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Condo prices in the Silicon Valley have come down from last year

ByBroderick Perkins

Even as single-family home prices in Silicon Valley regained some ground lost this summer, condo prices slipped for the first time--year-over-year--in more then three years.

Still more indication the housing market has hit the doldrums, sales overall have slipped to near post-9-11 levels, when a stunned nation "went into shock and did nothing," said Richard Calhoun, real estate broker at Creekside Realty in San Jose.

The median price of condos in closed sales slipped in October to $490,000, down from $495,000 a year ago and down from the same level, $495,000, in September this year. The year-over-year decline was the first since July 2003, the last time when single-family home prices likewise took a dive, according to Calhoun's Bay Area Real Estate Market Newsletter, a report comprised of statistics from the area's multiple listing service, RE InfoLink of Campbell.

In October, condos were on the market an average 47 days, nearly twice as long as the average 24 days they were on the market a year ago. Buyers, obviously under no pressure to rush offers, paid condo sellers an average 99.3 percent of their asking price, down from 101.3 percent a year ago.

For both condos and single-family homes, the percentage buyers pay on sellers' asking price has been shrinking for months.

The single-family market, which tends to hold prices better than condos in a falling market, yielded a median price of $775,000 in October, up from $741,000 a year ago and up from $769,000 a month earlier, Calhoun reported.

The median single-family home price has been staging a $7,000 comeback in the last two months after losing $50,000 in late summer this year.

Still, single-family homes, on average, took 54 days to sell, 20 days longer than a year ago.

Inventories of both condos and single-family homes fell slightly from September to October this year, but at 5,151 remained well above the 4,181 properties for sale in October 2005.

The month-to-month inventory decline indicates sellers are pulling out or holding out for a better market. Only 1,267 properties--condos and single-family homes combined--sold in October this year, down from 1,704 a year ago.

"More of the folks who don't have to sell are coming off the market, and that's the beginning of a nice change," said Edwin Resuello, president of the Santa Clara County Association of Realtors.

"More buyers are focusing on what they really want to do. If they plan on selling within a year, they should not be buying. That would be turning the American Dream into an American Gamble," said Resuello, also broker-owner of Realty World Silicon Valley Homes.

Buyers, on average, gave sellers of single-family homes only 98.8 percent of their asking price, down from 100.1 percent a year ago. For both condos and single-family homes, the percentage buyers pay on sellers' asking price has been slipping for months.

"I don't think it's [about] prices. Mortgage payments are too high. We went from a 4.75 percent interest rate to 6.75 percent. That's a 50 percent increase, and in someone's mortgage payment, that's huge," said Calhoun.

During the market boom this decade Freddie Mac's Mortgage Market Survey reveals the lowest rate was 5.21 percent in June 2003 for fixed-rate mortgages. Rates trend slightly lower in the West, and one-year adjustable rate mortgages have been as low as 3.5 percent, according to Freddie Mac.

Now, however, with increases in federal benchmark rates and economic pressures, ARMs have steadily adjusted upward, forcing refinancing and a growth in foreclosures.

By Nov. 3, Freddie Mac reported average fixed rates at 6.31 percent and one-year ARMs averaging 5.53 percent.

"The point is, that's a dramatic increase in the cost to homeowners without a change in the price of a home. It makes a dramatic difference," said Calhoun.

Janet Houde, an independent real estate broker and past president of the Santa Clara County Association of Realtors Association, says the "hype" about prices coming down is overrated.

She says while the average price of all housing remains above last year, the market is segmented by price range and by geographic areas.

Calhoun's statistics do reveal more price strength in the northwest sector of Silicon Valley. In Palo Alto, buyers were still paying an average 100.2 percent of the sellers' asking price. The percentage was 99.9 percent in Cupertino and 99.8 percent in Sunnyvale and Mountain View.

In the largest city, San Jose, the figure was 99 percent, but the percentage was smaller in the southern reaches of the county, 95.7 percent in Almaden Valley and 96.8 percent in South County (Gilroy, Morgan Hill and San Martin).

"The overall global trend is that the 'red hot' went out of the red-hot wave. The Northwest is doing best, but in general, even that area is slowing down because the market is trending toward slowing down," said Calhoun.

Real estate writer Broderick Perkins, executive editor of San Jose-based Dead
lineNews.com, writes regularly for this newspaper.