Silicon Valley's median home price is mired at the three-quarters-of-a million-dollars mark and given seasonal trends, rising interest rates and moderate gains in employment and incomes, getting unstuck will likely mean prices falling further rather than rising.
July's $750,000 median price for single-family homes in closed sales was down $10,000 from the previous month's record of $760,000, but still nearly $100,000 more than the median at the beginning of the year, according to Richard Calhoun, broker/owner of Creekside Realty in San Jose. Calhoun 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.
That small drop, in light of price hikes thus far this year, doesn't give buyers much to rejoice.
A few high-end cities or regions in Santa Clara County saw month-to-month home price increases, but not nearly enough to offset price drops in most other areas where larger inventories and a greater number of sales had a stronger influence on the median price.
So the seller's market stays -- for now.
"Shop smart. Sit down with a real estate professional and get a clear understanding of the total cost of owning a home before you invest. Good negotiation strategies will be your tickets to getting into the home of your dreams," said Shawneequa Badger, a real estate agent with Century 21-Alpha in San Jose.
A bit more salvation is available in the less expensive condo sector where prices slipped to $480,000 in July, down from $489,000 in June this year, Calhoun reported.
"In a nutshell, the market hit a stone wall -- almost -- at the three-quarter million-dollar level. It reached $750,000 in April. May dipped to $749,000. June saw $760,000. July is back down to $750,000. My guess is that August will dip further, but only $5,000 or $10,000," Calhoun said.
Reflecting the late-summer-vacation and back-to-school trend of distracted buyers and sellers leaving the market with higher inventories and slower sales, the market's inventory of all homes -- single-family detached homes and condos -- rose from 3,504 in June to 3,799 in July this year. Sales slipped 2,267 to 1,998 during the same period.
Suggesting a deeper seasonal slump than normal, however, sales and inventories were lower this July than they were a year ago.
"It's still a seller's market, just not as crazy at it was a few months back," said Stefan Walker a broker associate with Alain Pinel Realtors.
"This time last year, we were sliding down from a peak in May and June, whereas our inventory has been slowly rebounding this year after starting at record lows on January 1.
It is a pleasant surprise when we can actually be the sole offer on a given property. The instances when we're one of 10 to 15 offers are becoming more rare," Walker added.
Unfortunately for buyers, just when there's some relief on the pricing side -- at least enough, perhaps, to give buyers time to think -- interest rates are inching up.
"All buyers are concerned with the prospects of rising interest rates, and all are concerned with the prospects of a market correction. However, while we all know that both will come eventually, there has been no tangible evidence of either happening soon. So while the fears are definitely there, these fears have not yet had an impact on market demand," said Walker.
That could quickly change.
Freddie Mac reported last week that interest rates rose to an average 5.89 percent (on fixed-rate, conforming loans) for the sixth consecutive week since June 30 when the average was 5.53 percent. The year's high average was 6.04 percent on March 31. Last year's high was 6.34 percent set back on May 13, 2004.
So how do buyers manage to shell out the dough necessary to keep sellers on top of the game?
They often begin as sellers.
"I see a lot of sellers cashing in on their appreciation, people who purchased a home two to three years ago and are taking advantage of the equity they've accumulated. With their profits they are buying bigger homes and newer homes," said Badger.
Jobs certainly aren't adding cash to the till.
With an average annual raise of little more than $2,000 -- $56,680 was the average annual wage in the first quarter 2005, compared to $54,524 a year ago -- income growth haven't kept pace with home-price growth, even growth that's now stuck in place.
California's Employment Development Department also said Silicon Valley firms created 6,900 jobs in June, but the South Bay job market still hasn't recovered. In the combined statistical area of Santa Clara and (adjacent to the south) San Benito counties, employers still had 1,800 fewer jobs on their payrolls in June than they had a year ago.
The area's unemployment rate was 5.6 percent in June, up from a 5.1 percent in May, but down from 6.9 percent a year ago.
Even first-timers look to equity to buy a home.
"I am seeing a lot of gifting from relatives who are already in this housing market and have the ability to share their profits to get a loved on in the market too," Badger said.