Bucking the typical real estate cycle, residential property on the Peninsula has continued to increase in value with luxury homes driving the market, according to a recent MLS Listings report.
Within the first nine months of 2013, 26 percent more single-family homes valued at more than $1.5 million were sold than during the same period in 2012. Typically, in the fall, the residential real estate market weakens, according to industry experts.
The MLS report suggests that trend of million-dollar home sales is due to the growing number of residents who earn relatively high wages in the tech industry. Recent events — such as Facebook’s IPO — have likely injected large amounts of cash into the regional economy. For example, San Mateo County had the largest gain in average weekly wages — a figure that includes stock options and cash bonuses — in the country in the first quarter of this year, according to a recent Bureau of Labor Statistics report.
Employees at tech companies often want to live near where they work, which has put enormous pressure on markets such as Palo Alto and Menlo Park, as well as surrounding communities, said Susan Tanner of Dreyfus Properties.
Even for relatively affluent tech workers, it can still be a difficult real estate market in desirable areas such as Menlo Park.
“People move here, and then they realize there’s nothing for less than $1.5 million,” Tanner said. Palo Alto and Menlo Park are becoming too expensive for many, pushing buyers further north and south.
Another likely reason for the upward pressure on pricing is the extremely low inventory in the region, industry experts say. Since 2012 the number of available single-family homes has dropped by 11 percent in Santa Clara County and 14 percent in San Mateo County.
“There has been a really low level of inventory, a level of listings you’d normally see in November,” Tanner said. For example, Tanner says, the smallest house in Palo Alto — situated close to train tracks — was listed for $1.1 million, and sold for $1.2 million. “There is very little inventory at all price points.”
Emerald Hills, a neighborhood near Redwood City that traditionally lags the rest of the county’s real estate market, is up 30 percent in housing sales from the third quarter of 2012 to the third quarter of 2013, Tanner said.
The lack of inventory, high demand and pricing have given sellers distinct advantages over buyers during negotiations, she said. With many offers and with tours getting booked quickly, residential property often gets sold well above the sticker price, she added. Sellers are also able to insist on contracts without contingencies — legal terms that, for example, consummate a sale only if a mortgage for the property is approved by a bank.
Aside from seasonal adjustments, Tanner doesn’t see the market changing anytime soon, because the Peninsula is a desirable place to live.
“Try to go for dinner Friday night in downtown Redwood City or Palo Alto,” Tanner said, “Parking is impossible. So many people want to live here.”