Silicon Valley's housing market is rearing its volatile head again.
Consumers are bailing out in numbers reminiscent of the area's last major housing market downturn, but is it a buyer's market?
Buyers are negotiating down list prices, but rising interest rates and median home prices stuck at record levels are preventing more buyers from cashing in.
Homes are taking longer to sell and the inventory is swelling, but a seasonal factor also makes it too early to call an end to Silicon Valley's five-year, 50 percent run up in home prices.
Rather than a buyers' market, it's more like a "buyers aren't buying" market.
"Basically, the buyers have gone away, causing the number of transactions to be at or near record low levels. This is across all four counties that I track. This indicates that it is a fairly broad change and not localized," said Richard Calhoun, broker owner of Creekside Realty in San Jose.
Calhoun's Bay Area Real Estate Market Newsletter, a statistical report compiled with data from the area's official multiple listing service, R.E. InfoLink of Campbell, CA, reveals in Santa Clara County (Silicon Valley) there were only 661 closed sales on single-family homes in January 2006, down from 970 in December and down further from 839 in January 2005.
Since 1998, when Calhoun first started crunching R.E. InfoLink numbers, only January 2001 had fewer closed sales, 599. The next lowest was January 2000 with only 719 transactions, he said.
There were only 283 closed condo sales in January 2006, down from 352 a year earlier, Calhoun reported.
"Offers accepted, or initiated sales (for single-family homes) were way down also, at only 811 (for January 2006). Only January 2001 had fewer, at 761. So 811 is significant and it means February closings will be way down," said Calhoun.
As sales fell, inventories swelled to 2,229 for single-family homes, up from 1,547 a year ago. The number of condos for sale has nearly doubled in the last year moving from 440 in January 2005 to 825 in January this year.
It's not surprising then that homes are on the market longer, an average 48 days for single- family homes and 42 days for condos. Last year, in January single-family homes were on the market an average 36 days, while condos were snatched up, on the average, in 23 days, Calhoun reported.
"Buyers are a lot smarter then they have been in past years. They are doing their research and waiting for the ideal time to get into this market. This is really going to turn into a buyers' market. We will see homes on the market for much longer than we have seen in the past and we will also see buyers really taking their time to shop for that perfect home," said Shawneequa Badger, a real estate agent with Century 21 Alpha in San Jose.
On the average, buyers are getting single-family homes for 99.1 percent of the asking price, compared to paying an average 100.8 percent of the asking price at this time last year. Condos were selling like hotcakes last year for 102.6 percent of the asking price, on the average. This January, sellers can only manage an average 99.8 percent of asking price.
Listings that languish on the market, fat inventories and reduced list prices are all components of a buyers' market. An across-the-board slow down in sales is also indicative of a buyers' market.
"I think a good indicator of what is going on in the market is to look at the different areas, the different price ranges. If all the starter price homes and condos sit on the market with no takers, that could indicate a fleeing from this area. That is, the prices are too high for people to enter the housing market and they are universally moving out of the area," said Darlene Wood, vice president of Saratoga Management Company, Inc. in San Jose.
Calhoun says, just as slow sales are crossing county lines, home sales across all price ranges are indeed taking a dive.
Mark Hicks, real estate and mortgage broker/owner of Seabrooke Group in San Jose is ready to call it.
"We are in a buyers market already and I think it will be that way for a few months," he said.
"The people who are buying and selling right now are move-up buyers and short term investors who basically are using equity positioning to obtain better housing and to engage in some profit taking. Sales are down, but you have to remember that this is more of a normal market. We have not had normalcy here for 6 to 7 years," Hicks added.
But a bona fide buyers' market needs, well, buyers. The big sticking point in putting the "buy" in a buyers' market is the cost of housing.
That's because falling prices, often a key component in a strong buyers' market, haven't appeared.
The median price in January was $740,000, up from $664,000 a year ago, and not much off the peak median price for single- family homes reached twice last year -- $760,000.
In the once more "affordable" condo market, the median hit a record $500,000 in January -- a half million dollars -- up from $410,000 a year earlier.
The Office of Federal Housing Enterprise Oversight's Home Price Index reveals that Silicon Valley's home prices have risen by more than 50 percent in the last five years alone, ending in the third quarter of 2005.
And then there are those pesky mortgage rates.
The benchmark 30-year fixed-rate mortgage on a conforming loan rose to 6.28 percent, the week ending February 16, according to Freddie Mac's Weekly Mortgage Survey. A year ago, the average was 5.62 percent.
"On the positive side, interest rates are relatively low, there are actually choices for buyers with the larger inventory, and many loan programs offer further assistance in helping families get into their first home," said Edwin Resuello, broker/owner of Realty World - Silicon Valley Homes and Valley Homes Mortgage and president of the Santa Clara County Association of Realtors.
Buyers don't appear to be buying it.
