Annual Market Trends
2016 Annual Recap
Last year started with, in some areas, literally no homes for sale. Low inventory caused first quarter sales to be strong locally in terms of multiple offers and home prices, similar to the last 5 years. However, the party started changing in May. Demand softened slightly, causing the summer months (June-August) to be weaker than summer 2015. Many agents voiced concerns that the market had fundamentally changed. I wasn’t convinced that was the case, and wrote you in July that it was too early to tell. Summers are typically the second slowest time for home sales each year.
September home sales rebounded strongly with more homes selling, and for a greater percentage over the asking price in most cases, than September 2015. It seemed the market was out of the proverbial woods. However, during the 4th quarter most statistics weakened each month. I will be watching closely to determine if this slowing trend continues during Q1 2017. I don’t expect it to.
2017 Market Forecast
In January of 2016, I predicted that low inventory and pent-up demand to buy a home would lead to another hot spring market. Got that part right. I went on to state the current 7-10 year Bay Area real estate market cycle would end later in the year – not so right on this. Although price appreciation slowed significantly last year as reflected in the charts below, there was no definitive confirmation that home values had peaked and the cycle had ended.
For 2017 I have a binary prediction. If the new administration in Washington is successful in quickly passing a $1 trillion infrastructure spending package and a major tax cut, the hot market will likely continue into 2018. The boost to the economy and consumer confidence would likely extend the current market cycle. If massive spending and tax cuts are not passed, I expect the current cycle to end in 2017.
In the charts below, you’ll find 15 years of data for annual market activity and median sales price for Palo Alto, Los Altos, Los Altos Hills, Menlo Park and Mountain View. You can’t find this level of historical data all in one place anywhere else, so if you have any questions or wish to get more info about your community, don’t hesitate to contact me.