by Linda Taaffe
Home prices along the Peninsula continue to rise with no indication of coming down any time soon, according to real estate experts.
Since 2012, the median price for a single-family home in every Midpeninsula city -- Palo Alto, Los Altos, Los Altos Hills, Mountain View, Menlo Park, East Palo Alto, Atherton, Portola Valley and Woodside -- has jumped double-digit percentages. And prices have surpassed pre-bubble levels seen during the 2000 dot-com boom. Woodside has seen a 50 percent jump, and Palo Alto and Menlo Park values rose just above 37 percent each. In East Palo Alto, the median price has gone up 85.6 percent, and Mountain View has climbed 27 percent, according to data from MLSListings.
Does this mean the market is heading toward a bubble burst? Here's what a survey of real estate experts in the area have to say:
"This is a very different market than 2000. People want to relate it to 2000 because a lot of the money that is in the marketplace is from technology, but there is a distinct difference," said Bob Gerlach, vice president and manager of Alain Pinel Realtors in Palo Alto.
"This time around, there's real money. Many of these companies that are issuing stocks and whose employees have money to buy houses are very viable companies with great cash flow. Before, the money came and went quickly. A lot of companies were startups that didn't have a product they were selling or making any money on. This is a much stronger market."
Along with the robust tech market, the area is seeing a tremendous migration from the overseas Asian market and an increase in cash buyers. These are fueling demand for housing and keeping the market strong.
In the first half of 2014, the median price for a single-family home in every city in the Midpeninsula was above $1 million, with the exception of East Palo Alto where the median value was $492,000. In Atherton, the median price rose to $4.05 million. Los Altos Hills was $3.14 followed by Portola Valley, Woodside, Los Altos and Palo Alto, which all saw median prices rise above $2.3 million.
"The tech industry definitely sparked this rebound," said Keri Nicholas, an Atherton native and sales associate at Coldwell Banker Residential Brokerage in Menlo Park. "All the job growth is what took the market to the next phase. We're seeing whole companies transferring here from the East Coast, and companies like Facebook and Google hiring like crazy. We are the center of the tech world, and everybody wants to be on the Peninsula."
"It's really hard to get a house under $1.3 million from Millbrae to Mountain View. It's that tight," she added.
Leannah Hunt, a seniors real estate specialist at Sereno Group Palo Alto and past president of the Silicon Valley Association of Realtors and director of the California Association of Realtors, remembers the 2000 dot-com market well. She sold a Palo Alto home for $1 million over asking price during the peak of the market.
"There was certainly a tremendous number of buyers in the year 2000, but there were many more homes available," Hunt said.
At the height of the boom, there were 160 single-family homes on the market in Palo Alto, compared to 34 listings now, she said. In neighboring Mountain View, there were 10 single-family homes and 13 townhomes listed for sale in the third week of September. In an ordinary market, there typically would be about 30 to 35 homes and 40 to 50 condominiums listed there, Hunt said.
"The amount of inventory is the major difference between now and then. We have a lot of people who want to get into housing here, but we have a very limited supply across the Midpeninsula, and that's what's driving up the prices," she said. "If you look at the Peninsula, it is limited by the amount of land we have. We have a finite amount of infrastructure. It's not like other places."
Lack of space, however, isn't the only reason for the unusually low inventory levels the market has experienced over the past two years. There's simply less inventory being freed up. More homeowners are holding onto their property as investments, and fewer people are downsizing or moving after retirement as they did 20 years ago.
Nicholas said downsizing isn't the easy transition it used to be.
"Before, maybe you'd sell your home in Atherton for $3 million and buy something downtown for $800,000. Well now, even though you're selling your home there for $6 million, you might not be able to get downtown for under $3 million," she said. "More people are choosing to age in their homes, which makes the market even tighter."
In Palo Alto, where only 278 homes went on the market during the first half of 2014 and inventory sells in about 14 days, Gerlach said agents are finding themselves going beyond the normal route to find housing for clients.
"Most of our sales go through the market on the MLS, but we're selling more and more homes off the marketplace," Gerlach said. "We're out there trying to find additional housing. We might send letters out to neighborhoods and canvass certain areas just to find homes that might be available for sale."
About a quarter of the homes sold in Palo Alto, Atherton, East Palo Alto, Los Altos Hills, Menlo Park and Portola Valley during the first half of 2014 were not listed for sale on the market, according to data from MLSListings.
Menlo Park is seeing similar demand. The Facebook effect has been tremendous, said Hugh Cornish, an Atherton native and sales agent at Coldwell Banker.
"Areas such as The Willows neighborhood and east of El Camino Real have really, really blossomed and prices have risen dramatically," he said. "These have been markets that have not historically risen as much as West Menlo, but now have done really well, I think, because of Facebook."
Cornish said he's seeing new Facebook money, entrepreneurial money and a lot of young buyers east of El Camino Real who want to put roots down in the area.
"Menlo Park traditionally has been more affordable than Palo Alto, and I think people are taking advantage of that fact. They realize that the neighborhood and quality of life there is very similar, and want to be close to work and not have to face a long commute."
Nicholas said homes in the $4 million-plus price range in West Menlo Park and the Lindenwood neighborhood in Atherton are capturing six to eight offers and selling well over the asking price. She's seeing 20 to 40 people come through open houses in those areas.
"People want the schools, and they only want certain spots," she said.
Nicholas said a recent home in West Menlo Park ended up with two counter offers and sold for $700,000 over the $2.9 million asking price. Another in Lindenwood sold for $1 million over the $3.9 million asking price.
Cornish said downtown Atherton and Menlo Park are also seeing more foreign investors.
"Definitely, 2014 has been a year where we've seen a tremendous amount of money from the overseas market come in and purchase real estate not just to create a home but actually as a long-term investment," he said. "People feel that between Silicon Valley and the venture capital community that this a very good place to put money long term," he said.
The tech boom also has transformed the Mountain View market.
Denise Welch, a broker associate at Alain Pinel Realtors in Los Altos, said all of Mountain View is desirable right now, in part due to its most notable resident, Google.
"The section that used to be considered the lower end because it wasn't in the Los Altos School District is increasing in value because all of Mountain View is very centrally located to three of the area's biggest employers: Facebook, Google and LinkedIn."
Welch said the home she bought in 1984 for $150,000 will now sell for $1.2 to $1.3 million in exactly the same condition as she bought it.
Downtown condominiums are selling for more than $1 million, and a one-bedroom, one-bathroom condo will rent for $1,800 a month, she said. The lowest-priced single-family residence was an 821-square-foot, three-bedroom, two-bath home with no garage located near Lockheed Martin that was listed for $725,000. The next lowest home was listed at $1.1 million in the downtown area.
"What we're seeing in Mountain View now are the Palo Alto prices of yesteryear," she said.
Gerlach said he sees no end to what's going on in the market right now.
"This is going to be a very expensive place to live," he said.