The Silicon Valley is now leading the nation in its long-awaited housing recovery, according to veteran Bay Area real estate agents.
“We’re at that leading edge, ” said Suzanne Yost, president of the Silicon Valley Association of Realtors.
Many cities, in fact, are showing double-digit gains in year over year sales prices. In San Jose, the median cost of a single family home is now $582,000, up 22 percent over November of last year. And in Palo Alto, which boasts some of the region’s best performing schools, high demand has pushed the median sales price of a home to $1,684,000.
What surprises buyers, sellers, and even seasoned real estate agents in parts of the Bay Area is the number of homes receiving multiple offers that are non-contingent and all-cash.
Certainly, the initial public stock offerings of such Silicon Valley luminaries as LinkedIn, Facebook and Groupon have helped spur the region’s resurgence in housing. But there’s another increasingly significant group of buyers who are fueling the frenzy. Numerous agents reference the impact of Chinese investors, both foreign nationals and immigrants.
“Just in the last year, we’ve seen a doubling of buyers coming directly from China and they’re pretty much all-cash buyers, usually here for just one week,” said Ken DeLeon, broker and founder of Palo Alto’s DeLeon Realty.
Nationally, Canada remains the largest group of foreign investors in U.S. real estate. But there is ample anecdotal evidence to suggest that the Silicon Valley is bucking the national trend.
“Amazingly, within Palo Alto, with its great schools,” DeLeon postulated, “70 percent of the buyers are now Chinese, either American-born Chinese, or coming directly from China. It’s staggering.”
The Silicon Valley Association of Realtors (SILVAR) recently formed a Global Business Council to help its members respond to the growing interest from foreigners, most notably from Asian investors. A delegation of 10 Chinese government officials recently met with the association to learn about real estate ownership, development and taxes in the Golden State.
"It was evident from the meeting that our world is more global than ever, and so is the business of real estate,” council chairwoman Jennifer Tasto said.
Meanwhile, high demand combined with low inventory have spawned a robust market in Silicon Valley. Agents Anina Van Alstine and Sharon Witte recently sent out 32 disclosure packages for a home they co-listed within walking distance of Stanford University. Even during the Thanksgiving holiday when the business of buying and selling homes usually slows, the highly desirable location drew a remarkable 15 offers. Priced at $1,695,000, the final sales price was $2,230,000 - 32 percent above the original asking price.
“More than 30 percent of the offers were all-cash and the one that got accepted closed in seven days from acceptance,” Van Alstine added.
Other, similar stories abound. Tasto recalled receiving 38 offers on a ranch-style home in Palo Alto's Green Acres neighborhood. Listed for sale at $1,195,000, half of the offers, she said, came in above $1.5 million. It sold for $1,650,000.
Michael Repka, who brings his legal and tax expertise to the DeLeon Asian operations team said: “It’s absolutely remarkable. It’s the most frenzied, excited market that I’ve come across in the last 10 years.”
But Van Alstine and Witte were careful not to focus too squarely on the Asian investor. They said, as agents who represent many high-end properties, there are people from all over the world moving to the Bay Area as well as local residents, who have plenty of resources to engage in the bidding wars. The amazing prosperity generated by businesses centered in Silicon Valley, they said, has generated unprecedented amounts of cash and buyers from all backgrounds who are willing to invest what it takes to live where they choose.
Most of the buyers taking part in the overbidding are focused on buying homes near good schools, real estate agents said.
Julie Tsai Law, who recently returned from client meetings in Hong Kong, Taiwan, and China, said the major reason her buyers develop such a strong attraction to Palo Alto is “for the school districts here. From elementary to high school to even the universities.”
“They wire the money overnight, and they close the deal within five days,” Law added.
Van Alstine echoed a similar view: “We could tell from remarks made at our open houses, that people making offers imagined a K-Stanford education for their children."
The Fair Housing laws prevent the industry from recording real estate transactions by race or ethnicity. As a result, precise data is unavailable from the California Association of Realtors and likewise, SILVAR, on the percentage of recent home sales tied to Chinese investors, either foreign-born or resident Chinese.
Other developments, however, confirm the rising tide of interest from The People’s Republic of China.
DeLeon recently launched an Asian Operations unit with more than a $250,000-marketing budget targeted toward Mandarin-speaking investors.
“There’s such an interest in purchasing houses by the Asian community, we wanted to structure something that was most convenient for them and also to help us market our homes” explained Repka, chief counsel for DeLeon Realty.
Other Bay Area real estate firms are in the process of setting up offices in China, as well. RE/MAX reported that 25 percent of the visitors to their year-old global website, www.global.remax.com, come from China.
Following her recent meetings with the delegation from China, SILVAR president Yost elaborated: “I think they feel it might be time to get their money out of China.”
That's a sentiment echoed by Repka who explained that citizens are not allowed to own the land they purchase in China; they buy their homes on long-term leases, and many investors fear that the Chinese housing market may have peaked.
Additionally, the People’s Republic of China restricts the purchase of second homes so there is only so much real estate an investor can buy. All the more reason, Realtors add, that homes from San Jose to San Francisco and parts in between are getting swamped with offers of all-cash and a quick close, oftentimes from foreign investors.