Red-hot real estate: Palo Alto 2 bedroom's asking price—$2.6M

MILPITAS, Calif. (KTVU) - In the South Bay, another home is up for sale in a red-hot real estate market. And while seven figures is common, the price tag for this home is raising eyebrows for what it doesn’t have.

Step inside this comfortable bungalow on Middlefield Road in Palo Alto and you’ll see thoughtful staging and amenities. What you won’t see – a lot of house.

This two-bedroom, one bath home barely fills 900 square feet. And the listed sale price – an eye popping $2.6M. Long-time residents and neighbors aren’t shocked..

“It’s monopoly money,” said Charlotte, a neighbor walking the area around midday Monday. “The younger generation is making a lot more money. They’re doing a lot more things. The economy is up.”

“People are very familiar with it,” said real estate agent Laura McCarthy. “We have a lot of people who walk in the neighborhood; they’ve come through. We’ve had owners in from the past, they’ve come through.”

McCarthy says steady foot traffic since the property went on-market 20-days ago is a good sign.

However, in an area where the average time from listing to closing is nine days, three weeks seems like an eternity. Could it be, even in the Bay Area, there is a limit to the price of real estate?

This house has small bedrooms, a cramped bathroom and modest kitchen.. All available space is used, including the basement, where there’s barely enough height to stand up straight. But room enough for a washer and dryer.

All this for $2.6M? McCarthy is quick to point out the 4,361 square foot lot offers a small back cottage.

Other homes on busy Middlefield Road have sold in the $2M-$3M range. These homeowners are taking a different approach to pricing – they want to avoid a bidding war, and target that one buyer who has to be in this house.

“We’re looking for somebody who says I see the value. I love the fact that I can walk to town. I love the fact that I can live in it and then maybe increase the size of the footprint at some point in time,” said McCarthy.

The sellers may have time to play with, since sales typically slow in the summer months. But McCarthy says if there are no offers in the next month, there could be conversations about adjusting the asking down, and understanding the red-hot market may be showing signs of cooling.