I hear this question almost daily: What is going on with the real estate market?
For anyone who has lived in this area for more than a week, it does seem like prices just keep going up, and in many cases by a lot.
Q: What is driving the appreciation in prices?
A: There are a number of factors, but it is primarily a supply and demand imbalance. There are more people who want to move into the area than there are people willing to move out. When demand is high and supply is low, prices go up.
Q: Why aren’t more people leaving?
A: Again, a number of reasons. Many say they don’t know where they would move if they sell. For some, their families are still here, so they don’t want to move away. People are living longer, so they are staying in their houses longer than the generation before them. The other factor that we tend to forget as we are dodging in and out of traffic is that this really is a nice area to live: abundant job opportunities, easy access to culture, top-rated schools, medical care, sports, outdoor activities, airports, intellectual capital and great weather.
Q: Why are so many people trying to move here?
A: For the same reason that people don’t want to leave.
Q: How can buyers afford it here?
A: Do you remember when you bought your house here? Was it 1960? 1975? 2000? 2018? I suspect you thought: “Wow, this is a lot of money. Are we crazy to pay this much for a house?” Now, looking back, you think you were a genius and wonder why you didn’t buy two houses back then. Today, it’s trying to figure out what to do with all the profit you are going to make. The same applies to current buyers; my take is that 20 years from now, they will be having the same conversation.
Q: Do you think there will be a correction?
A: Yes, I do. My crystal ball gets a bit foggy the further you go out, but at some point there will be a correction and prices will drop a bit before they start heading back up.
Q: Are there other factors that impact the market?
A: Yes. Interest rates will be going up and this will undoubtedly have some impact. Today’s buyers know this is part of the reason the market is so robust right now. Changes in tax laws may encourage some sellers to sell sooner rather than later, but I don’t see that having a huge impact.
Q: There has been a lot of discussion about the impacts of the new State Senate Bill 9. Will that impact the availability of new houses and change the supply and demand imbalance?
A: It’s too early to tell, but my sense is that SB 9 – the California Housing Opportunity and More Efficiency Act – will have minimal impacts on our local market. There will be some infill and lot divisions, but so far it appears that it won’t really change the equation much.
Longtime Los Altos resident Owen Halliday is a realtor who manages the Sereno office in downtown Los Altos. Call him at (650) 492-0062 or email Owen@Sereno.com.
