How closely do Palo Alto home prices follow tech stocks?

Closer than the county data suggests — close enough that the two analyses tell genuinely different stories.

Why I ran the question twice

The regional article uses the federal home price index for Santa Clara and San Mateo counties, going back to 1990. That is the right instrument for a regional question and a blunt one for a particular town: a county index combines very different cities, price ranges and property types, and Palo Alto’s exposure to tech wealth is not the county’s exposure to tech wealth.

In the county numbers, the direction of the tech year mattered and the size of it barely did — a 30%-plus Nasdaq year was followed by 6.2% county growth against 6.1% after an ordinary good year. That result is real, and it is the kind of result a county average is prone to producing, because averaging across a whole county is exactly how you flatten the places that move most.

So I ran the question again on Palo Alto itself. I went to the MLS and pulled every Palo Alto single-family sale in its records: 13,371 sales with a contract date from 1998 to this September.

I dated each sale by the day the buyer and seller agreed on a price, not the day it closed — falling back to the close date in the few cases where the contract date was missing. Closing usually comes about four weeks later, and four weeks matters when you’re lining houses up against the stock market. A handful of records go back to 1994, but the MLS only has the full picture from 1998, so that’s where I start.

For each year I took the median price per square foot of the contracts signed that year, for homes between 400 and 20,000 square feet. Then I paired the Nasdaq’s year-end change for 1999 through 2024 with Palo Alto’s change the following year, 2000 through 2025 — and ran the counties over those same Nasdaq years, so the comparison is fair on timing even though a median of real sales and a repeat-sales index are different animals.

Over that stretch, the median price per square foot went from $400 in 1998 to $2,166 so far in 2026. That’s more than five times as much. The Nasdaq did better, about ten times from its 1998 close to its 2025 close. In fairness to your house, you can’t host Thanksgiving in an index fund.

A bad year for tech, then a dip

Each dot compares one year of the Nasdaq with Palo Alto’s price change the year after. The pattern is hard to miss. When tech stocks had a good year, Palo Alto prices tended to climb the next year. When they had a bad one, prices tended to slip.

In numbers, every 10% move in the Nasdaq went with roughly a 2% to 3% move in Palo Alto’s price per square foot the following year, depending on whether you count the dot-com years. In the county data it was closer to 1%.

The Nasdaq fell in seven years between 1999 and 2024. In five of the years that followed, Palo Alto’s median price per square foot fell too. On average it dropped 3.3%. The two counties rose 1.6% in those same years.

That is worth sitting with, because it cuts against the running joke. Palo Alto is not immune. It is the more responsive of the two, in both directions.

And here the size of the tech year shows up, which is the clearest difference between the two analyses. After the seven years the Nasdaq rose 30% or more, Palo Alto’s median price per square foot rose an average of 13.8% the next year. After an ordinary up year it rose 8.0%. The counties, over the same years, managed 7.6% and 6.5% — barely distinguishable from each other.

So in the county data, direction mattered and magnitude didn’t. In Palo Alto, both matter. A town with this much of its buyer pool paid partly in stock does not average away the way a county does.

That is the whole case for reading both articles, and it is also the limit of what either can tell you. A relationship this visible is still not a mechanism:

The stock market is one source of buyer wealth. It is not the Palo Alto housing market.

Two crashes, quarter by quarter

The share of homes selling over asking is my favorite thermometer for this market. It reacts faster than prices do.

• The dot-com crash. In early 2000, 83% of Palo Alto homes sold over asking. By late 2001, it was 8%. The median price per square foot fell from $668 in late 2000 to $492 by the third quarter of 2001, a drop of about 26%.
• 2022. Early that year, 74% sold over asking. By the last quarter, 32%. The median price per square foot went from $1,971 in the spring to $1,658 at year end, down 16%. A year later it was back to $1,856.

Both times, Palo Alto caught a cold within months of tech sneezing. One caution: quarterly numbers jump around, because some quarters have only about 50 contracts. Look at the shape, not the decimals.

Cash is back

One more thing jumped out at me. In 1998, 8% of Palo Alto buyers paid all cash. By 2015 it was 43%. When mortgages got cheap, it dropped, to 21% in 2021. So far in 2026, it’s back to 38%.

The MLS can’t tell me where that cash came from. But with the average 30-year mortgage rate above 7%, a buyer who can sell some stock instead of borrowing has a real edge. So does a seller who knows how to weigh a cash offer against a slightly higher one with a loan.

And the last three years?

The Nasdaq rose 43% in 2023, 29% in 2024 and 20% in 2025. Palo Alto’s price per square foot rose 7.1% in 2024, 4.3% in 2025 and 7.7% so far in 2026. Solid, but less than the old pattern would suggest.

Mortgage rates are my best guess, the same one I reached in the regional piece, and it is a guess. Borrowing costs, how much was for sale, who was hiring and what kinds of homes happened to come to market were all moving at once. Nothing here separates them.

Even so, 2026 has been strong. So far this year, 70% of Palo Alto homes have sold over asking — the highest share since 2015.

What this means if you’re selling in Palo Alto

A pattern this visible invites a formula, so let me close the two doors it opens before anything else.

A good tech year is not a reason to postpone a sale. If you are already considering one, I would not hold a well-positioned listing back because the Nasdaq might generate more buyer wealth next year. This year’s competing inventory is knowable. Next year’s is not, and neither is next year’s rate environment, and neither — for that matter — is next year’s Nasdaq.

A bad tech year is not automatically a reason not to sell. The average dip after a down year is 3.3% in a town where the median price per square foot has gone from $400 to $2,166 since 1998, and where every dip so far has been followed by a new high. Three per cent is a number; the right buyer for your particular house, in the season you actually want to move, is a different kind of number. In two of those seven years prices rose anyway.

What the Nasdaq can do is tell you what sort of room you are walking into. What decides the outcome is nearer to hand: available inventory, borrowing costs, buyer confidence, your price segment, the condition and presentation of the house, what else is on the market the week you list, and the house itself.

A few things worth holding on to:

1. Read the Nasdaq by the year, not the day. A tech year has shown up in Palo Alto prices the following year more often than not. A tech week has shown up in nothing.
2. After a bad year for tech, price early and carefully. In the years after a Nasdaq drop, 39% of homes sold over asking on average. After up years, about 60%. Buyers get choosier, and an overpriced home sits — which is a pricing instruction, not a waiting instruction.
3. After a strong year, don’t underprice out of nerves. The following year has usually been a good one here.
4. Expect cash. More than a third of buyers this year paid all cash. Terms and timing can matter as much as the top number.

The bottom line

So, about that running joke. Do Palo Alto home prices really never go down? Not quite. The median price per square foot dipped in seven of the past 28 years, and most of those dips came the year after a rough one for tech. But so far, every dip has been followed by a new high. The joke gets the details wrong. Over the long run, it still has a point.

Use the Nasdaq as context. Make the selling decision from the housing market in front of you — which is a thing you can actually look at.

Next in this series: Atherton, Menlo Park, Los Altos, Los Altos Hills and Hillsborough, once I’ve pulled their records too. The regional picture, if you have not read it, is in the companion piece.

If you’re wondering what all this means for your home, I’d love to go through the numbers for your street with you. English or 中文, no pressure, and still no stock tips.

Talk through your home’s numbers

Prefer to text? Text Maggie at 650.709.5588.