If you are shopping for bargains in the rekindled seller's market in Northern California, look to high-end luxury homes—but look fast. Northern California's luxury-housing market has been lagging behind the Southern California market, but more recent evidence indicates that, overall, Northern California's reanimated seller's market may be about to sweep through the luxury end as well.

Low inventories and low interest rates are expected to push the median price of all homes sold in Silicon Valley to new record highs as a pre-spring seller's market sprouts in Santa Clara County.

Richard Calhoun, broker/owner of Creekside Realty in San Jose, said the median price of single-family homes could easily exceed $600,000 in March based on the median asking price of offers accepted in February. The last median price record was $578,000 in May of 2002.

"The key indicator, far more important than price, is unsold inventory. Unsold inventory (also known as 'days of inventory' or DOI) is at 30.9 days and dropping to 29 days. The only period when the market was hotter than this was Oct. 24, 1999, to April 27, 2000," said Calhoun, who publishes the Bay Area Real Estate Market Newsletter for five Northern California counties, including Santa Clara County.

DOI is a theoretical number indicating how long the current inventory of homes would last at the current rate of sales if there were no new listings.

"Most of the country talks about months of unsold inventory. Santa Clara County talks about days. We are selling more homes than ever," said Calhoun, who also expects the May 1999 monthly sales record of 1,917 sales to fall soon.

Meanwhile, Silicon Valley's luxury-home market is playing catch-up.

Luxury homes valued at $1 million or more rose 14.9 percent in Los Angeles and 8.7 percent in San Diego last year, but only 0.3 percent in the San Francisco Bay Area, according to First Republic Bank's latest Prestige Home Index. The San Francisco Bay Area's index includes properties from Los Altos, Los Gatos, Palo Alto and Saratoga, among others outside Santa Clara County.

In early March, DOI was 40.9 days in Los Altos, 55.7 days in Los Gatos, 35.6 days in Palo Alto and 58.1 days in Saratoga; compared to less expensive cities—24 days in Cupertino, 15 days in Mountain View and 21.6 days in Sunnyvale, Calhoun reported.

"I think we're slower [in the luxury market] than the rest of the state due to unemployment being up. We might also be experiencing gun-shy reaction. People who lost money a few years back, or know people who did, are not going to rush in and buy at the high end as quickly," said San Jose independent real estate agent Janet Houde, president of the Santa Clara County Association of Realtors.

Luxury-home purchases during the dot.com boom were often financed with technology-industry cash that doubled or tripled asking prices, which artificially inflated values.

When the housing market retreated, high-end values fell the hardest.

"It's important to identify what segment is being referenced. The $1 million to $2 million segment is very active, while the $3 million to $4 million is not," Houde added.

Calhoun said Santa Clara County's DOI by price was 23.6 days in the $500,000 to $599,999 range; 52.1 days in the $1 million to $2.49 million range; 232.6 days in the $2.5 million to $4.99 million range; and 175 days in the $5 million-and-up range.

A high-end seller's market isn't far off.

"The [First Republic] data is old. Almost everyone will say the market has changed since New Year's," Calhoun said.

Real estate agent Stefan Walker with Alain Pinel Realtors in Los Gatos agrees and says luxury homes cost more up north—an average $2.24 million in the San Francisco Bay Area compared to $1.55 in Los Angeles and $1.58 in San Diego, according to First Republic.

"That said, more people are getting comfortable again that their jobs will not vanish. The increased demand could very well keep inventory low for some time, which will put an upward pressure on values," said Walker.

"It is a distinct possibility that those in the luxury market have seen this and are sensing that we have reached the bottom of the luxury market and are heading back up again, and they are buying up property as a result," he added.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for
Saratoga News.