Single-family median home prices plummeted $35,500 in a single month from March to April in Santa Clara County, CA this year -- a fall of historic proportions.

To put it in perspective, the 6.19 percent month-to-month decline in home prices is nearly identical to a year-to-year price drop from 1989 to 1990 -- when Silicon Valley's housing market began crashing into the economic recession of a decade ago.

"That shows the magnitude of it. Everybody acknowledges the year-to-year drop was big. Here, in one month the median price lost the same percentage. Real values have dropped significantly more," said San Jose-broker, Richard Calhoun in his monthly, expanded Bay Area Real Estate Market Newsletter, formerly the Santa Clara County Real Estate Market Update.

April's single-family median of $530,000, was down from $560,000 in April of last year, 2000's highest level, and down from $565,500 in March this year. Prices peaked this year in January at $577,500 before tumbling.

Home sales in Santa Clara County dropped a whopping 39.5 percent in April, 26.3 percent throughout the nine-county San Francisco Bay Area, according to the California Association of Realtors.

The turnabout reveals what's likely the start of a buyer's market. Earlier this year, strong prices thwarted a full-fledged buyer's market even as inventories swelled to historic proportions and demand slumped.

Now, after nearly a decade of skyrocketing prices, multiple offers in the dozens, bids more than twice the asking price and new listings that sold in hours, Silicon Valley buyer's market is returning -- with a vengeance. Widespread dot combustion, growing job uncertainty, decreasing consumer confidence, and just plain weariness about home prices that made buyers gasp have all taken a toll.

"In the San Francisco Bay Area, including Santa Clara County (Silicon Valley), it's no surprise that the market is softer than the state as a whole. It's not just because of the cut backs in dot coms, but prices were so inflated to begin with, it was just a matter of time before it came down to earth," said Robert Kleinhenz, senior economist with the California Association of Realtors.

Deciphering data from Campbell, CA-based R.E. InfoLink -- the area's five-county multiple listing service -- Calhoun says record inventories and anemic demand has pushed actual property values down 15 to 20 percent in one month from March to April and as much as 24 percent so far this year.

Inventories have soared from 978 single-family homes and 205 condos for sale in December to 4,208 homes and 1,247 condos for sale in April.

"The inventory is at all time record high levels, at least as far back as 1984, when comparable records were first kept," said Calhoun, owner of Creekside Realty.

On the demand side, days of inventory (DOI) for single-family homes has more than tripled from 45.5 in December to 144.5 in April. DOI for condos has more than quadrupled from 29.3 in December to 135.1 in April. DOI is a theoretical number indicating how long it would take to deplete the current inventory at the current sales pace if no new homes came onto the market.

"Last year the DOI (in April) was a sizzling 34.6. The DOI increases with higher price ranges. The DOI is 88 for homes under $500,000; 168 for the $500,000 to $1 million range and 244 for homes that cost more than $1 million. Home sales in the $5 million and up price range are dead. With 53 homes on the market and only two homes in escrow, this yields a DOI of approximately 1,000 -- or three years," said Calhoun.

On the average homes sell for only 99.3 percent of the asking price, but some homes continue to sell for more than asking, perhaps an only-in-Silicon Valley phenomenon.

"There is clearly a trend of fewer homes selling for more than the asking price and more homes are selling below the asking price. It is noteworthy, that even in a buyer's market, a significant number (nearly one third) of the properties are still selling over the asking price," Calhoun said.

"If Santa Clara County is near the bottom, it is a great time to purchase, however, if the market continues to fall, waiting will be the correct strategy. Only time will tell," he added.

For more articles by Broderick Perkins, please press here.

Published: May 17, 2001

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.