Silicon Valley's Sellers Market Not Cast In Stone
by Broderick Perkins
In California, Silicon Valley's home sales remained seasonally flat in October, but inventories also fell, netting most sellers more than their asking price. "It's clearly still a seller's market anytime most people are getting more than the asking price and inventories are low," said Richard Calhoun, broker owner of Creekside Realty in San Jose. However, conditions may be ripe for a shift in buyers' favor. "If interest rates go up, which they are projected to do, and if the inventory of qualified buyers goes down, this could certainly move the market toward a buyer's market or at least a more balanced one," said Mark Elices, a Coldwell Banker real estate agent in San Jose. Right now, sellers in California's Santa Clara County (the heart of Silicon Valley) hold sway. Fifty-two percent of single-family detached home sellers and 60 percent of condo sellers obtained more than their asking price in October as inventories dipped 13 percent for single-family detached homes and just over 10 percent for condos. During the same month, the median price for single-family detached homes rose $6,000 to a median $636,000 as the condo median rose $5,000 to $400,000, according to Calhoun's monthly Bay Area Real Estate Market Newsletter, a compilation of statistics from the area's multiple service, Campbell-based RE InfoLink. Last year at this time, the median price for single-family detached homes was $563,000, and for condos, about $350,000, Calhoun reported. Some agents are warning buyers that they could face higher prices in the spring when interest rates are also expected to rise. "Now that the election is over, there is no political incentive to keep them low and the market is following the typical pattern of appreciation. After the holidays, expect to pay a higher price," said Calhoun. Indeed, after falling for three consecutive weeks, interest rates appeared to reverse course with fixed rates rising from 5.64 percent to 5.70 percent on 30-year, conforming loans during the survey week ending November 4 -- two days after the national election -- according to Freddie Mac. The same level of slow economic growth that kept rates lower than expected this year, however, should help hold average mortgage rates to 6.5 percent or lower throughout 2005, according to the Mortgage Bankers Association's forecast. That's down from the 6.75 percent the association originally predicted for the end of 2004. Interest rates for 30-year, fixed-rate mortgages should finish this year almost a full percentage point lower than expected -- 5.9 percent on average -- said Doug Duncan, chief economist for the association, who spoke during the annual Mortgage Bankers Association conference in San Francisco, CA's Moscone Center in late October. But there's no guarantee Silicon Valley's seller's market will hold. Some indicators point to a shift. Elices says that the available pool of buyers may have been diminished by recent years of historically low rates, special inclusionary loan programs and relatively easy mortgage money. Fewer buyers could exacerbate the region's seasonal inventory bulge due to arrive in late winter and early spring. "If the increase in interest rates combines with an increase in real estate inventory and the available number of buyers is not as strong as usual, these factors may swing the pendulum toward a buyer's market or at least a balanced one. Certainly, if rates do go up a full point relatively quickly, this will change the dynamics of buyers' purchasing power," said Elices. Obviously, no one can predict what will happen in any real estate market, especially one as volatile as Silicon Valley's. "It will be interesting to see how things develop in 2005. In the long term, with the growth projections for California being upwards of 50 million in the next 10 to 15 years," said Elices. It's much easier, of course, to see what has already happened, perhaps as a precursor of things to come. While the median single-family detached home price jump county wide was $6,000 from September to October, few central county areas actually enjoyed price increases. According to Calhoun's report, the city of Campbell's prices rose from $640,000 to $686,000; the city of Santa Clara was up from $609,000 to $625,000 and South County (the cities of Gilroy, Morgan Hill and San Martin) had the largest jump -- a $40,000 leap from $620,000 to $660,000. Meanwhile, in the bedroom community of Cupertino, prices slipped from $880,000 to $871,000. In the high-end hamlet of Los Gatos, prices fell from $1.2 million to $1.015 million. Likewise, in the hamlet of Saratoga, prices slumped from $1.425 million to $1.264 million. In Sunnyvale, where there's been a high tech employee exodus in recent years, prices slipped from $688,000 to $655,000. Also, in the county seat and largest city, San Jose, prices were down to $588,000 from $590,000. Not surprisingly then, San Jose's Rose Garden area was down from $617,500 to $609,475; the Willow Glen community's median was nearly flat, falling a grand from $700,000 to $699,000 and the suburb of Almaden Valley slid from $875,000 to $850,000. |
