The growing supply of unsold homes and lackluster demand from buyers has put more of Silicon Valley's housing market firmly in buyers' corner.

And savvy buyers may be hopping up on the fence, holding out for better days and better deals.

The latest report on one of the nation's most expensive housing markets, a market among the last in California and the nation to really feel the pinch, comes with a forecast for more home price declines in the near future.

Things could get nasty.

In Silicon Valley, the median price of single-family homes in closed sales fell 10 percent in May -- compared to last year. The May median price of $773,000 is down from the peak price of $858,000 set in April 2007, according to Richard Calhoun's Bay Area Market Newsletter.

The median condo price was down almost 6.5 percent to $502,500, compared to $537,000 a year ago.

A market icon for his housing market number crunching acumen, Calhoun, broker of Creekside Realty in San Jose, reported buyers were paying only about 98 percent of the sellers' asking price, on average, in May. That's down from more than 100 percent a year ago.

Calhoun says not since the year 2001 have home sales moved as slowly as they are moving now in the 15-city region of Santa Clara County, California, commonly known as Silicon Valley.

Much of the more affluent Northwest Silicon Valley region, thanks to a strong tech-based economy, remained a seller's market where some home price records continue to fall. But even within that area, smaller pockets revealed home price declines in May.

In the general market area, some prices have fallen by as much as 30 percent since the peak, says Calhoun. Other feet-on-the-ground real estate agents say some individual home prices have crashed even more.

Yet, even after price declines, many homes in Silicon valley remain unaffordable, especially in the current tight credit market.

The high cost of housing in Silicon Valley often means more expensive jumbo mortgage financing -- even after 20 percent down.

Along with tight and more costly credit and affordability issues, Calhoun cited other negative market factors including: homes in poor condition selling slower than the average sales pace and homes far from job centers likewise selling slower. The cost of gasoline is more than $4.50 per gallon at some Silicon Valley gas stations.

Together, local market conditions and economic issues impacting the nation point to further home price declines in the coming months, says Calhoun.

Published: June 16, 2008

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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.