The latest figures from Zillow show home sale prices in Palo Alto have dropped 7.1% since its highest point last year.
It is one of the several examples in the region showing how home prices in the Bay Area continues to cool.
"I think it's good," Stanford resident Trevor Hastie said. "The prices were way high here. For example, when we hire faculty at the university, it's really difficult because as soon as they see the cost of housing, they get scared."
There are a few reasons for the cooling market, but the region's dependence on the tech industry and adjustments to work during the pandemic are having a unique effect on the prices.
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"The rise of remote work - that's really decoupling the location of the office from where people can live when you work there," Zillow economist Jeff Tucker said. "And that's probably a bigger factor in the Bay Area than anywhere else in the country."
Zillow's latest data also shows home sale prices in Santa Clara County overall have dropped 6% since it's highest point.
It is also taking longer to close on a home in Santa Clara County. While buyers now have falling prices to monitor, they also have an advantage to negotiate with the seller to pay closing costs and other expenses.
But despite the drop in prices, the cost to own a home in Palo Alto is still quite expensive.
"I don't know that we could afford the house we're living in today if we had to go buy it today," Palo Alto resident Steven Levine said.
Higher interest rates are prompting buyers to reconsider jumbo loans for a new home. That is because monthly payments are potentially thousands of dollars more now than a loan secured last year.
The price drop - even significant ones like in Palo Alto - still does not help make a home much more affordable.
"That drop in the home prices is more than offset by the increase in interest rates, which is raising that borrowing cost," Tucker said. "And so, in today's market, there's not really any winner in the Bay Area."
New listings are also slowing, according to Zillow, in part because sellers locked into fixed rate loans may not want to get a higher rate on a new home and do not want to give up California tax rates that favor years-old sale prices.
