It's all about proximity. This month, I took a look at the semi-annual statistics aggregated for the first-half of the year so that my clients can get a good look at the overall trends, as opposed to the bumps in the road.
The story isn't about the median prices, which are charted further down in this article; what's interesting is the consolidation of pricing power around the center of Silicon Valley. I alluded to this increase last month, but the half-year figures distinctly highlight this strength, with the epicenter squarely in Mountain View.
In the first-half of 2006, an average single-family home sale would command 101.98% of the list price --- about 2% over the asking price --- but in the first-half of 2007, that percentage jumped to 104.56%. The increase in Mountain View's neighbors Palo Alto, Los Altos and Sunnyvale, is less drastic, but still pronounced, as illustrated below.
In fact, inventory of single-family homes in Mountain View and Los Altos is at its lowest point in ten years, with Mountain View equaling the low it reached in 2005 (lower than any other point since 1998).
What's Happening Further Out?
Cupertino has seen a similar increase in pricing power the first-half of 2007, but cities further out like , Santa Clara, Saratoga, Milpitas and --- to a lesser extent --- Campbell all experienced some erosion in pricing power, as measured by the percent of list price homes received. But prices have remained relatively strong: the median home prices in all of those cities except Milpitas have increased since 2006.
Silicon Valley as a whole remains strong with a 6% increase in the median price of townhomes and condominiums plus a 6.9% increase in the median price of single-family homes.
New inventory entering the market is down 12% year-over-year between the first-half of 2006 and 2007, helping to balance out the 17% increase in available inventory during the same period. The number of new home listings is actually at its lowest point since 2000, which in addition to Silicon Valley job growth (.pdf), helps explain why prices have risen steadily in the midst of less optimistic news from around the country.