Can Silicon Valley sustain a recent home sales boom in an economy with one of the nation's highest metropolitan area unemployment rates?

It already has, at least twice before, once when the rate was even higher and both times as evidence that real estate is a leading economic indicator.

It's also evidence that the much needed buyer's market that began last year may be short lived -- if it isn't already over.

Santa Clara County's surprise 7.5 percent unemployment rate in January is one of the highest in the nation among large metropolitan areas, after jumping more than a full percentage point from 6.3 percent in December, according to the Golden State's Employment Development Department. In January 2001, just a year ago, the unemployment rate for the region was 1.7 percent as workers basked in the fading glow of silicon success. Since then, the region has lost more than 80,000 jobs.

Unemployment hasn't been as high as 7.5 percent since it reached the 7.7 percent mark in July 1993 -- at the onset of the dot com boom that ultimately gave birth to stock market mania, also know as the "wealth effect," instant millionaires, and home prices that topped a record half million dollars and made a run for a $600,000 median.

While the national recession of July 1990 to March 1991 was officially long over, according to the Cambridge, MA-based National Bureau of Economic Research, Silicon Valley, in 1993, faced relatively high unemployment and its housing market was just beginning to pick up steam -- then as perhaps it is now.

Before July 1993, Silicon Valley's unemployment rate was 7.5 percent exactly 10 years earlier, in July 1983, again, at the onset of boom times for the area's economy and housing prices, but more closely following the end of that national July 1981 to November 1982 recession.

Today, with high unemployment and a recession that's almost a year old, Silicon Valley's volatile, but resilient economy -- closely tied to the housing market -- could be ready to crank out another boom.

"Housing is a leading economic indicator relating to consumer confidence. When homes are sold, it generates a stimulus in the economy that will have a ripple effect on construction, purchases of furniture and appliances and on its own it is a part of the overall economy that will tie into job creation and economic stimulus," said Robert J. Bailey, president of the California Association of Realtors.

The median price on Silicon Valley's single-family homes in closed sales was $493,500 in January, down from $499,000 a month before, and down from $577,500 in January 2001.

January's sales per day, however, were way up to 41.5 in Silicon Valley compared to 29.9 in December, according to the Bay Area Market Newsletter, official regional R.E. InfoLink multiple listing service data crunched by Richard Calhoun, broker-owner of Creekside Realty in San Jose.

"This is very early in the year for use to see these kinds of numbers," said Bailey.

Calhoun said the crucial "days-of-inventory" (DOI) data was even more telling. The statistic reveals theoretically how long it would take to deplete the market's inventory at the current selling rate if no new homes came on the market.

As area real estate agents reported the return of multiple offers from buyers trying to cash in on what could be the price bottom and near record low interest rates, the DOI for single family homes was 39.6 in January, down from 64.5 in December and 150.6 in September -- graphically represented as a stunning near-vertical drop.

"It's people who've been waiting on the sidelines since 9/11, it's the economy gaining strength again, it's interest rates at historic lows. It's a lot of positive factors as the reasons why the market is correcting itself," Bailey said.

The number of actual homes for sale in January dropped to 1,622 from 1,927 in December and 3,817 in September.

"People coming out of a recession go on a quest for tangibles, something that gives them a solid base, they want to start building equity. If they wait to get back on the playing field when the economy starts to improve the prices will start to climb," said Bailey, also broker/owner of Bailey Properties in Santa Cruz, CA.

Condo prices aren't waiting for fence-sitters.

More affordable condos show similar sales and inventory changes, but they also reveal an upwards pricing trend, with the median price at $335,000 in January, up for the third consecutive month, but still slightly off the $339,000 January 2001 median.

"This is not just a local phenomenon. Figures from the California Association of Realtors and the National Association of Realtors show that housing took a dramatic jump in January over December and year-to-year," Bailey said.

Published: February 27, 2002

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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.