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Silicon Valley recipient of huge home price drop
By Justin Hunter
The housing market has been declining in recent months after experiencing a record-setting boom for about five years.
Everyone in the real estate industry has finally accepted the fact that the housing market is slowing down, but what are the affects?
The most obvious difference in the market is that home sales are declining from years past, thus increasing the difficulty of the seller’s market. But related to the drop off in sales is the decline in home prices.
While many regions and states across the U.S. are starting to feel the affects of lower home prices, one area has recently experienced a significant home price decrease.
The September 8, 2006 Realty Times article, “Silicon Valley Homes Lose $50,000 In Two Months,” written by Broderick Perkins, explains how home prices are falling at unprecedented figures.
“Silicon Valley's median home price dropped 6.1 percent in the past two months, the largest such decline in three years, but when it comes to the dollar amount, the $50,000 loss over the two month period was the largest ever.”
Although a $50,000 drop from $800,000 is equivalent to a $25,000 drop from $400,000, the actual price amount drop represents the growing trend that the higher home prices go, the faster they can fall.
“The median price for single-family home prices came in at $770,000 in August, down $35,000 from July, which reflected a $15,000 drop from June, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.”
Just as alarming is that the new median home price is only $10,000 more than it was a year ago, which represents a miniscule 1.3 percent increase in home prices; the smallest year-to-year increase since September 2003, when prices increased only 1.6 percent, Calhoun said.
“‘The market is not tanking, but it is reminiscent in many ways to the real estate market of the early 1990's,’ said Edwin Resuello, president of the Santa Clara County (Silicon Valley) of Realtors.”
The current real estate market is simply trying to correct itself. The problem is, however, market inflation grew so rapidly that it may take a lot longer than investors originally envisioned to get back down to a more normal state.
“The up and then down cycle is normal for the market and it has been too hot for too long during what many considered an unsustainable boom of record proportions.”
Calhoun also reported a few more interesting facts about the housing market.
Buyers were paying, on average, only 99.4 percent of the seller’s asking price, compared to 100.3 percent in August 2005. The report also shows that single family-homes take an average 42 days to sell, compared to 29 days in August 2005.
“Home buyers in the market now certainly can enjoy a better negotiating position, but they should not expect fast gains and they should plan on staying in the home long enough for a return to at least offset buying and selling costs.”
Real estate transactions are difficult nowadays. Sellers want to sell at last year’s prices and buyers want to buy at next year’s prices.