If you are shopping for bargains in the rekindled sellers market in Northern California, look to the high end luxury market -- but look fast.

An index of 2003 prices that shows northern California's luxury market lagged its counterparts to the south and recent anecdotal evidence reveals northern California's reanimated sellers' market may be about to sweep the luxury end as well.

California voters recently elected to have the state borrow $15 billion in bonds to bail out the beleaguered state budget and dot com-gone bust economy, but you wouldn't know it by looking at the Golden State's robust housing markets.

With low inventories and low interest rates likely to push the median price of all homes sold in Santa Clara County (the high tech region known as Silicon Valley) to new record highs in March -- above the $600,000 barrier -- only the more expensive luxury home market up north hasn't joined the pre-spring sellers' market that recently sprouted in Santa Clara County playing catch up with the rest of the state. The more diverse economies in Southern California have kept most of the housing markets there humming along right through economic downturn.

Richard Calhoun, broker owner of Creekside Realty in San Jose said the median price of single-family homes could easily exceed $600,000 in March based on the median asking price of offers accepted in February. The median price of single-family homes in Silicon Valley reached a half million dollars just less than three years ago. The last peak was $578,000 in May of 2002.

Calhoun bases his calculations on data from RE InfoLink, the area multiple listing service, and he says low supplies and hot sales are fueling the market.

"The key indicator, far more important than price, is unsold inventory. Unsold inventory (also known as 'days of inventory' or DOI) is at 30.9 days and dropping to 29 days. The only period when the market was hotter than this was October 24, 1999 to April 27, 2000," said Calhoun, also a real estate market statistician who publishes the Bay Area Real Estate Market Newsletter for five northern California counties.

DOI is a theoretical number indicating how long the current inventory of homes would last at the current rate of sales if no new homes came on the market.

"Most of the country talks about months of unsold inventory. Santa Clara County talks about days," he said.

Not only is the Silicon Valley market set to explode the home price record, Calhoun expects the May 1999 monthly sales record of 1,917 homes sold to soon become history.

"We are selling more homes than we ever have," he said.

Silicon Vallely's luxury home market, however, is playing catch up.

While the value of luxury homes valued at $1 million or more rose 14.9 percent in Los Angeles and 8.7 percent in San Diego last year, San Francisco Bay Area values rose only 0.3 percent, according to First Republic Bank's Prestige Home Index.

For the San Francisco Bay Area, the index includes properties from the Silicon Valley cities of Los Altos, Los Gatos, Palo Alto and Saratoga.

"I think we're slower (in the luxury market) than the rest of the state due to unemployment being up. We might also be experiencing a bit of gun shy reaction because of past experiences in the dot com bust. People who lost money a few years back, or know people who did, are not going to rush in and buy at the high end as quickly," said San Jose independent real estate agent Janet Houde, president of the Santa Clara County Association of Realtors.

Luxury home purchases at the peak of the dot com era -- roughly from 1998 to 2000 -- came with tech industry-money bids that doubled or tripled asking prices. That artificially inflated values forcing high end values to rise faster than the rest of market. When the housing market stabilized and retreated, high end values fell hard.

Houde said some portions of the high end market are faring better than others.

"It's important to identify what segment is being referenced. The $1 million to $2 million segment is very active while the $3 million to $4 million is not," she added.

Calhoun says, at the current pace of sales and the lowered level of inventories it won't be long before the high end is also a sellers' market.

"The (First Republic) data is old. I believe the market changed mid-September. Almost everyone will say the market has changed since New Years," he said.

DOI for the overall Silicon Valley market is 30.9 days, but longer in more expensive markets -- 40.9 days in Los Altos; 55.7 days in Los Gatos; 35.6 days in Palo Alto and 58.1 days in Saratoga -- compared to less expensive cities -- 24 days in Cupertino; 15 days in Mountain View and 21.6 days in Sunnyvale, Calhoun reported.

DOI by price also reflects a buyer's edge in the high-end market -- 23.6 days in the $500,000 to $599,999 range, compared to 52.1 days in the $1 million to $2.49 million range; 232.6 days in the $2.5 million to $4.99 million range and 175 days in the $5 million-and-up range.

"The expensive homes are still below their record highs, but pretty much everything else is at or above their previous records. The reason is, the last time many buyers were playing with funny money," said Calhoun.

Luxury home market real estate agent Stefan Walker with Alain Pinel Realtors in Los Gatos says the high end market is picking up, but concedes it is moving slower because of the greater economic impact in the northern end of the state.

Luxury homes also cost more up north, an average $2.24 million in the San Francisco Bay Area compared to $1.55 in Los Angeles and $1.58 in San Diego, according to First Republic.

"That said, more people are getting comfortable again that their jobs will not vanish. The increased demand could very well keep inventory low for some time, which will put an upward pressure on values," said Walker.

"It is a distinct possibility that those in the luxury market have seen this and are sensing that we have reached the bottom of the luxury market and are heading back up again, and they are buying up property as a result," he added.

Published: March 10, 2004

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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.