Palo Alto CA has outstanding home appreciation rates compared to other communities, even in the generally excellent cities of the San Francisco Bay Area. It is by far my favorite city to for purchasing and listing homes for sale. Why? A few years after my clients have purchased their homes, they always comment something like, “We would never be able to afford this home now.” Home Sellers comment “Even I didn’t think my home was worth so much in so little time…” For more detailed statistical information on Palo Alto area home prices go to the Home Appreciation section of this website. All cities in Santa Clara County and San Mateo County have their own statistical reports. However, Palo Alto also has the most expensive property PRICES per square foot and per square foot of lot size. Palo Alto’s square foot prices for both homes and lots frequently exceed those in the very exclusive community of Atherton CA. In other words, Palo Alto is astonishingly expensive, and just a few miles away in San Carlos and Belmont, the prices are far more reasonable.
Let’s look at a 10 year chart and graph of Palo Alto Home Appreciation:
Since 1998, Overall appreciation for an average priced home in Palo Alto has gone from $712,000.00 in 1998 to $1,872,850.00. Keep in mind that during this time there was a huge run up in prices during the dot com boom and a bust when there was a period of deflation of -12.3% in 2001 and -4.9% in 2003. Yet, overall, an average priced home in Palo Alto sold for over 21/2 times in 2007 for what it sold for in 1998.
What is very important for both buyers and sellers to note however is that in general, there is a declining amount of inventory in Palo Alto every year since 2004 when there was a .6% (yes, less than 1%) increase in inventory. The lack of inventory affects overall sales numbers so that the local press leaves the impression that there is a problem with headlines such as “Sales down in Palo Alto”. Sales ARE down, because INVENTORY is down!
On any given week there are scores of buyers looking at a few homes in Palo Alto. Competition for homes is particularly strong in the under 1.8M sector, where typically homes are selling with multiple offers every week. My recent blog post on Cereza describes the type of home most difficult to find: the fixer upper on a generous sized lot. Cereza sold with thirteen offers. A recent pricing strategy for Palo Alto broker and Palo Alto home sellers is to price their home about 5%-7% under market value, essentially creating what is called in real estate parlance a “feeding frenzy”. Generally these homes sell for more than they would have if they had been priced slightly over market, due to the multiple offer phenomenon. My theory is that the buyer ends up paying for another year or two of home appreciation (up front) to the seller in order to “win” the bidding war. I think of Palo Alto as being similar to a Triple AAA rated bond versus a single A rated bond as an investment. It is a higher quality (safer) real estate investment compared to other communities, and therefore the cost of entry is higher.
If you want to purchase a home in Palo Alto, you will need an experienced Palo Alto agent who has established strong relationships within the Real Estate Community, and who can guide you as to how much to offer. Call me at 650 400 2986 if you are serious about purchasing a home in the community with the very best prospects for outstanding wealth building potential, and outstanding schools in K-12 Palo Alto is your best choice!
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