“Premium” is a word developers often use when describing new homes on the Midpeninsula.
With little land available for large developments, builders say demand for “new” exceeds supply, keeping them optimistic about selling the five local new developments at prices higher than resale of older, similar homes.
“There’s a segment of population that only wants new and won’t consider existing homes,” Rob Parker of Regis Homes, developer of Altaire in Palo Alto, said. “This keeps new-home building profitable since there’s a good base for the market. Palo Alto has very little room for development, which means a higher premium.”
Palo Alto real estate agent Bonnie Biorn noted that — although the recession has affected the real-estate market as a whole — the local new-home market has held up relatively well. This, Biorn said, is because the new-home market is primarily driven by the land available for redevelopment. The Midpeninsula’s limited supply and high income means high demand.
Altaire, which consists of 103 townhomes and condos, has been on the market since December 2008. These homes range in size from 778 square feet to 1,958 square feet, with one to four bedrooms each and prices ranging from $650,000 to $700,000. Of the 103 residences, 74 have been sold, at a rate of approximately six to eight per month since 2008.
For new-home buyers, the main attractions of Altaire are the Palo Alto location and school district, Parker said. In addition, Altaire is adjacent to the Oshman Family Jewish Community Center, which provides fitness, entertainment and cultural activities.
Parker said Palo Alto’s limited room for new construction creates higher demand among the customer base.
This segment of new-home buyers in the Midpeninsula has a distinct profile. According to Parker, typical customers are young couples, usually in their early 30s, who are first-time home buyers. Gary Pike, also of Regis Homes, added that many of the buyers are Asian. They tend to be well-educated and either have small children or are planning to start a family, thus the quality of the nearby schools is a big attraction.
For these customers, convenience and peace of mind draw them to the new-home market, Parker said.
“People like new homes because there’s guaranteed to be no problems. All systems and electrical appliances are new, so there are no surprises,” Parker said. “Also, new homes come with a builder’s warantee, so customers aren’t on their own, and sometimes they can customize the appliances and furnishing of the new home.”
Robert Freed of SummerHill Homes — a developer building a block of Palo Alto residences called Redwood Gate — added that new home buyers in the area are attracted to modern floor plans and the easy commute to other areas of Silicon Valley.
Redwood Gate is comprised of 45 homes and a park on 3.9 acres of land previously owned by the Elks Lodge, on the edge of the Charleston Meadows neighborhood. According to Freed, these are a combination of single-family homes and attached duplex homes, both of which have three to four bedrooms each. They range in size from 1,769 to 2,300 square feet, with prices starting at $1.3 million. SummerHill has sold 32 of the 45 homes at Redwood Gate, although only 23 have been fully completed.
Freed said that there are fewer homes on the market than in the past, due to limited space.
“In areas like Palo Alto, where there are substantial existing residential homes and little land for development, the number of existing homes for sale will always be higher than the new homes for sale,” Freed said.
Pike, of Regis, said that new homes have retained their approximate 20 percent premium over resale, though Freed added that the exact premium varies.
“There is still a premium for new homes; however the premium is largely driven by location,” Freed said. “It is common for buyers to be in the market for longer before making a decision. In the past, buyers wanted new exclusively. Now when they are looking for new, they want the new home to be in prime locations with good schools in good neighborhoods.”
Aside from Altaire, Regis has also built the brand-new Gables End townhomes in Mountain View. These homes also debuted on the market in 2008, although they cost about $100,000 less than their Palo Alto counterparts. Gables End consists of 108 homes, of which 105 have been sold. They are all two- to four-bedroom residences with two-car garages, ranging from approximately 1,250 to 1,950 square feet.
“Gables End is good for its location,” Parker said. “It’s right on the Palo Alto and Mountain View border, less than a mile from the Google campus, so it has the good attributes of Palo Alto with a lower price.”
In the Sylvan Park neighborhood of Mountain View, another new-home option is Mondrian, a condo development built by Shea Homes. Margaret Salazar of Shea Homes said that Mondrian — whose residences fall into the same price range as Gables End — offers four different floor plans, ranging from a three-bedroom, 1,410-square-foot plan to a three-bedroom, 1,591-square-foot plan. All have attached two-car garages. Mondrian has 151 of these homes, of which 52 have been sold, Salazar said.
In Menlo Park, Arizona-based developer Taylor Morrison has six new homes available in the Linfield Oaks area, called Morgan Lane. All of these are three-bedroom and four-bedroom single-family homes, ranging from 1,506 square feet to 1,951 square feet. Prices start around $1.1 million.
Despite the limited amount of land available, Parker is optimistic about the future of the new-home market, as developers finish current projects and seek new areas.
“The Peninsula has strong employment and income and limited space. This combination of high income, good employment and lack of supply will keep the market strong,” he said.