In 1868, Colonel William Welles Hollister sold his portion of the original land grant known as Rancho San Justo to a group of civic-minded citizens. The San Justo Homestead Association was formed, the city was laid out, and the surrounding property was auctioned off to the highest bidder. An abundance of Spanish place names already existed in the area, so the Association decided to name the new town "Hollister" after the man who had sold them the property.
Approximately 100 acres were set aside for the town of Hollister bounded by North, South, East, and West Streets. Building lots were quite narrow, so some buyers purchased two or three lots in order to erect larger buildings. A corner lot sold for the impressive sum of $200 while other lots sold for $100. San Benito and Fourth Streets were designated as the business district, which to this day boasts one of the best inventories of historic architecture in California.
in 1870, the Southern Pacific Railroad laid its first track from Carnadero (about three miles south of Gilroy) to Hollister. Growth in the new town now proceeded rapidly with new homes and business springing up. On August 29, 1872, Hollister was officially incorporated as a city and by February 12, 1874, had secured its place as the most important city in the area when San Benito County was formed and Hollister was named the county seat.
So began one of Hollister's most prosperous periods. The hay industry brought growth and prosperity, and the coming of the railroad brought increased communication from the rest of the world. Hollister became known as the "Hay City", and successful families began building splendid new homes that would reflect their position in this exciting new place.