LOS GATOS, Calif. (KTVU) - There's more proof the red hot Bay Area real estate market hasn't cooled down, yet.
A home the size of a small studio apartment is on sale in the South Bay. Tucked in the Los Gatos hills sits another example of the ever upward surging price of real estate in the Bay Area. 55 Rodgers Road is a one-bedroom, one bathroom home that's all of 550 square feet. Three rooms and a garage you can't park in, with an asking price of $857,888.
The realtor says this property is loaded with possibilities. If that's true, you don't have long to list them. You can walk from one end of the house all the way to the other in about 10 seconds.
The property is in a secluded section of town with access to great schools and shopping. The negatives include a kitchen and bathroom in serious need of upgrades. Still, realtor Coco Tan says a bidding war is underway with a possible purchase price sitting at $1.4 million. That's more than $2,500 per square foot.
"Well I think to anyone in the rest of the country this makes no sense at all. However those in the bay area realize we are in a housing shortage. We haven't built a lot of housing over the years and demand is high," said Veritas Urbis chief economist Ralph McLaughlin.
He says the unrelenting law of supply and demand has given rise to 15% property appreciation in recent years. That's led to bidding wars as is the case at 55 Rogers Drive. And there have been similar South Bay cases, from Fremont to Palo Alto. However, McLaughlin says the appreciation is starting to slow, to maybe 4% or 5%. It's still good, just not as great.
Paying more than a million for a three room house does makes sense since any prospective buyer will likely knock down this cottage to build a castle.
"When you're talking about a potential house that would go on that lot that maybe $1.5 million, $2 million, even $3 million, paying a million plus for the lot and then putting a $2 million house on it might actually make sense," said McLaughlin.
The tiny home does have a large lot - over 10,000 square feet of hillside land. All that's missing is a vision, and a bulldozer to clear the way to a new home with a view.