A healthy tech sector and wealthy residents unaffected by subprime losses mean homes in Silicon Valley still command top dollar
Mountain Home Road in Silicon Valley's Woodside community is a pleasant, tree-lined street. At first glance it might seem like any other upscale suburb, until it becomes apparent that few of the homes are visible from the road. That's because this, and streets like it all over California's San Mateo and Santa Clara counties, are where Silicon Valley's most powerful people live—and they like their privacy.
Silicon Valley's technology titans also try to keep a low profile when they put their mansions up for sale—especially when the prices equal the value of many of the area's startups. The most expensive properties in America's technology capital are often sold privately and without the help of the multiple listing service.
But many of the homes themselves are decidedly high-profile. Take, for instance, Oracle (ORCL) Chief Executive Larry Ellison's 23-acre estate in Woodside, which he bought in 1995 for $12 million before spending more than $200 million to remake it into a 16th-century Japanese palace, complete with an authentic tea house and strolling garden.
Silicon Valley is dotted with similarly expansive mansions, often hidden behind gates or giant redwood trees. Residents of Atherton, the area's most exclusive community, include Eric Schmidt, chairman and CEO of Google (GOOG); Charles Schwab, the founder of brokerage Charles Schwab (SCHW); and Meg Whitman, former CEO of eBay (EBAY).
Unlike other California markets that have been battered by foreclosures, real estate in Silicon Valley, part of the pricey San Francisco Bay area, has remained relatively strong and has been buoyed by the job growth in the technology sector and some of the highest salaries in the nation. The subprime problems that have vexed other parts of California have been relegated to parts of San Jose and to the outskirts of Silicon Valley. The towns with the best schools, including Palo Alto, Woodside, Los Altos Hills, and Cupertino also tend to have the most robust markets.
And luxury homes—properties listed for more than $3.5 million—might be holding up best because buyers who can afford these prices aren't concerned about interest-rate fluctuations or the credit crunch. This could change if the stock market continues to plunge and the nation falls into a deep recession, however.
"People here in Silicon Valley are so rich," says Los Gatos Realtor Susan Fagin. "When I first started in real estate 20 years ago, my dream was to get a doctor as a client. Now, all we want is a Google employee as a client."
A BusinessWeek.com survey of the most expensive listings in Silicon Valley included 14 ranging from a $10.75 million estate in Woodside to a $45 million manor in Los Altos Hills. The $45 million listing on Stonebrook Court includes a 30,000-square-foot mansion, built in 1914, which "played host to Presidents and kings, movie stars and celebrities," according to the property's online description. It has a grand ballroom that is adorned with "16th-century gilded Venetian ceiling paintings."
Asking Prices and "Gold"
The market has slowed since the credit crisis began last summer, says Dave Walsh, president of the Santa Clara County Assn. of Realtors and vice-president of Alain Pinel Realtors in San Jose. But multiple offers still come in for some listings, he says. "Most properties are not selling above asking price anymore," Walsh says. "Now they're getting asking price."
Median home prices in prime areas of Silicon Valley are "plus or minus 5%" compared to a year ago, according to Kenneth Rosen, chairman of the Fisher Center for Real Estate & Urban Economies at the University of California, Berkeley. Commercial real estate is even stronger. Apartment rents climbed 5% to 10% in the first quarter compared to a year ago, he says. "Technology is doing well and that's a big positive," Rosen says.
Teardowns, which were popular during the housing boom in suburbs across the country, are a visible sign of Silicon Valley's busy market. Buyers are making offers on homes with the intention of knocking them down and replacing them with mansions.
Drive a bit outside downtown Los Gatos, just past the post office, and you'll find a 20-acre estate on sale for $13.5 million. The owners of the property are empty-nesters and are looking to move to a smaller property in town. The house itself is not large compared to other Silicon Valley mansions in this range. But in addition to the 8,200-square-foot main house, a caretaker's cottage, and a guest house, the compound also has 45 minutes' worth of hiking trails and a swimming pool large enough to paddle around in a kayak. And the real attraction: 17 acres of undeveloped land that are more or less as nature left them. A buyer could easily subdivide the sprawling property and put up a few more houses here.
"In any of these hillside communities, a parcel of land is like gold," says the listing's agent, Dennis Byron, who has been selling Silicon Valley real estate for 36 years. "Buildable pieces are valuable."
On the Down Low
Byron is careful not to reveal much about the sellers. Wealthy homeowners in Silicon Valley tend to value privacy.
Catherine Marcus, a realtor with Sotheby's International Realty in San Francisco, says one of her listings, a 5,200-square-foot home in Woodside, recently sold for $7 million and "never made it to the market."
"An agent called me and said, 'What do you have? I have a client that wants to buy,'" she says. "At that level, people are very picky. Yes, people think these people have all the money in the world and can afford anything. They also want everything in the world so you have to go and hunt it down."
See BusinessWeek.com's slide show to see the most expensive real estate listings in Silicon Valley.