Nhat V. Meyer / Bay Area News GroupA 2-bed, 1-bath, 1,690-square-foot home at 180 Stanford Ave. in Menlo Park, California, is listed for $1.795 million.

Two years of tight supply and intense demand have pushed prices for modest homes in trendy neighborhoods of California’s Bay Area to mind-boggling heights.

In Palo Alto, tiny homes sell for multiple millions of dollars. In Oakland’s desirable Rockridge district, a home just sold for $500,000 over the asking price.

On both sides of the bay, location commands the biggest price, even as the amount paid per square foot reached new peaks in more than one-third of 155 Bay Area ZIP codes analyzed for the San Jose Mercury News by CoreLogic DataQuick.

With the price of homes in Palo Alto skyrocketing, Ken Plourde, a 79-year-old retired jazz bass player, decided it was time to sell the home he bought for $35,000 in 1970.

“I was sitting on a gold mine,” said Plourde, whose income from music gigs has been declining with his advancing years and changes in the live music business.

The 992-square-foot home within walking distance of Stanford University was snapped up in one day by a wealthy Stanford graduate in China for $3 million, a price that comes to more than $3,000 a square foot.

“They’re going to flatten it, but what the hell, I can’t do anything about that. Life goes on,” said Plourde. “It’s a fortune to me, for a guy who’s never made more than $30,000 a year.”

Spillover from the intense demand for the 94301 ZIP code known as “Old Palo Alto” is helping drive prices up along the Peninsula as buyers scramble for desirable homes.

Next door in Menlo Park, a bungalow is offered at $1.8 million, a little below the median price there and just above $1,000 a square foot.

“There’s too much money chasing too few homes,” said an agent, Scott Dancer with Coldwell Banker. “People are competing for a limited product.”

Farther south in Cupertino, fixer-uppers command $1 million. A 1,100-square-foot, two-bedroom, one-bath Cupertino home sold for $1.385 million Sept. 30. Why would anyone pay that much? Hint: It’s on a big lot a few blocks from Apple headquarters.

Plans for a 5,000-square-foot house are already posted on the lawn.

Real estate agents say two groups are leading the pack of home shoppers in Silicon Valley: newly wealthy tech workers and overseas buyers, particularly from Asia.

“We’re just getting an influx of Asian money, and a lot of money from China,” said Plourde’s agent, Dan Robinson of Today Sotheby’s International Realty. “They don’t mind paying for something, but they want a good investment.”

In the East Bay, neighborhoods close to amenities such as Berkeley’s “Gourmet Ghetto” or Oakland’s Rockridge have seen big appreciation over the past two years. The median price of houses in tiny Emeryville, minutes from the Bay Bridge, has more than doubled in the past two years, according to CoreLogic DataQuick.

“We had one just last week that went $500,000 over asking,” said Philip Weingrow of Alain Pinel in Oakland. The house is in coveted Rockridge.

A house in the Oakland hills sold this summer for $839,000, or $280,000 more than the asking price, according to data gathered by real estate firm Pacific Union. That was $730 a square foot in a ZIP code where the median price per square foot was $457 in the second quarter.

And a 940-square-foot, two-bedroom, one-bath home built in 1925 in Oakland’s Fruitvale district sold in October for $700,000 — $141,000 more than the asking price and $744 per square foot.

But Glen Bell with Better Homes and Gardens in Berkeley believes that the market will cool off for a while in most parts of the East Bay.

“There has started to be some resistance from buyers on going any higher,” Bell said. “Some areas are still going to get multiple offers over asking price, but the number of multiple offers is lower.”

Palo Alto is still going strong. One large home in old Palo Alto is listed at $12 million, while a roomy estate nearby recently sold for $20 million.

“Palo Alto never stops,” said Don Orason of Intero Real Estate in San Jose. “When does it end? I haven’t any idea.”