A Study of Appreciation in Atherton, California

Location, Location, Location

While the citizens of this quiet town probably would have preferred to have been overlooked, Atherton, California was ranked by Forbes Magazine as the most expensive ZIP code in America in 2013. With a population of 7,060 living in 2,330 total housing units, the total number of home sales each year isn’t a large figure. However, the average sale price of a single family home has climbed rapidly over the past two years from $5,187,484 to $7,995,640.

Although Atherton has several pockets of smaller homes, the catalyst for this appreciation has been the competition for the trophy homes at the very top of the market. To analyze this segment more closely, table B examines the change in the average sale price of one acre+ properties in Atherton’s various neighborhoods over the past two years.

Two trends have emerged:

1. Buyers are realizing that the “West of the Alameda” neighborhood is an extraordinary value when compared to adjacent West Atherton. The reasons are three-fold: builders have rediscovered the potential of the larger lots found in this quiet neighborhood; the Las Lomitas School District has emerged as one of the area’s top public school districts; and the rolling hills can provide wonderful views and exceptional privacy.

2. A similar relationship is developing on the other side of El Camino Real, where the lack of supply in the coveted Lindenwood neighborhood has lead value-conscious buyers to the tree-lined lanes of Atherton Oaks.

This dynamic environment has been especially appealing to custom home builders. A call to Atherton’s Building Department revealed that there are currently 754 active building permits in town. While many of these permits are certainly for small projects, it is impossible to drive down Atherton’s wide avenues without spotting convoys of construction vehicles surrounding various properties. Indeed, a 10,000+ square feet of living space on three levels is becoming the norm for newly constructed homes.

Additionally, buyers continue to desire a truly private setting. Several properties with roads bordering two sides of the parcel lingered on the market earlier this year. Not surprisingly, homes located on flag lots have done well. In a community where walled and gated parcels are the norm, a long private driveway provides yet another level of seclusion.

The convergence of prestige with location also explains why foreign buyers find Atherton so appealing. The Wealth Report, an annual report on global prime real estate markets, Knight Frank (a global property consultancy), stated that foreign buyers are willing to pay top dollar for homes abroad, but only when the location had an established record of value. Given the global mobility of people and capital, the report concluded that high-end buyers will continue to pay a premium for tangible assets in safe haven markets because of their relative financial security and the opportunity for significant appreciation.

In conclusion, we believe Atherton will continue to experience strong appreciation over the next 12 months.