Slower sales, growing inventories and values that may not measure up to prices are conditions that should send a signal to Silicon Valley buyers to take more control of the market.
That's not happening.
A larger than normal number of sales in high-end markets, wealthy buyers making cash deals and others who may be simply paying too much for homes in Silicon Valley factor in another record-breaking median single-family home price based on closed sales -- $819,950 in June, compared to $800,000 a month earlier and $760,000 a year ago.
The nearly 8 percent increase in single-family home prices in the past year is well off the double digit jumps in previous years, but that's still more than many in the field expected.
"Whew! Man," gasped Rob Roham, broker of the downtown San Jose RE/MAX office when told of the new median price for single family homes.
From where Roham sits, the market is ripe for buyers to step back and not jump at the first dream house, but wait for another dream home -- or two, or three or four -- to hit market.
"They have more choices than before. Some sellers still have the mentality to price low and get multiple bids, but that market is not there. Buyers will just wait and they'll have five more homes to choose from or buyers will give sellers time to find out you are not going to get multiple offers and they'll come back," perhaps with a lower bid, Roham said.
However, lower bids remain rare. Sellers continue to get, on average, 100.2 percent of their asking price for single family homes and 100.5 percent for condos. Both levels are down from a year ago, but still, on average, at or above asking, according to San Jose-based Creekside Realty broker Richard Calhoun's Bay Area Real Estate Market Newsletter.
Calhoun says even as prices rose in June, the combined inventory of single family homes and condos swelled to nearly 5,100 homes on the market in June, up from 3,500 a year ago.
Sales plummeted too. From 2,270 a year ago to 1,670 in June this year.
Not surprisingly, the average number of days a home was on the market before it sold was longer, 35 days for single family homes and 34 days for condos, up from 22 days a year ago for single family homes and 17 days for condos last June, according to Calhoun's report.
The median condo price, at $510,000 in June, up only 4.2 percent from $489,000 a year ago, better reflected changes in the market.
More and more buyers are taking their time, but they still pay top dollar.
"I'm floored by these prices," said Calhoun. "There is no need for a buyer to race out and buy a home unless they are going to be facing large financing with a 30-year or 15-year fixed rate loan. But even for them the rate won't impact them forever. All buyers should realize the market has been slowing since October and will continue to do so," said Calhoun.
Calhoun said the higher prices could be reflected in the larger than normal percentage of homes being sold in the more affluent northwest quadrant of Santa Clara County including Palo Alto, Cupertino, Los Altos and similar towns of wealthier residents where home prices are always higher.
"A lot of people are paying cash and are not impacted by interest rates. That's the not the whole answer. Some houses are going for more than their value," he added.
Steve Suchow, an associate broker with RE/MAX Valley Properties in San Jose also said the best homes are selling and the best homes cost more. Buyers see homes in tip-top shape in the best school districts as a hedge against the potential price deflation.
"If there is a choice of two properties, I will chose the best. The same holds true if there are 10 properties. I will still choose the best," Suchow said.
Suchow, along with a growing number of real estate agents, recently changed real estate companies, a common practice when markets slow. Agents hope the move will give them more flexibility in a more competitive market.
"This softened market will pose grave challenges to new real estate agents who have only experienced quick-selling homes with multiple offers in the last couple of years. They will now have to actually work to find the buyers," Suchow said.
Likewise, broker Carole Keser, recently transformed her existing Campbell real estate firm, First Choice Real Estate & Lending, into a Windermere franchise (and Gen X mortgage brokerage) and acquired three more Windermere offices in Los Gatos, Saratoga and Willow Glen. The move is designed to raise her profile and reach more buyers and sellers who need updated market information.
"Buyers, in my opinion, have been abused by lenders and market commentary. Lenders who over sold buyers into pay-option ARM (adjustable rate mortgage) products, HELOC (home equity line of credit) and stated-income products have now tightened underwriting rules. Lenders are even adding a not-too-beneficial 50 year loan product now," Keser said.
