The Epicenter

In case you were unaware of this, Palo Alto is undoubtedly the epicenter of all things real estate on this planet. Seriously. If you look at the numbers there, Palo Alto didn’t miss a beat following the mortgage meltdown, the 2008 crisis, TARP, the recession, the double dip, the debt crisis, S & P’s downgrade and whatever other sort of crisis has happened that’s effected real estate everywhere else. It’s simply amazing! Demand is high and folks are paying super premium prices to live there.

See that house pictured above? It’s a 1390 sq ft, 3 bedroom, 1 bath house at 120 Lowell that’s a half block from the Caltrain tracks. It looks alot like the houses in Fiesta Gardens in San Mateo.

The Fiesta Gardens house, at 1090 Fiesta Drive is a 3 and 2 and it’s listed for $665,000. Obviously, it’s not as nice as the Lowell house in Palo Alto…but the Lowell house is priced at $1,699,950. Amazing!

Last week I spoke to some folks about selling their home in Palo Alto. The place was originally a 2 bedroom, 1 bath house built on a slab with a 1 car garage. The garage was converted to a bedroom in the late 50’s and the side yard was turned into a covered car port. A family room and master suite were added at some point too, yet the house’s 2 bathrooms are now only accessable through the bedrooms. It’s 1540 sq ft. Imagine one of those Parkside ranchers with weird additions and no garage. The house also was located on a street with several large apartment buildings. Everything in me said it was worth about $850,000…yet the comps all showed more. Zillow showed it to be worth $1,250,000. The sellers had a 2 year old appraisal that brought it in at $1,200,000. Really fixed up houses in the same neighborhood have sold in the last year for between $1,640,000 and $2,250,000. We’ll probably list it for $1,200,000. Incredible!

I guess my question is…why is Palo Alto the Holy Grail of real estate? OK, the schools are great…right up to Stanford. It’s also true that it’s the hub of technology and University Ave is pretty cool…but REALLY! What I really think is that people believe in Palo Alto. They have confidence in it. They believe that Palo Alto is impervious to the fluctuations in the economy. There’s no reason at all for these prices to be as they are other than that. Compared to many, many other places Foster City is like that too. Folks believe in it…just not to that degree. The only thing that keeps moderating prices is confidence or lack thereof. The money is there and the buyers are there, once some confidence returns this market will climb. There are just too many people who either can’t afford or will simply refuse to pay $1,699,950 for a 3 and 1.

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