Trying to call Silicon Valley's housing market is like trying to call a winning roulette number.

Chances are the gamble won't pay off. It's a better idea to consider factors over which you have some control -- your own personal home economics.

Here's why.

If you purchased a home last May in Silicon Valley it could be worth tens of thousands of dollars less than it was years ago -- based solely on the $545,000 median price of closed sales, which was down $33,000 from a year ago. That's a record drop for May -- excluding the emotions-driven plunges following 911.

The median list price is also down $22,000. Year-to-year inventories in May were up by 1,000 properties, it takes 20 more days to sell a home this year than it did last year and sales have fallen to the year 2000 levels.

All those numbers, courtesy Creekside Realty broker-owner Richard Calhoun's Bay Area Market Newsletter-Santa Clara Count, are just that -- numbers. They provide an overview of the county's housing market, but they do not reflect what could be going on in smaller communities, individual neighborhoods and even some smaller ZIP-code areas.

One of the nation's most expensive housing markets also remains one of the most unpredictable because of its array of distinct smaller markets.

"In general, I would call it a buyers' market, but remember, the real estate market is very hard to generalize. It's a market made up of many micro markets, and, although it may be called a buyers' market, there is no guarantee that the house you want to buy won't be sought after by any number of people," says Elea Raiswell, a real estate agent with Coldwell Banker and publisher of The Silicon Valley Real Estate Report.

For example Mary Pope-Handy with Windermere Silicon Valley Properties in Los Gatos has seen homes with similar floorplans (in San Jose's Cambrian area five to seven miles south of central San Jose) rise steadily since 1995. The average price of the three bedroom 1,249 square foot floorplan home rose from $443,666 in 2002 to about $463,000 this year, she said.

"I don't see a whole lot of slipping in value for a typical Cambrian house. I don't trust the median numbers to give a sense of what most homes are doing. I think a better measure is to find the same floorplan in a neighborhood, in approximately the same condition and track it," Pope-Handy said.

In Fremont, a few cities north of San Jose, and in one county to the north, the market is split into two distinct pricing categories -- homes above $600,000 and homes below. Cheaper homes sell with seller credits for buyers' non-reoccurring closing costs and prices have been creeping up. Cheaper homes also sell twice as fast as more expensive homes which reflect prices that are not rising.

"Condos and townhomes are doing very well with some complexes having no more units available for sale. Their prices have been creeping up and the units have been receiving multiple offers. A few of my buyers have been completely priced out of the complexes where they want to buy into," said MaryAnn Morrar, a broker associate with RE/MAX Eastbay Group in Fremont.

That scenario plays out so vividly in many markets that for the first time in his career Santa Clara County tax assessor Larry Stone is lowering assessed values on some homes while raising values on others.

"A method of tracking sales on a ZIP-code basis is far more accurate in what is happening in the market of a specific neighborhood," than looking at county-wide numbers, said taxation professional Sam Gilstrap, an enrolled agent.

"When you look at Saratoga, Los Altos, Monte Sereno and Almaden Valley, along with other high end sales, you can see that homes from around $1.5 million and up have suffered a drop in value. However, in most desirable neighborhoods where the lower to middle income people live, the prices are steady or slightly increased from last year," Gilstrap.

So how do buyers and sellers cope with such a market? It's a lot like picking stocks these days.

"If we segment the total market we have a better understanding of the picture," says Mike Donohoe, president of the Santa Clara County Association of Realtors.

"The loans I've been doing for home buyers are in areas where the prices appear to be up from a year ago. So perhaps the median price is adjusting downward due to the softness in higher priced areas. First-time homes and move-ups appear to be steady. It's kind of like the affordability statistic, you know, only 28 percent can afford the median priced home and people take that to mean only 28 percent can afford a home in a given area," said Donohoe, also a mortgage broker and owner of Silver Creek Financial in San Jose.

How home prices will perform depends a lot on the home's location, sometimes right down to the city block, experts say, and buyers must shop accordingly.

At the same time buyers should not neglect their own personal household economic conditions.

"Prospective buyers should compare the after-tax monthly cost to purchase a given home to the cost of renting that same home. Like the price-earnings ratio in the stock market, the cost of owning versus renting a home can tell you whether home prices may be overvalued (cost of owning is greatly more than renting) or a fair value (cost of owning is about the same)," said Eric Tyson, a New England financial advisor and author of "Dummies" guides on buying, selling, mortgages and investments.

Most experts also agree on another point -- hesitate not. Ultimately, prices will rise just about everywhere.

"Life is uncertain. Prices may begin to climb and interest rates may go up. The longer the buyer waits, the more money he, she or they will have spent (wasted) on rent. It is better to get off that fence," said tax expert Marie Sternberger, an enrolled agent in Sunnyvale.

Published: June 18, 2003

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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.