Perceptions of neighborhoods change slowly, if at all.
For some home buyers it's the pot of gold at the end of the rainbow: the dark horse neighborhood "in transition", the under-dog area now "in the path of progress", the overlooked city sure to get overdue recognition.
Or it's some bargain hunter's pipe dream, a poorly-located neighborhood with a long history of no infrastructure and low-testing schools and a solid reputation as a place to drive through with your doors locked, chained and bolted.
It's the neighborhood that gets a quick pop during boom times from a flossy new shopping center and a flurry of new construction, only to collapse when the boom goes bust. It's the area whose sole claim to fame is affordable new construction, but the homes are new and affordable because the areas people really want were built out years ago. It's the city "you won't recognize in ten years", only you do.
I mention this because a few days ago I was contacted by a reporter for a local news outlet that I'm told writes and produces the Bay Area pages of the New York Times. The reporter introduced himself by saying that he was "working on a story about Facebook moving its headquarters from Palo Alto over to Belle Haven in east Menlo Park". He went on to say that "I've become particularly interested in the impact on the housing and real estate markets in Belle Haven and East Palo Alto. I came across your website and your descriptions of various areas and it seems like you really know a lot about what's going on in real estate on the peninsula. I've heard some people say that this move of thousands of employees is already having an effect on real estate there. I'm wondering if you've seen any impact. Are employees calling you up and looking? Are investors buying places up for an anticipated jump in prices? Is this a selling point for real estate agents?"
All great questions for a plausible story. But my response didn't fit the story line.
The only person who’s contacted me about Belle Haven lately was an investor. Investors are active there and in East Palo Alto, since declining prices and rising rents mean it’s one of the few places on the Peninsula where they can get “positive cash flow” (make more money each month than they spend).
As for techies driving up prices in Belle Haven and East Palo Alto, I may well be missing something but I’m skeptical. I'll concede that rising rents west of 101 may be driving young professionals to rent east of 101. A client of mine who leased out her Belle Haven home early last year (before the Facebook move) told me that only young vegetarian professionals responded to her ad. Sure sounds like the tip of the spear of gentrification, but I don’t know how deeply these renters will root. Virtually all the buyers I work with who work in the tech field want highly-regarded schools, something the Ravenswood district doesn’t offer.
The one exception to this was a young Hispanic engineer, a Stanford graduate fast-tracked for management at HP, who in 2000 bought a Belle Haven single-family home instead of the Mountain View townhome most locals of his age and income buy. His priority was staying close to his culture, and his choice involved a moral element that doesn't often figure in the home-buying decision.
He later moved to LA to get into music production, and I’ll tell you about selling his house because I think it illustrates how slowly neighborhoods—and perceptions of neighborhoods—change. We put his home on the market early in 2006, just as the east-of-101 market (along with most of the California market) was weakening. Homes west of 101 were still selling in seven to ten days with multiple offers, but homes in Belle Haven and East Palo Alto suddenly stopped selling, period. It didn't help us that my client's next-door neighbor chose this moment to Agent Orange her front lawn.
Or maybe her chemically-ravaged lawn didn't matter, because no one was showing up to my Sunday open houses anyway. So I decided to go after what I imagined was a vast untapped market of home buyers, the tens of thousands of workers driving through Belle Haven five days a week from their good-paying Peninsula jobs to their far-off but affordable East Bay homes. I held my listing open each Wednesday in the thick of commute hours, from 4:00 to 6:00 PM, with an A-frame on clogged Willow Road to tempt weary commuters my way. I even had a loan agent there to qualify hot buyers on the spot. I figured that at least one commuter, stuck in an hour-plus of bumper-to-bumper traffic, would think, “if I lived here, I’d be home by now” and detour to see the home. But the only traffic I got the three or four times I did this was a mortgage broker trying to pick up my business. Eventually we sold it to someone who rented a few blocks away, and whose uncle lived a few doors down.
I think you can draw an analogy between Facebook/east of 101 and Google/north Mountain View. Both employers have a large, bright, well-paid workforce, and they're located in areas that have traditionally been among the most affordable on the mid-Peninsula. I recently sold a home in north Mountain View that’s within easy biking distance of the Google campus. It’d been rented by a Google employee, and we sold it, in less than a week, to a Google employee. But other single-family homes in north Mountain View generally aren’t selling quickly, not nearly as quickly as homes in Mountain View neighborhoods further west that are more consistent and have higher-testing schools. In fact, there’s a home around the corner from my listing that’s been on the market forever, most recently as a short sale, something you rarely find further west. I sent some buyers through it a few months ago, since the home was in their price range and the location worked well, but they were concerned about the neighborhood and ended up buying twenty miles to the south.
I could be wrong, but I think the old rule still applies: if they have to, most local buyers will trade a convenient commute for an established neighborhood. And thinking an old rule doesn't apply usually spells trouble.