Why Real Estate Prices in Palo Alto & Los Altos Defy Logic

We’re asked routinely by buyers if prices in the greater Palo Alto/Los Altos market area are sustainable. The short answer is yes! However, it is very difficult for area newcomers or first-time home buyers to believe it. Here’s some help:

An article in today’s Chronicle by Dan Levy of Bloomberg News titled, “Sales in SF Jump 50% in First Quarter” summarizes the reasons why prices rise in our area more than in other areas quite well.

Another good source of data is First Republic Bank’s “Prestige Home Index

The data is revised quarterly and shows the movement – up and down – of upper-end home values in the SF, LA, and San Diego market areas going back to 1985. One can easily see below that the SF area, as compared to the other two, has been much less volatile. This is due primarily to the limited space in which to build homes in the SF area (as Levy discusses in his article above).

Source: First Republic Bank

Source: First Republic Bank

Home prices are rising – demand is up – and multiple offers are back as Silicon Valley leads the way out of the recession – again.