One of the trends that we are seeing again in the Lafayette CA real estate market are the one million dollar home tear-downs. Referred to as “scrapers” back in the height of the market in 2004-2005, these are typically homes that are in the most desirable areas of the Lafayette real estate market, with excellent lots, but inferior homes.
As one would surmise, the tear down and rebuilding trend is heaviest on the Peninsula and the most affluent parts of Santa Clara County, but it is becoming more common in our world of Lafayette real estate. Logic would dictate that it would happen when it makes financial sense to take a property to the level of “highest and best use.” Sometimes that logic simply does not apply, and we’ve seen buyers make these types of property acquisitions, simply driven by their desire to live in a desired location. In fact, this trend has made it very challenging for builders to find homes that make good financial sense for them to remodel/expand the existing home, and then resell the property to garner a profit. A buyer who is purchasing the “tear-down” to build their dream home is often willing to pay above market rate, knowing that they will live in it for the long-term.
According to a recent article in the Mercury News, “We’re wrecking 3,000-square-foot houses and erecting 14,000-foot houses,” said Hal Nelson of O. Nelson & Son excavating and demolition company in Woodside. He stated that he has 20 tear-downs scheduled in Los Altos, Palo Alto, Menlo Park and Atherton. His business was up 20 percent last year, and up 15 percent in 2012. We are not seeing the same extremes in our world of Lafayette CA real estate, but the trend is firmly established and will certainly continue as long as our local real estate economy remains strong.