Publication Date: Wednesday, March 12, 2003

In search of trophy homes
Market is slow, but steady, for expensive homes

by Carol Blitzer

Photos by Don Feria

While the glory days (for sellers of high-end property) of 2000 are long gone, that doesn't mean homes selling for more than $5 million aren't moving, say local Realtors.

"There are many buyers that are looking in the upper end. Similar to the stock market, there is a lot of money just waiting for the opportune time to purchase," said Mary Gullixson, an agent with Alain Pinel Realtors in Menlo Park.

Guarded by a gate, this home on Fleur Place in Atherton was offered at $8.75 million in early March.

Last year there were 18 sales of homes over $5 million in Atherton, up from 15 the year before, but nowhere near the 55 sales in 2000, she said.

Instead of dot-com instant millionaires, buyers of the more expensive local properties are often involved in the Silicon Valley high-tech economy - sometimes as CEOs, venture capitalists or patent attorneys. "There are still a lot of buyers, with cash," said Jim McCahon, a Woodside-based Coldwell Banker agent, noting that many pulled their money out of the stock market and are hesitant to take another risk. Instead, they're waiting for the right property at the right price.

High-end buyers are looking for what everyone else is: more bang for the buck, Realtors agree.

"Buyers are particular, they want a house that's unusual but must have a certain level of class and elegance. They're going to be selective about where they put their money. When you buy a trophy home you take more time to do it," said Miles McCormick, a Menlo Park-based Coldwell Banker agent.

"What a high-end buyer is willing to pay for is value. They're not waiting for foreclosures, but they have a very keen sense of value. The properties that are priced appropriately are getting activity," according to Peter Cowperthwaite, of Cowperthwaite & Co., Portola Valley.

Home prices in Woodside, Portola Valley and Atherton came down in 2002. In early March, homes on the market included Redberry Range in Portola Valley, $8.95 million.

"At the high end, there is often a large gap between what sellers anticipate they can get for their home and what buyers are actually willing to pay. In the last quarter of 2002 and early 2003, there were a number of properties that initially listed in the $4 million-$5 million range that finally sold in the $2.5 million range after being on the market for many months," said Hanna Shacham, a Palo Alto-based Coldwell Banker agent.

How long property sits on the market seems to vary widely. "It's a bizarre market because some things sit and some things sell," noted McCormick. "It generally means that if a buyer is financially and emotionally ready for it, there's enough inventory out there."

Local buyers who already own a $3 million home can take their time choosing what McCormick calls their "trophy home."

"They have to find the right house and feel they're paying a fair price to make the change. When they find the right house, right location, right style for them, then they're motivated. Until then, they can stay in their $3 million house," he said.
In the first six weeks of 2003, "we sold three homes over $5 million. ...That's a pretty good start for the year. They adjusted their prices. People are starting to be more realistic now. The further we get away from 2001, the more realistic they (sellers) are," noted McCahon.

Euclid Avenue in Atherton, $8.2 million.

Coldwell Banker agent Tom LeMieux, who specializes in high-end properties in Atherton, Menlo Park, Portola Valley and Woodside, sees uncertainty in world affairs affecting the local market. "Buyers can't get a trend line. We need the Iraq decision to be made and hopefully get behind us. It's not that sales are not happening and buyers have withdrawn; there are plenty of buyers out there," he added.

But buyers are making what he calls "cautious offers. They're concerned what the market's going to do going forward. I don't see our market returning to a strongly appreciating (one) soon, but there's not much downside risk either," he said.

Will rapid appreciation ever come back?

"In 2004 we'll see the appreciation again in high end," predicted McCahon. If 2003 is a recovery year and corporations report better profits, people start reinvesting in the stock market, and whatever happens in Iraq happens and is over, then more buyers will enter the high-end market, he said.

"That doesn't mean a repeat of 1999-2000, when people were throwing money at properties. I don't think we'll see that ever again," he said.

Ed Kahl, who sold the priciest property in Woodside last year at $27.5 million, said "there are many people in this area who have a great deal of money and some of them realize this is the bottom of the cycle and the time to invest in top-quality locations. Historically, properties appreciate 200 to 400 percent every decade. So they feel Silicon Valley will come back sometime in the next five or seven years and they're willing to put their money where their mouth is."

Carol Blitzer can be reached at cblitzer@paweekly.com.