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!

How Hot is Hot? Westwood Knolls and San Mateo Knolls

I set out to write about another home selling hot spot in the Bay Area - Westwood Knolls and San Mateo Knolls / Laurel Creek Farms in San Mateo, but was interrupted multiple times. Finally, as the day came to an end I went back to my writing. My first and only sentence I wrote said “There are only six listings in the Westwood Knolls and Knolls / Laurel Creek Farms”. Just to be on a safe side with numbers I went back to search and the number was different! There are only four listings left. It is the end of Friday and we are just about to start the Memorial Day weekend. While many people prefer to go away for the weekend, it is also a great weekend to start selling homes. I quickly checked the details. 324 Greenfield Ave and 3502 Michaels Dr houses changed status to pending, the former after seven days on the market and the latter one after nine days. There are six pending for this area now with the average thirteen days on the market (time from listing on MLS to the moment an offer is accepted).

324 Greenfield Ave

But where exactly are Westwood Knolls and San Mateo Knolls?  They stretch from El Camino Real to Alameda delas Pulgas (Westwood Knolls) and from Alameda delas Pulgas to the Sugarloaf Mountain in the West and from W. Hillsdale Blvd. to Belmont border in the South. 23 homes sold in this since the beginning of the year and 15 out of them or 65% above the listing price. From March 7^th three of them sold on “200” and “300” blocks of Greenfield Ave. The 324 Greenfield will be number four. All three that already sold, closed above the asking, one for $2,015,000 (asking $1,599,000),

278 Greenfield Ave

 

another for $1,360,000 (asking $1,249,000) and the 3^rd for $1,251,000 (asking $1,050,000). The 324 Greenfield was listed for $1,288,000 and of course we don’t know what the accepted price is. So, the 200- 300 blocks of Greenfield Ave are the hottest area of already hot Westwood Knolls and San Mateo Knolls / Laurel Creek Farms area. Three sales and one pending in ten weeks long period sold $243,000 or 20% above the listing! Greenfield Ave is really hot. You might not fully appreciate why Greenfield Ave homes are selling so well from the pictures presented in this post, but it has a breath taking panoramic view of the Bay from SF to beyond San Mateo bridge. This has certainly something to do with why they sell so well.

View from Greenfield Ave

But make no mistake, these homes were extremely well prepared for sale, especially the 278 Greenfield Ave home. This is what it takes today to sell house for a top price. Either a brand new house or brilliantly remodeled house. Of course a good view will not hurt. It looks as “good views” help more than ever. Is it because of younger buyers and more “easy money”? I leave answer to professional market researches.

Next week I will write about home selling in Marin and in a week or two give you an update on the Greenfield Ave.

Burlingame Real Estate On Fire - Part 2

Supply and demand at work

In my recent post “Burlingame Real Estate on Fire” I described the dramatic increase in Burlingame home prices as a result of limited supply. While the price increases are quite common at the moment in many locations in the Bay Area, Burlingame is the third most desirable City in the Northern California and certainly deserves a closer look (to find out why, please read my previous write-ups Why is Burlingame so Desirable? and Why is Burlingame So Desirable? More Reasons and More Facts). In my previous post I used data from the beginning of the year until March 22^nd, in this one I am commenting on the sale data for the period from March 23^rd until May 10^th.

Within 6 weeks since March 23^rd we observed market forces at work. The increased demand and led to significant increase in the listing and selling prices (81% of homes sold in first 3 weeks of March sold above the listing price) and that led many owners in Burlingame to believe that it might be the right time to sell. Let’s then look to what happened since March 23^rd .

The number of listed, pending and sold homes dramatically increased. In the period of last 6 weeks 33 homes sold comparing to 36 that sold during 11 weeks from the beginning of the year until March 22^nd. As of today (May 10^th) we have 27 homes active and 32 are pending and 68% of all homes sold from the beginning of the year were sold at or above the listing price. This number increased to 76% for sales completed during the last 6 weeks. Six of the ten most expensive homes sold during that time are located in Easton Addition reasserting this area as either one of the most, or the most desirable part of Burlingame.  But if so many homes were sold or are being sold at the present time, is it enough to cool down the demand and slow down the price increases? Will prices continue increasing or the market already picked? We will find out in next few weeks.

The next couple of weeks will clearly show the direction of where the market is heading and sustainability of the recent price increase. In the meantime, let me share with you interesting homes that either recently sold, are pending, still active on the market at the present time or just are worth of showing.

A few months ago San Francisco Magazine heralded Burlingame Terrace to be among 10 up and coming neighborhoods in the Bay Area. Here are pictures of few homes in this neighborhood.

1321 Sanchez Av (still active as of May 8^th)

1105 Edgehill Dr (pending)

 736 Neuchtal Av (pending)

Willborough Pl (none of these properties are on the market at the present time) - a block-long strip of early 20th century Tudor revival homes. To read more about this place click here: Willborough History.

EASTON ADDITION:

1401 Vancouver (pending)

BURLINGAME HILLS:

105 La Mesa (pending)

Will prices in Burlingame continue increasing as fast as until now or increased number of houses on the market will put further increases in check at least for now? As I mentioned in my previous post: “By summer 2013 we will know if it is a transition to a fully fledged boom or something else…”.

BURLINGAME REAL ESTATE ON FIRE

Reasons behind limited inventory

Most of the Burlingame houses are selling like hot-cakes, often being sold right after they are put on the market. But there are other properties that linger for many days and sell only after drastic price reductions. So, why are some properties selling quickly while others are stuck in purgatory? For example, the 2504 Hillside Dr (sold in February) and 2301 Poppy Dr (sold in January), both located in a very desirable Easton Addition neighborhood. The first sold in zero days at the listing price ($2,475,000) and it took 108 days and 2 price reductions for the latter to sell for $1,183,000 or $215,000 (15%) below the listing price. Is it just the matter of proper pricing or do the recent price increases apply only to new or perfectly renovated and modernized homes?

To answer this question I analyzed prices of numerous Burlingame homes that sold in 2012 and most that sold in 2013. My analysis of these listings showed that clients are quicker to spend significant funds for perfect properties. However, they still bargain very hard while buying older, less desirable properties. While doing that they often submit low ball offers not afraid to lose a deal if a Seller does not respond to their offers. This might be one reason for the small amount of listings on the market as owners of older properties still have little incentive to put their properties for sale at a low price.

I have recently asked several potential clients in Burlingame how much they would pay for the house at 1417 Vancouver if it was sold today, assuming that it is in exactly the same condition as it was when it was sold at the end of December, 2011. This property was originally listed in August 2011 for $1,328,000. Sellers lowered the price first to $1,258,000 then to $1,185,000 and then to $1,090,000.  The house sold finally for $1,070,000 on Dec 29, 2011 after 5 months on the market. My clients answer might (or might not) surprise you. Most of my responders felt that $1,090,000 listing price correct and in a competitive situation they would offer $20k or $30k over the listing price, but not more. This confirmed our market read that prices for older houses (even well prepared for sale and staged, but not significantly improved or modernized) are still close to their historic lows despite the perceived recent market boom. This of course will change sooner or later if supply of properties continues to be very low.

Let’s quickly look on what is happening on the Peninsula real estate market since the beginning of 2012. The market picked up around March 2012, initially for the very low end ($300k) properties in places like Daly City and San Francisco as buyers realized that it might be cheaper to buy again instead renting. By mid of summer all Peninsula, including Burlingame was on fire, but mainly below $800k with as many as 50 simultaneous offers per listing. Overall, 269 single family homes sold in Burlingame in 2012 with the 5 La Strada Ct being the most expensive for $3.1 M or $400k below asking and 128 days on the market (DOM). As the year progressed, the DOM number kept falling down and by end of the 2012, 70 homes (or 26% of all homes sold) sold in 10 days or less.

So, how are things looking for 2013? 36 houses sold in Burlingame by March 22^nd  (for 16 out of them the escrow closed during first 3 weeks of March). 13 of those sold in March (81%!) were sold at or above the listing price. 10 of houses sold in March (or 63%) were sold in less than 10 days on the market. The 2517 Valdivia Wy house in Ray Park sold in 9 days for $2,410,000 or $460,000 above the asking price! The only reason that more homes have not sold is the small supply - there are simply not enough homes on the market. We see a very clear acceleration in sales (fewer days on the market and more sales above the listing price). So what makes the market in Burlingame so special? For quite some time Burlingame has been considered to be the 3rd most livable City in Northern California following only San Francisco and Palo Alto (Why is Burlingame so Desirable? and Why is Burlingame So Desirable? More Reasons and More Facts). Burlingame is close to San Francisco (20 min ride to the downtown SF) and very close from the San Francisco Airport. It always had good schools that are getting even better. The API scores for its five elementary schools in Burlingame oscillate between 954 (Franklin) and 883 (McKinley). Burlingame Intermediate School (BIS) has a score of 903 and Burlingame High School (BHS) - 869. Demand for these schools is so high that Burlingame Elementary School District just repurchased the Hoover school that was closed many years ago and is planning to open it soon. There is no doubt that good schools are behind the recent climb in demand for real estate in Burlingame. It is clearly on every prospective buyer mind when searching for a new home.  

So what lies ahead for Burlingame's real estate market? For now demand will be growing as demand simply exceeds supply. Opening of the Hoover Elementary might bring even more families with children to Burlingame and reflects increasing demand for Burlingame’s schools. If the low house supply continues even prices for older, less perfect properties will start climbing again. This should encourage more sellers to list their properties. The price increases might slow down for a bit, but probably not for very long. This analysis assumes no major changes in global economy, as in the case of significant economic downturn, all these predictions might be entirely off.   My analysis applies to the Burlingame houses priced between $1 to $ 3M. Please note that houses priced below $1M are already selling at premium independent of their conditions. A “tear down” property at 2415 Hillside sold on March 14 for $1,175,000 or $276,000 over asking (31%!) For properties priced between $1 and $3 M there is a clear separation in demand and sellability of new and perfect properties versus the older ones. The Burlingame market for this price range is very different than it was before. The current “real estate boom” is a market in transition. By summer 2013 we will know if it is transition to a fully fledged boom or something else…