Silicon Valley housing prices rebound
By Kathleen M. Howley
Bloomberg News Service
LOS ALTOS, Calif. — The 1948 house in Los Altos where 89-year-old Laura Cox died in January is a "fixer-upper" by Silicon Valley standards, with nonmechanized garage doors and no air conditioning.
Bloomberg News Service
Even so, a bidding war erupted over the two-bedroom ranch on a quarter-acre lot, and the house sold for more than the $995,000 asking price, said real estate agent Lorraine McIntosh.
The asking price for this 3,100-square-foot home in Los Altos, Calif., is $2,598,000 — but the property is expected to fetch much more as Silicon Valley's improved economic outlook and a dearth of listings create a seller's market.
The housing market in the technology hub is bouncing back.
A wave of job cuts by Cisco Systems Inc., Sun Microsystems Inc. and other area employers contributed to a 16 percent decline in home prices last year even as the rest of the United States saw a 6.3 percent gain. Consumers are buying again on the belief that layoffs are largely over, brokers said.
"There's pent-up buyer demand because people didn't make a move last year when it was clear the (real estate) market was heading down. Now, they're all jumping in," said McIntosh, of Coldwell Banker-Los Altos Downtown, which handled the Cox sale.
March home sales in Santa Clara County — the heart of Silicon Valley — climbed 59 percent from the same month in 2001, according to the California Association of Realtors. The median price is up 7.2 percent to $535,000 since the end of 2001, above the 4.6 percent gain for the rest of the state.
Prices are up as unemployment is down. The area's jobless rate dropped to 7.4 percent in March, the latest figure available, from 7.7 percent in January, which was the highest level recorded for Silicon Valley, according to unadjusted figures from Bureau of Labor Statistics dating to 1990.
"Now that the job losses have slowed, real estate is turning around as well," said Robert Bailey, president of the National Association of Realtors.
A dearth of homes for sale is also sending prices higher.
The number of single-family homes registered with the county's Multiple Listing Service fell to 1,966 from a high of 4,417 in May. The improving market has prompted some owners to delay listing their homes for sale in hopes of getting better prices, brokers said.
Newlyweds Hoang Pham and Ngoc Bui-Tong paid $415,000 in February for a three-bedroom home in San Jose — a price they now consider a bargain.
"We could easily sell this house now for $30,000 more than we paid," said Pham, 34, an engineer for Lockheed Martin Corp.
The revival has brought back some practices from the boom year of 2000, including sellers setting deadlines for the flood of bids.
The market is still a long way from the frenetic pace of 2000, when the median home price rose 31 percent to a peak of $577,500 in January 2001, brokers said.
Unlike then, few buyers today are Internet entrepreneurs paying all cash for million-dollar estates, brokers said.
"Prices are heading up, but it's a much more traditional market than we saw in the boom," said Avram Goldman, president of Coldwell Banker Northern California. "We're not seeing any 'stock option babies' plunking down cash. We're seeing a more serious clientele —baby boomers in their peak earning years who are taking out mortgages."
Safer investment
Consumers see real estate as a safe place to put money, compared with the Nasdaq composite index, according to Goldman. The index, which includes Silicon Valley-based companies such as Hewlett-Packard Co., Yahoo Inc. and Palm Inc., is down 67 percent from its March 2000 high.
Even as prices rebound, 30-year mortgage rates below 7 percent and one-year adjustable mortgages averaging 4.75 percent, the lowest since April 1994, have helped make Silicon Valley housing affordable for more home buyers.
The California Association of Realtors' housing affordability index for Santa Clara County was 27 in February, up from 19 a year earlier. The index measures the percentage of California households that can afford to purchase a median-priced home in a particular county.
With more economists expecting the Federal Reserve to keep interest rates unchanged when policy-makers meet in June, the state's housing market should continue to rebound, industry officials said.
"The combination of softness in prices and the low interest rates brought a large number of first-time buyers and move-up buyers into the market," Bailey said.
McIntosh, who wouldn't disclose the buyer or the price of the Cox home, said low supply spurred four bids. The new owner will probably tear it down and build a new home, she said.
"The value is mostly in the land," McIntosh said.
