Palo Alto is the nation’s most expensive college town, according to a recent survey by Coldwell Banker Real Estate.
The new College Home Listing Report, released on Nov. 11, ranked college towns in order of affordability using the average home listing price of four-bedroom, two-bathroom properties listed for sale between April and September 2010. With its average listing price of just under $1.4 million, Palo Alto claimed the title of most expensive market. Honolulu and Los Angeles came in second and third, respectively.
There are a variety of factors that make real estate in Palo Alto pricier than in other college towns, according to Carole Feldstein, a Coldwell Banker real estate agent based in Los Altos.
“Palo Alto offers highly rated schools, a university environment, easy access to San Francisco,” she said. “There are also business opportunities in a variety of fields. Not all areas that have colleges have [a place like] Silicon Valley in such close proximity.”
Tiffany Griego ‘98, associate director of Stanford’s Office of Real Estate, attributes the high prices to an imbalance of supply and demand.
“There’s strong demand for executive housing in the region, given the close proximity of high-quality jobs,” she said. However, “federal, state, and city laws protect open space in the city so there’s limited space for new development.”
According to Griego, home prices in the neighborhoods directly contiguous with Stanford have increased approximately 30 percent in the past 10 years. In 2000, a three-bedroom, two-bathroom, 1,500-square-feet house in the immediate Stanford area cost about $1.3 million. In 2010, such a house comes in at around $1.7 million.
Although this is the first year Coldwell Banker has released an affordability ranking exclusively for college towns, Palo Alto ranked as the fourth most expensive market overall in its 2009 Home Price Comparison Index, with an average four-bedroom, two-and-a-half-bathroom house coming in at just under $1.5 million.
The expensive real estate market in Palo Alto does pose difficulties in the hiring and retaining of University faculty, said Jan Thomson, director of Faculty Staff Housing.
“The fact that housing prices here are higher is certainly a challenge for the University,” she said. “We’ve been fairly successful in dealing with it in the past, and we’re optimistic about our ability to handle it in the future.”
Although Thomson said home prices on campus “compare favorably” to Palo Alto home prices, she pointed to University-sponsored housing assistance programs, including loan and allowance programs, designed to attract and retain faculty. According to Thomson, there are currently 650 single-family homes and 200 condominiums on campus leased by faculty and senior staff. In addition, the new Olmsted Terrace development includes 39 homes for faculty with reduced prices of $700,000 to $900,000.
“For the homes at Olmsted Terrace, we’ve created a new, more restrictive ground lease to drive down the price of homes,” she said.
Key features of the lease include cap depreciation, a non-extendable time limit of 51 years, and an agreement to sell the property directly back to the University.
Palo Alto is not the only area market covered in dollar signs. The report named the Pac-10 as the most expensive football bowl subdivision conference; homes in the region have an average price listing of just over $570,000.
Although real estate in Palo Alto–like the markets in most other cities–took a hit during the recent economic downturn, Feldstein emphasizes the general strength of the market.
“Home prices have had a lot to do with general economic trends,” she said. “In the past 10 years, there have been some increases and some price adjustments, but home prices have always been historically strong in Palo Alto.”
Contact Samantha McGirr at [email protected].