A tiny Silicon Valley Starter Home Sold For A Shocking $1.8 million Bankrate.com Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Courtesy of Redfin October 03, 2018 Natalie Campisi is a former mortgage reporter at Bankrate. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Most people in most parts of the U.S. would laugh at a $1 million-plus price tag for a house the size of some kitchens. In Palo Alto, California, they’re laughing all the way to the bank to apply for a mortgage. Here, a 804-square-foot house built in 1916 fetched almost $1.8 million in August. The modest cornflower blue and beige home has two bedrooms and one bathroom on a 5,000-square-foot lot not far from the 101 freeway. In one of the most expensive cities in the country, where the median sale price for single-family homes was $3.2 million in August, this starter home, which sold in 2003 for $100,000, seems like a deal. And these houses aren’t sitting around waiting for buyers. According to Realtor.com, the median age of inventory here is 24 days, which is fast for homes at this price point. It’s not uncommon for Palo Alto buyers to either remodel or knock down the old structure and build new, says Javier Vivas, director of economic research at Realtor.com. In a market where half of the homes were built before 1968, land makes up two-thirds of the home value. “This is a great market for construction and remodeling,” Vivas says. Who can afford Palo Alto
The birthplace of Google and Facebook, Palo Alto is the epicenter of Silicon Valley — a place synonymous with innovation as much as it is with outrageous fortune. The median household income is $145,000, which is 2.5 times higher than the national average. Compare Mortgage Rates Today The problem is houses are 10 times more expensive, making it tough for most folks to find affordable housing, according to Vivas. “Only 15 to 20 percent of households can afford to buy here.” Many of the buyers are tech entrepreneurs and foreigners. Corporations and private LLCs are snapping up Palo Alto property, at twice the rate of the rest of California. Similarly, people who have the funds to flip property here are doing so at double the rate of the rest of the U.S., according to Realtor.com. People who don’t earn high six- and seven-figure incomes struggle to find housing, says Vivas. Many people resort to renting houses with other families or renting a single room in a house. Some tech workers will get corporate housing for a few months, but after that they’re on their own, sometimes sleeping in cars and on couches. Kate Downing, an attorney in Palo Alto, made headlines in 2016 when she wrote an open letter resigning from her position from the Palo Alto Planning and Transportation Commission, citing the high cost of living as the reason. “After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here. We rent our current home with another couple for $6,200 a month; if we wanted to buy the same home and share it with children and not roommates, it would cost $2.7 million and our monthly payment would be $12,177 a month in mortgage, taxes, and insurance. That’s $146,127 per year — an entire professional’s income before taxes. This is unaffordable even for an attorney and a software engineer,” Downing wrote. The future looks scary for affordable housing
The Silicon Valley enclave is home to just 61,000 people; and that number is starting to shrink, according to Vivas. Last year, Palo Alto lost about 310 residents and there’s no sign of that number rising. “When we looked at migration data this year, population is on the decline. People are leaving Palo Alto to other places in the state,” says Vivas. The real estate market is starting to cool, as well, says Avi Urban with the Sereno Group in Los Altos, California. “There’s no question that the market has slowed down. For the first time in years, I’ve seen my clients say that they’re going to stop looking,” Urban says. There are several reasons for the slowing market, affordability being just one of the problems, Urban says. The federal crackdown on H-1B visas — denials rose by 41 percent in the latest available figures — is also contributing to the slowdown. A number of foreign-born workers in Silicon Valley depend on these visas and without them they can’t work in the U.S. H-1B visas are temporary visas given to foreign workers, with special skill sets, because there are not enough American workers to fill those positions. “The new administration’s H-1B policy is turning people away. Silicon Valley is a magnet for people coming from all over the world. They don’t want to invest in a community that they can’t stay in,” Urban says. Not only are home prices exorbitant, but rent is unaffordable for many people, too, says Urban. The average rental price for an 815-square-foot apartment in Palo Alto is $3,034, according to RentCafe. For a two-bedroom apartment, renters will pay an average of $3,616 per month. For a family of four, this living situation can be tenuous. “Affordable housing is a huge problem here. What happens to the teachers, firefighters, people who work in restaurants? Not only can they not purchase but they can’t rent. You can’t have a healthy community like this,” Urban says. Learn more
SHARE: Natalie Campisi is a former mortgage reporter at Bankrate. Related Articles