Two years of tight supply and intense demand have pushed prices for modest homes in trendy neighborhoods of California’s Bay Area to mind-boggling heights.
In Palo Alto, tiny homes sell for multiple millions of dollars. In Oakland’s sought-after Rockridge district, a home just sold for $500,000 over the asking price.
On both sides of the bay, it’s the location that commands the biggest price, even as the amount paid per square foot reached new peaks in more than a third of 155 Bay Area ZIP codes analyzed for the San Jose Mercury News by CoreLogic DataQuick.
With the price of homes in Palo Alto skyrocketing, Ken Plourde, a 79-year-old retired musician, decided it was time to sell the home he bought for $35,000 in 1970.
“I was sitting on a gold mine,” said Plourde, whose income from music gigs has been declining with his advancing years and changes in the live-music business.
The 992-square-foot home within walking distance of Stanford University was snapped up in one day by a wealthy Stanford graduate in China for $3 million, a price that comes to just over $3,000 a square foot.
“They’re going to flatten it, but … I can’t do anything about that. Life goes on,” said Plourde. “It’s a fortune to me, for a guy who’s never made more than $30,000 a year.”
Spillover from the intense demand for the 94301 ZIP code, known as “Old Palo Alto,” is helping drive prices up along the Peninsula as buyers scramble for desirable homes.
Next door in Menlo Park, a bungalow is currently being offered at $1.8 million, a little below the median price there and just above $1,000 a square foot.
“There’s too much money chasing too few homes,” said the agent, Scott Dancer of Coldwell Banker. “People are competing for a limited product.”
Farther south in Cupertino, fixer-uppers command $1 million. A 1,100-square-foot, two-bedroom, one-bath Cupertino home sold for $1.385 million on Sept. 30. Why would anyone pay that much? Hint: It’s on a big lot a few blocks from Apple headquarters. Plans for a 5,000-square-foot house are already posted on the lawn.
Nearby, another two-bedroom home that was slightly smaller sold for $1.9 million; and not far away, a 990-square-foot home in San Jose sold for $1.352 million in July, or $1,300 a square foot.
“Everyone wants to come here,” said Mark Wong of Alain Pinel Realtors in Saratoga. “The demand is still out there.”
Real-estate agents say two groups are leading the pack of home shoppers in Silicon Valley: newly wealthy tech workers and overseas buyers, particularly from Asia.
“We’re just getting an influx of Asian money, and a lot of money from China,” said Plourde’s agent, Dan Robinson of Today Sotheby’s International Realty. “They don’t mind paying for something, but they want a good investment.”
In the East Bay, neighborhoods close to amenities like Berkeley’s “Gourmet Ghetto” or Oakland’s Rockridge have seen big appreciation over the past two years. The median price of houses in tiny Emeryville, just minutes from the Bay Bridge, has more than doubled in the past two years, according to CoreLogic DataQuick.
“We had one just last week that went $500,000 over asking,” said Philip Weingrow of Alain Pinel in Oakland. The house is in coveted Rockridge.
“It’s a nice house, but the underlying cause is very, very tight inventory and an awful lot of people coming into our area from San Francisco, where they are priced out because they have a mere $2 million to spend. That can buy you an awful lot more home in Oakland and Berkeley.”
A house in the Oakland hills sold this summer for $839,000, or $280,000 over the asking price, according to data gathered by real-estate firm Pacific Union. That was $730 a square foot in a ZIP code where the median price per square foot was only $457 in the second quarter. And a 940-square-foot, two-bedroom, one-bath home built in 1925 in Oakland’s Fruitvale district sold in October for $700,000 — $141,000 over the asking price and $744 per square foot.
Just off popular Solano Avenue in Berkeley, a small house on a cul-de-sac sold for $1.1 million in September, or $331,000 over the asking price. On the flatlands of West Berkeley, a 1,300-square-foot home on a tiny lot fetched $905,000 this summer, almost $700 a square foot.
But Glen Bell, of Better Homes and Gardens in Berkeley, believes that the market will cool off for a while in most parts of the East Bay.
“There has started to be some resistance from buyers on going any higher,” Bell said. “Some areas are still going to get multiple offers over asking price, but the number of multiple offers is lower.”
Palo Alto is still going strong. One large home in old Palo Alto is listed at $12 million, while a roomy estate nearby recently sold for $20 million.
“Palo Alto never stops,” said Don Orason of Intero Real Estate in San Jose. “When does it end? I haven’t any idea.”