Even with the market cooldown, demand for homes priced at $5M and up remains steady.

During a year that has seen a residential real estate market cool-down thanks to rising interest rates and other economic and political factors, the Midpeninsula’s luxury home market has not been immune from its effects.

Insiders know, however, the local luxury market is a resilient one with a national and international reach and reputation.

Though agents report stabilizing prices, fewer multiple offers, a continuing lack of inventory and cautious buyers moving into the autumn season, it’s not like there haven’t been some breathtaking recent transactions.

Take the July sale of adjoining properties at 1934 and 1936 Waverley St. in the Old Palo Alto neighborhood for $28.5 million – the third-largest sale ever of a private residence in the city.

The two-story, three-bedroom, five-bathroom contemporary home on a 10,971-square-foot lot was designed by EYRC Architects of Culver City and built by San Francisco-based Matarozzi Pelsinger Builders Inc. in 2015.

“This sale represents the ongoing desirability of the local market,” said Hanna Shacham, sales associate in the Menlo Park office of Coldwell Banker Real Estate, who served as exclusive listing agent for the property. “Luxury buyers continue to seek exquisite properties with large lots in exclusive neighborhoods, like Old Palo Alto and Professorville.”

The Waverley Street home features an enormous glass window imported from Europe, an open-kitchen format, and a second floor that sports stainless steel panels and oversized windows. The home’s basement has a 700-bottle wine cellar and tasting room that opens into a landscaped sunken exterior courtyard.

A guest house on the adjoining 10,535-square-foot property features one bedroom, one bath, a fitness/yoga studio and kitchenette.

On the market for 11 months, Shacham said the property was on MLS Members Only, so it could only be viewed by real estate agents and was not listed on sites such as Zillow.

The sale of the Waverley Street properties reveals an emerging trend, Schacham said, of growing interest among luxury home buyers – many of whom are commuting to work again – in more established, centrally located neighborhoods in Palo Alto, Menlo Park and Atherton. This is the latest shift after buyers snapped up spacious homes on sprawling properties during the COVID-19 pandemic in more rural neighborhoods of Woodside, Portola Valley and Los Altos Hills.

“The luxury home prices remain steady as inventory is very low in 2022,” Shacham said. “There were many more opportunities at the end of 2020 and during 2021.”

It will continue to be a challenge to find suitable luxury properties on the Midpeninsula this fall for a large number of potential buyers, she said.

Despite relatively low inventory in all price ranges in the region, real estate professionals say they’ve seen an unusually high percentage of more expensive properties on the local market in recent months, according to Leannah Hunt, Realtor in the Palo Alto office of Sereno Group.

In late summer, out of 57 properties listed in Palo Alto, 26 were priced at $5 million or above, she said.

“In my 33 years of local experience, I can tell you that is an unusually high percentage,” Hunt said.

Midpeninsula home sellers retain high expectations this fall, Hunt said, but conditions have slowed compared to last spring’s more vigorous market.

Many sellers will have to adjust their asking prices accordingly, she said – a trend she has already seen in the market, citing one property that has dropped from $12 million to $9.8 million.

Statistics from Palo Alto compiled by Hunt’s organization, Christie’s International Real Estate Sereno, reveal a slightly less robust market this year. Home sales dropped from 43 in August 2021 to 28 in August 2022, median days on the market increased to 13 this past August from nine a year ago, while the median sales price dropped to $3.39 million from $3.47 million in August of last year.

Laurel Hunt Robinson, also a Sereno Group Realtor, said despite recent predictions of a slow local real estate market – in both luxury and more moderately priced homes – are more balanced and “normalized” compared to the unusually active period from late 2020 to early 2022.

“This fall should bring a lot of great opportunities for buyers,” she said, noting intense competition for properties has eased a bit. “I do anticipate increased activity as the season progresses. During September, contractors and stagers getting properties ready for the market were very busy.”

Hunt Robinson said well-priced, well-presented, move-in ready properties are still in high demand among high-end buyers, especially as many potential buyers are back to more normal in-person work and school routines.

The luxury market has “softened a bit” in recent months, said Brian Chancellor, Sereno Group Realtor based in Palo Alto.

“We are still super lucky to be in this area,” he said of the Midpeninsula. “We are largely insulated from many of the economic issues impacting the country.”

If anything has had an effect on the area’s most affluent buyers, it has been the mercurial stock market of 2022. Rising interest rates have less impact on luxury buyers than those at the entry level and, historically speaking, are still quite reasonable, Chancellor said.

“Considering what may happen down the line, there are probably many buyers who will have some urgency to take advantage of the rates now,” Chancellor said. “I do see a renewed sense of vigor in the fall market ahead.”

Decadent details: A look at what’s included in luxury properties for sale on the Midpeninsula

From home theaters and spas to infinity pools,  the Midpeninsula’s housing market offers plenty of decadent details, but here’s some unimaginable,  one-of-a-kind extras that come with properties currently for sale (or recently sold) on the Midpeninsula.

–A 700-bottle wine cellar and tasting room that opens into a landscaped sunken exterior courtyard

–An underground archery range

–A garden that includes the largest collection of camellias in northern California and has been documented for the Smithsonian Institutions Archives of American Gardens and accepted as part of the Garden Club of America collection

–A 6,000-square-foot pool pavilion

–Three acres of pinot and merlot vineyards

–A home gym with 12 Cybex exercise stations

–An eight-car garage with EV charging

–Four custom guest houses ranging between 300 and 1,900 square feet 

–A tree house with a pullout sofa bed, composting toilet and 50-foot bridge connecting to a floating open deck with forest views

–An indoor ice hockey rink 

–An Indoor rock climbing wall

Information curated from Realtor listings of Midpeninsula homes on the market in September.