Silicon Valley's Boom Creates Shortage of $1 Million Homes
The capital of high tech is now the capital of high-priced real estate.
Silicon Valley currently leads the nation in the number of homes sold for $1 million or more, according to Realtytrac. Sales of $1 million-plus have more than doubled in many communities in the Valley this year, toppling longtime luxury real-estate leaders like Beverly Hills or Miami.
Topping the list is Saratoga, Calif., in Santa Clara County, which had 225 homes sold for $1 million or more. That marked a 162 percent increase over last year.
Ranked second was Burlingame, Calif., which had 211 sales of at least $1 million, more than double last year’s rate. Cupertino and Los Altos ranked third and fourth in the nation, with 175 homes and 170 homes respectively.
“Silicon Valley is one of those hyper-local markets that are just very strong right now,” said Daren Blumquist of Realtytrac. (Read more:For Luxury Real Estate, the 'Year of Capitulation')
Brokers say tech growth is the main driver of demand in Silicon Valley. But they say it’s not coming from the new crop of high-profile social-media tycoons. Instead, it’s coming from executives at Apple, Google and other more established companies.
“Everyone was waiting for the big Facebook effect,” said Bill Lewis, a vice president in the Los Altos office of Alain Pinel, the Silicon Valley Realtor.
Another big force behind demand is China. Realtors say waves of wealthy Chinese buyers are pouring into the Valley and buying up multi-million-dollar properties. They say the buyers are increasingly nervous about the Chinese government and economy and are looking for a safe haven.
While some Chinese investors are buying properties to rent, many are buying homes for their families and children, brokers say. Almost all of the deals are cash, they say.
Robert Gerlach of Alain Pinel’s Palo Alto office, said he recently sold a home that was priced at $1.495 million. The house attracted eight bidders – seven of whom were Chinese. He said the home sold for more than $1.7 million.
“The Chinese buyers are telling me that this is a safe place to put their money and a good place for their kids, given the quality of the schools,” he said. (Read more: The Mass Migration of the Super-Rich)
The surge in demand has drained much of the inventory in Silicon Valley. Communities like Palo Alto and Los Altos have only a few weeks of inventory. Brokers say that the total supply of homes for sale has fallen by half over the past year.
All that demand and lack of inventory means that $1 million doesn’t buy much luxury in Silicon Valley. A 1,700-square-foot home in Los Altos, with dated fixtures and “lots of upside potential,” is priced at $1.3 million, according to one listing.
In Saratoga, $1.1 million gets you 1.2 acres of land – but no house.
Rob Godar of Intero Real Estate Services in Los Gatos said he doesn't have any listings at between $1 million and $2 million. "They just sell too quickly," he said.
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank