Silicon Valley's Micro Markets

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom – If you are buying or selling a home in Silicon Valley, now is the time, perhaps more than ever, to be sure you hire someone who has his or her finger on the pulse of a specific micro-market.

That micro-market -- not general statistical trends -- will determine how you should proceed.

Local experts are saying, statistically speaking, when it comes to home sales and most prices, the Silicon Valley real estate market is, by and large, long past the boom. Sales have plunged and prices are slipping, but at different rates in different areas.

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"There are lots of mini-markets around and you can find pockets of homes in areas that are good homes, but you need to find a good Realtor to sell it and market it," says Warren Winsness, president of the Santa Clara County Association of Realtors.

"There's just a lot of supply out there and that's good news. There is also a stricter set of guidelines from lenders, but they really do want to make loans," says Winsness, also broker/owner of Winsness Realty in Los Gatos.

Santa Clara County-wide, closed single-family home sales came in at only 575 for the month of October, the second lowest in recorded history and down from 892 a year ago. Condo sales were 227 in October, down from 375 last October, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.

Even as sales have fallen and inventories for both types of housing combined have swelled from 5,151 a year ago to 6,451 in October this year, the median price has continued to rise. The median price on closed sales of single-family homes came in at $861,500 in October, up more than 11 percent from $775,000 in October. Condos were up more than 6 percent to $520,000.

Or so it would seem.

The median price is rising because of the larger-than-normal share of sales in more expensive communities. However, prices and real value are falling in some sectors. And the fall is gaining momentum.

Calhoun estimates that in October, 27 percent of closed sales on single-family homes were in the Saratoga and Los Gatos markets; 17 percent in Los Altos and Palo Alto; 15 percent in Cupertino and Sunnyvale; 14 percent in Santa Clara, Campbell and the Willow Glen and Cambrian areas of San Jose; 8 percent in the Santa Cruz mountains and the Evergreen and Almaden Valley areas of San Jose; 7.7 percent in east, central and south San Jose; 6.3 percent in Milpitas and the Santa Teresa, Blossom Valley and North Valley areas of San Jose and 5 percent in South County (Gilroy, Morgan Hill and San Martin).

"Silicon Valley is currently performing like three separate and distinct markets," added Stefan Walker, a broker with Alain Pinel Realtors in Los Gatos.

"The lower peninsula and upper south bay markets are on fire. These are the markets that are keeping the average county value figure in positive territory. The mid-county areas are experiencing that rare market status of equilibrium. In the lower-county areas, we find inventory in these areas has exploded, mostly due to the incredibly weak sales," Walker said.

Calhoun says the middle market portion that includes Santa Clara, Campbell and the Willow Glen and Cambrian areas of San Jose are beginning to join the less expensive sectors' trend of price declines. He says if sellers don't quickly adjust prices to match the trend, they will find themselves chasing the market down.

Generally, while high-end markets still enjoy multiple offers -- within reason -- low-end market sellers already have to price ahead of the market or pull their listing and wait it out.

Buyers at the upper end still must be ready to compete, while buyers in the low end, and more and more often in the middle market as well, are finding bargains -- if they can get financing, if they don't decide to wait it out.

The key is, those are general, broad based considerations. A real estate agent in a given market should reveal to buyers and sellers conditions that will help them make a "buy" or "sell" decision specific to the location.

"I have a fiduciary duty to my clients to council them that there is every indication some areas will go soft. I show them the data about the potential for negative direction of prices or depreciation," said Calhoun.

• Silicon Valley Home Improvement Bargain Alert
• Silicon Valley Bullish On Buying, Not Selling
• SF Bay Area Home Sales Nose Dive"

© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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