Menlo Park Downtown – the Hottest Neighborhood on the Peninsula?

A small downtown area of Menlo Park (referred to in MLS as the area #304) tucked between El Camino Real on the East, Valparaiso Ave on the North, Stanford Shopping Center on the South and Johnson St, Arbor Rd. and Fremont St on the West might be the hottest neighborhood not just in Menlo Park, but on the entire Peninsula. Prices keep moving up and following brisk sales in 2012, the inventory in 2013 dried out. 

There were signs of the Downtown area heating up already in 2012.  In the early part of that year before May 30, 2012 only 7 homes sold. Some sold prices exceeded the listed prices, but only by a few thousand dollars or a small fraction of a percent.  Then on May 30, 2012 two transactions closed, one for a small 750 sq. f. house on a 5800 sq. f. lot at 455 Yale Rd for $976k or $1,301 per sq. f. and another for a slightly larger 1260 sq.f.  house at 1330 Hoover for $1.261 M on a 900 sq. f. lot or $ 1001 per sq.f.  The latter sold $312k or 33%(!) over the asking price. This changed everything. The boom in the Menlo Park downtown had begun. Through the end of the year another thirty homes sold bringing the total for the year to thirty seven.  The number of days on the market (DOM) went down and sold prices started to significantly exceed the asking prices.

The trend continued in 2013, but inventory disappeared, which exacerbated the demand. 90% of the homes in this area sold above listed prices. Due to the lack of inventory only ten homes were sold in 2013 through June 21, five are pending and two are active. One of the active properties is a house with a roof partially missing described in MLS as a "townhouse in the making".  It is offered for $1.8 M and is supposed to be ready later this year. So, what happened to the inventory?

It is really real estate economics 101. The area 304 is shared by both, residences and businesses of the Menlo Park downtown. There are many modest residential homes in this area that were built 60 to 70 years ago. Many of them deteriorated due to lack of adequate maintenance, a process magnified by a recent real estate crisis, and the price of land kept growing due to successful neighbors. This area is surrounded by Stanford University from the South, Menlo College and Menlo Park from the North and Sand Hill Road, notable for its concentration of venture capital companies, from the West. And of course, there is the Facebook HQ.

Facebook moved to Menlo Park from Palo Alto in February 2011(to buildings previously occupied by Sun Microsystems). The Facebook HQ is 4 miles away in a straight line from the Menlo Park Downtown. It is difficult to overstate its impact on demand for condos, townhouses and homes in this area. If one would attempt to find a single event behind a local boom – the current boom started one year after Facebook moved its HQ to Menlo Park. Demand for real estate is so high that many owners who cannot afford the cost of improvements or remodeling have only one alternative to maximize the gain – wait for the price of the land to go even higher. So, the inventory dried out.

It is exciting development for developers in this area and future owners, but not always by those who either are displaced by the rapid change of fortunes of this small area.

This handsome 60 years old, 1200 sq.f. house is located on Hoover St (R 3 zone) on approx. 5700 sq. f. lot. The only way to bring this property to the going $2 M range is to either totally remodel it and add another floor or to tear it down to make room for an entirely new construction.

Menlo Park Downtown street scene. Owners waiting for an offer?

So, what will happen next? As new development will be replacing older properties, prices of land will continue moving up. More homes will be remodeled and sold or bought by investors to tear down and make room for development of new homes and condos. As land to redevelop becomes undeveloped, demand will be increasing in the adjacent areas of Menlo Park, Redwood City and East Palo Alto.

What is Different about Buying Homes in Marin and San Mateo Counties?

Have you considered living in Marin County? There are some obvious advantages, like weather. Periods of warm weather are longer and it is very scenic. Marin’s proximity to San Francisco makes it possible to live  in your "Marin retreat" every day and not just to go there on weekends. Many people think that living in Marin is more expensive, but is it true? Any quantitative comparison would be very difficult so I am primarily using my observations; let analysts to try to disprove me. For the purpose of this post I examined a few cities in San Mateo County including Millbrae, Burlingame, Belmont, San Mateo, Foster City, San Carlos and Menlo Park and Mill Valley, Larkspur, Greenbrae, San Anselmo, Corte Madera, San Rafael and Kentfield in Marin County. 

So, what is different about buying a house in Marin County from that in San Mateo County? The first thing that caught my eyes was that there were significantly more homes that stay on the market longer, even now. The average days on the market (DOM) is definitely much higher there. In San Mateo County we see this only in very expensive areas like Hillsborough, but in Marin we see much higher DOMs for all prices ranges. Faster sales are not the only reason, San Mateo agents prefer to take it of the market to reset DOM. Either the MLS in Marin does not allow it or agents are keeping houses longer on the market.

There are fewer homes in Marin that are selling for significantly more than asking price – surprising but true! Out of 50 homes sold in Greenbrae, Larkspur, Mill Valley and Kentfield from the beginning of May “only” 28 or 56% sold at or above the listing price and often just a few thousands above. If you followed my posts about Burlingame and San Mateo you might remember that in Burlingame the number of homes sold above the listing price was 76% during the same period of time. There are also fewer new homes in Marin, possibly because San Mateo County homes are older we see a lot of old house torn down and new built in their place. There are also fewer homes being sold in zero days, especially since new constructions are often sold before their completion and before they are listed (what indicates less pre-listing selling). Because there is less new construction, we see less houses sold in zero days (prices of homes sold in zero days are shown for comparative reasons). As real estate boom was in its fullest in San Francisco and San Mateo and more homes were listed, the limited supply lasted in Marin much longer. It took a few weeks longer for more listings to start coming to the market.

In Marin providing a home inspection report by Seller is not common. I talked to a couple agents in Marin and they simply don’t do it. But it is quite common in San Mateo County that listed house will at least have the inspection report paid by the buyer. It allows for much more efficient selling process and less escrow cancellations following inspections.

Price per square foot for the same price range and similar quality of homes is also smaller in Marin! Again, I will let analysts to try to prove or disprove it, but your money will buy a bigger house in a good location and with great view in Marin!

So what is the same? Overall, Marin real estate market accelerated as much as  in San Mateo. Only 35 homes sold in the above listed cities in Marin in January and as many as 99 in May. In both counties great homes sell very fast and well over the listing price. Homes in areas with great schools sell faster and for much more than similar homes in other districts. There are great schools in both counties. Proximity to great schools and easy and quick access are in high demand in Marin as well as in San Mateo.

Here are few pictures from a currently pending 3 bedroom and 2.5 bathrooms, 2500 sq.f.  house in Mill Valley that was listed for $1,595,000 (or mere 638 per sq.f.).

 

 

Sorry to say, but in San Mateo County you would pay at least $2 million for it. So, maybe you should look into buying in Marin? Please don't hesitate to contact me for your private tour of homes in Marin if you do!