Article by Sharon Simonson
The answer for prospective homeowners, at least for a little while, may be "buy," according to a former economist for the Federal Reserve and the current director for the USC Lusk Center for Real Estate.
The Lusk Center's Stuart Gabriel says home seekers in Santa Clara County or those looking for fancier or larger digs may be seeing a chink in the armor of what has been a formidable housing market.
The region's fundamental housing-supply problems, fueled by the area's restrictive topography and "a lot of regulatory constraint related to new housing development," aren't going away, Mr. Gabriel says. But two developments -- the loss of stock market-related wealth and some easing in the job market -- are evolving to reduce demand, at least in the short term. That reduction, coupled with falling interest rates, may make
the iron as hot as it's going to get for quite some time.
"The message is, that if you intend to buy, things have improved a bit and will likely continue to improve a bit more before things swing back forcefully in the opposite direction," Mr. Gabriel says.
When and how much demand strengthens or weakens from here depends heavily on the business prospects of the area's largest and most significant employers such as Cisco Systems Inc. and Hewlett-Packard Co. So timing the perfect buy is, of course, impossible.
But, Mr. Gabriel says, the wise will spend some time monitoring the Asian economies and watching county employment data to see if labor markets erode, especially for white-collar workers with the wherewithal to buy the valley's expensive homes.
Do not expect a fire sale, however, the Fed economist says. He does not anticipate falling housing prices. Rather, the rate of housing appreciation has simply slowed some.
... And sellers are offering greater housing variety
Meanwhile, Santa Clara County home sellers, perhaps sensing that peak prices have been reached for now, have pumped inventory onto the market, according to analysis from Richard Calhoun of Creekside Realty of San Jose.
Single-family home inventory has grown since November compared with the same time in 1999 and 2000, Mr. Calhoun says. Typically, single-family housing inventory falls in November and December.
At November's end, 961 homes were on the market, or 8.5 percent more than the inventory of November 1999.
By the beginning of March, housing inventory had surged to 2,187 homes, or 203 percent higher than March 2000.
"You have three times the inventory you had last year, and so buyers can be three times more picky, and with fewer buyers they can be even pickier still," he says.
Now, more expensive homes are taking roughly three times longer to sell as more "affordable" housing priced at $500,000 or less. For most of 1999 and 2000, most Santa Clara County homes sold in roughly a month or less, regardless of price. Some homes are still selling in that period, but others aren't.
"The homes that are selling are still selling in a month, but there are a lot of homes that aren't selling because of such factors like a busy street, an uncooperative occupant, a house that doesn't show well or a house needing work," he says.
So is now the time to buy in Santa Clara County? For the first time in a long time, Mr. Calhoun says he's sitting on the fence.