A normal seasonal slow down, high prices, rising mortgage rates and slipping consumer confidence all converged on the Silicon Valley market as it continued to unwind from a year of price surges.

September's median home price, based on closed sales of single-family detached homes, came in at $733,000, down from $760,000 in August -- the lowest its been since March this year when the median was also $733,000, according to Creekside Realty owner/broker Richard Calhoun's Bay Area Real Estate Market Newsletter.

The report is comprised of Santa Clara County home sale statistics from the area's official multiple listing service, RE InfoLink of Campbell, CA, which makes the numbers available to paying real estate industry members, but not the media.

Even with the $27,000 price plunge, the median price is $103,000 more than it was a year ago, a 15.25 percent increase.

"In a nut shell, the market is moving to a balanced market. Sales are strong but sellers are coming on to the market causing inventory to grow. Currently (Oct. 11) it's 2,478. Inventory was only 1,980 on July 12, 2005 when inventory normally starts decreasing. Instead, inventory is up 25 percent," said Calhoun.

Relatively more affordable condo prices fell 3 percent from August's $495,000 median to an even more affordable level, a median of $480,000 in September, according to real estate broker Rick Campbell's Palm Desert, CA-based Information Designs, which uses the same RE InfoLink data to publish real estate market reports on its REReports.com website.

Campbell says the market remains a seller's market, but it's shifting in buyers' favor more and more each month.

"For sellers, the market is turning and in a few more months it will be a buyers' market. That means 'as is' won't cut it. You will need to spiff up your home to sell it. For buyers, a moderating market makes the whole process of finding and buying a home less stressful. Although the sales price to list price ratio is still over 100 percent, the trend is downward," Campbell said.

The high prices are bouncing sales off the wall, forcing them down to 1,339 in September this year compared to 1,404 a month ago and 1,473 a year ago.

Interest rates, which topped 6 percent for the first time since March, according to Freddie Mac, had a stagnating effect on sales in some sectors.

"The interest rates are having a small effect on the market, but with the proliferation of interest-only mortgages, I am not seeing any decrease in the market. In fact, we are busier right now than earlier in the year on refinances and purchases," said Mark Hicks, broker/owner of the Seabrooke Group in Campbell, CA.

But swelling inventories indicates fewer buyers and or more sellers rushing to a market which could be choking.

Campbell reported that sales fell, year-over-year, for the tenth month in a row and at one point in September inventory surged past the 3,000 unit mark to post its first year-over-year inventory gain since July 2003.

"The increased inventory is creating a buyers market where they have more choices, but the real nice properties are still being snapped up by first-time and move-up buyers," Hicks said.

Most experts say the shift doesn't forebode a bubble burst, but more of a change in who is buying and selling. As prices rise, current home owners are able to cash in their equity and move up, but finding buyers for their old home is getting more difficult.

"It does not mean that people are losing equity," says Mary Pope-Handy a real estate agent with Intero Real Estate Services in Los Gatos.

"What we are seeing in the marketplace is a slowdown in higher-priced homes, but the entry level market is still quite active. A better gauge of whether homes are appreciating or not is what is happening in (the smaller geographic are of) neighborhoods," she added.

She also said month-to-month changes in home prices can be scary, especially to new home owners accustomed only to price hikes, but such short term changes don't document true trends.

"Housing prices here do fluctuate some, and worrying about it rising or falling in one particular month is a little bit like checking your stocks every single day. I advise my clients that in the short run, prices could go up or down, but historically, over the long haul they make much more than they lose in the 'corrections'," Pope-Handy said.

Published: October 21, 2005

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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.