For the past several quarters, the news in the local real estate market has been much of the same—escalating prices, low inventory and quick sales, often above listing prices. Now it looks like we may finally see a change in the Portola Valley market, along with most Peninsula markets, this year.
After a whopping 59% price increase in Portola Valley real estate over the last six years, including extremely rapid growth over the last three years in particular, prices are starting to level out.
We are seeing fewer homes selling for a premium (over listing price) and properties are staying on the market a little longer before selling.
It’s All About Inventory
The one constant is that inventory remains low and that may continue to impact prices. In just the past year the inventory of homes on the market has decreased from 20 in 2014 to to 16 in 2015. As a contrast, in 2005 the inventory of homes for sale was around 47. One reason for this decreasing inventory is that, according to the California Association of Realtors (CAR), owners are staying put in their homes longer than ever—an average of ten years in 2015, doubling from five years in 2005.
As the local economy continues to grow, more people are drawn to our area for the well-paying jobs, and the demand for housing is squeezing the inventory of homes available for sale even more.
Affordable Housing
It’s no secret that housing is becoming increasingly unaffordable in the Bay Area. As recently as 2010, 48% of households could afford to purchase a median-priced home in California. It’s startling to see that number has plummeted to 31% in 2015 and is expected to further decrease to 27% in 2016.
This year Portola Valley passed an ordinance to promote secondary housing units that hopes to begin to address this issue. However, the impact on home prices will likely be negligible, as residents of these secondary housing units would not have been typically in the market to buy.
2016 Outlook
We have had a great run over the last several years, and have seen an increase of 12% in median prices in the last year alone. But things are likely to change in 2016. The Fed has raised interest rates, China’s economy is volatile and the US stock market is off to a rocky start. There is even buzz that we are in a “tech bubble,” which, if true, would undoubtedly affect real estate prices. The California Association of Realtors is projecting a conservative 3.2% statewide appreciation, with an expected uptick in mortgage rates. Although coastal areas, including the peninsula, usually outperform statewide averages, single digit appreciation still sounds about right.
But the market continues to surprise. I’ll be back next quarter to re-evaluate and do this all again. In the meantime, please contact me for an up-to-date evaluation of what your home is worth or assistance in buying a home.
