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$782k over asking for a house in Sunnyvale (mercurynews.com)
84 points by cx1000 9 months ago | hide | past | web | favorite | 199 comments

In France, there's no such thing as paying over the ask price. You are forced to sell to the first buyer who offers to pay the ask price. I suspect that this is done to prevent prices from rising too quickly.

OK, but you have to understand the dynamic in this neighborhood. I also live about 1 mile from the new Apple campus, in a slightly different, though very similar, Sunnyvale neighborhood.

You prep your house to sell by getting all inspections done ahead of time and staging it reasonably for showing. Agent-only open house tours are on Tuesday in my neighborhood. Buyers' agents make a short list of properties worth visiting with their clients. Open house on Saturday or Sunday, take offers the following Wednesday or Thursday. Expect 10+ offers from pre-qualified buyers. High bidder takes it, assuming they have a clean offer and financing.

If any house in this neighborhood sits on the market for more than two weeks, everyone wonders what is wrong with it.

As a seller, though, it is a one-way trap door. If I sold today, I'd never be moving back into the same neighborhood.

Someone below said to the effect that is is a push-in bought for the land. That happens, but not so much in this neighborhood. The houses were built in the 1960's and are well constructed. There are older homes in some areas that are smaller that are the push-in candidates.

BTW -- I chatted with a neighbor that was one of the original buyers on my street in 1961. The four bedroom floor plans sold for $21,000. $22,000 if you wanted insulation in the walls. Oooof

It's still a huge change in real value vs today, but for accuracy, 22000 1961 dollars is 181000 2017 dollars.

A 13.6x growth. Pretty good. But not as good as the stock market which would have given you 22.1x over the same period.

You also have to take in to account all the rents you saved (dividends on stocks are peanuts relatively).

For what it's worth, all of this is currently true for most US cities. It's not a "just San Francisco" thing, or a "just the coasts" thing.

Wowwwwww. That is insane.

In suburban long island NY, plenty of homes sit on the market for months, in good school districts, near halfway decent jobs.

I can't believe it, but I guess I should, that Sunnyvale has so many high paying jobs and so little land that buyers are swarming like bees to a hive.

This is a market that literally 99.3% of the world is priced out of.

Are houses ever sold in auctions in France? How long are typical houses on the market? It seems in this situation that you would start the house price high and then lower it over weeks/months until you get an offer.

In the US, sometimes houses are priced "low" intentionally and the listing agent says something like "offers will be accepted until noon Monday" to encourage over asking, all cash offers, and waiving inspections.

Sometimes, houses are also sold at auctions in the US. This is common for foreclosures and seizures, for example.

IMO, over the long-run, the market always wins. You cannot randomly change an unimportant technical detail and actually impact the long-run pricing. The type of mechanism that is described where you must take the price offered has so many drawbacks, like... how do you handle contingencies, etc.

Are you familiar with auction theory? The conditions for the auction can significantly change the optimal bid.

There are auctions, but those follow an entirely different set of rules. You have a few weeks to visit the property, then you either mail in your bid or come to the auction house on the final day. Most of what you'll see in those auctions is being sold for legal reasons (such as bankruptcy).


Can you just overprice it and let bidders fight on lower than asking? Essentially the same thing, but with different psychology. I wonder how it would play out differently.

A couple of years ago (in Oakland) we bid on some houses that were priced at the market rate or slightly over. In one case, we bid a token amount over the asking price, and were the only bidder. In the other case, we were slightly below asking. In both cases, the sellers had expected to get a bidding war and pulled the house from the market. In the first scenario (we bid over asking), the sellers are supposed to pay the selling agent the commission the agent should have received had the deal gone through (that is generally the rule when the agent delivers a full price offer). In the Bay Area market, however, demanding the commission would be fatal to the agent's reputation. The sellers of both houses re-listed about 6 months later and got a much higher price that what we had offered, so they won in the end.

If France is anything like Denmark, the price is usually based on a combination of a public and a private valuation of the house (both of which are available to buyers upon request). You can give it any price you want, but since buyers can get an insight to its valuation, the asking price is usually around its valuation.

So as I understand it, the strategy is usually to sell the house for a much higher price than its valuation, hoping someone is really interested in the house. And as time passes, you keep lowering the price until you get a buyer.

If you're selling through an agency, they usually recommend a price range (that you are free to decline, in which case the agency might refuse to do business with you).

If you're selling on your own, there's really no guidelines.

If buyers and sellers never set a price, how is a valuation ever accurate?

Usually, you try to base it on the recent sales of similar properties nearby. Sale data is more-or-less public information, and there are good aggregators:


I'm curious if the population generally thinks this is a reasonable situation. I can easily imagine a 25% difference in valuation of two properties in the same area with the same number of bedrooms, the same age, same space, and nominally the same amenities. I can also imagine a 25% difference based on some newly opened restaurants, new bus routes, etc., that will not be reflected in historical data.

There is also an enormous subjective-experience component in how people value residential real estate, and enormous variation in details that really do matter and aren't available in real estate data aggregates (like lighting profile, and how intelligently the interior design exploits that lighting profile).

It's so far from what I'd consider reasonable based on my (obviously limited) experience, and I'm genuinely curious how the locals feel about it.

Paris is its own bubble, with prices that are less tied to changing things like new bus routes or restaurants, and more to the perception of what other people pay for it. The historical aggregates usually serve as a bullshit test (if you sell at 25% above historical prices and don't have a very good reason to do so).

It is a given that the price will be very different depending on the state of the property, the quality of the building and its era (1900-1930 flats command significantly higher prices than 1970-1980), whether it's a narrow alley or a large boulevard, whether it has windows on only one side or both sides, whether there's a window in the kitchen and bathroom, and whether part of the building belongs to the public housing agency (among many others). After a while, you start to get a pretty good intuition of how high a property will sell above or below the average.

Another thing about subjective experience is some properties fit certain lifestyles and will be priced accordingly. A flat in the Bastille area (lots of bars, restaurants and night clubs) appeals to people who would pay for the privilege a bonus that a boring father of two (like me) wouldn't consider. Conversely, having an address in the Quartier Latin makes it easier to enter the top high schools, so tiny one-bedroom flats sell surprisingly high (and are then rented out to university students for a far lower price than the purchase price would suggest).

There's a lot to this.

1) having a lower price attracts more bidders, and the bidders may go much higher than they originally planned after they see it in person.

2) having multiple potential buyers in the mix creates urgency, which drives the price up AND lets you sell faster.

3) Homes aren't free to own. Most have mortgages that you waste money on interest again each month, amongst other things (taxes). Selling fast for cheaper may not be less money in the end.

4) Homes on the market for a long time get tainted. People get worried there's a reason no one has jumped on it yet (maybe there's a sinkhole under it, or the water is bad, or some other thing you can't tell in a driveby).

In short:

Supply = Very limited.

Demand = Increased and ever increasing.

Result = $$$$$

This might be the case for very high-end houses and flats, but I don't have a lot of experience with those.

For mainstream properties, from my experience the market is saturated with people who price above market rates and would rather wait for months than accept a significantly lower price. If you see something that you might consider buying with a 20% discount, you usually don't bother visiting the place. This likely drowns out the people who are trying to set up auctions by setting a very high ask price.

I think this sounds like what the GP is describing -- they price above market to seek a higher than market offer. That they aren't inundated by offers simply suggests that the demand isn't there to garner that sort of premium. The market for houses in Silicon Valley is severely supply constrained, so sellers are able to demand a premium (that is, they could price well above what they "market" price ought to be and likely get offers at or near their asking price). It would set up a similar uncertainty in potential buyers minds that results in the absurd offers above asking that we see today.

Put differently: while the specifics of this sale (price well above asking) might be impossible in France, the "sale price well above rational market price" phenomenon is really hard to quash when the market chooses to be irrational for a while.

So basically it seems that houses in France are sold via a slow Dutch auction[1], whereas in the US it's an English auction...

It seems that the English auction goes much faster for the seller, whereas in the french house market, the buyer is the one having a fast process since as soon as they find a good home with a price they like, they can just decide to buy.

[1] https://en.m.wikipedia.org/wiki/Dutch_auction

I don't know about France, but that's how it works in Italy. People ask what the maximum they think they could get, then buyers asks for discounts or the price is lowered when no buyers show up.

Are asking prices artificially limited somehow, or do people just set the price high so they can negotiate between potential buyers?

no they aren't limited anyhow, and if I would be selling my flat there this is definitely a tactic to do

If experience has taught us nothing (and it hasn't [1]), it's that price controls simply don't work in the long term.

That being said, capital controls are an entirely different beast.

I've seen a variety of property systems in different parts of the world. In Sydney and Melbourne for example, it's hard to work out what anything will cost because the majority of properties are sold at auction. If there's a listed price at all, it doesn't tend to tell you a lot.

I haven't seen the state of Switzerland in more than a decade but from my time there, they seemed to have a pretty reasonable system. It's one that basically discouraged property speculation in that short term sales of property attracted high, even punitive, rates of taxation. This could be close to 100% of the gain if held for under two years.

There's two basic problems with global real estate as I see it right now:

1. Real estate is not a reportable asset under FBAR (the US foreign asset reporting framework to ostensibly clamp down on money laundering). As such, it's becoming pretty clear that real estate in the world's great cities are being used for money laundering; and

2. Real estate is being used to park vast amounts of foreign wealth. This is the case in Vancouver, London, NYC and a host of other places.

Now if a bank takes money there is a lot of requirements placed on the bank, so called KYC (Know Your Customer) frameworks. In most cases this simply isn't the case with real estate. Why not? The true owner is hidden behind an LLC in any high end property sale in NYC.

But (2) is the big one. I'm a firm believer that New York, for example, should be for New Yorkers. Not Russian and Chinese billionaires.

Australia has a regime where property purchases by foreigners need to be passed by the FIRB (Foreign Investment Review Board). This typically means new developments. This is a somewhat flawed system as it means apartment buildings are built for and sold to foreign investors. This is killing inner city living.

In NYC ultra-luxury condos are taxed really low, probably the lowest (as a percent of market value) of any property kind in NYC. The reasons for this are complex and NYC can only do so much to fix it because it's up to New York state to fix it and New York state has a whole bunch of SFH owners who will fight property tax reform tooth and nail.

Property investors in general perform a useful service. Those houses and apartments you rent have to be owned by somebody. Kill that regime and where are people going to live? As an example, before about the 1970s, the UK had a virtually nonexistent private rental market.

So I'm all for:

1. High valued properties taking a bigger share of the tax burden (as a function of property value);

2. Restricting to some degree who can buy property in a city; and

3. Taxing non-working property punitively. By this I mean a property that isn't either occupied (by the owner or a tenant) the majority of the year.

This French system however of forcing someone to take the first offer is ludicrous.

[1]: Reference to https://www.reddit.com/r/TheSimpsons/comments/2w2hjs/lisa_if...

Salient points.

re Sydney and Melbourne (and Australia in general)

FIRB is easily circumvented (just buy properties using a company structure, no need to tell FIRB now)

Also regarding the $800k overage paid, this kind of thing has been happening in Australian east coast cities for a decade, due to our govt refusal to enact Anti Money Laundering funds transfer reporting rules for accountants, lawyers and real estate agents.

Australian govt of both flavours review the AML reporting rules every 2 years since 2006 but never actually change it to include realestate.


So now I live in Melbourne's east in a 1930's house last renovated in 1980 that sold for $2.2 million earlier this year and I rent it for $650 a week.

Previous owners bought it for $1.1 million 8 years earlier.


In the UK it's quite the opposite: https://en.wikipedia.org/wiki/Gazumping

I've never heard that before. Do you have a reference?

Edit: It seems you're right! http://www.pap.fr/conseils/achat-vente/votre-annonce-a-quoi-...

The USA is like that as well. If you receive a cash offer with no contingencies for your asking price then you can't refuse. This is specifically to prevent discrimination against minorities.

In most real world transactions there's some back / forth with the lawyers about details (ex: "We want your ugly drapes!") as well as non-cash considerations. A seller may accept a lower cash offer over a higher mortgage based offer due to fear that the latter may fall through.

You can refuse any offer, period. Brokers might make up rules to prevent the seller from dithering (and increase chances of collecting commission) but that's different. You never have to take an offer. Contracts are mutual in general and particularly so in the sale of real property.

Do you have a citation for "seller must accept cash offer"?

Agreed-- sounds fishy to me, too. I'm not a lawyer. I'm not a licensed real estate sales agent in my locality either, but I did complete a course of training to that end. I never heard such a thing. If a seller were discriminating against a protected class in refusing such an offer that would be illegal. Holding-out for a better offer (whatever that memans) however, AFAIK, the seller's prerogative so long as they're not discriminating against a protected class.

In belgium a written counter-offer is binding. So, say a buyer makes an offer via email, the seller makes a counter-offer via email, the buyer accepts, then the seller is obligated to sell at that price to that buyer, even if a higher offer comes in from someone else. If they refuse to sell they can theoretically be forced to pay a fine, though in practice things usually don't escalate that far.

I can't find a citation so maybe I am mixing things up. If I do I'll post it.

In France, it doesn't even have to be a cash offer (although it mustn't have any contingencies beyond "buyer will get a loan"). This is mostly because most people in France don't have that kind of cash lying around, so if you only accept cash offers the rule applies to almost no one.

Of course, sellers prefer an asking price offer in cash, rather than with a loan that might be denied, so there's usually some (illegal) leeway if offers are received by mail. If you intend to make an offer contingent on a loan, make sure you print out the offer and bring it with you, and have the seller sign your copy. This lets you answer "There was another offer before you" with "That's not what it says on the paper you signed".

Interesting. I've heard people talk a lot about foreign all-cash buyers coming in and driving up prices. But if a non-contingent cash offer for asking price cannot be refused, then why would prices be driven up? Wouldn't these buyers just offer the asking price and save hundreds of thousands?

I'm curious to know more about how the non-discrimination laws apply here, since I know there definitely are laws, but if they are as blunt as described, then we'd expect to see more cash-offers-for-asking-price around here.

Prices can be driven up by someone going through and buying up houses reducing the supply, even at asking prices.

What if you receive another cash offer above ask? This seems to happen every day in hot markets (e.g. New York City).

Working at a huge tech company like Google or Facebook is attractive to me, but not enough to justify spending $2.5M on a smaller house, or 12x more per square foot. And this is just in Phoenix. I know there are other places with tech jobs and much lower cost of living, or better income-to-COL ratios.

They aren't paying that much for the house. They're paying that much because it's located in a good area. They'll knock it down and built a brand spanking new house and sell that for a profit. This happens every day in hot real estate markets

Depends on the HOA, if there is one, and the city planner's office. You may not be able to do so at all or the new house may be very expensive, especially in a place like Sunnyvale with 'green' building codes and state earthquake laws. I mean, yeah, that's still chump-change for a $2.5M lot, but those HOAs will get you.

The description kind of hinted the lot would be big enough for 2 houses. Would the local lets law you flatten the house, build 1 house to live in on half the land, and say sell the other half of the land for a million bucks to a developer?

You go through a city planning commission to do the sudivison.

Startup idea: Let people pool money to buy larger lots and do exactly this.


> but not enough to justify spending $2.5M on a smaller house, or 12x more per square foot.

Maybe it's just the wording but I don't get that. If they're paying enough that 2.5M is within reach where it wouldn't be in Phoenix is it really a problem?

I'm in the middle of a job search right now and I'm finding that while absolute numbers sound appalling (ie. 2.5M for a 2,000 sq.ft. house) the income:COL is not as dramatic. I rent, but so far places that have high-end apartments that cost 2x what my current one does pay about 2x more (usually even a bit more) on average.

To me it comes down to wether you'd like to live in Sunnyvale or Phoenix as long as the companies in both locales are paying enough to afford comparable housing (I wouldn't expect identical square footage). Remember we're talking about a 2.5 Million dollar home 1 mile from what is probably one of the most advanced tech campuses on Earth (and probably has some of the best paid).

When you put it like that I don't think it's hard to see why some people would sacrifice a little square footage for living and working at a place like that over Phoenix in an instant (I know I would).

No, you people don't get it. That house is on a large lot. You could knock it down, build a much bigger house for a 1 million and have a 4-5 million dollar house for 3.5 million. it's a good deal.

I do get that, 2.5M for that plot is still a large amount of money.

The point is that even a 3.5M for the new house will be a lot, but by virtue of it's location and salaries at Apple it's justifiable

Here is a snapshot of sales of lots that are 10.000 to 20.000 sqft sold in the last 3 months:


2,5M, with respect to the existing market, doesn't appear to be out of the norm.

It's not a lot relative to Sunnyvale it's a lot relative to the US

The idea being Sunnyvale can justify that with salaries and the employers in the area

This is why everyone wants Amazon HQ2.

They might have tens of millions and think that the house will retain and probably increase value. Greater fool theory.

You are not buying this with a $150k salary.

Yep this was bought on an upswing that will be impossible to sell at this value again for 100 years.

Much lower cost of living / much better income-to-COL ratios? Better sure, but I don't know about MUCH better. Arizona is famously inexpensive. Sure, you might be comparing to the midwest, but there I'm not sure there are the high paying jobs there to support the "much better income-to-COL ratios" claim.

I imagine the calculation is more like risking $1 million out of several million of assets.

There is always the potential for a crash in the housing market, but it can also end up that the $2.5 million is a winning investment (as compared to being spent).

i'd rather be dead in california than alive in Phoenix

Can you extrapolate your thoughts on Phoenix real estate?

I have a 50% bigger single story custom house on a 50% bigger lot in a really convenient location with virtually no traffic in one of the most sought after cities around Phoenix. It's worth $700k.

You can get a decent house in a nice location for $400k in Phoenix itself.

> The four-bed, two-bath house — less than 2,000 square feet — listed for $1,688,000 and sold for $2,470,000.

Using a ballpark figure of $500/mo per $100K of house, this comes out to $12,500/mo. That's $150K/year, mostly after tax (there's a bit of a deduction for interest but let's ignore that for now). Using the standard 30% rule, that means you should have a gross income of about $500K.

What I'm questioning is, how many people are there with that income level to eventually sell these insanely expensive houses to? Sure you have a bunch of all cash offers but that eventually dries up as well right?

Plus 4BR at 2000sqft isn't particularly spacious. And only two bathrooms at that size? IMHO that's insane.

They're probably converting stock options into a house. That's why you see a lot of all-cash buyers. If you have a few million lying around a house in silicon valley is probably a better investment than stocks and bonds. Especially if it also makes your commute easier and gets you the suburban lifestyle that many american families crave.

a lot of buyers are coming in with 500k+ of equity, sometimes over a million dollars, sometimes ALL CASH because they liquidated a boatload of stock and are now upgrading their living situation.

your mortgage numbers are way higher than reality. another concern is property taxes, but even at 2.5M, that's less than 30k/year in property taxes -- a working power couple or one single high earner can easily pay that. and in 20 years, 30k/year will have less than half the real value.

i think someone leveraging themselves into a 5-figure/month mortgage is the exception, not the rule.

tl;dr people are rich these days. my real concern is social unrest because of these insane imbalances in wealth distribution.

I'm not sure if its accurate, but https://www.redfin.com/CA/Sunnyvale/1129-Prunelle-Ct-94087/h... lists the property tax for last year at 1504$?

That's thanks to Prop 13, which caps the rate of assessed property valuation between sales. The house will be reappraised at the value it sold for, and the owners will pay the full ~1.25% property tax in the future.

Interestingly, the Santa Clara county tax collectors will take several months to reappraise the property, and then they'll send a supplemental tax bill to cover the difference between the $125/month the prior owners were paying and the $2.6k/month the new owners will be paying. It's frustrating they don't just assess taxes correctly from the beginning, but they do things old school over there.

That's a pretty good tax bill for a house assessed at $150,000, which to me suggests that the neighborhood hasn't been reassessed since it was built. I bet that won't last much longer.

CA has a state wide law that prohibits reassessment unless there is a change of ownership or substantial renovation. Property taxes growth is capped (I think at 2% or inflation, whichever is less). There are many houses that were bought in the 60s or 70s that pay peanuts in taxes. This is partly (or primarily depending on who you ask...) why the CA school system so screwed up.

Primarily, for me. My folks pay ~$150/mo in sum total of taxes, electricity, etc. (no more mortgage now, so large caveat). Their neighbors, in the exact same house plan, who paid ~$950k, most likely pay ~$4500/mo. My folks have nothing to say to them, they live in totally different worlds despite being neighbors. The neighbors on the other side are pretty much meth-heads, but the trust scheming makes their monthly payments a bit more than my folks. Imagine that, you pay ~4.5k/mo, two hours out into the 'burbs, and then 2 doors down is a literal crack-house. Prop 13 just distorts things so much, it destroys neighborhoods by freezing them.

For a lot of these transactions, the mortgage isn't for the full price of the home. Partially because buyers have other assets (like stock, or cash that needs to be parked somewhere).

But also because the mortgage interest deduction tops out just shy of $1m, I believe. So the government-sponsored giveaway (being able to use pre-tax income to pay for your mortgage interest) tails off quickly, and the rational calculus around loan-to-value shifts dramatically.

I would say it is more typical than anything else.

Maybe not so much for new construction, but most houses don't have a master bath.

> how many people are there with that income level

Probably an high-income couple with help from their families.

Two people working at a big tech company in the area will easily gross > 500K total comp.

$250K/year isn't chump change either. Let alone both having such jobs. Salaries in SV are high but they're not that high for most. At the single income level it's rare to have employees (NOTE: not contractors or business owners) surpass $3-350K.

Plus, if you plan on raising a family[1] then you'd have the added costs of a full time nanny as I doubt anyone with a $250K+ job is going to be around much to raise their kids.

[1]: Which I'm assuming they are if they're buying a 4BR house...

You get promoted once at a place like Google or Apple after 4 years and you're making like 250k/yr (as a software person). 300-350k is easily attainable.

I think there's a lot of people on HN who are unaware of how high comp is at the big 4/5 tech employers.

You obviously don't work at Apple! ;)

Maybe it is because I am not from that area, but I just don't see how anyone can justify that as a reasonable investment. The house prices have to come down eventually right? A house like that in the DC suburbs (depending on exact commute time) is probably only worth 10-15% that. Something about those prices has to normalize eventually, and when it happens the value tanks. You lose a million dollars, and possibly have to take a big credit hit for short selling the house....or hold it even longer and lose even more money. What am I missing? Why do people do it?

It's a 13k lot a mile from Apples new campus. The person who bought it knows it's potential. Even if you make 10% of that initial investment you're still doing amazing.

There are an incredible number of Apple employees worth tens of millions of dollars that would love to not commute. The potential to rebuild a monster house on this lot next to Apple is definitely quite valuable.

Location, location, location.

>"There are an incredible number of Apple employees worth tens of millions of dollars that would love to not commute"

Is there really? Can you quantify what an "incredible number of employees" is here? Thousands, 10s of thousands? Do you have a citation for that statement?

Why would so many people worth 10s of millions of dollar be competing for the same properties/ Also why are so many people worth 10s of millions of dollars still working at Apple?

Because Apple pays most people with some amount of stock and that stock is worth 150x what it was 15 years ago.

Those (now rich) people still work at Apple, as do tens of thousands of other wealthy people.

I don't know how much jobs Apple has now but the new Campus is "huge". Like really gigantic. Apple is a wealthy tech company and even if it is not paying high salaries, I expect lots of employees have made a killing from stock options in the last few years.

Yes they have a new campus and yes Apple is rich but that does not mean their employees are rich. How do you imagine employees "made a killing"? Do you think that Apple just hands out stock grants to everyone? Company stock is an asset like anything else, why would would they just be giving it away?

Stock options are a part of the compensation especially for startups. But regular companies do it too. They do it because it is "free" money at least at the time of issue.

Apple new campus is both huge and the "flagship". It means Apple top employees will work from there. It has a 12,000 employee capacity. There will be hundreds or maybe thousands of top executives, top managers and high-grade engineers. I'm pretty sure the compensation for those is very high.

It is not "free money" at all, it is an asset like any other on the company's balance sheet.

For a publicly traded company such as Apple it wouldn't be options but RSUs and they are a percentage of you salary. And you still have to pay tax on them just like normal salary.

Just because the built a new large campus it doesn't mean that the majority of people there will be worth tens of millions of dollars. Very senior management sure, rank and file engineers - not so much.

Is apple paying these people tens of millions or are these stock programs?

You do know there is more than one company in the US right?

I think you're on to something here; usually when you see transactions that seem absurd from the outside, there is some other angle that you don't know about (like, you can rip down the existing house and build one 3x the size that you can sell for $8mm).

Or 6-7 smaller houses and sell them for ~$1m each.

Not on a 13k square foot lot!

But yeah, that has happened elsewhere in the Bay Area. (Zoning tends to prevent it, though, so there's an element of regulatory arbitrage.)

You could definitely fit that many units in a 13k square foot lot. Fitting a narrow format house on a 2k square foot lot (40x50') is plenty doable. Even more so if they have some adjoining party walls, as with townhomes.

Though as you mention, zoning may prevent it. Some areas have 5,000 s.f. minimum lot sizes.

This should be illegal. There's no good reason why you shouldn't be able to split up your 13,000 sq ft lot into smaller lots and sell those separately if you want to. Setting some reasonable state right-to-split-lots bill might go a long way to helping solve the housing crisis.

A little late response to this, but many of the minimum lot size laws are rooted in historical racism and classism to prevent people of the wrong type from being able to move in to the neighborhood. In many areas there is a lot of foot dragging to change any of it. Typically the language used to oppose it is "traffic" or "neighborhood feel."

My lot in Seattle is 1500 sq feet. You can definitely subdivide 13k into 6-7 lots if zoning allows it.

It's not 1 mile away from Apple, it is 3.5 miles away but this means nothing. There are 7 perfect school district areas in the Palo Alto, MV, Los Altos, Sunnyvale, Cupertino, West San Jose area. These places are in the center of the valley, extremely safe and best commute too.

This neighborhood is probably the 5th or 6th best here. Los Altos same house would go for 3.5M, MV there is just 0 supply, Palo Alto would be around Los Altos, Cupertino 300k more expensive, only west San Jose/Cupertino border is comparable. Apple has been here forever. They have had their hq here forever and same with their 2nd and 3rd largest offices.

For all the comments about listing shenanigans, we're overlooking a basic game theory issue here: when you set a price that looks to be near the value of the home, you're saying you're willing to accept reasonable offers. You're setting an implicit cap on the value of the home.

An obviously undervalued home, though, in addition to driving up interest (and creating a bidding war), suggests a much fuzzier cap so there's less signaling around price and a less obvious ceiling to offers. In other words, buyers are stuck wondering what other buyers might offer, rather than discussing whether to go some normative amount over the ask (like 10-20%).

Also, there's a 'curse of the winner' dynamic in auction-like environments, where the deal will necessarily go to the party that values the asset the highest. (This is evidently destructive to profits in oil and gas leasing auctions, for what it's worth.)

I think that's the dynamic, because no one is actually fooling anyone by underlisting prices, and real estate agents talk to each other and know immediately if something is priced to generate interest, or if the price is closer to what the buyer expects.

Yes South Bay is so overpriced right now it’s ridiculous. Keep in mind that 5 years ago that same house would have sold for 650k and even then people would have been complaining that’s it was way overpriced.

One things certain, east bay across the 84 is still under a million at the moment. I suspect that will change soon.

Yes, I bet that in the near future, a modest house will cost $20 million, Bitcoin will be $100K per coin and Facebook will be a $10 trillion company. Poor SV suckers will spend their lives paying off their $20 million shoeboxes with their $500K per year salaries. Meanwhile I will be living in some exotic place in a mansion which I will have bought for $200K. I like where the future is going.

Yeah I'm in Southern California and I could buy a primary but I'd have to spend at least $1.25M for a small place where I'd want to live. It just doesn't make sense though. I rented a $2M house last year for $4.3k/mo. It's just way cheaper to rent at that level. You're either renting the house or renting the money (mortgage).

I've been buying investment properties for $500-600k each that cash flow instead. I don't want to rely on appreciation and I don't want to come out of pocket to cover the debt. The cash flow offsets your liability and improves debt to income so you can get approved for buying more cash flowing homes (once you can show income). So you should be able to buy a home at least every 2 years.

I may buy a primary if the market corrects, but otherwise I'm perfectly fine renting my primary. Too many people get infatuated with the idea of owning a primary residence. If you live in an expensive area, it's best to earn the higher salary there and rent, invest elsewhere and move somewhere cheaper later.

    I bet that in the near future, a modest house will cost $20 million, Bitcoin will be $100K per coin and Facebook will be a $10 trillion company
One of these things is not like the other.

I've been closely tracking Bay Area real estate for the last 7 years, and assuming it was kept in good condition (original owners), 5 years ago it would've sold for over $1m. It has 4 bedrooms, is in an amazing school district, and in a generally good location.

The extent of the upgrades to it make the sale price a little high, but somewhat inline with pricing in similar neighbourhoods across the bay, e.g. https://www.zillow.com/homes/for_sale/15561231_zpid/37.49241...

That's just not true. They bought this house for $1M 13 years ago. 5 years ago it was worth 1.7M. It's all on public record. It's not overpriced, there is just so low capacity because no one is selling due to property tax prop 13.

Milpitas had a huge dumping yard, and used to smell really bad. Houses were still in the ballpark of $1 - $1.5 million last year.

It think its just that some people get a lot of money through stock options that they spend this way.

Aside: I don't think it should be legal to not accept the asking price for a home. With any other thing I want to buy, if I agree to pay the list price I get the item. Sometimes I can haggle the price down but the listed price is always accepted.

This system of listing a price to 'get people in the door' and then igniting a bidding war makes it impossible for anyone to shop for a house except for realtors who are 'in the know' and can tell you the real price based on listing.

> Aside: I don't think it should be legal to not accept the asking price for a home.

You're attacking basic supply and demand here. Let's say I set a list price and then figure out I could have asked for more...you want to legally bind me to sell for less than what the free market is willing to offer? Where does this stop? Should we ban speculative investments as a whole?

No, it just reverses the dynamics: instead of starting out low to get people into the door, you start with a list price that's too high. If the bids you're getting are always far below your asking price, you know the free market isn't willing to cough up what you want, and you lower the price to something that is more in range. If your initial asking price is $1MM and all bids are around $800K, consider dropping the list price to $850k and see if they want to play now.

That's the usual dynamic in Belgium.

So why is this better, exactly? Seems like it just takes longer to accomplish the same goal (finding FMV). Buyers are still not guaranteed their offer will be accepted unless they gratuitously overpay (by offering list price).

You're assuming all the sellers are always overpricing by a very large percentage and that nobody accepts a lower offer.

What usually happens though, is that you determine an estimated FMV (eFMV) based on recently sold properties in the neighborhood that are similar in size. Experienced realtors are usually quite good at this. You can add a factor to the eFMV to get your list price. As a seller, in the worst case, you may have to drop your list price to your eFMV. Best case, you get a nice bonus. When there are multiple bidders around your eFMV, but under listing, you have some leverage to get a higher bid. Let's assume your eFMV is 850K. "Look, I have a bid of 850k. You're at 825k. My list price is 900K, but if you bid 875k now, it's yours guaranteed." It looks like a steal in the buyers eyes ("25k below list price!") and you get a nice 25k bonus over the eFMV.

As a buyer, this silent "list price is always accepted" rule, gives you the ability to properly filter properties because the list price functions as a cap. This saves both buyer and seller time because you're not chasing unreachable properties. You can also get a realtor to get your own estimated FMV for the property that looks interesting. It's up to you to decide if the certainty of the buy is worth the difference between list price and your eFMV. If not, you can always bid something lower, closer to your eFMV but with the possibility that someone outbids you.

The process usually is really fast, because realtors are good at estimating a FMV, most sellers realize they shouldn't expect a huge premium over that estimate and buyers accept a premium for the certainty of an immediate sale.

I'm not assuming nobody accepts a lower offer. Just that sellers will overpice FMV by some margin (as you confirm) and eventually accept the highest bid under list (seems confirmed too).

And I think this system makes more sense - pricing is more transparent and saves everybody a bunch of time.

I think he simply wants the same rules that apply to McDonalds to also apply to homes.

If McDonalds has their BigMac Meal labeled with CHF 12.50 (the current price in Switzerland IIRC) the cashier won't be able to refuse to sell it to me for that price even if I look particularly hungry and it's 4 O'Clock in the morning (and might thus be ready to pay more than 12.50). At least in Switzerland you are generally obliged to honor your displayed prices.

I have never bought a home (I'm a 23 y/o student), and I don't know if the process in the US would be comparable to the process in CH, but if a home is labeled with a price of say CHF 1'250'000 I expect to be able to walk in there with a bag with 1'250 CHF 1000 bills and pay for the house without additional price haggling. However I can imagine that this is not how it works (apart form the "pay with cash" part, which I know works for sure).

Big Macs are standardized commodities. Houses aren't. And even standardized commodities can have different prices for different customers based on geographic location, time, whether or not the customer has a coupon, etc.

I understand, but where does that stop? What if McDonalds raises the price in the next minute, should they be required to honor the previous price? This just screams of unnecessary, unenforceable regulation.

If the average market price for my neighborhood raises after my listing, am I not permitted to raise the price? How would you apply this reasoning to a stock market?

Would you then be okay with a grocery store demanding you pay 5x the list price for the last gallon of milk they have because the guy who also wanted it said he would be willing to pay that much?

That's not a good example. If a supply shortage drove price that high, what choice would I have? However if the store clerk is demanding 5x asking price without basis, I'll just go to another store. That's just how supply + demand works. That house went for 782k over the asking price because it can. This isn't a case of the supplier being unreasonable.

You can, with a modicum of effort, learn the market as well or better than a real estate agent. You're only interested in a small slice of the houses that are on the market (at least in the Bay Area, supply is very low here). It's worth going to open houses, looking at asking prices, and then following up on what happened to that property. Spend at least 6 months getting to know the market for the neighborhoods and type of home you're interested in before you shop seriously. And keep in mind that you may be disappointed more than once along the way.

Finally, the "asking" price is not a contract. When my wife and I bought our house, there was a competitive offer that included "lifetime" seating at a popular restaurant near us. We had both offered slightly over asking, and this was 2009, so not exactly a "hot" market. Your solution would basically ask sellers to treat their house like a commodity, which might make sense in a spec home or developer deal, but really makes zero sense for two parties who are each making what is likely the single largest financial transaction of their life.

>You can, with a modicum of effort, learn the market as well or better than a real estate agent

This is the sort of reasoning that people say that pay for the used car salesman's boat.

You are going to buy, what, 5 houses in your life? If you're a big mover.

Real estate agents spend their entire life doing the thing you do once every couple of years at most. Why do you think you'd be better than them?

This is like saying that you, as the person who walked out of a 48-hour boot camp, can code that JS program better than the veteran programmer because she doesn't specialize in Javascript.

You want to spend 6 months doing research? Real estate agents are spending years! There's a bit of principle-agent problems when working in this, but still. Beyond the information parity, there's simply knowing how to do sales and getting people to sign the contract.

It sounds like you haven't been in the presence of incompetent real estate agents... (which is good!) Anecdotally, however, by being in the market for housing for about 18 months, my level of knowledge and preparedness about individual properties, their attributes, and their value is now exceeding 80% of the agents I speak with. This is in Seattle, mind you, where prices are increasing off the charts. In a volatile market like this, it's harder for agents to learn their market and then rest on their laurels, so many fall behind.

I used to know how applets worked really well. That knowledge isn't so useful anymore.

Real estate agents have the same problem.

Of course they know more than I do about the process of buying a house. But knowing whether a house is worth more than asking and roughly how much over -- I can learn that specific piece of info for the houses I care about and my knowledge will be roughly equivalent.

That just shifts things to everybody listing their house for far more than it is worth.

The response to that is to either not worry about it or to have some entity fixing prices...

> With any other thing I want to buy, if I agree to pay the list price I get the item

This is a modern phenomenon wholly reliant on the predictable cost of industrially-produced goods. Houses are different. Your proposal would lead to: most people (a) listing at $100 billion, (b) giving no listing price, or (c) becoming reliant on third-party pricing consultants, since you only get one chance to get it right.

> makes it impossible for anyone to shop for a house except for realtors who are 'in the know' and can tell you the real price based on listing.

Impossible and not easy for you?

So that is the harm you are stating? That you don't want to put the effort into understanding the market enough (without a realtor) to know the value of what you are buying? Plenty of people operate fine under the current system.

What's next? Do you want to have a lottery with a fixed and low price. That way people with more money and so on don't have an advantage.

Things are never equal. Some people have an edge. This edge is not entirely a realtor skimming as I think your comment implies.

> This system of listing a price to 'get people in the door' and then igniting a bidding war

Is it wrong for ebay to do this as well?

Follow up: well, this was an unpopular comment!

I am not saying we should simplify house buying to the same process as buying a cup of coffee.

I am saying that there is probably some price for which you're willing to forego negotiation and just sell it. This is like the ebay "Buy it Now" price. I think when most people list their house, they have this number in the back of the mind.

So let's start by putting that price out there. And maybe some basic conditions about how you'd like to be paid. If the perfect buyer comes along, you're done! This is currently not possible with our system. If the house is listed at $100k and I am willing to pay $150k I still start by offering asking to feel out the seller. If they had listed a "Buy it Now" price we could be done instantly.

Now let's say nobody wants to pay your buy it now price, they are free to make a lower offer. In the worst case, we get back to where we are now.

For all of the argument saying how hard it is to price a home and how nobody can get this number right because every home is unique, I don't think this is any harder than picking a list price in the current system. Most realtors pick the list price hoping to get x% more, depending on their market. Just include that x% in your "Buy it Now" price and be done with it.

What problem does that really solve? Most people shop on Redfin anyway, which gives a fairly accurate estimate for what the house will sell for.

It might help to think of this like a "Reserve Price" on an auction. The listing price illustrates the lowest price at which the seller will sell with no questions asked. This doesn't mean they can't sell lower - it just requires negotiation. Likewise, if there are multiple competing bids, it clearly has to go to the highest bidder.

There are instances of this kind of price movement in commodity products too, depending on demand. A rapidly selling product will get a bump to its MSRP, while the introduction of a competitor will cause price competition. It's not all that different in methodology - it just moves slower.

Be grateful that your local supermarket is no longer a street market, where each price has to be negotiated and haggled. Price discrimination there is rampant, so each buyer gets a personalized price tailored to extract as much as possible while still completing the sale.

One issue I see is: houses aren't like any other item, there are exactly only one of each house. If you miss out on the house you want, you can't go across town and get another one just like.

Edit to add: Also, it occurs to me, if you go to ebay.com you can bid at auction for general consumer goods. So there's that.

When selling a house you want some ability to be selective on buyers. Some properties won't be able to be mortgaged as is under some of the special programs (VA loans require particular building codes and standards in addition to the standards required for conventional loans for example) as often the seller is buying a new property with the proceeds of sale, delays that one of these special programs might create may be costly to the seller.

You are trying to stack the deck in your favor, making the seller pay for a portion of your house...

Why is it "fair" for the buyer to be able to offer less, when they determine the house to be worth less than the ask, but the seller shouldn't be able to ask for more, when they find out there is a lot of interest?

You will find that your suggestion will make all houses more expensive.

Price is a big, but not the only factor when choosing a buyer. The highest priced bid doesn't always get the house. Factors such as inspection contingencies, settlement dates, financing, what the buyer plans to do with the house, etc all play a role in the transaction. If a person wants to buy your house and tear it down, you should not be obligated to sell.

It doesn't seem practical to avoid the need for an expert when buying unique, hand-built items that cost multiple times the buyer's annual salary. Not everything needs to be condensed down to a one-click buying experience.

Woo! Now everyone's house is listed for $100M!

however a home is a unique item, limited in availability. Hence it warrants allowing others to offer more for it. plus just as it is the right of buyer to haggle for the best price it does not always mean the lowest

I guess it must be a cultural thing. In major cities in Sweden 15% over the asking price is the asking price and 50% over the asking price, while rare, is hardly unheard of. No seller ever accepts the asking price unless they're really desperate.

I've read that in Sweden, participation of recent immigrants in economy is lower than in most other European countries.

Why not create some jobs for them at building new homes and propping price down? Genuine question.

You can't build houses without land to build on, and desirable land makes up most of the price of desirable housing.

I don't think of Sweden as a country that lacks land.

Population of Sweden is comparable to that of Bay Area but seriously.

I imagine if you could just go and buy a home in "the next suburb by the road" really affordably, it would deflate prices for most desirable places too.

If you could just get plenty of cheap land in the suburb down the road someone would have built houses there 30 years ago.

Sure there is land and there are plenty of places where you can buy a nice house for less than, say, $100k. However none of those places are within a one hour commute of where any jobs are.

Well, I'm looking at map of Sweden near Stockholm and sure as hell I see a lot of place for building up. Glades with direct access to highway.

And you think that the reason they haven't built on that land is lack of cheap labor? Labor costs are simply not a factor when it comes to the economics of building houses in and around places like Stockholm.

I think that the reason they haven't build on that land is unwillingness to build on that land.

They surely can overcome this unwillingness, can't they?

And then they actually have access to labor already. Makes things better for virtually anybody, excluding some rent-seekers.

They surely can overcome this unwillingness, can't they?

First of all it's not like they're not building in Stockholm. Secondly most of that 'unused' green land you're probably looking at is public parks and nature reserves. So it really boils down to a debate on the value of nature reserves vs more housing.

Makes things better for virtually anybody, excluding some rent-seekers.

and people who see a value in public parks and nature reserves.

You can discern nature reserves, public parks and "wild" parks when you look at OSM, for example. That still leads to some place to develop on.

There is no debate. You can always build up around a city. Housing prices bubble shows they're not building fast enough, by far.

Not building is a non-solution. It's not sustainable.

About a half hour north of Sunnyvale, there is this brand new 3300 sqft spec house offered at 2.5M:


It has been on the market for months without selling.

[UPDATE] Downvotes? Seriously? Why?

I don't get your point. It's a different house, in a different location. I live in Redwood City too; the schools aren't as good as Sunnyvale, the commute will be longer, etc etc.

What's the catch?

It's on a small sloped lot, so it has no yard. And it's not in Sunnyvale.

Listing under to create a bidding war is definitely a thing in the Bay Area. It's really gotten out of control the last few years. From last month:

Listing: $2M - https://deleonrealty.com/property/4136-briarwood-way-palo-al...

Sale Price: $3.2M - https://www.redfin.com/CA/Palo-Alto/4136-Briarwood-Way-94306...

This is absurd but not quite as absurd as the headline makes it out to be.


Over-asking sales are at least partly the result of agents’ sleight of hand. It’s become common strategy to list homes under their market value in order to entice Silicon Valley buyers; they are all too willing to fight over the few houses available in this chronically tight market [...] Given prices to the north, spending less than $2.5 million for a house in Sunnyvale on a large lot — about 13,000 square feet — “wasn’t a wrong move,” Kalkat said.

I see this everyday in the Bay Area. In this case it seems to be a tech worker. Usually these are bought by some investors in China and the houses are never occupied.

I doubt that's the "usual" case -- yes, cash-only transactions occur, and foreign investment buyers are in the market, but I don't see a ton of vacant homes. I recall hearing from a real estate agent that foreign purchases were fewer than 10% of the transactions, but I have no idea what her source was.

Vancouver circa 2016, though...

"Large lot - 13000 square feet". So I'm not anywhere near as good of a commute location, takes me 25 minutes to get to Los Gatos, so getting to Apple is probably 40, but I've got 15 acres, a main house almost twice as big (it's too big in my opinion, just gathers junk, so not necessarily a plus), a barn that we have turned into 1/4th man cave, 1/4 exercise room, 1/4 chicken house, and 1/4 barn, and a 1 bedroom guest house, and a 1500 square foot shop, and a quonset hut you can park 3 or 4 semis in.

All for less than what that buyer paid, admittedly 10 years ago. So it's in no ways apples to apples. My guess is my place is worth about what they just paid. Yeah, my commute would not be great if I worked at Apple, but you guys remember Rands in Repose, right? The manager dude with the blog about managing? Worked at Apple? He's my neighbor. We've got lots of Google/Apple/whatever people up here, you get way way more house and property for your money and you are not living right on top of each other.

If you are house hunting and you want to consider the mountains, PM me, I'll hook you up with an excellent real estate agent. It's definitely not for everyone, if owning and running a generator, tractor, chainsaw seems nuts to you, yeah, not for you (though I didn't know anything about tractors before I moved up here, now I own two and an excavator and do jobs for $1000/day). Happy to answer questions on or off the forum about the mountains, I frigging love it up here.

I'm blown away that people will spend that much for a boring ranch house on a little lot. I could get it if it were downtown Mountain View, that's pretty pleasant, ditto Palo Alto, but Sunnyvale? That seems nuts.

Does anyone else feel like it is a bubble? Or is this the new normal?

I have zero desire to own a big house in the mountains. Like you say, it's not for everyone. shrug The land, house, commute, dealing with septic and water services, all sound like a lot of work.

It is a lot of work. We've got a saying in the mountains: there is no need for a gym membership :)

But there is some satisfaction from learning how to run a tractor, fetching fresh eggs from the hen house, etc.

I lived in San Francisco for 19 years before I moved here, I like it here fine. Very little in the way of neighbor problems.

It may be an age thing, I remember when I was in my late 20's going backpacking with a friend who said "when I have enough money I'm going to buy 40 acres in the shape of a square and put a house dead center." I remember thinking why on earth would you want to do that? Then I had neighbor problems and the light went on.

I like it but you are absolutely right, it's not for everyone.

As a skeptical home-owner of a modest town house this screams housing bubble. The only thing left is to figure out how to make money off of it.

Please come to Vancouver, BC. We have bidding wars on houses and many have sold WAY over the asking price. Here's a fine example: http://www.cbc.ca/news/canada/british-columbia/vancouver-tea...

As a tech worker with a large family (this house is too small for my family), I believe I am now officially priced out of every moving to SV. And that's with me being quite wealthy; I have about $1MM in equity in my house, and various other investments and retirement savings.

South San Jose (Evergreen) and the East Bay would be within your reach most likely.

What are commute times like to where the jobs are from those (Cupertino, Palo Alto it seems)?

Many jobs actually are in San Jose and Sunnyvale. About 45 mins from evergreen which has great schools, safe, big houses on big lots. $1.7M would be 3k sq feet

East bay to the valley is not possible for commute under 2 hours

My $235,000 home is also 4-BR, 2-BA, 2000 sq ft. Its just located on the wrong coast.

>The property is one of more than 50 South Bay homes that sold in the last month for at least $200,000 above the listing price. More than half of those deals were made in Sunnyvale. Others were made in Cupertino, Saratoga and West San Jose

as they mentioned this house is close to that humongous Apple new campus, and the mentioned areas - too. Given the current traffic and what it can become near that campus, one can understandably want to live closer, especially given the current fashion for the biking, walking, etc.

Some areas in Vallejo above Oakland are also currently rising in price pretty quickly. After San Francisco, even Oakland is running out of affordable houses. There is a Ferry that goes from Vallejo to the Ferry building in San Francisco with free wifi. Unsurprising more people decide to live there.

After living in Dublin, Ireland, for a year, this looks rather unimpressive.

If they keep paying for it, you should just really rise prices.

It's the market, baby.

Yes, presumably the asking price was just far under market.

I remember a time when a company would open a campus, and provide cheap housing rental or purchase but only to employees.

Now the same is happening, except with crazypants pricing.

A colleague that was looking to buy a house last Spring said that the house he put a bid on in San Francisco sold for 100% above the listing price.

I assume that's last "spring," and not that your team is doing agile real estate sprints. But I'd be happy, and rather curious, to be wrong....

Fixed. Thanks!

I'm guessing it's bitcoin money !

Yeah, right after 10% drop in value is a fantastic time to cash out...

It's actually right after a 50% rise.

It was $1000 earlier this year...

If the house were for sale by a politician I wold suspect that it was one hell of a bribe!

They're paying for that 13,000 sq feet of property, not so much the house.

And I thought NYC RE was bad .... Northern California is out of control

are there any affordable places in around SF? North Bay or Berkeley or further south? or are they all just as insane prices?

No; everyone's already thought of that. Your cost will be inversely proportional to your commute misery.

Though as mentioned elsewhere here, the Santa Cruz mountains are the biggest bargain in the area. By far. It's just not for everyone.

Greetings from New York.

You people are fucking insane, for the love of God please consider building some apartment buildings.


Several apartment buildings by me in Sunnyvale just went up, if you want to pay $2940 for a studio[0].

In my experience, anything in the South Bay or Peninsula (in a decent area) that is managed by a large company (AvalonBay, Alliance, etc.) is going to start in the 2ks and go up a couple hundred each year.


Is that really so bad? Here in CT I payed 1.2k for studio with similar amenities. A mid-level developer making 75k +-20k is normal here. A mid-level developer making 170k +-20k is normal there.

You obviously lose some disposable income, but in exchange you're in Sunnyvale. The job market there makes CT's look like a joke and for growth as far as income is concerned in incredibly limited in most parts of CT compared to any areas around Sunnyvale, making it a great deal for younger people.

170-200 is not normal for mid level when average is 150 despite what people like about.

The range I mentioned is 150k-190k. 75k is also the number people talk about when 60k is a lot easier to find so I think the scales a pretty even

The strength of NIMBYs here is dramatically higher than in New York. That is supported structurally through the fragmentation of local politics.

Source: I'm a New Yorker transplant to Palo Alto.

> The strength of NIMBYs here is dramatically higher than in New York. That is supported structurally through the fragmentation of local politics.

Also the lack of developers. Probably owing to concentrated land ownership, e.g. the Getty family. New York's structural consolidation was driven, in part, by private companies developing real estate and transportation systems.

Developers seem to play a unique political role in organizing, in absentee, renters. Homeowners tend to self organize. This is because (a) they bet a lot of money on their houses, (b) have the time and money to politically organize, evidenced by (a), and (c) stay put for a while. Renters don't naturally self-organise. Developers naturally counterbalance homeowners by seeking to (x) increase housing supply and (y) consolidate small plots into larger ones, thereby also (z) driving density.

Apartments wont change the dynamics of SFH in the South Bay/Peninsula given local zoning rules. The main driver of price seem to be the local schools.

This is an example of a pre-1975 windfall at it's finest and the decades of legacy effects of Prop 13 [0]. Why would you ever want to sell your house if it costs almost nothing to keep empty/second home and you bought it before 1975?

If the Zillow data is correct, it looks like it's being taxed at a value of only $110k, ~60% of the original purchase price in 2017 dollars (from comment below). [1]

[0]https://en.wikipedia.org/wiki/California_Proposition_13_(197... [1]https://www.zillow.com/homes/for_sale/fsba,fsbo_lt/19540393_...

California state law means that commercial real estate is absurdly more profitable than municipalities then residential. Why would you ever approve a permit for an apartment building, when a much more taxable office building could go on a lot? There are dozens of non cooperating municipalities in the area, and none of them have incentive to allow high-density residential development, because it will just increase demand for office buildings in the neighboring municipalities.

Apartments/Condos are being built like crazy in Redwood City. It's no South Lake Union, but it's close.

Someone who wants a house is not really willing to have an apartment. Someone who is ready to put this amount of money in a house is definitely not willing to get an apartment.

Yes, but some people would prefer to have an apartment and save some money, and that would overall create less demand for the available homes.

End result: people who want apartments get them, people who want houses still get them and pay less for them too.

That's not how it works. Anyone in the market for an apartment isn't driving up demand for this $2.4m $1,200/s.f. house.

Lower apartment prices would cause a downward pressure on overall real estate prices, including for houses. As an extreme (and absurd) example, consider the scenario where apartment prices are zero or even negative. Demand for houses would drop dramatically, causing their prices to also drop.

They are not perfect substitutes. If they were, no one would be paying $2.4m for this postage stamp in Sunnyvale.

There is plenty of supply below $2.4m. The 20 people who made offers on this house weren't interested.

Aren't your apartments still over $1k/sq foot?

Isn't this how trump is accused of accepting bribes from the russian government?


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