Fall Real Estate 2002

Publication Date: Wednesday, October 16, 2002

Breaking into or opting out
Is a Palo Alto home within this couple's grasp?

by Jessa Vartanian Aubin

I sometimes wonder what my husband and I will do on Sundays if we ever manage to buy a house in Palo Alto. Open house trolling in the 94301 zip code has been our weekend routine for 10 months now. We're so seasoned we know to wear sandals -- easier to slip off when faced with those "Please Remove Your Shoes" signs.

Jessa and Paul Aubin are happy for now in their Melville Avenue rental, but are still seeking a permanent home in Palo Alto.

This isn't the first time we've been in the market for a house in Palo Alto. When my husband and I (he's a D.C. transplant, I'm from Woodside, we're both 38) got engaged three and a half years ago, I sold my Willow Glen bungalow and moved into Paul's one-bedroom rental duplex on the corner of Cowper and Lytton.

We walked everywhere: Zibbibo for happy hour, Blockbuster for movies, Pasta? for dinner, Whole Foods for fresh fish. We walked to the dry cleaners, bank, post office, drug store, library, bookstore, movie theater, and more. Granted, I'm a self-employed writer who works out of the house, but in the year we lived on Cowper I put less than 5,000 miles on my car.

The house hunt began in earnest post-wedding in September 1999: Newlywed Couple Seeking 3/2 in Palo Alto for $800K or Less.

Unfortunately, we didn't realize how much we'd miss our "within-walking-distance" lifestyle when, in April 2000 -- the height of the frenzy -- after a torturous seven-month search that brought me to tears more than once, we gave up on Palo Alto and settled for a house in the foothills of San Carlos. We beat out nine other buyers in two rounds of bidding to own a 1940s-original, 1,200-square-foot ranch with full basement on a premier tree-lined street. Our prize featured pink walls, pink carpet, a Daffy Duck chandelier, and an 8,000-square-foot lot of wall-to-wall weeds. We closed in five days (got to make your offer attractive, right?).

Woefully under-priced to incite a bidding war, a photo of our new home was showcased on the cover of USA Today several weeks later as proof of the real estate madness in the Bay Area. The caption blurted: "2 bedrooms, 1 bath. List price: $599K. Sale price: $797K." We prayed no one we knew would see it. The immediate feeling of winning that bidding war was sweet. We speed-dialed friends and family: The search is over! A day or two later, however a sinking feeling crept in. We'd forked out more money than anyone else had been willing to. Nor did it help that the week we closed escrow, the NASDAQ plummeted 25 percent, "the worst weekly performance of all time" shrieked CNN reports -- and the bear market began.

The house had incredible potential and we decided to make it ours and enjoy it. But, after 14 months in San Carlos, we found we missed Palo Alto. We missed being able to walk everywhere, the bustle of University Avenue, the mix of students, singles, families and retirees. So after sinking thousands of dollars and untold hours of sweat equity into our new house -- new Pella windows and doors throughout, new landscaping, a 300-square-foot Home & Garden-worthy deck with stainless steel railings Paul constructed single-handedly, a professional Thermador gas cooktop, and lots more -- we put it on the market in June 2001.
When it sold five months and two buyers later for significantly less than we paid for it, we packed up our stuff and headed back to Palo Alto -- as renters. We were ecstatic.

Buy at the high. Sell at the low. Not exactly an ideal financial strategy, but we figured if we moved fast enough, we could take advantage of the low and land a house in the town where we'd wanted to live all along. And it isn't that my husband and I are cavalier about money, because we're not. We have one credit card and pay it off in full every month. We maintain a larger-than-recommended reserve for emergencies such as unemployment. Heck, we've been agonizing for months whether or not to buy a new TV. In our minds, moving back to Palo Alto boiled down to quality of life, and we were willing to lose money to achieve it.

In what was a long overdue stroke of timing karma, to stage our search we managed to score a 3/2 rental house in Professorville that my father and aunt own, as their long-term tenant gave notice at the exact same time we sold our house. Just 10 blocks off University Avenue, the house was built by my now-deceased immigrant grandfather. My parents, newlyweds at the time, were the first tenants in 1958, and they plan to move back in if the day comes when they can no longer drive. It's a nice feeling, knowing my parents cooked dinner in the same room we do now.

We've been searching the MLS Web site on a daily basis ever since. I e-mail MLS numbers to Paul. He fires numbers back at me. We take virtual tours. We map properties. (Railroad tracks? Now the price makes sense...) We tour open houses. We scour the Weekly. We e-mail Erika, our wonderful-not to mention patient-agent, for details on any listings that interest us. And yes, we write offers, four or five in the last 10 months, beaten out virtually every time by deeper pockets.

What are we looking for? At the bare minimum, three bedrooms (one for us, one for potential kids if we decide to have them, one for an office/guest room), two baths, and a yard bigger than a Cal-King mattress. Yes, we've considered condos but I like to garden, and Paul, whose passion is woodworking, needs space for his tools and saws. And we both abhor the thought of $200-$600 per month homeowner association fees.

Even though we asked Dennis, our mortgage broker, to approve us for a $1.2M purchase price, mentally we consider $1M our top limit, as we'd still like to go out to dinner once in awhile. Theoretically, if we bought a $1.2M house and put 20 percent down, our monthly out-of-pocket housing costs assuming a 30-year fixed rate mortgage at 6.875 percent, plus property taxes and insurance, would add up to more than $7,600 per month-three times what we now pay in rent (tax advantages notwithstanding). According to Dennis, at that price point most people put more than 20 percent down. Still, Paul and I value being able to sleep at night.

The thing is, a million bucks doesn't buy much in Palo Alto. Honestly, we'd be depressed to move into anything we could afford. "Within-walking-distance" of downtown we might get a 1,200-square-foot house on a 4,500-square-foot lot with a one-car shed in a flood zone leaving little if any room for expansion. And yes, we've considered Midtown, College Terrace, Southgate and all the other lovely areas of town, but for now, perhaps foolishly, we're sticking with our dream of 94301.

There have been days when we're really discouraged, such as when we see sellers raise their asking prices by a hundred thousand dollars when, in the first week on the market, the bidding war they hoped to create fails to materialize. My husband, a high-tech sales manager, would debate the legality of sellers being able to refuse full-asking-price offers. Being from the East Coast where asking price means the price you'd be thrilled to get, the poor man still can't get over that one.

Admittedly, after nearly a year of searching I've become a tad jaded. But at this point, we've begun to wonder if tying up all our assets in a home here is worth it, if -- in the big scheme of things -- home ownership is the end-all-be-all that we've been conditioned to believe.

Maybe we should just rent for the long haul and buy a vacation home in Sonoma or Tahoe. Sure, we'd miss out on tax write-offs, equity and appreciation. And there are a lot of changes we'd make to this rental if it were ours -- getting a dishwasher to start, a new front door and maybe a second story.

But we like the idea of having assets on hand to fund business ventures (Paul would like to be his own boss); time-off-work, nannies and college tuition (if we decide to have kids); and an early retirement. Renting affords us a higher degree of life flexibility. We could also relocate our life to a more affordable state like many of our friends have.

The whole problem is -- absurd cost of living aside -- we love it here. We love the local shops and restaurants, the farmer's market, the well-regarded schools, the energy of Stanford University, the lack of snow and humidity, the opinionated residents, and the gorgeous neighborhoods. Most importantly, we have friends, jobs, and family -- my parents, four siblings, five nieces and nephews, grandmother, and countless aunts, uncles and cousins -- here.

Which is why we continue to slide into our sandals most Sundays and make the rounds.

Possible drop quotes:
Our prize featured pink walls, pink carpet, a Daffy Duck chandelier, and an 8,000-square-foot lot of wall-to-wall weeds. We closed in five days.

Buy at the high. Sell at the low. Not exactly an ideal financial strategy...

Maybe we should just rent for the long haul and buy a vacation home in Sonoma or Tahoe.

The whole problem is -- absurd cost of living aside -- we love it here.