Heard the one about the Menlo Park house that was on the market for $600,000? Twenty-two offers later, the house, a simple three-bedroom, two-bathroom abode went for $900,000 (£636,000).
Menlo Park, an affluent, established town just north of Palo Alto, is at the epicentre of a real estate boom that staggers even industry veterans. Silicon Valley is sizzling, adding about 50,000 jobs a year, and new millionaires are being created every week as the stock market continues to soar.
As if that wasn't pressure enough, the geography is against any further expansion. "We're a peninsula," says local real estate agent, Betsy Dwyer, "Just like Manhattan, the part of New York where everybody wants to live, we have no room to grow and there's only so much land to go around."
According to the National Association of Home Builders, 13 of the least affordable housing markets in the US are in California. Surveying San Jose, a significantly less expensive area than Menlo Park and Palo Alto, the association found that only 32 per cent of families earning the median income for the area could afford to buy a home.
The American Dream must seem very distant for the other 68 per cent. The average price of a Palo Alto home was $530,000 in December, although according to estate agent Carmen Lynch, quoted in the local paper: "There has been huge demand for homes in excess of $800,000." There are a lot of first-time buyers who have high incomes and stock options.
As if to underline this, another local agent is selling a half-acre plot in Palo Alto for $2.5 million (£1.7 million). That's just for the land.
While I keep meeting sellers who are astonished at their good fortune when they put their house on the market a house is considered "stale" if it isn't under offer after 10 days the plight of buyers is a sorry one.
David Harrah, an executive with chip manufacturer VLSI, has been looking for a house for several months. He and his wife have been outbid on several homes, including one where the asking price was just under $500,000 and the winning bidder paid $570,000 in cash.
"Having come from New York, where everything is outrageously expensive, we thought we'd seen high home prices," Harrah says. "But the valley real-estate phenomenon is mind-boggling." According to Harrah, you can't even begin the process until you have been pre-approved for a mortgage and lined up your cash down payment, which in this market needs to be 20 per cent to be even considered.
Ultimately, Harrah's advice is to be flexible: "We're now in negotiations to buy a house in the mountains above Silicon Valley. We're paying $100,000 more than we planned. It's a long commute, down a treacherous road on the edge of an earthquake fault line, and a stone's throw from the 1989 Loma Prieta earthquake's epicentre. So we're living dangerously!"
Many Bay Area workers simply opt out of this race altogether. Steve Eldridge, a manager with San Francisco's Interactive Public Relations lives way, way out of the area in the farmland town of Turlock. House prices are lower there a new three-bedroom home costs $160,000 but Eldridge has a commute that averages 2 1/2 hours each way daily. He gets up at 4.30 a.m. to be at his desk by 8 a.m.
In the eight months that he has been doing this commute one thing continues to surprise him, and that is how the roads are packed even at that early hour. While the area is a magnet for workers, house prices force those workers to live at ever-increasing distances from their jobs.
Communities are beginning to notice the effect this is having on their essential services, as teachers, firemen and police have to live a long way from the community they serve. In a recent local controversy, the town of Atherton (median house price $1.4 million) agonised over requiring its police chief to live within the town's boundaries.
The chief, who earned about $84,000 last year, could not afford to do so and asked Atherton to subsidise his housing. At a hot-tempered city council meeting the vote was four-to-one to reject the request. "What's the next step, groceries?" asked one councilman.
Estate agent, Betsy Dwyer, predicts the current boom in housing will last another four years. During that time, house price records will continue to be broken, many more Steve Eldridges will be forced to commute, many more David Harrahs will compromise on their dream home and the Atherton police chief will probably have to join the maids, teachers, shopkeepers and aspiring CEOs streaming in to service the Bay Area economy every morning.
