After two months of Silicon Valley's home prices plummeting like a Drop Zone amusement park ride, churning stomachs got a chance to settle in September.
Even as the housing slow down trend continued with rising inventories, fewer sales and longer listings for homes that managed to attract buyers, the median price of single-family detached homes lost only $1,000.
Prices fell from $770,000 in August to $769,000 in September this year, remaining nearly 5 percent above the median price in September 2005, according to Richard Calhoun, a San Jose-based Creekside Realty real estate broker.
The median single-family home price had dropped $50,000 or 6.1 percent during July and August, the largest dollar amount ever shaved off the median price in a two month period, according Calhoun who publishes the Bay Area Real Estate Market Newsletter, a report comprised of statistics from the area's multiple listing service, RE InfoLink of Campbell, CA.
"Buyers in Silicon Valley are taking their time. If there ever was a time to do that this is it," said Edwin Resuello, president of Santa Clara County Association of Realtors.
Dickering single-family home buyers were paying, on average, only 99 percent of sellers' asking price in September when homes took an average 50 days to sell. Last September, sellers netted an average 100.7 percent of their asking price and homes were on the market an average 29 days, Calhoun reported.
Closed sales of single-family homes withered from 1,339 in September 2005 to 887 this September, as inventories swelled from 3,060 last September to 3,926 the same month this year.
Most of the median price loss in September came from Santa Clara County's largest city, San Jose, the county seat, where the median price dropped this year from $721,000 in August to $715,000 in September. The vast majority of other cities in the county, even the generally softer South County (Gilroy, Morgan Hill and San Martin), revealed solid month-to-month price increases.
However, year-over-year home price increases throughout Silicon Valley are shrinking and some forecasters predict home prices overall will eventually decline, as they have in the neighboring counties of Santa Cruz and San Mateo, as well as elsewhere throughout California.
"It is only a matter of time, before nominal home prices are down on a year-over-year basis," said University of California Los Angeles (UCLA) Anderson Forecast senior economist David Shulman said in a third quarter report "Soft Landing with Turbulence Ahead."
"2005: The Year the Tortoise Won the Race, Whither California Home Prices," a companion forecasting piece by Anderson Forecast director Edward Leamer, says five years from now, California's home prices will be about the same as they are today, with values reduced by as much as 20 percent due to inflation.
The forecast is consistent with real estate advice not to expect overnight wealth from what's considered a long term investment.
Existing home owners appear to be heeding that advice and hedging their bets for the long haul by replacing short term, riskier loans that are currently adjusting to budget-busting monthly mortgage payments.
The Mortgage Bankers Association revealed refinancing applications were up 17.5 percent in the week ending September 29, compared to the previous week. That pushed the level of refinancing to 47 percent of all mortgage applications, the highest refinancing share of all mortgages since February 2005. Purchase mortgages make up the bulk of all originations.
The new loans are often fixed rate mortgages (FRMs) and more traditional adjustable rate mortgages (ARMs) that stay fixed for five years or more. They initially may be more expensive each month than the discarded mortgage, but they lock in the monthly payment for a longer period and allow home owners to avoid the financial stress of rates -- and mortgage payments -- adjusting frequently.
"I chatted in the past week with appraisers who say they are getting a lot of orders, but that most of them are to refinance these days. People are trying to get rid of option arms and other loans," said Resuello, also owner broker of Realty World-Silicon Valley Homes.
Interest rates, at an average 6.3 percent for a FRM on a conforming loan in the week ending October 5, were as low as they've been since March, according to Freddie Mac.
Silicon Valley condos also give buyers a better shot at budgeting the cost of home ownership. The median condo price dropped $15,000 from $510,000 in August to $495,000 in September, and was only 3.1 percent more than it was a year ago, according to Calhoun.
