For home sellers, Silicon Valley is like a progressive slot machine guaranteed to pay out every month.

For buyers it's more like crapping out with every roll of the dice.

Sellers walk away from the table with more chips than when they arrived, but most buyers leave empty handed, wrung out and demoralized.

"A lot of them are extremely frustrated," said Brandon Knapp, a mortgage planner with Lawson & Associates Mortgage Planners in Campbell, CA.

"I have many clients who are up to eight offers and can't get in on the contract. I just had a client go after a condo in Campbell. The list price was $600,000. She bid $650,000 and it went for $680,000. What are you going to do?"

It's a one-sided, high-stakes game of home buying in Silicon Valley, but just like gamblers who can't leave the table, buyers keep coming back for more.

There were 714 more home sales (houses and condos) in March than February, as the March inventory of homes increased by 360 properties.

Instead of the $41,000 February price increase, the median price of single family detached houses rose only $28,000 in March ($79,000 in two months), but to a new record of $733,000. Condo prices cooled at $450,000, actually losing $1,000 from March's median price.

Sellers hauled in an average 103.3 percent of their asking price for houses, 104.9 percent for condos and 70 percent of all sellers received more than their asking price, says Richard Calhoun whose Bay Area Real Estate Market Newsletter each month provides a statistical look at Silicon Valley's housing market.

"It slowed down a little bit, but it always slows down this time of year. It's a fairly typical year and there's no indication prices are dropping. I would expect to see prices even higher next month," said Calhoun.

Mortgage rates dropped in the week ending April 7 for the first time in seven weeks, falling back below the 6 percent mark to an average 5.93 percent last year, compared to 5.79 percent a year ago according to Freddie Mac's weekly rate survey.

But that was hardly enough savings in the cost of financing to offset the relentless increase in home prices.

"Everything is still selling, but some of the frenzy has gone away. It's hard to imagine there is this much equity in the market when there is supposed to be a downturn. People are still scrambling to find work, but you can sell any priced house you want in this valley," said David Castellanos an agent with the Synoptic Real Estate Group Inc. in Los Gatos.

Knapp says the bidding is pushing prices up so high it's getting tougher to get appraisals that match the bid. That's forcing some sellers to pay the difference now. They could pay later too.

Appraising, the science of determining the value a home, was the subject of the recently released "Home Insecurity: How Widespread Appraisal Fraud Puts Homeowners At Risk", a report by public policy think tank, New York City-based Demos.

The report says too many home owners risk financial ruin because high appraisals could allow them to borrow more than their home is really worth. Should home values tumble, home owners with "upside down" mortgages (mortgage balances larger than a home's true value), who are forced to sell their home, say because of financial hardship, will have to come up with the difference at a time when they can least afford it.

Depending upon the scope, depreciation in over-inflated home values could have a devastating impact on local, regional and national economies which more and more often get a boost from real estate transactions.

"Offers are getting challenging. If you are paying $80,000 over the list price you have a hard time finding comparable sales to support that amount. Some buyers are having to come in with the difference between the appraised price and the purchase price," said Knapp.

So who can afford housing costs so astronomical? "It takes two incomes to buy houses," said Calhoun.

Published: April 13, 2005

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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.