We may be in a recession with 11% local unemployment, but affordable homes are getting scooped up with multiple offers and in many areas, inventory is shrinking.

Today we’ll look at five areas of San Jose which offer at least some, if not mostly, entry level housing: Blossom Valley, Cambrian Park, Evergreen, Santa Teresa and South San Jose.

Evergreen does have some high-end housing in Silver Creek and elsewhere, but it also provides some very affordable homes for first time home buyers.  Cambrian Park is mostly middle class but it, too, has some McMansions (original Cambrian Park tract with large lots and very old homes that are not infrequently bulldozed) and some homes with views (Vista Loop area, bordering Los Gatos and Almaden Valley).  Blossom Valley has some beautiful properties and many close to the scenic Santa Teresa Foothills.  Overall, though, these homes represent affordable or mid-range houses for sale in Silicon Valley.  When we look at them as a group, it gives a strong sense of what the market is doing generally.

The months of inventory reflect how long it would take the current inventory to be absorbed (or sold off) if no new inventory came on the market and sales continued at the current pace.  Six months is a balanced market.  Fewer represents a seller’s market and more reflects a buyer’s market.  As you can see, April shows a push in all five districts of San Jose into seller’s territory:

Why the change from buyer’s market to seller’s market?  South San Jose and Blossom Valley have been flooded with distressed property sales (though not as much as Alum Rock, which was almost exclusively short sales and bank owned real estate sales the first quarter of 2009), pushing prices down substantially and making home ownership affordable for many who were otherwise priced out of the market a few years ago.   Bargain-hunters have been scooping up these homes.  Prices are stable – approximately flat – so there’s not as much fear for further declines in pricing right now.

To keep it from being too busy, I rounded the numbers to the closest whole number.  Using exact numbers, the averages of these five areas by month is as follows:

Right now, buyers in many areas and price points looking for a home to purchase in Silicon Valley are frustrated with the lack of inventory (or appropriately priced inventory), so this graph will not be a surprise to many of them.

Sellers who are unable to get traffic or offers on their homes may find this baffling.  If the market is so “hot”, then why isn’t my home selling? If you are experiencing this market rejection, it’s not that your home isn’t sellable.  Most likely, it means that your price and condition are not realistic for today’s market – if your home is a normal (not short) sale.  Short sales are trickier as some agents refuse to show them since they are harder to close.

Some buyers are holding off, waiting for the next anticipated flood of short sales and bank owned properties.  How many will there be? We don’t know. It might change the market conditions entirely. Or it could be as significant as the local threat of pandemic from the swine flu.