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The Silicon Valley is now leading the nation in its long-awaited housing recovery, according to veteran Bay Area realtors.

Suzanne Yost, President of the Silicon Valley Association of Realtors summarizes, “We’re at that leading edge.”

Many cities, in fact, are showing double-digit gains in year over year sales prices. In San Jose, the median cost of a single family home is now $582,000, up 22 percent over November of last year. And in Palo Alto, which boasts some of the region’s best performing schools, high demand has pushed the median sales price of a home to $1,684,000.

What surprises buyers, sellers, and even seasoned realtors in parts of the Bay Area, is the number of homes receiving multiple offers that are non-contingent and all-cash.

Certainly, the initial public stock offerings of such Silicon Valley luminaries as LinkedIn, Facebook and Groupon have helped spur the region’s resurgence in housing. But there’s another increasingly significant group of buyers who are fueling the frenzy. Numerous agents reference the impact of Chinese investors, both foreign nationals and immigrants. “Just in the last year, we’ve seen a doubling of buyers coming directly from China and they’re pretty much all-cash buyers, usually here for just one week,” says Ken DeLeon, broker and founder of Palo Alto’s DeLeon Realty.

Nationally, Canada remains the largest group of foreign investors in U.S. real estate. But there is ample anecdotal evidence to suggest that the Silicon Valley is bucking the national trend. “Amazingly, within Palo Alto, with its great schools,” DeLeon postulates, “70 percent of the buyers are now Chinese, either American born Chinese, or coming directly from China. It’s staggering!”

The Silicon Valley Association of Realtors (SILVAR) recently formed a Global Business Council to help its members respond to the growing interest from foreigners, most notably from Asian investors. A delegation of 10 Chinese government officials recently met with the association to learn about real estate ownership, development and taxes in the golden state. “It was evident from the meeting that our world is more global than ever, and so is the business of real estate,” council chairwoman Jennifer Tasto said.

Meanwhile, high demand combined with low inventory have spawned a robust market in the Silicon Valley. Agents Anina Van Alstine and Sharon Witte recently sent out 32 disclosure packages for a home they co-listed within walking distance of Stanford University. Even during the Thanksgiving holiday when the business of buying and selling homes usually slows, the highly desirable location drew a remarkable 15 offers. Priced at $1,695,000, the final sales price was $2,230,000 – 32 percent above the original asking price. Van Alstine added, “More than 30 percent of the offers were all-cash and the one that got accepted closed in seven days from acceptance.”

Other, similar stories abound. Tasto recalls receiving 38 offers on a Palo Alto green acres rancher. Listed for sale at $1,195,000, half of the offers, she says, came in above $1.5 million. It sold for $1,650,000.

Michael Repka, who brings his legal and tax expertise to the DeLeon Asian Operations team remarks, “It’s absolutely remarkable. It’s the most frenzied, excited market that I’ve come across in the last 10 years.” But Van Alstine and Witte are careful not to focus too squarely on the Asian investor. They write, “As agents who represents many high end properties we can tell you that there are people from all over the world moving to the Bay Area as well as local residents, who have plenty of resources to engage in the bidding wars that are so prevalent now. The amazing prosperity generated by businesses centered in Silicon Valley has generated unprecedented amounts of cash and buyers from all backgrounds are willing to invest what it takes to live where they choose.”

All of the realtors and agents with whom I spoke while researching this story emphasized the importance of education and high quality schools for buyers. Julie Tsai Law, who had just returned from client meetings in Hong Kong, Taiwan, and China, said the major reason her buyers develop such a strong attraction to Palo Alto is “for the school districts here. From elementary to high school to even the universities.”

Their keen interest and personal holdings are such that Law says, “They wire the money overnight, and they close the deal within five days.” Van Alstine echoed a similar view. “We could tell from remarks made at our open houses, that people making offers imagined a K-Stanford education for their children.”

The Fair Housing Act prevents us from keeping tabs on race and ethnicity in real estate transactions. As a result, precise data is unavailable from the California Association of Realtors and likewise, SILVAR, on the percentage of recent home sales tied to Chinese investors, either foreign-born or resident Chinese. Other developments, however, confirm the rising tide of interest from The People’s Republic. DeLeon recently launched an Asian Operations unit with more than a quarter of a million dollar marketing budget targeted toward mandarin speaking investors. “There’s such an interest in purchasing houses by the Asian community, we wanted to structure something that was most convenient for them and also to help us market our homes” explained Repka, chief counsel for DeLeon Realty.

Other Bay Area real estate firms are in the process of setting up offices in China, as well. RE/MAX reports that 25 percent of the visitors to their year-old global website, www.global.remax.com, come from China.

Following her recent meetings with the delegation from China, SILVAR president Suzanne Yost elaborated, “I think they feel it might be time to get their money out of China.” That’s a sentiment echoed by Repka who explained that citizens are not allowed to own the land they purchase in China; they buy their homes on long-term leases, and many investors fear that the Chinese housing market may have peaked. Additionally, the People’s Republic of China restricts the purchase of second homes so there is only so much real estate an investor can buy. All the more reason, realtors summarize, that homes from San Jose to San Francisco and parts in between are getting swamped with offers of all-cash and a quick close, oftentimes from foreign investors.

Realtors agree that it’s a great time to be a seller, but it can be a really tough market for buyers.

Article source: http://www.nbcbayarea.com/news/local/Chinese-Capitalists-Help-Fuel-Housing-Rebound--184185391.html

Pierre Buljan guided his black Mercedes SUV around the winding roads of the Hillsborough hills and into Atherton, where the mansions of Silicon Valley technology barons hide behind thick stone walls, wrought-iron gates and tall, manicured hedges.

“These people have essentially infinite money,” said Buljan, who has been a Realtor on the Peninsula for more than 30 years. He pointed at a sloping four-acre property that included a large redwood grove with a private creek.

“If someone falls in love with a property like this,” he said, “the price doesn’t matter.”

Everywhere Buljan turned, a historic transition was under way. A generation ago, many of these properties were second homes for San Francisco’s elite families. These days, most are being bought, for cash, by international tycoons or the youthful leaders of local technology companies.

While the wider Bay Area has suffered, along with the rest of the country, with falling property values and rising foreclosures, the luxury housing market has remained robust, analysts said. That is especially true in Silicon Valley, where an arms race for talent among emerging social networking companies has raised salaries for executives and engineers, and a resurgent market for initial public stock offerings is creating hundreds of new millionaires.

Some of the sales are eye-popping. In March, the Russian billionaire Yuri Milner, an investor in Facebook, Groupon and Zynga, bought a French-style chateau in Los Altos Hills for a reported $100 million. Some buyers have hidden their identities behind companies.

In September, an Atherton estate formerly owned by the great-grandniece of Levi Strauss sold for $53 million, while the home of Sue Burns, a major investor in the San Francisco Giants, was sold for $20 million by her estate.

“It’s going to take a while for the wider economy to recover, but there are enough people to make a difference at the high end of the housing market,” keeping demand high, said Steve Levy, director of the Center for Continuing Study of the California Economy, a think tank in Palo Alto, where the median single-family home price last week was $1,838,750.

Across the Peninsula, a small-scale building boom is under way as developers and wealthy property owners buy million-dollar homes, tear them down and build larger ones. Stroll down Waverley Street in Old Palo Alto, home to many Google executives and the late Steve Jobs, and you’ll see the ultramodern 6,000-square-foot house that Google’s co-founder Larry Page is building, rising from its foundation. Page’s mansion will also include a 3,500-square-foot basement that has been called a “bat cave” by neighbors. Analysts and builders said such high-end construction had been largely recession-proof.

“While the large number of foreclosures have created a significant inventory of homes at the middle and lower end and kept prices down, that hasn’t happened at the top end,” said Eduardo Martinez, a senior economist at Moody’s Analytics.

The high unemployment rate in the Bay Area’s construction sector has driven down wages and therefore the overall cost of building, said Leonard Mezhvinsky, a principal at Sieger Property Development. Meanwhile, the number of potential buyers for top-tier homes continues to grow.

“We are expecting Facebook and Zynga to go public,” Mezhvinsky said recently, “and that will create an instant number of multimillionaires.” Indeed, Zynga went public on Friday with a $1 billion stock offering. Facebook is widely expected to file a $10 billion offering early next year.

In anticipation of the onslaught of new multimillionaires, Mezhvinsky bought a single-family home on Ralston Avenue in Hillsborough in 2009 and demolished it. “When we’re done, there will be a 10,000-square-foot main house, and a loge,” he said. “There will be a six-bedroom house, seven full bathrooms and two powder rooms. There is a swimming pool with a Jacuzzi. There is a sauna and steam room,” and five fireplaces.

The new house will not be finished until July or August, Mezhvinsky said, but it is already on the market for $13 million, nearly four times what he paid for it. The buyer will probably pay extra to finish it to his or her taste, he said.

“What you’re witnessing,” said Buljan, the real estate agent, “is the next generation of superwealth.”

This article also appears in the Bay Area edition of The New York Times.

Article source: http://www.baycitizen.org/real-estate/story/luxury-real-estate-market-no-downturn/