Menlo Park Real Estate Viewed as a Relative Value
Only a few real estate markets ago, our neighbor across the creek, Menlo Park, used to demand about the same average sales price and price per square foot as Palo Alto. Sure, buyers still made trade-offs: people buying in Menlo Park got a little more house than those buying in Palo Alto, and the Palo Alto buyers got slightly better schools. But before 2007, buying in Palo Alto or Menlo Park was going to cost you about the same no matter which city you picked.
Times have changed. In 2006, the average sales price in Menlo Park was just 3.24% lower than Palo Alto. By 2012, that difference had grown to 27.56%. The trend has continued in 2013, with Menlo Park’s average home selling for 28.09% lower than Palo Alto’s, year to date. The average price per square foot in each city also mirrors this difference. In 2006, Menlo Park went for $732 per square foot as compared to Palo Alto’s $812, a difference of only 6.16%. By 2013, the delta has grown to 26.20% as the trend continues.
These statistics demonstrate that there is a lack of equilibrium between Palo Alto and Menlo Park real estate prices currently, based on the historical price differential between the two cities. Some may argue that the cities have changed in the past six years, and that Palo Alto has simply developed a better reputation than Menlo Park due to the schools, location, or other factors. While relatively this may have occurred, no combinations of factors can justify such an extreme deviation in prices being sustained over the long term.
Menlo Park’s elementary school districts continue to excel, all elementary schools serving the city have Academic Performance Index (API) scores above 925 this year, making them comparable to Palo Alto elementary schools. Menlo Park’s Oak Knoll Elementary, with an API of 961, rivals the top Palo Alto elementary schools. The city is served by Menlo-Atherton High, while having an API score lower than Palo Alto High or Gunn High, it does have an exceptional AP program for gifted students with high levels of participation. In addition, the current price difference of the same size house in each city certainly exceeds the cost to educate your children at one of the prestigious private high schools in Menlo Park and nearby Atherton. These include the Sacred Heart Schools and Menlo School, both known to be highly selective and academically rigorous.
Menlo Park’s ease of access to Stanford and shopping has not changed in the past six years. In addition, Menlo Park has also only become more convenient to major employers in the area as the Peninsula high tech companies continue to expand. While Facebook is the most famous company to relocate to Menlo Park, it is certainly not alone. With more employers expanding their presence on the Peninsula rather than growing towards the South Bay, Menlo Park’s accessibility has improved, not lessened.
In addition to the many objective factors that draw buyers to Menlo Park, there are also some subjective factors that are quite appealing. For example, Menlo Park has a less crowded and hectic feel than many of the surrounding cities. For example, the tree lined streets are wider and less crowded than many parts of Palo Alto and down town area feels quainter. On the other hand, some may find the town to be sleepier.
The statistics and lack of long-lasting factors justifying such a difference indicate that Menlo Park is a possible alternative to buyers who are willing to look at creative options for high schools for their children and those who want a bit more house and yard for their money. As Palo Alto continues to appreciate, more people will become priced out of the city, and therefore they are likely to turn to Menlo Park as their best alternative. As this trend accelerates, it will cause upward pressure on Menlo Park prices as well, driving them up closer to the relative delta that existed prior to Palo Alto’s current booming appreciation, year over year. Menlo Park may not be right for everyone, but it has certainly become a relative value for many buyers that have found themselves priced out of the Palo Alto market.
