In Silicon Valley, Real Estate Remains Strong

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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.

Gopal writes about real estate for BusinessWeek.com in New York.