Silicon Valley's record median home price is $38,000 higher than it was a month ago and nearly $100,000 higher than a year ago, so it's not surprising Forbes.com named it the 10th most overpriced housing market in the nation.

However, the area's record-shattering April median price of $868,406 for existing single-family homes in closed sales and Forbes.com's rendering of a price-to-earnings ratio for housing costs are but statistical representations revealing only an inkling of the real story.

The real story?

The "normal" divide between the haves-and-have-nots is trending toward an even greater rift.

Silicon Valley's trend of high and rising median home prices is being driven by an unusually large share of home purchases completed in the higher end of the market -- a trend likely to continue until the mortgage morass shakes out.

Mortgage market problems nationwide stem from the high rate of foreclosures on subprime loans. That's forced lenders to curtail subprime loans as well as other riskier loans, including so-called "nontraditional" loans.

Riskier mortgages typically come with high leverage terms and require a small stake from the home buyer and, as such, are initially more affordable. During the housing boom in the first half of the decade, the loans were popular among first-time home buyers and others with little money down and less than stellar credit records.

The California Association of Realtors says the share of buyers statewide using zero-down loans, for example, soared from 4.5 percent in 2000 to 21.1 percent in 2006.

"It was a question of 'I don't have the money now, but I'm going to get it now.' In some cases, buyers were overly optimistic. They (lenders) sold people on the initial payment and not the higher payments later," said RE/MAX Valley Properties broker/co-owner Colleen Badagliacco.

Also president of the California Association of Realtors, Badagliacco added, "The Bay Area doesn't have a high percentage of subprime loans, but FHA and VA, no and low-down loans? Those markets have faded."

Without an ample supply of high-leverage loans for first-timers and others looking for more affordable housing, fewer can afford to buy.

On the other hand, growth in the higher-priced end of the housing market continues, fueled by technology-sector incomes, stock options or other wealth building benefits.

"The dark side of that is that there is a lot of money chasing neighborhoods with low inventories to start with," said Badagliacco.

With fewer multiples in the offers now than in the past, multiple offers nevertheless remain common in the high-price end of Silicon Valley's housing market.

Multiple offers tend to drive up prices.

Likewise, the combination of fewer sales and larger inventories in the lower-priced end of the housing market and more action in the tighter, high-priced end, tends to put upward pressure on the median price -- the point at which an equal number of homes sold for less and an equal number of homes sold for more.

For example, the higher priced Mountain View-Palo Alto northwest quadrant of Silicon Valley typically represents 10 percent of all transactions. In April that rose to 25 percent, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.

The share of sales in the less expensive Central, East And South San Jose areas typically account for 16 percent of the market. That dropped to 11 percent in April, according to Calhoun.

The larger supply of more affordable homes does have an upside for those who can find financing.

"Right now we have the most homes on the market that we've had in two or three years. It's a buyers market (in the lower-priced end). If you qualify for a loan prior to submitting an offer, you have plenty to choose from," said Zdenka Mahan, a Los Gatos Intero real estate agent who also works the central San Jose condo market.

"The 360 Residences (luxury high-rise) are 90 percent reserved, but they are from $700,000 to $2.5 million. Downtown has many $500,000 to $600,000 homes, entry-level," she added.

Indeed condo prices were up to a median of only $550,000 in April, compared to $530,000 in May and $500,000 a year ago, according to Calhoun.

Throughout Silicon Valley, condo inventories have swollen from 1,053 a year ago to 1,436 this April, while single-family home inventories grew less, from 3,231 to 3,900 during the same period.

Any condo "deals" may be short-lived, however, as the average selling price for condos moved from 100 percent of asking in March to 100.6 percent in April, also up from 100.5 percent a year ago, Calhoun reported.

Meanwhile, the lopsided median price trend is likely to continue.

"The market hit this pattern early this year. It's not just because of the subprime market. It's also other loans for people who don't want to get their loans documented (with proof of income and other evidence of creditworthiness). Until you reach an equilibrium and there's more liberal financing emerging," the trend will continue, said Calhoun.

Published: May 9, 2007

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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.