Santa Clara County home prices flatten, but experts say recovery distant

By Sue McAllister, Mercury News

After falling steeply for most of last year, median home prices in Silicon Valley have been flat for the past four months, according to a home sales report released Thursday. While that is a positive sign for homeowners, experts say a housing market recovery is distant, not around the corner.

The median price of single-family, previously owned homes that changed hands in Santa Clara County last month was $435,000, up 2 percent from March, but down 38 percent from April 2008, according to a report released Thursday by real estate information firm MDA DataQuick.

Since January, the median house price in the county has hovered in a narrow range between $420,000 and $435,000, while sales volume has increased from last year for several months. Economist Matthew Anderson of Foresight Analytics called that "a typical pattern in the early stages of a recovery."

A total of 1,171 previously owned single-family houses changed hands in the county last month, 27 percent more than in April 2008, the DataQuick report said. That marks the fifth consecutive month that sales volume has been up more than 20 percent on a year-over-year basis.

Condo sales in the county rose too, but only by 1.3 percent, to 318 units.

Across the nine-county Bay Area, sales volume of houses increased 28 percent in April from a year earlier, while condo sales rose 1.4 percent.

"Still, the sales volume is rather anemic, so we think it is too early to really call this a recovery," said Anderson, whose real estate research firm is based in Oakland. "The economy itself — that is, jobs — will need to recover in order to fuel a sustained recovery in the housing market."

The price trend for Santa Clara County condos and townhouses was similar to that for houses. The median price of condos sold last month was $255,000, up from $230,000 in March, but down 45 percent from a year earlier.

DataQuick reported that one reason median prices are flattening is that post-foreclosure properties — which are usually cheaper — make up a smaller proportion of home sales.

In April, 41 percent of previously owned homes sold in Santa Clara County had been foreclosed upon sometime in the previous 12 months. That was down from a high of 45 percent in January. For the Bay Area as a whole, foreclosures accounted for 47 percent of resales, down from a peak of 52 percent in February.

Rick Turley, president of Coldwell Banker for Northern California, said the number of foreclosure resales could go back up again later this year.

"We know there is a backlog of foreclosure properties that have not been released," he said. And though the introduction of those

properties would nudge the median price downward, a recent spate of luxury-home sales will keep it stable, he said.

The median price represents the midpoint, meaning half the homes sold in a given period cost less than the median figure, and half cost more.

Meanwhile, sales of cheaper Silicon Valley homes are brisk, said Kurt Aichele of Thurro Realty in San Jose.

For homes priced at about $550,000 and below, he said, "it's a very competitive market. If you think, 'I can throw a bunch of lowball offers out there,' that day is gone; this market has bottomed out." Unless, of course, a lot more foreclosures flood the market or the economy sends a lot more people to the unemployment rolls, he added.

Multiple offers for under-$500,000 listings are common, and many of those properties sell for more than their asking prices.

The combination of lower prices, average mortgage rates of 5 percent or less for smaller loans, and a new $8,000 federal tax credit for first-time buyers is motivating people, Aichele said.

"If you're buying a $1.5 million property, an $8,000 tax credit doesn't get you all excited," he said. "But if you're buying a $300,000 property, $8,000 coming back to 'em is a big deal."

San Jose resident Pono Aiona and his wife have been looking for a Berryessa house priced at $400,000 or less since last month.

"We're four offers in," Aiona said, having made two unsuccessful bids for bank-owned homes that had multiple offers and two offers for short-sale properties, one of which was accepted about three weeks ago.

"Short sales" occur when an owner sells property for less than is owed on the mortgage; the sale must be approved by the lender, which is often a long and bumpy process.

If Aiona and his family do finally get the keys to the home they've signed a contract to buy for $350,000, Aiona says his monthly loan payments will be only $200 more than the rent he's paying now — "perfect," he said.

"I'm only willing to spend so much. I own my own business, and I need to make sure with the relatively soft economy, things don't go upside-down with it," said Aiona, a chiropractor in Fremont.

"We're just being really careful. I don't want to be in the position that many people find themselves in" — that is, unable to pay the mortgage if the family's income drops.