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.”
The online broker and listing company forecasts slower price growth in coming months, unlike the double-digit percentage gains across the country in 2021. But in recent years, she added, “the Bay Area always seems to do whatever it wants.”
Home prices are high, but Bay Area accounts are very deep with home equity, stocks and cash, agents say.
The frothy home market has been boosted by record low interest rates, and strong stock market performance boosting tech salaries. Bay Area techies and entrepreneurs have suffered few economic bruises through the pandemic, and savings rates have climbed with lockdowns limiting travel and curbing other non-essential purchases.
The demand for suburban properties with more indoor and outdoor space has grown with remote work routines. Bay Area home prices overall soared past $1 million during the pandemic, and year-over-year appreciation has hit double-digits.
Multiple bids on homes are the norm, agents say. Prices on desirable Peninsula homes have quickly risen by hundreds of thousands of dollars. Los Altos had six bidding wars that jumped by seven figures in recent months, followed by three in Palo Alto and one in San Jose, according to Zillow.
Saratoga agent Mark Wong has seen the high end market speed up in Silicon Valley. He counted nearly three dozen homes near major tech companies selling for more than a half-million dollars premiums in recent months. “When the market is hot, everybody wants to buy,” Wong said. “It’s definitely not for the faint of heart.”
Wong said buyers have become more aggressive, upping bids by $500,000 as if they were just $50,000 increments. “Right now, basically, this is part of the Silicon Valley culture — everybody wants to win,” Wong said. “You don’t need any comparison (homes) anymore. It’s all a competition.”
Veteran Los Altos agent Joanne Fraser said low listing prices have long been a staple of marketing Silicon Valley homes. In recent months, the average premium paid above a home’s asking price has jumped to 10%, according to local real estate data.
Fraser stressed that local agents have the best insights on neighborhood markets and pricing a home accurately for a sale. In Los Altos, for example, many of the homes are custom-built, sit on large lots and are difficult to compare to others in the neighborhood. “They’re apples and oranges,” she said.
Buyers looking in Los Altos and Los Altos Hills these days have been trading up for more space and amenities, Fraser said. “They make a lot of money. They say, ‘I want that house.’”
And, she said, they usually get it.
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