When Akiko Hata and Georgio Lagna relocated from Boston this year, they set their sights on Palo Alto. After renting an apartment during their search, they moved into a townhome in Palo Alto's Sterling Park development in mid-September.
"We immediately decided it was a great community to be in," Lagna said. "It came to us very quickly that a single-family home like we had on the East Coast would be out of our range in the Bay Area, and so we focused on condos in our search."
The markets in Palo Alto, Mountain View and Menlo Park have been awash with condominiums and townhomes selling at prices far more affordable than they were at peak levels in 2007-8. Homeowner hopefuls are shopping for a steadily increasing number of condominiums, where the square footage of the home is individually owned and a portion of the shared facilities is collectively maintained through annual fees.
"After the market decline in 2007, buyers were wary, but by 2010, they were more optimistic. ... Condos are rebounding with the rest of the market," Gwen Luce, a Coldwell Banker, Menlo Park, Realtor with more than 20 years of experience, said.
Despite sluggish sale prices for condominiums in Menlo Park and Mountain View, the market is showing signs of increased interest in Palo Alto, Galen Carnicelli, sales manager for Classic Homes, which built the new Sterling Park development in Palo Alto, said.
"It's a good, hot market in Palo Alto and will continue to be for the foreseeable future," he said, adding that no new condo complexes are slated to be built soon. By mid-September the new 96-home development had sold all but one of its residences.
Recent condominium sales prices in Palo Alto show resilience characteristic of local real estate, with per-square-foot prices recovering slowly but steadily this year, according to figures available at Bay Area multiple listing real estate site MLSListings.com.
The large number of sales in Palo Alto and surrounding areas is fueled by two types of buyers, real estate agents say. A steady number purchase condominiums as the next step in transitional housing after renting or after downsizing from a single-family home in the area. Others, attracted to Peninsula communities and access to high-performing schools, see condos as an alternative to costly single-family homes.
"This arrangement is perfect for couples who can't afford a million-dollar home," Luce said.
Despite affordable prices, condos in Palo Alto and in more sluggish markets are staying on the market for a record number of days and selling at more affordable prices, with average prices staying flat or dropping in Mountain View and Menlo Park. The market currently favors buyers, who can take advantage of low interest rates that are equivalent to 1975 levels, Realtors say.
"People expect prices will stay very flat for awhile, but the interest rates are attractive and that's a motivator for people who are a little gun-shy.
"It's really a wonderful time for people to take advantage," Terrie Masuda, a Los Altos Coldwell Banker Realtor with more than 20 years of real estate experience on the Peninsula, said.
Low prices and desirable listings on the condominium market are opportunities for renters looking to make a leap, she added.
"It used to be that you could rent something nicer than you could own, but that isn't the case anymore," Masuda said.
Many would-be first-time buyers are nonetheless sitting on the fence about making a purchase. Potential buyers often express interest in purchasing condominiums as rental properties to supplement income, Realtors note, but complex association regulations set limits on percentage of complex units that may be non-owner occupied. Condos available at current prices might better be considered long-term opportunities, Realtors say.
"As an investment, if you can sit and hold your condominium and keep it for awhile, then the value will go up," Masuda said.
With condominium values still slow to recover, Realtors suggest potential buyers see condos as a means to afford desirable but expensive real estate on the Peninsula rather than a short-term financial decision. Long-term investors on the market for a condo will see property values recover in coming years, Realtors predict.
"You should buy real estate not as a place to sell, but as a place in which to live. I've lived here a long time, for 40 years, and for as long as I've watched, the housing market always gets better," Masuda said.