Call Me ... Mr Lucky

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I called this chill many months ago. ...

As my associate at a local news media station would say, "I got lucky on my call." ... Heaven knows why they are the so-called #1 news station in Northern California.

The global economy is squeezing out California ... And California forgot how to breathe.

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http://www.mercurynews.com/mld/mercurynews/classifieds/real_estate/12821583.htm

Slight chill hits housing market

By Margaret Steen and Rhasheema A. Sweeting

Mercury News

UNCERTAINTY LOOMS AS INTEREST RATES CREEP UP, PRICES
FALL

Experts have long predicted that Silicon Valley's hot
real estate market will cool off. Now, with interest
rates rising, some prices falling and for-sale signs
sprouting up across Santa Clara County, that may be
finally happening -- at least a little.

It could be just a seasonal blip, but buyers say
they're able to take a bit more time with their
decisions. And when they bid on houses, they're not
competing against as many other buyers as they would
have been a few months ago.

``There's been more selection lately,'' said Mike
Nelson of Campbell, who's looking for a house in the
$700,000 to $800,000 price range -- and who was outbid
on two homes this summer. ``We're seeing more
inventory on the market much longer.''

A key measure of the strength of the market, called
days of unsold inventory, has climbed in recent
months. Days of unsold inventory calculates how long
it would take to sell all the properties on the market
at the current pace of sales.

Also, preliminary figures suggest that the median
price of homes sold in Santa Clara County was lower in
September than in August.

And reports from those active in the local real estate
market say it's getting easier for buyers, both
because of softening prices and a better selection of
homes for sale.

Experts caution that it's too early to conclude that
the county's decadelong stretch of rising prices has
come to an end. But even if the slowdown proves
temporary, sellers and buyers alike sense a shift in
the market.

Steve Bonbright will list his rental property in
Millbrae today with Intero for $624,000. He has been
thinking about selling the 1,500-square-foot house for
about six months and decided now's the time.

``I get the sense that we're not in a seller's
market,'' he said. ``I'm not as optimistic about
offers pouring in.''

But despite Bonbright's caution, the days of price
appreciation and multiple offers may be far from over.
And even if prices flatten in coming months, houses
may not become more affordable if interest rates
continue to climb. Last week, the average rate of
interest on 30-year mortgages jumped to 5.91 percent,
the highest level in five months.

``Half of the houses available are still selling with
multiple offers,'' said Nina Yamaguchi, managing
broker with Coldwell Banker in Cupertino.

Just how difficult is it to read the signals the
housing market is sending right now? Consider the
number of homes for sale in Santa Clara County.

The number has been rising for the past two months, a
time of year when it usually falls, said Creekside
Realty's Richard Calhoun, who tracks statistics about
the region's real estate market. Nonetheless, the
inventory of homes is still relatively low.

Prices also often dip at this time of year, experts
note.

Calhoun's figures show a drop in the median price of a
single-family home in Santa Clara County from $760,000
in August to about $733,000 in September. His numbers
are drawn from sales reported to the Multiple Listing
Service, and typically are higher than the figures of
DataQuick Information Systems that are widely used by
the Mercury News and other media.

DataQuick gathers statistics from public records of
closed sales and includes sales that weren't part of
the MLS. DataQuick's September figure is not yet
available, but its median price for August was
$714,000, or $46,000 less than Calhoun's median for
that month.

"It's too soon to say that there's a real slowdown. We
saw some patterns of slowdown like this about a year
ago, particularly in Southern California. And yet it
didn't last,'' said Steve Cochrane, managing director
of Economy.com.

Still, experts said it's just a matter of time before
prices stop climbing as fast as they have been, which
was 21 percent over the past year, according to
DataQuick.

``I'm not saying home prices are going to collapse;
I'm not saying they're going to drop. But the rate of
growth should slow materially next year,'' said Frank
Nothaft, chief economist with Freddie Mac.

A key factor in whether home prices keep climbing,
level off or fall will be interest rates. If they
rise, it will be more difficult for buyers to pay the
prices sellers want.

Likewise, if lenders tighten their requirements for
some of the innovative but riskier loans they have
been offering, that could have a big impact in areas
like Silicon Valley, where buyers are flocking to
adjustable-rate loans, Cochrane noted.

High energy costs and an increase in demand for
construction materials following Hurricane Katrina
could also affect what buyers can afford to pay and
how much it costs to build homes, economists said.
Contact Margaret Steen at msteen@mercurynews.com or
(408) 278-3499.

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