Fall Real Estate 2004

Publication Date: Friday, October 1, 2004

What's new?
Brand-new houses are at a premium

by Dwana Simone Bain

Perhaps it's those high ceilings. Or maybe it's the large, modern kitchens. It might be the energy-efficient design.

Whatever your reason for wanting a new home, you are not alone.

In the Palo Alto area new homes are in great demand -- far outpacing the supply, said Elaine Breeze, senior vice president of development for SummerHill Homes. "There's just not a lot on the Peninsula at all."

New homes for sale are indeed a rarity in Palo Alto and Menlo Park, said Stan Herrmann, associate broker at Coldwell Banker in Palo Alto. Excluding developing communities like SummerHill, only about five or six single-family homes, and no condominiums, are now on the market in Palo Alto. "There's less in Menlo Park," Herrmann said, noting that only one new home is on the market in Menlo at the moment.

However, those who must have a new home do have options.

Right now new home communities are the biggest source of such properties in the Palo Alto area. Two Palo Alto-based builders, SummerHill homes and Clarum homes, are developing new homes now.

On the site of the former Palo Alto Medical Foundation property, SummerHill homes' University Park community encompasses three new developments spanning six city blocks in the heart of downtown Palo Alto.

The Weatherly project, 30 condominiums located on Homer Avenue and Bryant Street, sold out this past spring. The units, ranging from about 1,000 to about 1,700 square feet, sold in the $800,000 to $900,000 range.

However, two more SummerHill projects in the neighborhood are still available.
The Woodmark series of condominiums and townhouses just opened its sales office at the end of August. The 36-unit project features 22 floor plans ranging in size from 1,250 to 2,300 square feet. Prices start in the low $1 million range.
SummerHill's Channing collection, around Channing Avenue and Ramona street, includes five historic renovations and 22 new homes.

For buyers who love new-home amenities but also adore the old-fashioned charm of Palo Alto's traditional homes, "Our homes are kind of the best of both worlds," Breeze said.

The collection's historical homes were restored and updated with modern conveniences. In designing the new homes, SummerHill intended the homes to fit well architecturally with surrounding properties. "When you walk around, the blocks that we've completed look like they've been there for years," Breeze said.

Strolling through the neighborhood, one struggles to distinguish the older properties from the newly built models. Only the pale shades of the new brown shingles give clues to the new homes' identities.

While on the outside the homes look like their historic neighbors, on the inside they are equipped tip to tip with state-of-the art amenities. The homes meet the latest energy-efficiency standards and the interior finishes, including the hardwood flooring, countertops and appliances are all coordinated by an interior decorator, Breeze said.

The completed single-family homes, which range roughly between 2,200 to 2,362 square feet, have sold in the $1 million to $2 million range. Twelve homes are still under construction. They will be priced when construction is complete in the spring of 2005.

And starting in the spring of 2005, Clarum homes will build a new environmentally sound development in the Belle Haven neighborhood of Menlo Park. The project, known as Hamilton Park, will feature 47 single-family homes, three- and four-bedroom plans ranging in size from 1,500 to 2,000 square feet.

Clarum's "enviro-homes," also known as "zero-energy" homes will include solar electricity, tank-less water-heating systems and several other "green" features that can save homeowners up to 90 percent on their utility bill, according to Nicole Gittleson, vice president of sales and marketing for Clarum.

If Clarum's enviro-home concept sounds familiar, it is. The company has already built 39 environmentally friendly homes in East Palo Alto. Known as the Shorebreeze development, the homes were built in four phases in different areas of East Palo Alto between 2001 and 2003. The final 20 homes of the project were about 2,200 square feet and sold for about $600,000.

Prices for the Menlo Park homes, still in the planning phases with the city, have not yet been set.

Clarum is also building two "idea homes" with Sunset Magazine that should be available for viewing by August 2005. Idea homes are intended to inspire home builders, and the magazine often sells the plans.

The thrill of a new home is not cheap. Typically buyers pay a premium for new, Breeze said. New home buyers are not just buying a house, they are buying a new low-maintenance lifestyle.

Of course, on the Peninsula, much of the value in a new home is in the land. Buyers also pay a premium for good land in a good location. For instance a lot in old Palo Alto is worth more than a lot in South Palo Alto, Herrmann said. "You're not just looking at the structure you're looking at where is it located," Herrmann said. "Here, it can be half the amount of the home costs is in the land."

That might be why home designer and builder David Crouch paid more than $900,000 for a 1,400-square-foot ranch-style home on a 10,000 square-foot lot in Western Menlo Park and promptly tore it down.

While it might seem expensive to fork over nearly $1 million for a home just to destroy it, those who want to build in the Palo Alto area have little choice.

"There's really no vacant land around here," he said.

Crouch , who builds before he has a buyer, is known as a "spec" builder. He bets on what buyers will want.

Crouch replaced the ranch house with a five-bedroom, five-bathroom, three-fireplace, Tudor style home. The house has a huge kitchen, hardwood floors and French doors. "I love the old English country style," Crouch said.

The house is much larger than it looks from the street, a total of 5,500 square feet, including a 2,000-square-foot basement. The windowed basement is really more like a house beneath the house, complete with a dining room, kitchen, wine cellar, bar and bathroom.

Crouch's instincts were correct. The house sold the week it went on the market, above the asking price for about $3.3 million.

When considering the costs of bringing a 50-year-old house to current code, repairing cracking foundations and termite damage, on a per-square-foot basis, tearing down and rebuilding is usually less expensive than remodeling, Crouch said.

New home construction runs between $250 and $300 per square foot, while a remodel often costs between $300 and $500 per square foot, he said.

While Crouch both designs and builds houses, different people often perform the two jobs. Generally someone building a new home hires an architect and, once the design is complete, a builder to fulfill the dream.

This is of course once you have secured the land. For "good property in a good location" around Palo Alto, you will have a ton of competition, Herrmann forewarned.

Generally a person who acquires a good lot will have purchased one with an existing house. Fortunately, demolition is the cheapest part of the rebuilding process, about $10,000 to $15,000 according to Crouch.

For those who would rather skip the planning process and buy a ready-made home, Herrmann advises seeking advice from a professional before signing.
"A buyer would want to get an expert or some kind of counsel in purchasing a new home," he said.

While all new homes might appear well built at first, differences between a quality built product and one that cuts corners will be evident a few years down the line, Hermann said. Someone experienced with houses should examine the home's finishes, faucets and fixtures to ensure a quality product. "That," Herrmann said, "is worth money."

For more information

University Park
or SummerHillhomes.com

Nicole Gittleson, (650) 322-7069

David Crouch Custom Homes, (650) 464-4448