Seasonal market fluctuations are depressing home prices in Silicon Valley, but a drop in the inventory of homes for sale still makes it tough for buyers to find bargains.
The median price of single-family detached homes fell by a "significant" level in August to $625,000, down from $640,000 in July and down from the area's record $642,000 set in May this year, according to Richard Calhoun, Realtor and owner of Creekside Realty in San Jose. The median for single-family detached homes was $65,000 less at $560,000 a year ago in August 2003.
Inventories slipped from 3,222 in July to 2,912 in August, leaving buyers with fewer homes to tour.
"A $15,000 drop is significant. And it comes at a time when you think the market should be on fire because it's the middle of the summer. I think it's normal," said Calhoun who graphs the numbers from four Bay Area counties with data from the area's multiple listing service, RE InfoLink of Campbell.
Calhoun said with the back-to-school crowd off the market, fewer buyers mean smaller home prices throughout Santa Clara County, which includes the Silicon Valley high tech area.
The number of closed sales of single-family detached homes in Santa Clara County fell from 1,642 in July to 1,547 in August, said Calhoun in the latest Santa Clara County edition of Bay Area Real Estate Market Newsletter, which covers five counties.
The trend of lower or flat prices should continue into the fall, though September often comes with a temporary pick up in prices.
"There's a little uptick because moms have more time to be out and about in September," said Janet Houde, an independent real estate broker and president of the Santa Clara County Association of Realtors.
A closer look at some cities and communities within Santa Clara County reveal some markets are holding prices better than others, but both high-end and more affordable cities show a mixed market.
In Los Gatos' for example, the median price on single-family homes fell from $1.22 million to $1.025 million, as the inventory improved from 184 to 188. Saratoga, on the other hand, revealed an increase in prices from $1.26 million to $1.45 million, as the inventory rose from 32 to 39.
In more affordable markets, the city of Santa Clara's median rose from $570,100 to $590,000, as the inventory fell from 122 to 118. And in the county seat of San Jose, the median fell from $586,000 to $575,000, as the inventory fell from 1,626 to 1,503.
Calhoun cautioned that the smaller statistical samples for cities could be misleading and likely represent only temporary conditions. All cities are expected to reflect the seasonal downward or flattening trend in prices for the rest of the year.
"Prices are down and the market has cooled off. Real estate is behaving absolutely normal. The normal trend is for reduced value and reduced prices," Calhoun said.
He added, "The real estate market conditions are such that we are past the peak price for the near term. Sellers should consider moving forward rapidly as we believe May 6 was the ideal date to enter the market. Buyers should be careful not to overpay as the market has clearly passed the near-term peak and sellers don't yet realize this."
Steve Suchow, a real estate agent with the Blossom Valley-Almaden Coldwell Banker office said despite the overall decline in prices, some areas' lower inventories continue to help sellers bring in the prices they want.
"This week (September 6), the inventory of both single-family homes and condos was 2,465. A normal inventory is about 4,000 homes when it's not a seller's market or a buyer's market. There are still multiple offers, if houses are priced fair, at market value. If they are over-priced, sellers are passing them by," Suchow said.
For buyers, one saving grace remains low mortgage rates -- 5.77 percent nationwide and 5.72 percent in the West, according to Freddie Mac's weekly Primary Mortgage Market Survey for September 2.
Buyers can also opt for even cheaper adjustable-rate mortgages coupled with low money-down plans.
"We expected them to edge up and they did, but they've come back down so interest rates are wonderful. We are all watching the election to see how that will affect matters," said Houde.