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Luxury Real Estate Market Sees No Downturn

 
In Silicon Valley, new millionaires are buying mansions with cash

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.

Luxury Home

“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.

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