Fall Real Estate 2006

Publication Date: Friday, October 13, 2006

Megamillion-dollar market
Properties change, prices remain the same

by Ann Duwe

Talk about a real estate downturn turns out to be just so much hot air when applied to Peninsula properties selling for more than $10,000,000. In that market the number of homes for sale, the length of time it takes to sell them and the prices remain relatively stable, according to local Realtors, lenders and builders.

"The two communities with more sales over $10,000,000 are Atherton and Woodside. Currently, there are 17 listings over $10,000,000 in Atherton and Woodside," said Mary Gullixson of Alain Pinel Realtors in Menlo Park. In her experience Atherton offers the most homes in that price range on the Peninsula. Why Atherton? The close-in location, acre-minimum lots and the potential for larger main residences.

Statistics gathered from the Multiple Listing Service suggest that in Atherton there were only two sales above $10,000,000 in 2004, the same number in 2005 and one sale so far in 2006. In Woodside there were two such sales in 2004; five in 2005 and none so far this year. Los Altos Hills averages only one megasale per year.

According to Gullixson, the demand for high-end properties usually comes from families with very specific needs.

"They would prefer to have a new home because a new home offers a more casual lifestyle centered around the kitchen/family room area," she said. These families want a prime location, prefer more than one acre and want a residence that includes a theater, wine cellar, exercise room, great master suite, a library as well as his and hers offices.

Among mega-properties currently for sale, though not on the Multiple Listings, is the estate home begun by the late Phil Goldman, co-founder of Web TV. Goldman died unexpectedly, leaving his 15,000-square-foot "Villa Bella Vista" at the top of Alexis Drive in Palo Alto 80 percent complete.

The estate features a 4,000-square-foot guest house (already completed) connected to the main house by a waterfall and stream as well as a children's pool. The site has 360-degree views, taking in the western hills, the City skyline and San Francisco Bay.

In addition to the usual long list of amenities, the compound has a state-of-the-art geothermal energy system for heating and cooling all of its gracious, glass-enclosed interior spaces. The system is completely noise-free and relies on the constant temperature of the ground to regulate room temperatures. There is a gas back-up system, just in case.

Interior finishing choices on this $26 million property are again under construction. It's not too late for the right buyer to step in and influence the decisions, since these details are not included in the price, according to listing agent Ed Kahl of Coldwell Banker, Woodside. The home received initial publicity when it was first offered for sale two years ago, but neither the price nor the parameters of the sale have changed.

The story of one particularly conspicuous property might have been the cause of all the downward spiraling talk about high-end home prices. Oracle mogul Larry Ellison put his Atherton home on the market for $25,000,000. Subsequently a portion of the property was sold for an undisclosed price. When the home went back on the market, the price was $16,000,000. The new price reflects an adjustment to account for the lot split rather than any reduction at all for the house, Gullixson said.

George Hill of Coast Capital Mortgage in Palo Alto refers to the Peninsula as "Camelot." "People don't leave unless they're forced out by a job transfer, death or divorce," he said.

No one seems to think prices will plummet. Prices as high as $40 or 50 million for very large, unusually magnificent estates are still within memory of Realtors who routinely work with high-end clients. It is a special fraternity. Very high-end properties may or may not ever appear on the Multiple Listings, but word of their availability inevitably travels this private network. These agents have tacit agreements about helping each other. Their clients prize privacy about all aspects of the sale, including the location of the property and the price. These clients pay cash, said broker Tom LeMieux, Coldwell Banker, Menlo Park.

One can look at the numbers and conclude that "high-end real estate has always been in a slump" as did one agent, who meant that home sales in that league have always been fewer and farther between than sales in other segments of the market. Or one can look at the numbers and conclude that "the demand for expensive homes will always be there," as did any number of agents, who meant that when the ideal property comes along, the buyers are there.

The dot-com boom may be over, but the money lingers on.