Single-family home prices in Silicon Valley are among the last in the state to avoid year-over-year declines, but that's likely to end this year.
Falling sales and rising inventories left the January 2007 median for single- family detached homes at $740,000, exactly where it was in January 2006, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.
January's median price is approximately 9.75 percent and $80,000 lower than the market's record high of $819,950 set back in June of 2006.
It will be a long haul in a tough market for the median price to make it back to the record level by June this year.
Calhoun says the market's last year-over-year price decline for single-family homes in closes sales was July 2002 to July 2003 when prices fell from $564,500 to $550,000 for a 2.6 percent, $14,500 decline.
"I don't think we'll hit $819,000 again, but we are holding our own on the median price," said Warren Winsness, 2007 president of the Santa Clara County Association of Realtors.
The latest single-family detached home median is up from $738,000 in December, but it's been down or flat every month but one since the peak.
Among the 611 single-family closed sales in January (down from 661 a year ago and 825 a month earlier), buyers paid an average 98.3 percent of sellers' asking price. Only 32.6 percent of buyers paid more than the seller's asking price, while 55.2 percent paid less, according to Calhoun's report.
There's a bit more strength in the relatively more affordable condo sector.
The $518,880 median condo price for closed sales in January was up from $505,000 in December and up from $500,000 a year ago in January.
Among 273 closed condo sales in January (down from 343 in December and down from 283 a year ago) buyers paid an average 99.2 percent of asking with 30.4 percent of buyers paying more than asking and 53.5 percent paying less.
"Condos are generally much more affordable than single-family homes so there are always buyers in the market for condos, which keeps the condo market more level and less susceptible to fluctuations in the economy," says Tony Sum, broker with the new downtown San Jose-based SiliconValleyLofts.com realty company largely serving the city core and other areas with relatively new, higher-density and infill communities now hitting the resale market.
But even the condo market is not immune to softer prices. Silicon Valley condos took a year-to-year plunge back in October, albeit a smaller one than single-family homes now face. In October 2006, the condo median came in at $490,000 compared to $495,000 a year earlier, according to Calhoun's report.
"No, sellers are not getting with the program yet (and lowering prices enough to satisfy buyers), but mainly because there is so little inventory and so many Realtors going after what there is listed. Buyers, meanwhile are really dragging their feet on making an offer, and many want to go in very unrealistically low," said Linda Boyd, a broker associate with Meredith Homes in Los Gatos.
"Both sellers and buyers need to be educated by their Realtors. I think with all the newbies out there, they are not being properly educated either before making an offer or before putting their property on the market," she added.
The disparity between buyers who think prices are still too high and sellers who want what their year-old neighbors paid is causing listings to languish longer and inventories to grow.
"Over the period 2003 through 2005, inventories were lean, multiple offers were common, and buyers and sellers alike knew they needed to move quickly to consummate a transaction," said California Association of Realtors president Colleen Badagliacco, who is also broker/owner of Valley Properties in San Jose.
"But as the market began to slow in late 2005, buyers sensed that they would get a better deal if they waited, while sellers still hoped to sell their home at a premium. This drove a wedge between buyer psychology and seller psychology, creating more market friction and leading to a slowdown in activity," she added.
Calhoun's report reveals single-family home listings remained on the market an average 71 days in January, up from only 48 days a year ago and 59 days in December. Condos sold sooner, in an average 62 days, but compared to 42 days a year ago January and an average 53 days in December, 2005.
"Our prices have held better than the rest of the state, but I am seeing the lower end properties that don't show well will sit on the market for 90 or more days," said Boyd.
"A lot of the ones being withdrawn or cancelled were over-priced to begin with and even with our (relatively) low inventories, they are not being snatched up as they would have been a year or two ago," she added.
Silicon Valley's inventories of both condos and single-family homes combined, grew to only 3,671 in January, from 3,054 a year ago, and from 3,297 in December, a month earlier.
"I tell sellers to be realistic. It's not the same market it was in 2005. I tell them to put a lot of emphasis on staging. I tell them there is a fair amount of inventory and they should look at the competition and see what the other houses look like so they are marketing-wise and price-wise," said Winsness, also broker/owner of Winsness Realty in Los Gatos.
San Jose, the county's city with the largest concentration of homes, continued to see median home price increases from $683,000 in January 2005 to $697,000 this January, as inventories dipped from 385 to 341 during the same period.
Campbell, Gilroy, Los Altos, Los Altos Hills, Monte Sereno, Santa Clara, Sunnyvale and Mountain View all revealed flat or falling prices. Other cities showed pricing improvements. Except for San Jose, however, the numbers of home sold in an individual city each month is too small to be statistically significant unless the trend continues.
Winsness says 30 percent of homes in some areas still generate multiple offers. That's inline with Calhoun's statistical rendering of the percentage of homes sold for more than asking.
It's not 2004- or 2005-level multiple offers, but more than one bid per listing.
"It depends on the area. The west side, Cupertino, Saratoga. They get multiple offers, Winsness said.
Also, the median price isn't a true measure of an individual property's true value. The median is the price point at which an equal number of homes sold for less and an equal number sold for more.
"Just because the median price is down does not mean that property values are down. To determine property values a comparison (of sales) of the same home should be done," said Calhoun.
