A couple of years ago during the peak of the Silicon Valley real estate boom, local real estate agent Chris McDonnell gave me an inside look at the housing equivalent of tulip mania: frantic bidding wars, houses going for double the asking price, nice digs getting razed for new construction. All that seemed like a distant memory when McDonnell and I met in mid-February for coffee. I mean, we're in the dumps around here. The messy and mysterious war on terrorism drones on, tech stocks are down, local unemployment has zoomed from under 2% last January to over 7% today. Everybody is nauseated by the nasty Hewlett-Packard Co. soap opera that's sullying one of our icons and is bound to whack thousands more jobs regardless of what happens. In many office buildings, cavernous rooms of empty cubicles sit eerily silent like human-scale rat mazes.
Yet McDonnell plopped down across from me at Menlo Park's Cafe Borrone, rolled her eyes, and announced: "Well, it's going nuts out there again." O.K., I'm expecting to hear things have picked up a little. Instead, McDonnell says: "Last week, a tear-down in Palo Alto that was listed for $795,000 had 37 offers on it."
"Thirty-SEVEN?" I repeat, choking on my latte.
I'd heard correctly. We're talking circa 1999 kind of nuts in residential real estate. Final sale price: Over $1 million.
I am so shocked that we jump in her car and drive by the house. It's a not-very-attractive one-story home that makes Beaver Cleaver's digs look like the Taj Mahal. As we drive, McDonnell rattles off several other similar tales--eight offers on one modest little house, 13 on a pleasant rancher we pass in Menlo Park. It doesn't even have a garage, just a rickety-looking carport.
It's happening all over San Mateo and Santa Clara counties, the heart of the Valley. "In late January, we went from a buyer's to a seller's market overnight," says Nancy Mott, an agent with Alain Pinel Realty in Palo Alto. Coldwell Banker agent Miles McCormick held an open house in Palo Alto a couple of weeks ago. In a three-hour period, 1,200 people streamed through.
I would love to play Pollyanna and view all this as a positive economic indicator. But, in fact, the agents and buyers are miserable and don't see it that way either. Pros say this market is a weird confluence of low interest rates, low inventory, and tons of buyers who have been banking good money for some time and probably would have acted in the fall when prices had come down substantially, but they were freaked out by September 11. "Had we jumped in October, we could have gotten a house for about $750,000," laments attorney Kristin W. Baker of Menlo Park. Kristin and her husband Brett last week lost out in a 13-offer frenzy. The selling price was almost $200,000 over their offer. "It's so intimidating," she says. "If this continues into spring, we could be priced out." Agent Linda Umbach of Coldwell Banker says "there's a lot of panic out there" among buyers who have terrified memories of previous real estate runups.
Local therapist and addictions expert Stephanie Brown has an interesting perspective on what may be our short-duration tumble off the reality wagon. If local home shoppers are overextending themselves because they think a return to Lotteryville is imminent despite the grim economic picture, "I'm not sure the downturn has lasted long enough for people to learn any lessons," she says with a sigh. "This culture doesn't accept the idea of limits."
In the meantime, even the agents, who stand to gain higher commissions, fear the return of nerve-racking wrestlemanias for overpriced, mediocre properties. "I hope this doesn't last. It's horrible," says Mott. Not to mention nutty. By Joan O'C. Hamilton