For the last half of 2000, computer engineer Tarun Arora shopped around, dickering over the cost of homes in Silicon Valley because he knew prices were flattening.

With an expectant wife Shalini, however, he needed to move up -- and soon -- to a larger home in a good school district.

Unfortunately, by the time he realized the deals just weren't coming, the stock market had snatched some of his buying power.

In December, he finally closed on a 1,750-square-foot, single-family home in Cupertino with four bedrooms and two-and-a-half baths -- for $850,000.

"I think it's a good investment. It's (real estate) much more stable than the stock market. Unless there is a widespread recession and people really start leaving, the impact (of the softening economy) will really be minimal here," said Arora.

Even when it's cooler in Silicon Valley, it's still hot.

Larger housing inventories, stable prices, falling stock portfolio values, energy woes and anything else you can throw at the market doesn't seem to faze it.

It's unlikely even a major earthquake would shake up Silicon Valley's golden real estate market where too few listings and too many buyers continue to buoy prices.

"There are more first time buyers than there have ever been and the move-ups are so well off they are sitting there and buying their replacement home while they still own the first home because no one will take the contingency," said Richard Calhoun, a statistician and broker-owner of Creekside Realty in San Jose.

The median price on closed sales of single-family homes was $540,000 in December -- up more than $115,000 from $425,000 a year ago, according to Calhoun's monthly "Real Estate Market Update."

Make no mistake about it, Silicon Valley's real estate market isn't the same market it was a year ago. The $540,000 December figure represents a lower price than November's $550,000 figure and the market has been unable to return to the $560,000 peak set earlier in the year before a Wall Street bear grabbed bullish high-tech portfolios by the horns and refused to let go.

What stock market sell off?

Rather than imploding Silicon Valley's housing market, dot combustion so far has only split it in two. "The high end is going down or not selling, but the stuff at the low end is continuing to increase. When you get into the moderate priced homes, they are still skyrocketing at 5 percent in a few months," said Calhoun.

In November, after residential property manager Andrea Caldwell lost money to the stock market, she and her husband decided to invest in a second home and keep the first as a rental property.

As their stock portfolio continued to plunge, rising real estate values helped offset their losses.

"We took a huge hit in the stock market. We were holding out for the market to improve and waited too long. We believe we made the right decision as the new house is bringing us immense satisfaction," said Caldwell.

Calhoun says with demand generated by an unemployment rate lower than 2 percent, along with falling mortgage rates, Silicon Valley's flat prices may be just about ready to rebound, with or without a cooperative Nasdaq.

In a surprise move, the Federal Reserve on Jan. 3 lowered the fed funds rate, the rate banks use for overnight loans, from 6.5 percent to 6 percent. The Fed also cut the discount rate, the Fed's rate on loans to banks, from 6 percent to 5.75 percent.

The unexpected rate cuts came weeks before the Fed's next scheduled policy meeting at the end of January. While many lenders had already lowered consumer rates in anticipation of such a move by the Fed -- most experts expected only a quarter percent drop in the fed funds rate, and then, not until month's end.

Consumer rates will likely continue to fall in coming weeks as lenders play catch up and home buyers look to cash in before home prices resume their rocket ride beyond the stratosphere.

Calhoun says move-up buyers can have the best of both worlds if they can manage to buy a home now and sell a few months later.

"This would give them the appreciation on both properties. I would expect the appreciation to far exceed the cost of owning two properties," he said.

Likewise, sellers who aren't looking to buy anew should wait for the spring to realize maximum appreciation.

For buyers with no home to trade up?

Buy now or pay more later.

Published: January 5, 2001

Use of this article without permission is a violation of federal copyright laws.

Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.