In 2014, the median price of a [Palo Alto] house with less than 1000 sq.ft. of living space surged 40 percent.
Josh Lipton, “Gigantic Price Tags”, PBS Nightly Business Report, January 16, 2015
In itself, it’s a meaningless statistic, generated by a local brokerage probably more for its shock value to the national news media than for the insight it gives us into the Silicon Valley housing market.
Why? Because there aren’t enough tiny homes in Palo Alto to be either a market factor or a market indicator. Yes, they represent the teardown market, but around here so do medium-size or even large old homes, and their living space is irrelevant to buyers, or as we call them here in Silicon Valley, “bidders”. Teardowns aren’t valued by their living space, they’re valued by what really matters, their lot size.
So as I say, it’s a meaningless statistic, using a meaningless metric. But I didn’t say it’s a statistic with no value–it gave a reporter a story, a story mercifully free of the usual “California, land of fruits and nuts” slant the national media, which still hasn’t forgiven us for the dot-com era, often brings to Silicon Valley. And it got someone face time on national TV.
Also of some value is hearing the superlatives showered on Palo Alto by NBR’s Silicon Valley reporter. “Palo Alto is one of the most sought-after communities in the Bay Area, with its elegant downtown, respected schools and proximity to the headquarters of tech giants…”
So does a 40 percent surge in the price of doll houses mean that Palo Alto real estate is a bubble market? “Economists don’t think so”, says Lipton, making my blood run cold–check out my admiration for economists by clicking the Economists category on this site–because “the big jump in income growth will keep supporting home prices in the area”–and here’s the economists’ trap door–“at least in the near term”.
And you can take that to the bank. Not that the bank will deposit it to your account, but maybe you’ll make a teller’s day.
copyright © John Fyten 2015