As housing prices nationwide start to recover from their depths, home prices in Silicon Valley are close to an all-time high. Many Silicon Valley cities have come nearly all the way back from the real-estate bust of just a few years ago, in terms of how much buyers are willing to pay per square foot for existing single-family homes.
Driven by technology employees looking to buy and a constrained housing supply, Los Altos, Palo Alto and Burlingame have registered the strongest comebacks. During the third quarter of this year, home prices in those cities were just several percentage points away from peak levels in 2008, according to new data from research firm DataQuickMDA.T +1.70% .
At the same time, in Sunnyvale, Mountain View and Cupertino—home to large technology companies Yahoo Inc., YHOO -0.40%Google Inc. GOOG -1.68% and Apple Inc., AAPL -2.54% respectively—the median prices per square foot during the third quarter were within 10% of their highest levels, DataQuick says.Only three other spots along the California coast—the Los Angeles County communities of Arcadia, Manhattan Beach and Pacific Palisades—boast similar figures, says Andrew LePage, a DataQuick analyst. “It’s unusual to be within 20% of the peak,” let alone at just under peak levels, he says. Mr. LePage notes that the data show Silicon Valley is one of the strongest housing markets not just in California but in the nation as a whole.Los Altos, with fewer than 30,000 residents, had one of the strongest recoveries in Silicon Valley. The median price per square foot for homes in the city was $810, or just 1.3% below the peak price in 2008, according to DataQuick. The median price of homes sold in the third quarter was $1.97 million, up 1% from $1.95 million in 2008.There is “still so much money flowing into our marketplace,” says Ed Graziani, a Los Altos-based real-estate agent.
A number of factors are in play, says Glenn Kelman, chief executive of Redfin Corp., an online real-estate brokerage with 13 agents operating in Silicon Valley. The inventory of available homes is low, with some owners hesitant to sell amid the housing-price recovery while others are renting out homes to take advantage of the local rental boom, he says.Meanwhile, an influx of young employees from established and newly public tech firms including Facebook Inc. FB -1.71% and LinkedIn Corp. LNKD -2.96% have increased demand, he says. Salaries for rank-and-file programmers also continue to rise.”Whether you’re selling hamburgers or houses, the prices can’t go up as fast as the wealth is increasing; there are too many people who have ‘I-don’t-care’ kinds of money,” Mr. Kelman says.While Facebook’s and social-games maker Zynga Inc.’s ZNGA -3.59% share prices have fallen since their initial public offerings, some of their employees sold stock on private exchanges before the IPOs, meaning they were less affected by volatility in early public trading, he says.The result: plenty of bidding wars. Earlier this week in Saratoga, a plain-looking ranch-style home with three bedrooms, two baths and 1,352 square feet sold for $930,000—$180,000 more than its listing price—after receiving 36 offers in just nine days on the market, says Jaleh Taghipour, the listing agent.