Thursday, September 14, 2006

Silicon Valley's home values drop

Silicon Valley's median home price dropped 6.1 percent in the past two months, the largest such decline in three years. The $50,000 loss over the two-month period was the largest ever. Granted, percentage-wise, a $50,000 drop from $800,000 is the same as a $25,000 drop from $400,000, but the dollar figures reveals that the higher prices go, the more room that they have to fall.

The median price for single-family home prices came in at $770,000 in August, down $35,000 from July, which reflected a $15,000 drop from June. "The market is not tanking, but it is reminiscent in many ways to the real estate market of the early 1990's," said Edwin Resuello, president of the Santa Clara County (Silicon Valley) of Realtors.

"We saw a two- to three-year downturn in the housing market, a huge number of foreclosures and a new trend that was labeled 'short sales.' Wouldn't you know it, we have similar characteristics just starting to show now," said Resuello, also broker-owner of Realty World Silicon Valley Homes in San Jose.
Surrounding county markets and a few Silicon Valley sub-markets already reveal year-over-year price declines and that trend is likely to spread further into Silicon Valley, most experts say. The up and then down cycle is normal for the market and it has been too hot for too long during what many considered an unsustainable boom of record proportions.

"Yes, some segments of the market will go down, and these will be properties that are overpriced by sellers still thinking they can get whatever they want for a property. It's like a wildfire that has been out of control for a couple of years, but that has finally been brought back to just a steadily burning flame. Sellers have either got to get smarter and less greedy or they will be stuck with these overpriced properties for months. The day of insane overbidding is over," said Linda Boyd, a broker associate with Meredith Homes & Enterprises, Inc. in Los Gatos.
Neighboring counties, San Mateo County (down 4.5 percent) to the north and San Benito (down 0.84 percent) and Santa Cruz (down 2.3 percent) counties to the south, also experienced year-over-year price declines.

Homebuyers in the market now certainly can enjoy a better negotiating position, but they should not expect fast gains and they should plan on staying in the home long enough for a return to at least offset buying and selling costs.
Buyers are going to have more choices, but they too have a learning curve to go through. I heard a speaker at a broker's tour breakfast sum it up perfectly: 'Sellers want last year's prices and buyers want next year's prices.


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