Silicon Valley’s luxury real estate market has split into sharply defined tiers, according to Chris Iverson, a realtor at Golden Gate Sotheby’s International Realty. Ultra-luxury homes above $15 million are selling rapidly, and entry-level listings under $3 million attract intense competition. But between $5 and $10 million, buyers are pausing, hesitating, or simply leaving the market.

Iverson says the issue is not affordability but a gap between what buyers expect at this price and what the market actually offers.

“As you move into that five to ten million range, buyers want more than just a roof over their head,” Iverson explains. “They want a bigger lot, more bedrooms, more amenities – maybe a pool. They expect to get all this, but when they start looking, they realize those things aren’t available. That’s when disappointment sets in.”

Geographic Limits on Luxury

This disappointment is rooted in hard geographic constraints that no amount of money can overcome in certain areas. Palo Alto’s zoning and small-lot sizes make it impossible to deliver the complete package many buyers want at the $10 million price point.

“In Palo Alto, even in the $10–15 million range, you’re still not getting more than maybe a quarter-acre lot,” Iverson says. “You might get a pool or a guest house, but you can’t have a giant house, a pool, a guest house, and a car barn. There isn’t enough space.”

For buyers who want it all – a large home, pool, guest house, car barn, and a spacious lot – the only option is to relocate to less-dense towns like Atherton. But that comes with its own challenge. “If you want all those features, you need a big lot,” Iverson says. “But in Atherton, lot values alone are approaching $10 million, depending on the neighborhood. That leaves little budget actually to build your house.”

Iverson recalls a recent conversation with a buyer who had been searching in Atherton for three years. “He was considering either a turnkey house for $25 million or buying a teardown for $15 million to build custom. But when he added up everything he wanted, the numbers still didn’t work. It’s a tough realization for someone to hear that $25 million still isn’t enough to get everything on their list.”

Prolonged Waiting and Missed Opportunities

This mismatch in expectations leads some buyers to delay purchases for years, hoping the right property will eventually appear at their target price. Iverson warns this strategy can backfire.

“I had lunch with someone who took six years from the time I met her to when she actually bought a house,” he says. “During that time, prices basically doubled. She went from being able to buy in a great neighborhood with a nice house to settling for a marginal neighborhood with an okay house, simply because her income didn’t keep up with the market.”

Many mid-tier buyers, Iverson observes, are now choosing to stay put and renovate. Instead of selling to move up, they’re adding space, remodeling, or building accessory dwelling units in their backyards. This trend further restricts inventory in a market already short on supply.

Ultra-Luxury Segment Remains Strong

While the mid-tier slows, the ultra-luxury segment above $20 million is thriving, with buyers operating under different constraints and motivations.

“There’s an opportunity to build high-end homes and sell them,” Iverson says. “Spec homes listed at $50 million will sell, because there’s a group of buyers who have a lot of money and no time or patience. They’ll pay a premium for something they can move into immediately.”

These buyers often purchase the home fully furnished. “They’ll walk in, like what they see, and take the furniture along with the house. They hook up their internet and start living,” Iverson says.

At the lower end, competition is driven by scarcity. “In Palo Alto, you can’t get into a single-family home for under $3 million,” Iverson notes. “There’s fierce competition because people are just happy to get a roof over their heads and three bedrooms.”

In contrast, mid-tier buyers are no longer motivated by scarcity but haven’t reached the level of wealth where convenience outweighs price. “That’s why we’re seeing softness in this segment,” Iverson explains. “There’s a disconnect between what buyers expect and what’s actually possible at that price.”

Market Impact and Outlook

Hesitancy in the $5–10 million range is creating an unusual market dynamic: strong demand at both ends but persistent softness in the middle. “As you move up in price, buyers become more willing to wait and less willing to compromise,” Iverson says.

Whether this is a temporary adjustment or a lasting feature of the market will depend on how quickly buyer expectations realign with geographic and financial realities. For now, many mid-tier buyers are waiting or renovating, even as prices remain out of reach.

This standoff between expectations and reality is keeping Silicon Valley’s $5–10 million segment in limbo, underscoring the limits of wealth in a region where even substantial sums can’t guarantee the dream home.