A custom-built home in the heart of California’s Silicon Valley had its price cut by $500,000 last week after sitting on the market since the end of March -- a move that would’ve been almost unfathomable a year ago and a signal that frenzied demand has peaked.
The six-bedroom, five-bath house in Palo Alto -- located blocks from Stanford University and the homes of Google co-founder Larry Page and Steve Jobs’s widow, Laurene Powell Jobs -- is now listed for $7.5 million. It joins a growing inventory of high-end homes in the area that are taking longer to sell.
“We’ve recently noticed a slowdown,” Jack Woodson, who works at Alain Pinel Realtors in nearby Menlo Park, said on a tour of the house in the Old Palo Alto neighborhood. “Buyers are taking more time to decide about making offers.”
Silicon Valley, the most-expensive U.S. housing market, is seeing a pullback by the wealthiest homebuyers after a four-year real estate boom marked by bidding wars and multimillion-dollar prices. Stock-market turmoil, a drop in foreign investors and concerns of a technology-industry slowdown are cooling demand at the high end, even as interest remains robust for more moderately priced properties.
In Palo Alto, an ultra-wealthy city that’s home to many Google and Facebook Inc. executives, homes costing more than $5 million were on the market for a median of 16 days in April, compared with 11 in the same month in 2015 and 10 in 2014, according to data from Irvine, California-based John Burns Real Estate Consulting. The 11 active listings in that price range as of May 14 have been on the market a median of 30 days.
While that’s quick by most standards -- across the U.S., the median time on the market is 67 days -- it’s a departure from recent years, when newly minted millionaires from tech initial public offerings raced against buyers from China to scoop up anemic inventory.
“The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all,” said Dean Wehrli, a senior vice president at John Burns. “The peak is behind us, and that’s becoming clearer and clearer to builders and buyers.”
The San Jose metropolitan area, encompassing Silicon Valley, is the most expensive U.S. housing market, with a median single-family home price of $970,000, according to the National Association of Realtors. In Palo Alto, the median home price was $2.5 million in the first quarter, data from Zillow show. That’s higher than San Francisco, at $1.1 million, and New York, at $616,100.
Across the country, luxury-home sales are cooling as turmoil in the global economy and the prospect of higher interest rates roils financial markets. Silicon Valley has the added pressures of being closely correlated to the tech industry and a top target for foreign buyers.