on the market for March, April and May of the last three years:
2014: March - 8 days, April - 15 days, May - 14 days
2015: March - 14 days, April - 16 days, May - 14 days
2016: March - 21 days, April - 22 days, May - 22 days
After May last year, the number of days a home stayed on the market stayed steady at 15 for five months. Two years ago, for the same five months, the average was 16.6. It will be interesting to see if June through October remains in the low 20s or if the busy summer selling season brings the numbers down.
Various factors can affect the speed at which homes sell. A market replete with qualified buyers often sees homes moving faster. Fewer buyers (or less interest, in general) can cause homes to linger on the MLS.
Lack of inventory generally leads to increased buyer competition and faster sales. But this isn't the case currently in Palo Alto as housing inventory levels have slowly risen.
A rise in inventory
More homes were listed for sale from March through May than in the same three months for either of the previous two years:
2014: March - 81, April - 97, May - 94 (total: 272)
2015: March - 75, April - 92, May - 84 (total: 251)
2016: March - 103, April - 110, May - 95 (total: 308)
This year, March and April figures were higher than any month in more than three years, with May having the fourth-overall highest figures in the three-year comparison.
Although housing inventory has increased from years prior, it's not the only reason for the increase in days on market. It also may be due in part to relatively fewer serious buyers, as borne out by the number of sales made in the three-month periods we're looking at. Here are sales versus listings:
The Bloomberg article mentions a reduction in foreign buyers, particularly from China, as a reason for a slowing in the market of homes priced over $5 million. That, along with uncertainty in the stock market, a slowing IPO climate and rising interest rates, could be other contributing factors to the numbers we reviewed.