Los Altos Real Estate Blog

The Los Altos real estate market is as strong as ever with the average selling price in March up to $2,032,075 and 37 single-family homes sold.  That's up from 15 homes sold last month and up from 28 sold in March 2011.  Prices are up and multiple offers have become standard as the median is now up to $1,915,000.

With only 1.8 months of inventory, the market is strongly biased to sellers.  The sales price to list price ratio is one telling sign of this.  In March 2012 the ratio was 102.7%, down a bit from 104.2% in February but still high.  This means that offers over asking dominate the market.  Another factor is that days on market is also low.  Most sales are happening within one week on the market, with a few homes taking up to 2 weeks (depending on price and location).  Low inventory is partially due to some sellers waiting for "The Facebook Effect" to occur - buyers with Facebook IPO money to get into the market.

Some of the major sales last month in Los Altos include 1310 Villa which sold for $3,450,000 and 307 Verano Drive which sold for $3,395,000.  They were two of four sales that closed in March over $3 million.  What's more interesting is five sales in the $2.4-2.6 million range.  This is a major tier for builders and was a barrier in prior years.  The increase in activity indicates more "move up" buyers who are buying larger, quality homes without pushing the top tier too far.  If sales continue to hold in this price range, the overall market should continue its strong climb.

I get this question frequently from prospective clients looking for perspective on when to sell their Los Altos home.  The question isn't simple to answer because, honestly, it depends on the objective of the owner.  You need to consider whether the home is producing income, has appreciated enough since you bought it, or if future appreciation is needed.  In general, this is an excellent time to sell and here are three reasons why:

#1 - BUYER DEMAND IS SUBSTANTIAL

The typical home in Los Altos (a 4BR2BA rancher) in good condition will sell in its first week, as long as it's priced right.  The number of buyers is reflected in the number of offers, easily 4-6 in most cases.  The key is how nice the home is and where it's located.  However, multiple offers are now very normal.

#2 - PRICES ARE UP

The average selling price was up almost 5% last year and the trend has continued into 2012.  Assuming inventory stays in the same ballpark and demand remains as it is, we'll see similar gains this year.  With prices up, it's definitely a good time to sell.

#3 - NOT ENOUGH INVENTORY

Over the last 6 months, the number of homes listed matches what sells, adjusted for listings that expire or get cancelled.  The perception among most buyers is that there is very little inventory and that is making buyers act faster and with stronger offers.

If you'd like to discuss the current market in more detail and the value of your property in particular, please call me to set up a meeting.

The Los Altos real estate market last peaked in 2008 and dropped substantially in 2009.  At the time, the market was driven by fear and uncertainty.  Sales were still strong, from a units perspective, but the prices had dropped.  This was driven mostly by a nearly complete absence of high-end sales.  The homes that sold were, for the most part, the bargains.  Inventory levels were fairly high as people who had to sell did.

I remember conversations with agents in 2009 and 2010 where many felt they had no idea the bottom would come.  As you can see from the chart below, the bottom was clearly in 2009.  The interesting thing was that consumers (many asking questions on Trulia and Zillow) made it clear that based on "paired sales", the market was still declining or likely to decline.  At the time, I pointed out the flaws in the paired sales analytic approach.  There were those who said I was crazy because that analysis is the basis for "Case-Shiller".  Again, look at the chart, the markets rose.

Why did prices rise even in the face of market uncertainty?  Very simply, it's a matter of supply and demand.  The economy bottomed in 2009 and the recover picked up steam in mid-2010.  Since Los Altos is a high-demand town (just as Palo Alto is) with top schools and nice neighborhoods, buyers came back.  What you don't see in the chart is that sales of high-end homes really came around at the end of 2010.  Those sales were the basis for much of the increase in the "average sales price".

Going into 2011, the level of inventory was relatively low and pent-up demand created a fervor in the spring unlike anything seen since the 2005 boom market.  More importantly, the extreme high-end (homes in the $3+ million range) got much more action and that continued to pull up the low end.  What made things worse was the fact that many homes were selling with 6-10 offers with many from all-cash buyers.  That dried up a bit when the national economy was holding it's breath in August 2011.  The loss of Fannie and Freddie loans up to $729K made people wonder if the rest of the markets would have an issue.  That lasted about a month.

Now, as we're going through 2012, the trend is still to see slow and steady gains in sales prices.  I expect this will continue based on current activity.  Last year prices rose about 4.9%.  I expect this year we'll see about the same, perhaps a little higher.

I had predicted that the market would rise substantially in 2012 and it has definitely done so in the last 2 months.  The average selling price for single-family homes in Los Altos increased to $2,012,642 in February.  That's about a .3% increase from last month.  This continues the trend from January when prices rose over December.  The trend is a slight increase each month.  Keep in mind that these increases are coming before the "hot" Spring market.  You can expect this trend to get more pronounced going into March.

Sales were very strong for February with 17 homes sold compared to 7 in January.  There were 35 new listings which means that almost 50% of what was listed sold in the same month.  There were 17 expired listings.  That means that the inventory in Los Altos was effectively flat for the month.  The lack of inventory is what is driving price increases.  Toward the end of February, there was an increase in two distinct areas - "off MLS" listings and buyers at the $2 million price point (give or take 5%).  The off-MLS listings are getting sold quickly but without the hassle of open houses, expensive marketing, and multiple-offer chaos.  The increased buyer pool at the $2 million price point seems to be growing based on how many requests for homes I'm seeing.

What homes are selling in Los Altos?  For the most part, the homes selling the fastest are homes with 4+ bedrooms, 2.5 or more bathrooms, 2000+ square feet that are fully remodeled, new, or newer.  I know one home that sold over asking before the open house was done - all-cash.  That home was slightly over $2 million but priced lower.  The bottom line is:  nice, clean, turn-key homes are selling.  The buyer profile is usually:  all-cash (or almost all), fast close, no contingencies.  Homes needing work are taking a little longer to sell but not much.

My suggestion for buyers who have been looking for a long time is to jump into the market as soon as possible because prices are likely to continue their trend up.  If you're looking for a pull-back, it's unlikely to happen.  The trend is up.  Your best chance of getting a relative deal is to focus on off-MLS properties or write preemptive offers on homes before they hit the market.

Yes, but as the spring buying market ramps up it'll take more than just a few open houses to get what you want.  The fact is that as the median and average sales prices keep getting closer to $2 million, buyers are finding it harder and harder to get a "deal".  The biggest issue for buyers is finding a nice home and not overpaying.  Let's face it, when a nice house comes on the market and has 6-10 offers, you're going to pay more just to get in the door.  That's how competitive this market is.  How much more you pay depends on the house.

First - WHERE NOT TO LOOK FOR A DEAL!!

• Short sales
• Foreclosures (have an notice of default already)
• Bank owned properties

But Bryan, those are all great deals!  No, they're not.  Every property that fits one of those categories that has been on the market has sat for a LONG time.  You want to know why?  They have all been overpriced, in bad locations, or had other issues.  If it sits on the market a long time, there's a reason.

Second - Have a local agent

An agent to works in or sells homes in Los Altos will know the market.  They'll know about market activity, buyer profiles (cash, financing - your competition), and properties coming soon.  They'll also know about...

Third - Off-MLS or off market properties

the best way to get a deal in Los Altos (or Los Altos Hills) is to find a home that isn't on the MLS.  You'll typically have much less competition and thus avoid overpaying in most situations.  A well-connected agent will have at least 1 off-market property to show you, even if it's not an exact match.

Fourth - Old listings and everything else

Sellers from many years ago may be interested in selling now, depending on the market.  I also doing mailings to neighborhoods to find possible sellers who haven't done anything with an agent.  Again, find the home and make the deal.  You'll avoid the competition going this route.  The key is not going in with 10 other buyers who drive the price up.

The local real estate market is back to being on fire with mutliple offers the standard, not the exception.  This is simply a matter of supply and demand, Los Altos (and nearby towns as well) have very little supply and there is LOTS of demand.  It's not uncommon for homes to see 10 or more offers.  As a buyer, everyone one of those situations means you have to make an offer above asking price in order to win.

Should you make an offer over asking price?

• Yes, if you really want the house.  The winning bid will go high and how high depends on how many offers there are and the original asking price.  If the home is priced at $1.2 million (a bargain for Los Altos), it's in nice condition, and it's in a nice neighborhood, be prepared to offer much more than asking.  It's not unusual to see offers 10-15% over the asking price in these situations.  But, the key to knowing if you want the house is asking a few simple questions...
• Have you been looking for a long time?  If you spent the last year looking and having no luck, you're going to spend more this year (market appreciation).  You might want to just bite the bullet and get it over with before the market rises too much.
• Do you have to buy a home now?  Whether relocating, buying for schools, or whatever other reason you have if you need to buy now then just jump in and make an offer that will win.  Be prepared to offer as much above asking price is warranted by the situation.
• Is it "the perfect house"?  The ideal house is rare and you're better off NOT waiting for something similar at a lower price.  Prices are rising in Los Altos so the chances of getting a "deal" are extremely low.  You're better off buying what appeals to you now and making an offer above asking price - if it's needed.

You should not make an offer above asking price if...

• You just started looking in the market
• You're not in a hurry
• You still don't know what you really want
• You can't afford the higher price

Keep in mind that waiting until the slower periods in the year means just as little inventory as now with a little less competition.  You may not get what you want and you're not likely to save, but just not overpay.  One way or another, you'll still be competing against other buyers. 

I'm holding open a gorgeous home today in Los Altos.  Priced at $1,899,000 - this home is very affordable and located in one of the quietest neighborhoods in the entire town.  It's within walking distance of the Los Altos Hills Country Club and Loyola Corners.  It's 10 minutes to downtown Los Altos - even with the lights.  You get a nice "country" feel on the street with a nice mix of homes styles plus new and old construction.

This home has been substantialy upgraded in 2005 and 2008 but looks "new".  The floor plan has nice flow to it and offers easy access to the back yard from the kitchen, family room, and master bedroom.  The yard offer a pool with automatic cover and plenty of room to move around.  The lot is 11,904sf.

I can't say enough about this place and highly recommend stopping by to take a look.  We had a lot of visitors to the open house yesterday and I'm sure this will move fast. 

Home buyers are continuing to snap up pretty much anything that comes on the market.  Even though we're not officially in the hot selling season, multiple offers are still prevelant.  The lack of inventory meant only 9 home sold in January 2012 but the average selling price continued to rise to $1,984,286 for single-family homes.  This is a sharp rise from a year ago and is actually the highest January average selling price...ever.  This is a sign of things to come for the Los Altos market overall as the normal hot market time is just starting.

Single-family homes are still selling fairly quickly, only on the market 43 days on average.  They're getting offers in line with listing prices, matching what we saw in November 2011 (97.4%).  For a typically slow month, this shows a strong market to start the year.  What's interesting is that there were 23 new listings and 23 expired listings so the loss of 9 due to sales means a net loss of inventory.  This will see prices most likely hold firm and rise.

Is Los Altos a buyers market or sellers market?  It's definitely a seller's market.  There is no doubt that prices will continue to rise, just as they have in January.  My suggestion for buyers is that they prepare for tough negotiations on prime properties.  We're likely to see a return of cash buyers and multiple offers going into the late-winter and spring markets.

OK, maybe not the most common question, but buyers in Los Altos and other areas of Silicon Valley often ask "Is the Thanksgiving Holiday Week a good time to buy a home?".  Simply put, yes.  As a home buyer, this time of year is one of the best opportunities to buy homes in good areas with less competition and possibly at a better price than other times of the year.

If you've been looking for a while and you know where you want to live, now is the time to take a second look at homes still on the market.  Some other suggestions for home shopping now...

• Take another look at homes that have been on the market a while (possible bargains!)
• There are fewer buyers in the market so new listings may sell with little or no competition
• Adjust your offer price based on the comps and days on market
• Don't be afraid to make an offer of any kind (within reason).  Most buyers want a "SOLD" sign for Christmas

You should also be aware that because there is no broker tour (and usually no new listings), nothing new listings will come on this week in most markets of Silicon Valley.  There will be new listings next week and the week after that.  However, most agents will advise their clients not to list in the week before, during, and after Christmas because people are usually on holiday.  So, the inventory you see is pretty much what you'll get.  The number of homes for sale usually drops quite a bit during December.

So, all that said, now is the time to get in a nice home.  If you're not working with an agent, give me a call.  I can show you the existing homes this weekend but also let you know about homes coming on the market in the next 2 weeks as well as off-market listings. 

This wonderfully maintained home has nearly 2300 s.f. on almost 10,000 s.f. with an excellent floor plan in a very nice neighborhood.  Being in this home means access to Oak Elementary school, Blach Middle School, and Mountain View High School - all top Los Altos schools.  Located on a nice wide street, this location is also very secure and private being at the end of a court.

It has 4 bedrooms, all nicely sized, and 2 bathrooms including the en-suite master bathroom with sunken tub.  Spacious closets, plenty of storage, and an indoor laundry room fill out the left wing of the home.  The kitchen/great room space is ideal for day-to-day living.  There is a formal dining room and formal living room with plenty of space to entertain guests.  There's even a pool in the back yard.

Priced at $1,350,000 - this is a great deal for this neighborhood.

I'll be holding this home open today and will have all the disclosures available to discuss the home with you when you arrive.  Would you like to be living in your new home by Christmas?  Stop by today and let's talk.