July 25, 2024


Interior Of The Road

Bay Area luxury homes selling at record premiums

Real estate agent Michael Repka and the owners of a Los Altos Hills estate agreed the property should fetch around $6 million in the hot Silicon Valley market this spring.

The recently renovated, four-bedroom home sat on two private acres, with the standard luxury touches — walnut floors, top-notch appliances, gourmet kitchen, European styling, a pool and ample grounds for entertaining.

They hoped a few buyers would nudge up the sales price by 5 or 10%.

But as soon as the property went on the market, three families fell hard for it. Then, Repka said, “this crazy bidding war” erupted. It didn’t stop until one family agreed on a deal for $7.5 million.

Repka, CEO of DeLeon Realty, said in recent months he has sold a half-dozen homes for more than $1 million over the asking price. Many luxury buyers “are incredibly successful and they’re not used to losing,” he said. “It just becomes this feeding frenzy.”

Low list prices are a common marketing practice in parts of the Bay Area, especially Silicon Valley and San Francisco, designed to expand the pool of potential buyers. But this year, bidding wars took off during the peak home buying season of April, May and June. A dozen houses in the San Jose metro sold for more $1 million above the asking price. In the San Francisco metro, which includes San Mateo County and the East Bay, 36 homes did, according to a Zillow analysis.

Just two homes saw that type of premium in the San Francisco metro in the first three months of the year.

Nearly 1,000 homes in the core Bay Area sold for more than $500,000 over listing, a substantial jump from the first three months of the year. Home sales in the East Bay accounted for about one-third of the premium sales. For a real-world comparison, the median home value in the U.S. is  just under $300,000.

Silicon Valley homes historically have sold for about a 5% premium over list price — perhaps $100,000 on a $2 million home in Santa Clara or San Mateo counties.

The San Francisco metro led the U.S. with the highest percentage of homes selling 30% above their initial listing price — 7.4% of sales had super-heated bidding wars, according to Zillow. In Santa Clara County, 2.2% of sales exceeded 30% of the asking price.

“There are available homes, but there’s a ton of demand,” said Zillow analyst Nicole Bachaud. “Demand hasn’t really fallen in any way.”