The Real Deal
Sticker shock is a valley malady
By now this should come as no surprise to Bay Area residents, but the recent report released by the California Association of Realtors (C.A.R) states that owning real estate in Northern California now is one smart investment.
According to C.A.R.'s August tracking report, California home sales increased 4.7 percent and the median home price in Santa Clara County rose 26.2 percent in 2000 compared to 1999. The median price of an existing, single-family detached home in California in August was $255,580, and $522,500 in Santa Clara. August was also the 42nd consecutive month that the median price of a home posted an increase compared to the previous year.
What is especially interesting to residents of this area is that six of the top 10 cities and communities with the highest median home prices are in our own backyard ... Los Altos Hills, $2,560,000; Hillsborough, $2,165,000; Monte Sereno, $1,465,000; Saratoga, 1,328,000; Los Altos, $1,258,000; and Woodside, $1,252,500. The other four cities are Belvedere/Tiburon, $1,250,000; Malibu, $800,000; La Jolla, $780,000; and Mill Valley, $779,500.
If you are shocked by these prices, you are not alone. Realtors who service cities and towns from Millbrae to Morgan Hill are facing a market environment unlike anything they have seen before: offers on properties before the home is listed; multiple offers above the asking price; and bidding wars that escalate out of control. Sometimes, against the Realtor's best advice, a prospective buyer can and will offer top dollar just to gain entry into this high-demand, low-inventory market.
Based on the research, it is not just a lack of inventory fueling the demand. One of the prime drivers is the amount of wealth the valley has generated in the last several years. Young couples just starting out, who once had to settle for a one or two-bedroom condo at best, are able to put $200,000, $300,000, even $500,000 down for a first-time purchase. Stock options have enabled buyers to purchase $1 million starter homes.
Professional real estate agents advise their listing clients to set a "realistic" asking price based on competitive properties, location and value, market economics and the current environment. On the other side of the equation, buyers are advised to make a "realistic" offer they can live with and support. So, what happens when a couple of the potential buyers just made millions by selling their one-of-a-kind Internet idea to the local venture capitalist? The pricing strategy set by the seller is now driven by how much someone in the mix is willing to pay. It's a game for which no rules have been set--yet.
Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors. Send questions on any topic to: Ask Your Realtor, c/o SILVAR, Los Altos District, 345 San Antonio Road, Los Altos, CA, 94022; call 650.949.9115; or send email to ppompei@siliconvalley-realtors.org.
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