Hold off on those "I told you so's" for Silicon Valley's housing market.

The month of May's $1,000 drop in single-family home prices -- even during what's typically one of the busiest home buying periods of the year -- doesn't mean the air is coming out of the bubble.

Far from it.

The $1,000 drop from a record $750,000 median price in April to $749,000 for single-family detached homes in closed sales in May is more of a breather, a refreshing gasp of air the market is taking, likely before building up a new head of steam.

"I don't think it means anything. Silicon Valley's inventory is on the rise, which is a good thing, but we are still having multiple offers on everything," said Edwin Resuello, broker owner of Realty World-Silicon Valley Homes in San Jose.

"I'm still telling buyers to put their absolute best offer first," said Resuello, also president-elect of the Santa Clara County Association of Realtors.

The median condo price didn't move, remaining at $490,000, but condo buyers, on the average, were offering 104.6 percent of the asking price in May, identical to April's average.

Single-family detached home buyers were offering on the average 102.8 percent of asking in May, compared to 103.3 percent of asking in April, according to market expert Richard Calhoun, broker/owner of Creekside Realty in San Jose.

Silicon Valley's rare price drop was the first time home prices have fallen since August 2004, when the median price on single-family detached homes dipped from $640,000 in July to $625,000 in August, according to Calhoun's statistical archives the Bay Area Real Estate Market Newsletter.

The $15,000 price drop in August 2004 generated some gasps and was initially considered a significant reduction, perhaps a market turning point, because it occurred during what was supposed to be a hot selling period. In hindsight, the slippage was little more than a blip on the radar. Nine months later, the median price has grown by a whopping $124,000.

By comparison, the recent $1,000 reduction may not even be worth a footnote in the history of Silicon Valley's volatile housing market.

Jim Myrick, broker/owner of Realty World-Realty Solutions in San Jose, says April's record $750,000 median price represented sales of a larger share of high-end home sales than normal, rendering the subsequent $1,000 drop in May as truly insignificant.

"Last month's price range jumping up wasn't a fair representation of prices. It's (the $1,000 dip) nothing to get concerned about. I expect that (prices will) start going up a little bit more and then at the end of the summer (when sales typically dip), we'll be short again," said Myrick, president of the Santa Clara County Association of Realtors.

Indeed, even with the price slip, houses were selling faster than ever, after being on the market for an average of only 22 days in May, compared to 26 in April. More affordable condos sold even faster, after an average 15 days on the market during both months, Calhoun reported.

The number of closed sales of single-family homes fell, but insignificantly -- 1,422 in April to 1,419 in May. Condo sales remained unchanged at 615 for both months, Calhoun reported.

Inventories may tell the story. There were 2,827 houses for sale in May compared to 2,621 in April. The condo inventory, again, remained the same 743 for both periods.

"Let me tell you, it hasn't slowed down. I'm just as busy as ever," said independent broker Janet Houde.

Ever lower interest rates, which have fallen for nine of the past 10 weeks, were offsetting the higher inventories and sellers were setting prices at the right mark, said Houde.

"It might be what we are seeing is a little normal leveling, but it (the $1,000 drop) does not indicate (a trend of) falling prices. Two or three months ago, you'd get two or three dozen offers. Now we are seeing four or six," said Houde, the association's 2004 president.

"I had a condo listed for $300,000 in South San Jose and we got a barrage of calls, 35 to 40 calls. There's not much out there at that price," she added.

Revealing the continued strength in the market, Calhoun's research shows that the median price for single-family detached homes actually grew to an astounding $759,000 during the early weeks in May, before a host of less expensive closed sales pushed the median back down to the month's final $749,000 price tag.

"A single month dip is not a big deal," said Calhoun.

Personal finance counselor Eric Tyson, author of several real estate "Dummies" guides, agrees. He says buyers need to examine more than home prices before taking the plunge.

"Analyze the monthly after-tax of buying and owing a given home versus the cost of renting that same home. If owning costs much more, that's a red flag that prices may have gone too far and that renting is a better value," Tyson said.

Published: June 8, 2005

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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.